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Federal Energy Regulatory Commission
Agency for Toxic Substances and Disease Registry
Centers for Disease Control and Prevention
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Commodity Credit Corporation and Farm Service Agency, USDA.
Interim rule.
This rule is revising the Commodity Credit Corporation's (CCC) Conservation Reserve Program (CRP) regulations to specify the terms and conditions of CRP and to implement amendments made by the Agriculture Improvement Act of 2018 (2018 Farm Bill). The 2018 Farm Bill authorizes CRP through fiscal year 2023. This rule makes required changes to the eligibility criteria for enrollment in CRP, the benefits available to participants, and the land use and compliance provisions of CRP. In addition, this rule will implement two new pilot programs, the Clean Lakes, Estuaries, and Rivers 30 (CLEAR 30) Pilot Program and the Soil Heath and Income Protection Pilot (SHIPP) Program, as required by the 2018 Farm Bill.
We invite you to submit comments on this rule. In your comment, please specify RIN 0560-AI41 and include the date, volume, and page number of this issue of the
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All comments received will be posted without change and publicly available on
Virgil Ireland; telephone: (816) 926-6014, email:
CRP is authorized by the Food Security Act of 1985 (Pub. L. 99-198), which was amended by the 2018 Farm Bill (Pub. L. 115-334). The purpose of CRP continues to be cost-effectively assisting producers in conserving and improving soil, water, and wildlife resources, restoring wetlands by converting highly erodible and other environmentally-sensitive land generally devoted to the production of agricultural commodities to a long-term vegetative cover, or improving conditions of certain grasslands. CRP participants enroll land under contracts and maintain approved cover, including grasses and trees, or water cover, in exchange for annual rental payments and financial assistance to install certain conservation practices. Enrollment of eligible grassland in CRP results in adoption of sustainable grazing practices. CRP is administered by the Farm Service Agency (FSA) on behalf of CCC. Since its inception in 1985, CRP has proven to be one of the largest and most successful conservation programs in USDA.
There are three major types of CRP signups: General, continuous, and grassland. Each of the three types has specific enrollment provisions, as described below. For all signups, potential participants must submit an offer for enrollment at the local FSA county office or USDA service center.
Enrollment through general signup is based on a competitive offer process during designated signup periods. The general signup occurs when the Secretary of Agriculture (Secretary) announces USDA will accept general signup offers for enrollment. Offers from potential CRP participants are ranked against each other at the national level. Ranking is based on the environmental benefits expected to result from the proposed conservation practices, and expected costs. Each offer is assigned an Environmental Benefit Index (EBI) score using ranking factors designed to reflect the expected environmental benefits and costs. A fact sheet regarding the EBI factors will be provided on a USDA web page. These EBI factors may include, but are not limited to, wildlife habitat, water quality, and reductions in farm erosion benefits. The highly erodible cropland criteria are based on the provisions of the Food Security Act of 1985, as amended, and 7 CFR part 12. EBI may include benefits that last beyond the contract period and factors that include per acre expected costs. In a general signup, the offer process is competitive and not all offers will necessarily rank high enough to be selected for enrollment in CRP.
For practices and land with especially high environmental value, enrollment through continuous signup is usually available year-round without ranking periods. The continuous signup is focused on environmentally sensitive land, and offers are not ranked against each other. Land eligible for continuous signup may include:
• Land in riparian areas that border rivers, streams, and lakes;
• Land suitable for wetland restoration; and
• Certain land to be dedicated to other specialized conservation measures.
While land is accepted on a non-competitive basis, the practices available under CRP continuous signup provide environmental benefits that likely would consistently rank high under the EBI, making the land and practice(s) acceptable for enrollment under a general signup.
The 2018 Farm Bill changes the offer process for grassland signups from a continuous basis to an annual enrollment basis with ranking periods occurring subsequent to the announcement of general signup offers.
This rule does not change the basic administrative structure and nature of CRP.
This rule removes the following definitions in 7 CFR 1410.2 because they are no longer used in the CRP regulations, or are provided in 7 CFR part 718, or are no longer needed because of improved clarity in the provisions throughout this rule: “deputy administrator,” “field,” “landlord,”
This rule adds definitions in 7 CFR 1410.2 of “field border,” “grass waterway,” and “prairie strip” because they are relevant to continuous signup enrollment, as provided in the 2018 Farm Bill. It also adds a definition in 7 CFR 1410.2 of “carrying capacity” and “primary nesting season” that apply to the new permissive uses, as provided in the 2018 Farm Bill, and adds a definition of “eligible partner” as provided in the 2018 Farm Bill relevant to the Conservation Reserve Enhancement Program (CREP). Further, it adds a definition of “approved cover” because the term is used throughout the regulation.
This rule revises the definition of “conserving use” to update the years consistent with the updated cropping history years specified by the 2018 Farm Bill. This rule revises the definitions of “filter strip” and “riparian buffer” to improve clarity regarding the required location of the practice in question and provide consistency between the definitions. This rule revises the definition of “violation” to clarify that an inaction by the participant may also be a violation that results in adverse consequences. This rule also revises “annual rental payment” to specify that certain incentive payments are not included in the definition. This rule revises the definition of “considered planted” to not limit prevented planted credit to those cases in which a producer received an insurance indemnity payment for prevented planting. Further, this rule revises other definitions to remove obsolete, erroneous, or duplicative references and citations, or to improve the clarity of the definition.
This rule revises the provisions in 7 CFR 1410.3 to change the term “conserving use” to “approved cover” for consistency with the definition of the term “approved cover.” In addition, this rule removes the provisions regarding cost-share assistance from § 1410.3, as they are duplicative of the provisions regarding cost-share payments elsewhere in this rule. This rule also revises the provisions in 7 CFR 1410.3 regarding the requirement that a producer obtain and adhere to a conservation plan that is duplicated elsewhere in the regulation.
The 2018 Farm Bill maintains the acreage limitation that not more than 25 percent of the cropland in any county can be enrolled in CRP. However, it changes the description in 7 CFR 1410.4 of land to which the Secretary may provide a waiver of the county acreage limitation by specifically permitting it on land enrolled under a CREP. Further, it increases the percent of the cropland in a county that may be subject to a wetland easement from not more than 10 percent to not more than 15 percent. This rule revises the maximum county acreage provisions in 7 CFR 1410.4 to incorporate the changes made by the 2018 Farm Bill.
This rule revises the provisions in 7 CFR 1410.5 to improve clarity regarding when the 12-month ownership or operatorship applies based on the type of signup under which the offer is submitted.
The 2018 Farm Bill changes the cropping history requirement so that cropland must have been planted or considered planted for 4 of the 6 years preceding the date of enactment of the 2018 Farm Bill (December 20, 2018). The 2018 Farm Bill also provides that cropland enrolled in CRP is to be considered planted for purposes of cropping history eligibility.
The 2018 Farm Bill specifies certain CRP conservation practices that will have a positive impact on water quality, including grass waterways, filter strips, contour grass strips, riparian buffers, wetland practices and wetland buffers, bioreactors, and saturated buffers, as practices eligible for enrollment under a continuous basis. The 2018 Farm Bill also adds, as eligibility criteria for enrollment on a continuous basis, a new CRP conservation practice, prairie strip, and land devoted to practices to benefit State and federally identified wellhead protection areas. The 2018 Farm Bill also makes eligible for enrollment land that was enrolled in CRP under a 15-year contract that expired on September 30, 2017, or September 30, 2018, provided there was no opportunity for such land to be re-enrolled previously, and provided that the conservation practice on such land has been maintained.
The 2018 Farm Bill also limits the number of times land subject to a CRP contract that is devoted to hardwood trees, excluding riparian buffers, shelterbelts, and certain forested wetlands, can be reenrolled in CRP to only one re-enrollment.
Further, the 2018 Farm Bill makes eligible for enrollment in CRP certain land that is subject to State resource conserving or environmental protection measures or practices that would otherwise render such land ineligible for enrollment. Such land will be enrolled under a reduced annual rental payment.
This rule revises the eligible land provisions in 7 CFR 1410.6 to incorporate the changes made by the 2018 Farm Bill, to improve clarity, and to make minor technical corrections.
The 2018 Farm Bill adds two pilot programs (discussed below) that provide for CRP contracts ranging in duration from 3 to 30 years. Accordingly, this rule revises the provisions in 7 CFR 1410.7 to address the various contract durations and improve clarity.
This rule revises the provisions in 7 CFR 1410.8 to remove provisions regarding designations of National conservation priority areas and provisions allowing State FSA Committees to designate conservation priority areas. This rule revises the provisions in 7 CFR 1410.8 include provisions specifying that a State agency may submit proposals for conservation priority areas within guidelines established by CCC consistent with the Food Security Act of 1985, as amended.
This rule revises 7 CFR 1410.10 to remove provisions regarding potential cost-share and incentive payments that are duplicated elsewhere in the regulation.
This rule revises 7 CFR 1410.11 to include acreage enrollment limitations, provisions regarding incentive payments for farmable wetlands, clarify cropping history requirements, and for consistency with the Food Security Act of 1985, as amended.
The 2018 Farm Bill adds provisions identifying criteria for which the Secretary may give priority when evaluating offers to enroll grasslands in CRP, including land under risk of conversion, land of ecological significance, and land enrolled under an expiring CRP contract. This rule revises 7 CFR 1410.31 to include the 2018 Farm Bill's criteria that may be used in evaluating offers to enroll grasslands into CRP.
In addition, this rule revises the provisions in 7 CFR 1410.13 to include the activities permitted on grasslands enrolled in CRP, and to remove erroneous references to land previously enrolled in the Grasslands Reserve Program.
The 2018 Farm Bill adds that under the terms and conditions of the CRP contract, participants must agree to carry out proper thinning and other practices on land devoted to trees, excluding windbreaks and shelterbelts, to enhance the conservation benefits and wildlife habitat resources, and to promote forest management. This rule revises 7 CFR 1410.20 to add the obligation to carry out such activities, and to make other minor changes to improve clarity.
This rule revises the provisions in 7 CFR 1410.21 for clarity and consistency with the Food Security Act of 1985, as amended, by adding that CCC cost sharing must be appropriate and in the public interest.
The 2018 Farm Bill retains the provision that requires participants to undertake management activities on the land as needed throughout the duration of the CRP contract to implement the conservation plan. However, the 2018 Farm Bill prohibits the Secretary from making any cost-sharing payment for management activities. In addition, under the 2018 Farm Bill, in the case where a natural disaster or adverse weather event occurs that has the same effect as the planned management activity consistent with the conservation plan, then a planned management activity is not required. This rule revises 7 CFR 1410.22 to add provisions regarding a natural disaster or adverse weather event having the same effect as a planned management activity and specifying that no cost-share payments will be provided for any management activity. In addition, this rule clarifies that the conservation plan must be approved by NRCS. Further, this rule revises 7 CFR 1410.22 for technical changes for consistency with the Food Security Act of 1985, as amended, and for clarity.
The 2018 Farm Bill requires the Secretary to hold a general signup not less often than once each year. The 2018 Farm Bill also changes enrollment of eligible grasslands from a continuous basis to an annual enrollment basis with ranking periods being subsequent to the announcement of general signup offers. In addition, the 2018 Farm Bill specifies specific land and practices that will be eligible under a CRP continuous signup basis. Further, the 2018 Farm Bill adds two pilot programs (discussed below), one of which has a statutory deadline for enrollment of December 31, 2020. This rule revises 7 CFR 1410.30 to incorporate the relevant changes made by the 2018 Farm Bill.
The 2018 Farm Bill amendments add provisions to allow land enrolled in CRP during the last year of the CRP contract to be enrolled in the Environmental Quality Incentives Program (EQIP) or the Conservation Stewardship Program (CSP), and permit the participants to begin establishment of a practice under the EQIP or CSP programs without being in violation of the CRP contract. In addition, the 2018 Farm Bill adds that during the 3 years prior to the end of the CRP contract period, the participant may begin the certification process under the Organic Foods Production Act of 1990 without being in violation of the CRP contract.
This rule revises 7 CFR 1410.32 to incorporate the provisions of the 2018 Farm Bill regarding enrollment of land into EQIP and CSP and beginning the organic certification process. In addition, this rule revises 7 CFR 1410.32 to clarify that the provisions regarding the termination of CRP contracts and the refunding of payments and assessment of liquidated damages resulting from such CRP contract termination are applicable to the termination of a CRP contract in whole or in part. The policy on termination of CRP contracts is not changing with this rule; rather, the amendments clarify that termination on part of the land enrolled is, for the terminated part of the land, treated the same and has the same consequences as termination of the entire contract.
The 2018 Farm Bill amendments change the time period in which a CRP contract may be modified to facilitate the transition of land to a beginning, socially disadvantaged, or veteran farmer or rancher from the final year of the CRP contract to the last 2 years of the CRP contract. These changes are discussed further below under the Transition Incentives Program. This rule revises 7 CFR 1410.33 to incorporate the changes made by the 2018 Farm Bill with regard to needed CRP contract modifications.
In addition, this rule revises 7 CFR 1410.33 to clarify that the provisions regarding termination of a CRP contract are applicable to termination whether in whole or in part, consistent with the revisions made to this rule in 7 CFR 1410.32. Further, this rule removes the requirement that practice incentive payments must be refunded when land is transferred from CRP into Agricultural Conservation Easement Program (ACEP), because practice incentive payments are considered cost-share payments under the 2018 Farm Bill.
The 2018 Farm Bill adds provisions for practice incentive payments for certain land enrolled under continuous signup and under CREP in an amount not to exceed 50 percent of the actual cost of the practice. It also provides that in the case of seed costs for the practice, the cost-share payments are not to exceed 50 percent of the cost of the actual cost of the seed. Further, it amended the Food Security Act of 1985 to provide that in general, cost-share payments to participants, when combined with payments from all other sources, cannot exceed 100 percent of the actual cost of establishing the practice.
This rule revises §§ 1410.40 and 1410.41 for consistency with the 2018 Farm Bill changes regarding cost-share limits and the limitations for practice incentive payments. In addition, this rule revises 7 CFR 1410.40 to remove references to sections that were removed in 2015, and to add provisions regarding refunds of cost-share payments when other federal cost-share assistance is received by the participants for the same land, as required by the Food Security Act of 1985, as amended. It also clarifies that cost-share payments are not subject to the $50,000 payment limitation in 7 CFR 1410.42. Further, this rule revises 7 CFR 1410.40 to add that the benefits that would be received from the replacement or restoration of the practice must outweigh the cost of such action in order for cost-share payments to be authorized. This rule also revises 7 CFR 1410.41 to remove provisions that are duplicated in 7 CFR 1410.40.
The 2018 Farm Bill amendments provide an exception to the $50,000 payment limitation in the case where the participant is a rural water district or association and the land enrolled is for the purpose of protecting a wellhead. This rule revises 7 CFR 1410.42 to incorporate the 2018 Farm Bill changes regarding the exception to the $50,000 payment limitation. In addition, this
This rule removes 7 CFR 1410.43 as method of payment provisions are provided in 7 CFR part 1401.
The 2018 Farm Bill amendments provide authority for the Secretary to waive the income limitations that apply to CRP on a case-by-case basis if the Secretary determines that environmentally sensitive land of special significance would be protected as a result of the waiver. The income limitations and provisions for any applicable waiver are implemented in 7 CFR part 1400. This rule revises 7 CFR 1410.44 to add a reference to 7 CFR part 1400 regarding any waiver of the income limitations that may apply to CRP.
This rule revises 7 CFR part 1410 to add § 1410.45 to provide provisions regarding certain incentive payments authorized by the 2018 Farm Bill and incentive payments that may be made available at the sole discretion of CCC. The 2018 Farm Bill mandates a one-time signup incentive payment for the initial enrollment of certain land and CRP conservation practices, equal to 32.5 percent of the amount of the first annual rental payment of the land and practices. The 2018 Farm Bill also provides authority for CCC to provide incentive payments to encourage proper tree thinning and other practices to improve the condition of resources, promote forest management, or enhance wildlife habitat on the land. Such incentive payments cannot exceed 100 percent of the total cost of thinning and other practices. In addition, the 2018 Farm Bill provides discretionary authority for CCC to provide other incentive payments; however, such incentive payments are not required.
Prior to the 2018 Farm Bill, the annual payment limitation did not apply to a State, or political subdivision or agency thereof, in connection with State enhancement programs approved by FSA. The State enhancement programs were separate and apart from CREP (discussed below). The 2018 Farm Bill removes the provisions regarding the State enhancement programs. Accordingly, this rule removes 7 CFR 1410.50.
This rule revises 7 CFR 1410.52 to clarify that the provisions regarding termination of a CRP contract are applicable to termination whether in whole or in part, consistent with the revisions made to this rule in §§ 1410.32 and 1410.33. In addition, this rule revises § 1410.52 to remove the crop insurance purchase requirement, as it was eliminated under the Agricultural Act of 2014.
This rule revises 7 CFR 1410.53 to clarify that the provisions regarding termination of a CRP contract are applicable to termination whether in whole or in part, consistent with the revisions made by this rule in §§ 1410.32, 1410.33, and 1410.52.
This rule revises 7 CFR 1410.57 to clarify that any payment or portion of payment due any person under 7 CFR part 1410 will be allowed without regard to questions of title under State law, and without regard to any claim or lien in favor of any creditor, except agencies of the United States Government.
This rule revises 7 CFR 1410.62 to remove the provisions regarding research projects because CCC determined such provisions are not necessary.
Uses of land enrolled in CRP is generally limited to the list of uses specified in 7 CFR 1410.63, unless provided for elsewhere in the regulation. The intent of such limits is to ensure that land enrolled in CRP is not used for activities that would tend to defeat the conservation purposes of CRP, while allowing certain activities that are authorized by the Food Security Act of 1985, as amended, and are consistent with the CRP goals and purpose. Specifically, the permissive uses must be consistent with the provisions of the Food Security Act of 1985, as amended, and consistent with the conservation of soil, water quality, and wildlife habitat, including habitat during the nesting season for certain categories of birds in the area.
The 2018 Farm Bill amendments remove provisions for managed harvesting and routine grazing of CRP land. The 2018 Farm Bill specifies the activities permitted on CRP land, and which activities result in a reduction to the annual rental payment, and the amount of the reduction, if any. Further, the 2018 Farm Bill also specifies the criteria that must be met in order to conduct emergency haying, grazing or other emergency use of the land.
All haying and grazing activities will be conducted only after a detailed conservation plan is developed for such activity in accordance with the 2018 Farm Bill, this rule, and the Natural Resource Conservation Service (NRCS) Field Office Technical Guide (FOTG).
The 2018 Farm Bill prohibits all haying and grazing activities if such activity for that year would cause long-term damage to the cover on that land. It also prohibits all haying and grazing activities on land enrolled in CRP through CREP or a State Acres for Wildlife Enhancement (also known as SAFE) project, unless such activity is specifically permitted as part of the CREP agreement or State Acres for Wildlife Enhancement project, as applicable.
This rule revises 7 CFR 1410.63 to add new provisions and revise existing provisions for permissive uses consistent with the 2018 Farm Bill amendments, reorganize the section for improved clarity, and to make minor technical corrections.
The 2018 Farm Bill amends the provisions regarding the Transition Incentives Program (TIP) by changing the time period in which the beginning, socially disadvantaged, or veteran farmer or rancher can make conservation and land improvements, including preparing to plant an agricultural crop, and begin the certification process under the Organic Foods Production Act of 1990, from 1 year before the end of the CRP contract period to 2 years before the end of the CRP contract period. Further, the 2018 Farm Bill changes the provisions to allow a lease with a term of less than 5 years and option to purchase to qualify as an eligible lease for the transfer of eligible land under the Transition Incentives Program. The 2018 Farm Bill also removes the requirement that the owner or operator had to be a retired or
This rule revises 7 CFR 1410.64 to add and revise provisions required by the 2018 Farm Bill for the Transition Incentives Program, reorganize the section for improved clarity, and make minor technical corrections.
The 2018 Farm Bill adds two new pilot programs to CRP, the CLEAR 30 Pilot Program and SHIPP. Only certain land devoted to specific practices enrolled in CRP in the last year of the CRP contract is eligible to be enrolled under CLEAR 30. For CLEAR 30, the practices eligible are limited to those continuous signup practices that provide water quality protection by helping to reduce sediment loadings, nutrient loadings, and harmful algal blooms. A fact sheet regarding the practices eligible under CLEAR 30 will be provided on a USDA web page. Under CLEAR 30, producers must enroll land under a 30-year contract in exchange for annual rental payments.
SHIPP authorizes enrollment of certain cropland in the prairie pothole region of a State on a pilot basis. The deadline for enrollment is December 31, 2020. To be eligible to be enrolled, the cropland must have been planted or considered planted to an agricultural commodity during each of the 3 crop years preceding enrollment and must be verified to be less-productive land as compared to other land on the farm. Land that was enrolled in the CRP in any of the 3 crop years immediately preceding enrollment under SHIPP is not eligible for enrollment. Under SHIPP, producers enroll land under contracts for 3, 4, or 5 years in exchange for annual rental payments. FSA will not provide any financial assistance for the cost of installing or establishing the approved cover, except for participants who are beginning, limited resource, socially disadvantaged, or veteran farmers or ranchers, who may receive financial assistance in the form of cost-share up to 50 percent of the eligible cost of installing eligible cover. Under SHIPP, the only approved cover is the lowest practicable cost permanent vegetative cover.
This rule revises 7 CFR part 1410 to add §§ 1410.70 and 1410.80 to provide the provisions related to SHIPP and CLEAR 30, respectively.
The 2018 Farm Bill adds provisions for CREP. CCC began implementing CREP in 1997. Through CREP, CCC entered into agreements with States, their political subdivisions or agencies to use the CRP to cost-effectively address specific conservation and environmental issues of the State and the nation. Proposals, developed locally and submitted for approval by the Secretary, address resource concerns, provide for cooperation with the CREP partner, present clear goals with measurable objectives, and detail non-federal financial contributions by the partners. The 2018 Farm Bill included as potential partners under CREP Indian tribes and nongovernmental organizations, in addition to State governments and political subdivisions of states. It also specified terms and conditions that must be included in CREP agreements, provided minimum contribution requirements for nongovernmental organizations, and provided authority for certain actions and activities related to riparian buffers enrolled under a CREP agreement. The 2018 Farm Bill provisions relating to CREP agreements do not affect or modify CREP agreements existing as of December 20, 2018, unless the signatories to the existing agreements mutually agree to modify such agreements to include 2018 Farm Bill provisions.
This rule revises 7 CFR part 1410 to add § 1410.90 to provide the provisions related to CREP.
In addition to the changes required by the 2018 Farm Bill and the other changes discussed above, this rule includes other changes to make the CRP regulations consistent with the Food Security Act of 1985, as amended, and improve clarity. For example, some parts of the regulation were reorganized to be in a more logical order and easier to understand. Obsolete and erroneous parts and citations have been removed or corrected, as applicable. In general, this rule amends CRP regulations in 7 CFR part 1410 to implement changes required by the 2018 Farm Bill and make technical changes relevant to CRP implementation, for example, correcting erroneous citations.
The Administrative Procedure Act (APA, 5 U.S.C. 553) provides that the notice and comment and 30-day delay in the effective date provisions do not apply when the rule involves specified actions, including matters relating to benefits. This rule governs CRP for payments to participants and thus falls within that exemption. Further, the promulgation of regulations to implement the programs of Chapter 58 of Title 16 of the U.S. Code, as specified in 16 U.S.C. 3846, and the administration of those programs, are:
• To be made as an interim rule effective on publication, with an opportunity for notice and comment,
• Exempt from the Paperwork Reduction Act (44 U.S.C. chapter 35), and
• To use the authority in 5 U.S.C. 808 related to Congressional review and any potential delay in the effective date.
For major rules, the Congressional Review Act requires a delay in the effective date of 60-days after publication to allow for Congressional review. This rule is major under the Congressional Review Act, as defined by 5 U.S.C. 804(2). The authority in 5 U.S.C. 808 provides that when an agency finds for good cause that notice and public procedure are impracticable, unnecessary, or contrary to the public interest, that the rule may take effect at such time as the agency determines. As noted above, the 2018 Farm Bill exempts this rule from the Congressional Review Act effective date delay requirement. Therefore, even though this rule is a major rule for purposes of the Congressional Review Act, FSA and CCC are not required to delay the effective date for 60 days from the date of publication to allow for Congressional review. Therefore, this rule is effective upon publication in the
Executive Order 12866, “Regulatory Planning and Review,” and Executive Order 13563, “Improving Regulation and Regulatory Review,” direct agencies to assess all 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 emphasized the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The requirements in Executive Orders 12866 and 13563 for the analysis of costs and benefits apply to rules that are determined to be significant. Executive Order 13777, “Enforcing the Regulatory Reform Agenda,” established a federal policy to alleviate unnecessary regulatory burdens on the American people.
The Office of Management and Budget (OMB) designated this interim rule as economically significant under Executive Order 12866, “Regulatory
Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs,” requires that in order to manage the private costs required to comply with Federal regulations that for every new significant or economically significant regulation issued, the new costs must be offset by the elimination of at least two prior regulations. OMB guidance in M-17-21, dated April 5, 2017, specifies that “transfer rules” are not covered by Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs.” Transfer rules are Federal spending regulatory actions that cause only income transfers between taxpayers and program beneficiaries. Therefore, this is considered a transfer rule by OMB and is not covered by Executive Order 13771.
In a general response to the requirements of Executive Order 13777, USDA created a Regulatory Reform Task Force, and USDA agencies were directed to remove barriers, reduce burdens, and provide better customer service both as part of the regulatory reform of existing regulations and as an ongoing approach. FSA reviewed this regulation and made changes to improve any provision that was determined to be outdated, unnecessary, or ineffective.
Executive Order 12866, as supplemented by Executive Order 13563, requires each agency to write all rules in plain language. In addition to your substantive comments on this interim rule, we invite your comments on how to make the rule easier to understand. For example:
• Are the requirements in the rule clearly stated? Are the scope and intent of the rule clear?
• Does the rule contain technical language or jargon that is not clear?
• Is the material logically organized?
• Would changing the grouping or order of sections or adding headings make the rule easier to understand?
• Could we improve clarity by adding tables, lists, or diagrams?
• Would more, but shorter, sections be better? Are there specific sections that are too long or confusing?
• What else could we do to make the rule easier to understand?
The cost-benefit assessment analyzes the costs and benefits of this interim rule. The 2018 Farm Bill, mandates changes to the CRP regulations specified in the interim rule.
Among other things, the 2018 Farm Bill extended enrollment authority to September 30, 2023, and incrementally increases overall enrollment caps from 24 million acres in FY 2019 to 27 million acres in FY 2023. The 2018 Farm Bill also sets a goal of enrolling 2 million acres of grasslands; authorizes up to $12 million in incentive payments to encourage management of CRP tree stands to improve wildlife habitat; and authorizes up to $50 million for TIP payments (including $5 million for technical assistance costs). It also revises haying and grazing rules.
The 2018 Farm Bill makes certain mandatory changes that were in the past discretionary to USDA. For example, in the past, USDA had discretion to determine whether signing incentive payments (SIPs) were offered and at what level. Under the 2018 Farm Bill, SIPs are mandatory for all new continuous sign-up practices and are set at 32.5 percent of the annual rental rate. In addition, the 2018 Farm Bill limits annual rental payments to 85 percent of average county rental rates for general signup and to 90 percent for continuous signup.
USDA continues to have discretion in certain cases. For example, the 2018 Farm Bill mandates that USDA offer one-time practice incentive payments (PIPs). USDA has discretion in setting the level of those payments, which can range up to 50 percent of the cost of installing the practice.
The 2018 Farm Bill also added two pilot programs. Under the CLEAR 30 pilot, acres in CLEAR practices expiring under the 2018 Farm Bill may be eligible for 30-year contracts. No acreage limitation is specified in the statute, although CLEAR 30 contracts are subject to the 27-million-acre CRP enrollment cap. The Soil Health and Income Protection Pilot Program covers up to 50,000 acres in the Prairie Pothole region. The program limits enrollment to the least productive croplands on the farm, enrolled lands must have been in cropland use in the three preceding years, and no more than 15 percent of the cropland on the farm can be enrolled.
Since FY 2006, CRP financial assistance outlays have averaged $1.8 billion annually. Had the 2014 Farm Bill continued, outlays would have increased over time, largely due to the increasing share of continuous sign-up enrollment, which is more expensive than general enrollment sign-up. Under the 2018 Farm Bill, financial assistance outlays are expected to average $2.2 billion annually as the acreage cap is increased and cash rents—a critical component in the CRP rental payment—have remained relatively stable and, in some cases, increased. When discounted at either 3 percent or 7 percent, annualized outlays are $2.1 billion.
The Regulatory Flexibility Act generally requires an agency to prepare a regulatory analysis of any rule whenever an agency is required by the Administrative Procedures Act or any other law to publish a proposed rule, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This rule is not subject to the Regulatory Flexibility Act because CCC and FSA are not required by the Administrative Procedure Act or any law to publish a proposed rule for this rule. The Secretary is required by section 1246 of the Food Security Act of 1985, as amended, to issue an interim rule effective on publication with an opportunity for comment. Despite the Regulatory Flexibility Act not applying to this rule, the action only affects those entities who voluntarily participate in CRP and in doing so receive its benefits. Compliance with the provisions of CRP regulations is only required for those entities who choose to participate in this voluntary program.
The environmental impacts of this final rule have been considered in a manner consistent with the provisions of the National Environmental Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council on Environmental Quality (40 CFR parts 1500-1508), and FSA regulations for compliance with NEPA (7 CFR part 799). While OMB has designated this rule as “economically significant” under Executive Order 12866, “. . . economic or social effects are not intended by themselves to require preparation of an environmental impact statement” (40 CFR 1508.14), when not interrelated to natural or physical environmental effects.
As part of this CRP rulemaking, FSA prepared a Programmatic Environmental Assessment (EA) to evaluate alternatives and anticipated impacts. The draft EA was announced through an FSA press release on September 27, 2019, and a Notice of Availability published in the
Executive Order 12372, “Intergovernmental Review of Federal Programs,” requires consultation with State and local officials that would be directly affected by proposed Federal financial assistance. The objectives of the Executive order are to foster an intergovernmental partnership and a strengthened Federalism, by relying on State and local processes for State and local government coordination and review of proposed Federal financial assistance and direct Federal development. For reasons specified in the final rule related notice regarding 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983), the programs and activities in this rule are excluded from the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials.
This rule has been reviewed under Executive Order 12988, “Civil Justice Reform.” This rule will not preempt State or local laws, regulations, or policies unless they represent an irreconcilable conflict with this rule. The rule will not have retroactive effect. Before any judicial actions may be brought regarding the provisions of this rule, the administrative appeal provisions of 7 CFR parts 11 and 780 must be exhausted.
This rule has been reviewed under Executive Order 13132, “Federalism.” The policies contained in this rule do not have any substantial direct effect on States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, except as required by law. Nor does this rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required.
This rule has been reviewed in accordance with the requirements of Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments.” Executive Order 13175 requires Federal agencies to consult and coordinate with Tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects 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.
The USDA's Office of Tribal Relations (OTR) has assessed the impact of this rule on Indian Tribes and determined that this rule does have significant Tribal implications. OTR has determined that further Tribal consultation under Executive Order 13175 is not required at this time. Tribal consultation for this rule was included in the 2018 Farm Bill consultation held on May 1-2, 2019, at the National Museum of American Indian, in Washington, DC, and on June 26-27, 2019, in Sparks, NV. The portion of the Tribal Consultation relative to this rule was conducted by Bill Northey, USDA Under Secretary for the Farm Production and Conservation mission area, as part of Title II session on May 1, 2019. If a Tribe requests additional consultation, FSA and CCC will work with OTR to ensure meaningful consultation is provided where changes, additions, and modifications are not expressly mandated by law.
Title II of the Unfunded Mandates Reform Act of 1995 requires Federal agencies to assess the effects of their regulatory actions on State, local, or Tribal governments, or the private sector. Agencies generally need to prepare a written statement, including a cost benefit analysis, for proposed and final rules with Federal mandates that may result in expenditures of $100 million or more in any 1 year for State, local, or Tribal governments, in the aggregate, or to the private sector. UMRA generally requires agencies to consider alternatives and adopt the more cost effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates as defined in Title II of UMRA for State, local, or Tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.
The title and number of the Federal Domestic Assistance Program found in the Catalog of Federal Domestic Assistance to which this rule applies is 10.069—Conservation Reserve Program.
FSA and CCC are committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
Acreage allotments, Agriculture, Environmental protection, Natural resources, Reporting and recordkeeping requirements, Soil conservation, Technical assistance, Water resources, Wildlife.
For the reasons discussed above, CCC revises 7 CFR part 1410 to read as follows:
15 U.S.C. 714b and 714c; 16 U.S.C. 3801-3847.
(a) The Conservation Reserve Program (CRP) is administered under the general supervision and direction of the Executive Vice President, Commodity Credit Corporation (CCC), the Administrator, Farm Service Agency (FSA), or a designee, or the Deputy Administrator, FSA; and will be carried out by the FSA State and county committees (“State committees” and “county committees,” respectively).
(b) State executive directors, county executive directors, and State and county committees do not have the authority to modify or waive any of the provisions in this part unless specifically authorized by the Deputy Administrator.
(c) The State committee may take any action authorized or required by this part to be taken by the county committee, but which has not been taken by such county committee, including, but not limited to:
(1) Correct or require a county committee to correct any action taken by such county committee that is not in accordance with this part; or
(2) Require a county committee to withhold taking any action that is not in accordance with this part.
(d) No delegation of authority herein to a State or county committee will preclude the Executive Vice President, CCC, the Administrator, FSA, or a designee, or the Deputy Administrator, from determining any question arising under this part or from reversing or modifying any determination made by a State or county committee.
(e) Data furnished by producers will be used to determine eligibility for CRP benefits. Furnishing the data is voluntary; however, the failure to provide data could result in CRP benefits being withheld or denied.
(f) Notwithstanding other provisions of this section, the suitability of land for permanent vegetative or water cover, factors for determining the likelihood of improved water quality, and adequacy of the planned practice to achieve desired objectives will be determined by the Natural Resource Conservation Service (NRCS) or other sources approved by the Deputy Administrator, in accordance with the Field Office Technical Guide (FOTG) of NRCS or other guidelines deemed appropriate by NRCS. In no case will such determination compel the Deputy Administrator to execute a CRP contract that the Deputy Administrator does not believe will serve the purposes of CRP established by this part. Any approved technical authority will use CRP guidelines established by the Deputy Administrator.
(g) The regulations in this part apply to all CRP contracts approved after December 6, 2019.
(a) The definitions in part 718 of this title apply to this part and all documents issued in accordance with this part, except as otherwise provided in this section.
(b) The following definitions also apply to this part:
(i) Any crop planted and produced by annual tilling of the soil or on an annual basis by one-trip planters;
(ii) Sugarcane planted or produced in a State; or
(iii) Alfalfa and other multi-year grasses and legumes grown in a rotation practice as approved by CCC.
(i) American Indians or Alaskan Natives;
(ii) Asians or Asian-Americans;
(iii) Blacks or African Americans;
(iv) Hispanics; and
(v) Native Hawaiians or other Pacific Islanders.
(i) Technical expertise, information, and tools necessary for the conservation of natural resources on land;
(ii) Technical services provided directly to farmers, ranchers, and other eligible entities, including, but not limited to, conservation planning, technical consultation, and assistance with design and implementation of conservation practices; and
(iii) Technical infrastructure, including activities, processes, tools, and agency functions needed to support delivery of technical services, including, but not limited to, technical standards, resource inventories, training, data, technology, monitoring, and effects analyses.
(a) Under CRP, CCC will enter into contracts with eligible producers to convert eligible land to an approved cover during the contract period in return for financial and technical assistance.
(b) A producer must obtain and adhere, for the contract period, to a conservation plan prepared in accordance with CCC guidelines and the other provisions of § 1410.22.
(c) The objectives of the CRP are to cost-effectively reduce water and wind erosion, protect the Nation's long-term capability to produce food and fiber, reduce sedimentation, improve water quality, create and enhance wildlife habitat, and other objectives including, as appropriate, addressing issues raised by State, regional, and national conservation initiatives and encouraging more permanent conservation practices, including, but not limited to, tree planting.
(a) Except as provided in paragraph (b) of this section the maximum cropland acreage that may be placed in CRP and the wetland reserve easements of WRP and ACEP, as appropriate, may not exceed 25 percent of the total cropland in the county. No more than 15 percent of the cropland in a county may be subject, in the aggregate, to a wetland reserve easement.
(b) The restrictions in paragraph (a) of this section:
(1) May be waived by CCC as follows:
(i) If such waiver would not adversely affect the local economy of the county and that operators in the county are having difficulties complying with conservation plans implemented under part 12 of this title; or
(ii) If the cropland, in a county, is enrolled under provisions as specified in § 1410.90, provided that the county government concurs with such waiver.
(2) Do not apply to cropland that is:
(i) Subject to an easement and enrolled in CRP as a shelterbelt or windbreak; or
(ii) Designated with subclass w in the land capability classes IV through VIII because of severe use limitations due to soil saturation or inundation, as determined by NRCS.
(c) The restrictions on acreage enrollment in this section are in addition to any other restrictions imposed by law.
(a) To be eligible to enter into a CRP contract in accordance with this part, a person must be an owner, operator, or tenant of eligible land and:
(1) If an operator of eligible land seeks to participate without the owner's participation, then such operator must have operated such land for either at least 12 months prior to the close of the applicable signup period for enrollments under announced signup periods, or for at least 12 months prior to submitting an offer under continuous signup periods as provided in § 1410.30(b); further, such operator must provide satisfactory evidence to CCC that such operator will be in control of such eligible land for the full term of the contract period;
(2) If an owner of eligible land, such owner must have owned such land for either at least 12 months prior to the close of the applicable signup period for enrollment under announced signup periods, or for at least 12 months prior to submitting an offer for continuous signup periods as provided in § 1410.30(b), unless:
(i) The new owner acquired such land by will or succession as a result of the death of the previous owner;
(ii) The only ownership change in the 12-month period occurred due to foreclosure on the land, and the owner of the land, immediately before the foreclosure, exercised a timely right of redemption from the mortgage holder in accordance with State law; or
(iii) The circumstances of the acquisition present adequate assurance that a new owner of such eligible land did not acquire such land for the purpose of placing it in the CRP; or
(3) If a tenant, then the participation of an eligible owner or operator is also required.
(b) The provisions of this section do not apply to beginning, socially disadvantaged, or veteran farmers or ranchers who are eligible participants in the Transition Incentives Program as specified in § 1410.64.
(a) The provisions of paragraphs (b), (c), and (d) of this section do not apply to:
(1) The Transition Incentives Program as specified in § 1410.64;
(2) The Soil Health and Income Protection Pilot Program as specified in § 1410.70; or
(3) The Clean Lakes, Estuaries, and Rivers 30 (CLEAR 30) Pilot Program as specified in § 1410.80.
(b) To be eligible for CRP, land must be one of the following:
(1) Cropland that:
(i) Has been annually planted or considered planted to an agricultural commodity in 4 of the 6 crop years from 2012 through 2017, provided that field margins that are incidental to the planting of crops may also be considered qualifying cropland; and
(ii) Is physically and legally capable of being planted in a normal manner to an agricultural commodity;
(2) Marginal pasture land that:
(i) Is located immediately adjacent and parallel to an eligible stream, other water body, or wetland, but excluding such areas as gullies or sod waterways or similar areas; and
(ii) Is capable, when permanent grass, forbs, shrubs, or trees are grown, or when planted with appropriate vegetation for the area, including vegetation suitable for wetland restoration or wildlife habitat, of either substantially reducing sediment or nutrient runoff that otherwise would be delivered to the adjacent eligible stream or water body, or serving other water quality purposes;
(3) Acreage enrolled in CRP during the final year of the contract period, unless such land is federally-owned, provided the scheduled expiration date of the current CRP contract is before the effective date of the new CRP contract;
(4) Land that meets the criteria specified in paragraph (d) of this section; or
(5) Land that meets all of the criteria in paragraphs (b)(5)(i) through (iii) of this section, which land will then be considered as land enrolled in CRP in the final year of the contract period, and therefore will be eligible to be offered for enrollment in CRP until September 30, 2020, provided the effective starting date of the new CRP contract is on or before October 1, 2020:
(i) The land was enrolled in CRP under a CRP contract, with a contract period of greater than 14 years, that expired on September 30, 2017, or September 30, 2018;
(ii) There was no opportunity for re-enrollment of the land in CRP prior to the end of the contract period; and
(iii) The conservation practice and approved cover under the expired CRP contract has been maintained in accordance with the terms of the expired CRP contract.
(c) Land qualifying under paragraph (b)(1) of this section must also meet at least one of the following criteria to be eligible for CRP:
(1) Be a field or portion of a field that:
(i) Is suitable for use as a permanent wildlife habitat, prairie strip, contour grass strip, grass waterway, field windbreak, shelterbelt, living snowfence, field border, or other suitable uses;
(ii) Poses an off-farm environmental threat or a threat of continued degradation of productivity due to soil salinity if permitted to remain in production, including any applicable recharge area;
(iii) Is an area determined eligible for CRP based on wetland or wellhead protection area criteria; or
(iv) Is suitable for use as a filter strip or riparian buffer, and the land:
(A) Is located immediately adjacent and parallel to an eligible stream, other water body, or wetland, but excluding such areas as gullies or sod waterways or similar areas; and
(B) Is capable, when permanent grass, forbs, shrubs, or trees are grown, or when planted with appropriate vegetation for the area, including vegetation suitable for wetland restoration, of either substantially reducing sediment or nutrient runoff that otherwise would be delivered to the adjacent eligible stream, or water body, or serving other water quality purposes;
(2) Be non-irrigated or irrigated cropland that would facilitate a net savings in groundwater or surface water of the agricultural operation of the producer, only as approved by CCC;
(3) Be a portion of the field not enrolled in CRP, if either:
(i) More than 50 percent of the field is enrolled as a riparian buffer or filter strip; or
(ii) More than 75 percent of the field is enrolled as a conservation practice other than a riparian buffer or filter strip; and
(iii) With respect to both paragraphs (c)(3)(i) and (ii) of this section, the remainder portion of the field is determined to be infeasible to farm and enrolled at an annual payment rate not to exceed the maximum annual calculated soil rental rate approved by CCC;
(4) Be contributing to the degradation of water quality or posing an on-site or off-site environmental threat to water quality if such land remains in production;
(5) Be devoted to certain covers that are established and maintained according to the FOTG, provided such land is not required to be maintained as such under any life-span obligations;
(6) Have an EI of greater than or equal to 8 calculated by using the weighted average of the EI's of soil map units within the acreage offered;
(7) Be within a State or federally identified wellhead protection area;
(8) Be within a designated conservation priority area; or
(9) Notwithstanding paragraph (b)(1) of this section, be cropland devoted to a perennial crop; such cropland will only be eligible for continuous signup practices authorized by § 1410.30(b) and practices authorized under a Conservation Reserve Enhancement Program agreement as specified in § 1410.90.
(d) Notwithstanding paragraph (b) or (c) of this section, to be eligible under a grassland signup as specified in § 1410.30(c), the land must be one of the following:
(1) Land that:
(i) Contains forbs or shrubland, including improved rangeland and pastureland, for which grazing is the predominant use;
(ii) Is located in an area historically dominated by grassland; and
(iii) Is able to provide habitat for animal and plant populations of significant ecological value if the land is retained in its current use or restored to a natural condition; or
(2) Land that is enrolled in CRP in the final year of the contract period, provided the scheduled expiration date of the current CRP contract is the day before the effective starting date of the new CRP contract, and the provisions of paragraph (d)(1) of this section are met.
(e) Notwithstanding paragraphs (b), (c), and (d) of this section and §§ 1410.64, 1410.70, and 1410.80, land will be ineligible for enrollment if the land is one of the following:
(1) Federally-owned land;
(2) Land on which the use of the land is either restricted through deed or other restriction prior to enrollment in CRP prohibiting the production of agricultural commodities, or requires any resource-conserving measures, during any part of the contract period;
(3) Land already enrolled in the CRP, unless authorized by paragraph (b)(3) of this section and § 1410.80;
(4) Land for which Tribal, State, or other local laws, ordinances, or other regulations require any resource conserving or environmental protection measures or practices, and the owners or operators of such land have been notified in writing of such requirements, except, such land may be eligible for enrollment in CRP if:
(i) The land is, at the time of offer, enrolled in CRP under an approved Conservation Reserve Enhancement Program agreement that was in effect on December 20, 2018, and was initially approved before January 1, 2014, including any amended or successor
(ii) The land is such other land in the State that CCC determines is both otherwise eligible for CRP and appropriate for enrollment in CRP; and
(iii) The land is enrolled in exchange for a 25 percent reduction to the annual rental payment that would otherwise be paid for such land were no such laws, ordinances, or regulations in effect;
(5) Land that is required to be used, or otherwise dedicated to mitigate actions undertaken, or planned to be undertaken, on other land, or to mitigate other actions taken by landowners or operators; or
(6) Land devoted to hardwood trees that has been re-enrolled in CRP one or more times while it was devoted to hardwood trees; however, such ineligibility does not extend to:
(i) Forested wetlands enrolled under a Conservation Reserve Enhancement Program agreement or under a continuous signup as specified in § 1410.30(b);
(ii) Riparian buffers; and
(iii) Shelterbelts.
(a) In general, except as provided in paragraphs (b) and (c) of this section and §§ 1410.70 and 1410.80, the CRP contract period will be for a term of at least 10 years, and up to no more than 15 years.
(b) The CRP contract period for land enrolled under a grassland signup as specified in § 1410.30(c) will be for a term of 10 years or 15 years, as requested by the producer.
(c) CRP contracts for land devoted to hardwood trees, shelterbelts, windbreaks, and wildlife corridors will be for a term of 10 years to 15 years, as requested by the producer.
(d) All CRP contracts will expire on September 30 of the final calendar year of the contract period.
(a) Subject to CCC approval, a State agency may submit proposals for conservation priority areas within guidelines established by CCC. Such submission must clearly define conservation and environmental objectives, and provide analysis of how CRP can cost-effectively address such objectives. Generally, the total acreage of all conservation priority areas, in aggregate, will not total more than 25 percent of the cropland in a State unless there are identified and documented exceptional environmental needs.
(b) A region may be eligible for designation as a priority area only if the region has actual significant adverse water quality, wildlife habitat, or other natural resource impacts related to activities of agricultural production, or if the designation helps agricultural producers to comply with Federal and State environmental laws.
(c) Conservation priority area designations will expire after 5 years unless re-designated, except they may be withdrawn before 5 years by CCC.
(d) In those areas designated as conservation priority areas under this section, cropland is considered eligible for enrollment according to § 1410.6(c)(8) based on identified environmental concerns. These concerns may include water quality, such as assisting agricultural producers to comply with nonpoint source pollution requirements or wildlife habitat (especially for threatened and endangered species or those species that may become threatened and endangered).
(a) An owner or operator who entered into a CRP contract on land that is suitable for restoration to wetlands or that was restored to wetlands while under such CRP contract, may, if approved by CCC, subject to any restrictions as may be imposed by law, apply to transfer such land from CRP to a wetland reserve easement under WRP or ACEP, as appropriate. Transferred land will be terminated from CRP effective the day a WRP or ACEP wetland reserve easement is filed. Participants will receive a prorated CRP annual payment for the part of the year the land was enrolled in CRP as specified in § 1410.42. Cost-share payments or applicable incentive payments need not be refunded unless specified by CCC.
(b) [Reserved]
(a) In addition to other allowable enrollments, eligible land may be enrolled in the CRP through the Farmable Wetlands Program (FWP).
(b) Eligible owners and operators may enroll land in FWP provided that the land:
(1) Is a wetland, including a converted wetland, that has been planted or considered planted to an agricultural commodity during at least 3 of the immediately preceding 10 crop years and that does not exceed the size limitations specified in paragraph (d) of this section;
(2) Is enrolled to be a constructed wetland that is to be developed so as to receive surface and subsurface flow from row crop agricultural production and is designed to provide nitrogen removal in addition to other wetland functions and that does not exceed the size limitations specified in paragraph (d) of this section;
(3) Was a commercial pond-raised aquaculture facility in any year during the period of calendar years 2002 through 2007; or
(4) Was cropped, after January 1, 1990, and before December 31, 2002, at least 3 of 10 crop years, was subject to the natural overflow of a prairie wetland, and does not exceed the size limitations specified in paragraph (d) of this section.
(c) In addition, land may be enrolled through FWP if the land is buffer acreage that provides protection for and is contiguous to land otherwise eligible under paragraph (b) of this section, subject to the provisions of paragraph (d) of this section.
(d) Total enrollment in CRP under this section may not exceed 750,000 acres. In addition, the maximum size of land enrolled under this section may not exceed:
(1) 40 contiguous acres per tract, for land made eligible by paragraph (b)(1) of this section;
(2) 40 contiguous acres per tract, for land made eligible by paragraph (b)(2) of this section;
(3) 20 contiguous acres for land made eligible by paragraph (b)(4) of this section, not to exceed 40 acres per tract; or
(4) A suitable buffer for lands added under paragraph (c) of this section.
(e) All participants subject to a CRP contract under this section must agree to establish and maintain, as appropriate, the practice described in paragraph (b) of this section in accordance with FOTG including, as appropriate, restoring the hydrology of the wetland and establishing vegetative cover (which may include emerging vegetation in water and bottomland hardwoods, cypress, and other appropriate tree species in shallow water areas).
(f) Offers for contracts under this section must be submitted under continuous signup provisions as specified in § 1410.30(b).
(g) The annual rental payment for land enrolled under this section will be determined in accordance with the provisions of § 1410.42 for cropland. In addition, any incentive payments in the form of annual rental payments provided for enrolling filter strips under
(a) Land may be enrolled in CRP under a grassland signup as specified in §§ 1410.30(c) and 1410.31(e) and (f).
(b) Grassland enrollments will generally be administered under all the provisions of this part, except where specific provisions apply only to grassland enrollments.
(c) Land enrolled in CRP under a grassland signup may be eligible for the Transition Incentives Program as specified in § 1410.64.
(d) The following activities may be permitted on grassland enrolled in CRP according to an approved conservation plan:
(1) Common grazing practices, including maintenance and necessary cultural practices, in a manner that is consistent with maintaining the viability of grassland, forb, and shrub species appropriate to the locality;
(2) Haying, mowing, or harvesting for seed production, subject to appropriate restrictions during the primary nesting season;
(3) Fire pre-suppression, fire-related rehabilitation, and construction of firebreaks;
(4) Grazing related activities, such as fencing and livestock watering facilities; and
(5) Other activities, when the manner, number, intensity, location, operation, and other features associated with such activity will not adversely affect the grassland resources or related conservation values protected under the CRP contract.
(a) All participants subject to a CRP contract must agree to:
(1) Carry out the terms and conditions of such CRP contract;
(2) Implement the conservation plan, which is part of such CRP contract, in accordance with the schedule of dates included in such conservation plan unless CCC determines that the participant cannot fully implement the conservation plan for reasons beyond the participant's control, and CCC agrees to a modified plan; however, a contract will not be terminated for failure to establish an approved vegetative or water cover on the land if:
(i) The failure to plant or establish such approved cover was due to excessive rainfall, flooding, or drought;
(ii) The land subject to the CRP contract on which the participant could practicably plant or establish to such approved cover, is planted or established to such approved cover; and
(iii) The land on which the participant was unable to plant or establish such approved cover is planted or established to such approved cover after the wet or drought conditions that prevented the planting or establishment subside;
(3) Establish temporary vegetative cover either when required by the conservation plan or if the permanent approved cover cannot be timely established;
(4) Comply with part 12 of this title;
(5) Not allow grazing, harvesting, or other commercial or agricultural use of the land subject to such CRP contract, or the cover on such land, except as specified in this part;
(6) Establish and maintain the required vegetative or water cover and the required practices on the land subject to such CRP contract, and take other actions that may be required by CCC to achieve the desired environmental benefits, and to maintain the productive capability of the soil throughout the contract period;
(7) Comply with noxious weed laws of the applicable State or local jurisdiction on such land;
(8) Control, on land subject to such CRP contract, all weeds, insects, pests, and other undesirable species to the extent necessary to ensure that the establishment and maintenance of the approved cover as specified in the CRP conservation plan, and to avoid an adverse impact on surrounding land, taking into consideration water quality, wildlife, and other similar conservation factors;
(9) Be jointly and severally responsible, if the participant has a share of the annual rental payment greater than zero, with the other participants on the CRP contract, for compliance with the provisions of such CRP contract and the provisions of this part, and for any refunds or payment adjustments that may be required for violations of any of the terms and conditions of the CRP contract and this part; and
(10) On land devoted to trees, excluding windbreaks and shelterbelts, carry out thinning and similar conservation practices, as provided in the conservation plan to enhance the conservation benefits and wildlife habitat resources applicable to the CRP conservation practice on the land, and to promote forest management.
(b) [Reserved]
CCC will:
(a) Share up to 50 percent of the cost with participants of installing eligible practices specified in the conservation plan for which CCC determines that cost sharing is appropriate and in the public interest, and at the levels and rates of cost-sharing determined in accordance with the provisions of this part; and
(b) Pay to eligible participants for a period of years not in excess of the contract period an annual rental payment, including applicable and available incentive payments, in such amounts as may be specified in the CRP contract.
(a) The producer must obtain a CRP conservation plan that complies with CCC guidelines and is approved by NRCS.
(b) The practices included in the conservation plan and agreed to by the participant must cost-effectively reduce erosion necessary to maintain the productive capability of the soil, improve water quality, protect wildlife or wetlands, protect a public wellhead, improve grassland, or achieve other environmental benefits as applicable. The participant must undertake maintenance activities on the land as needed throughout the contract period to implement the conservation plan.
(c) If applicable, a tree planting plan or forest stewardship plan must be developed and included in the conservation plan. Such tree planting or forest stewardship plan may allow up to 3 years to complete plantings if 10 or more acres of hardwood trees are to be established.
(d) If applicable, the conservation plan must address the goals included in the conservation priority area designation authorized under § 1410.8.
(e) Except for land enrolled under a grassland signup, as specified in § 1410.30(c), management activities must be conducted as needed throughout the contract period in accordance with an approved conservation plan. However, the planned management activity is not required in the case where a natural disaster or adverse weather event occurs that has the same effect of the planned management activity. CCC will not provide any cost-share payment for any management activities.
(a) Eligible practices are those CRP practices specified in the conservation plan that meet all standards needed to cost-effectively:
(1) Establish permanent vegetative or water cover, including introduced or native species of grasses and legumes, trees, permanent wildlife habitat, and grassland improvements;
(2) Meet other environmental benefits, as applicable, for the CRP contract period; and
(3) Accomplish other purposes of CRP.
(b) Water cover is eligible cover for purposes of paragraph (a) of this section only if approved by CCC for purposes such as the enhancement of wildlife or the improvement of water quality. Such water cover will not include ponds for the purpose of watering livestock, irrigating crops, or raising aquaculture for commercial purposes.
(a) Offers for CRP contracts may be submitted only during signup periods as announced periodically by CCC, but not less often than once each year. Acceptability of otherwise eligible offers will be determined as provided in § 1410.31.
(b) Notwithstanding paragraph (a) of this section, CCC may hold a continuous signup for land to be devoted to particular uses. Generally, continuous signup is limited to those offers that provide appropriate environmental benefits, as determined by CCC, or that would otherwise rank highly under § 1410.31(b) and may include high priority practices including, but not limited to, filter strips, riparian buffers, shelterbelts, field windbreaks, living snowfences, grass waterways, shallow water areas for wildlife, salt-tolerant vegetation, prairie strips, field borders, and practices to benefit certain approved wetlands and public wellhead protection areas.
(c) Notwithstanding paragraph (a) or (b) of this section, offers to enroll acreage specified in § 1410.6(d) may be submitted only during signup periods as announced by CCC. At least 1 ranking period will be announced subsequent to the announcement of offers specified in paragraph (a) of this section. Eligible offers will be evaluated and ranked as provided in § 1410.31(e) and (f).
(a) Producers may submit offers for the amounts they are willing to accept as rental payments to enroll their acreage in CRP. The offers will, to the extent practicable, be evaluated on a competitive basis in which the offers selected will be those where the greatest environmental benefits relative to cost are generated, and provided that the offer is not in excess of the maximum acceptable payment rate established by CCC for the acreage offered. Acceptance or rejection of any offer, however, will be in the sole discretion of CCC and offers may be rejected for any reason as determined needed to accomplish the goals of CRP.
(b) In evaluating offers, different factors may be considered by CCC for priority purposes to accomplish the goals of CRP. Such factors may include, but are not limited to:
(1) Soil erosion;
(2) Water quality (both surface and ground water);
(3) Wildlife benefits;
(4) Soil productivity;
(5) Likelihood that enrolled land will remain in non-agriculture use beyond the contract period, considering, for example, tree planting, permanent wildlife habitat, or commitments by a participant to a State or other entity to extend the conservation plan; and
(6) Cost of enrolling acreage in CRP.
(c) Notwithstanding paragraph (b) of this section, when all other appropriate factors are equivalent, CCC may give preference to offers from residents of the county or contiguous county where the offered land is located.
(d) Notwithstanding paragraph (a) of this section, acreage determined eligible for continuous signup, as provided in § 1410.30(b), may be automatically accepted in CRP if the:
(1) Land is eligible under § 1410.6;
(2) Producer is eligible under § 1410.5; and
(3) Producer accepts either the maximum payment rate CCC is willing to offer to enroll the acreage in CRP or a lesser rate.
(e) For grassland signup offers:
(1) Notwithstanding paragraph (a) of this section, offers to enroll in CRP under grassland signup, as specified in § 1410.30(c), will be evaluated and ranked during an announced ranking period, on a competitive basis in which the offers selected will be those where the greatest environmental benefits relative to cost are generated, and further provided that:
(i) The offered land is eligible under § 1410.6(d);
(ii) The producer is eligible under § 1410.5;
(iii) The producer accepts either the maximum payment rate CCC is willing to offer to enroll the acreage in CRP, or a lesser rate; and
(iv) The offer ranks above the minimum ranking level needed for offer acceptance, as determined by CCC.
(2) Notwithstanding paragraph (e)(1) of this section, acceptance or rejection of any offer will be at the sole discretion of the CCC, and offers may be rejected for any reason as determined necessary and appropriate to accomplish the goals of CRP.
(f) In ranking and evaluating grassland signup offers, different factors may be considered by CCC for priority purposes to accomplish the goals of CRP. Such factors may include, but are not limited to:
(1) Existence of expiring CRP land;
(2) Land at risk of development or conversion; and
(3) Land of ecological significance, including land that:
(i) May assist in the restoration of threatened or endangered species under the Endangered Species Act of 1973;
(ii) May assist in preventing a species from being listed as a threatened or endangered species under the Endangered Species Act of 1973; or
(iii) Improves or creates wildlife habitat corridors.
(a) In order to enroll land in CRP, the producer must enter into a contract with CCC.
(b) The CRP contract is comprised of:
(1) The terms and conditions for participation in CRP; and
(2) The CRP conservation plan.
(c) For offers:
(1) In order to enter into a CRP contract, the producer must submit an offer to participate as provided in § 1410.30.
(2) An offer to enroll land in CRP will be irrevocable for such period as is determined and announced by CCC. The producer will be liable to CCC for liquidated damages if the producer revokes an offer during the period in which the offer is irrevocable unless CCC determines to waive such liquidated damages.
(d) The CRP contract must, within the dates established by CCC, be signed by:
(1) The producer; and
(2) The owners of the land to be enrolled in the CRP and other eligible producers, if applicable.
(e) For the termination of CRP contracts:
(1) CRP contracts may be terminated in whole or in part by CCC before the end of the contract period if:
(i) The owner loses control of or transfers all or part of the acreage under the CRP contract and the new owner does not wish to continue the CRP contract;
(ii) The participant voluntarily requests in writing to terminate the contract, in whole or in part, and obtains approval from CCC;
(iii) The participant is not in compliance with the terms and conditions of the CRP contract;
(iv) All or part of the acreage under the CRP contract is enrolled in another
(v) The CRP practice fails or is not established after a certain time period and the cost of restoring the practice outweighs the benefits received from the restoration;
(vi) The CRP contract was approved based on erroneous eligibility determinations; or
(vii) Such termination is needed in the public interest, or is otherwise necessary and appropriate to further the goals of CRP.
(2) A participant whose CRP contract has been terminated, in whole or in part in accordance with paragraph (e)(1) of this section, must refund all or part of the payments made by CCC with respect to the CRP contract, plus interest, and must also pay liquidated damages as provided for in the CRP contract, if directed to do so by CCC.
(f) If a participant transfers all or part of the right and interest in, or right to occupancy of, land subject to a CRP contract and the new owner or operator becomes a successor to such contract within 60 days, or such other time as CCC determines to be appropriate, then such participant will not be required to refund previous payments received under the contract; provided, that no refunds of previous payments received will be required if such participant sells such land to, or such land is purchased for, the United States Fish and Wildlife Service; provided further, that no refunds of previous payments will be required if the person or entity to whom all or part of the right and interest in, or right of occupancy of, land subject to such contract reaches an agreement with CCC to modify the contract in a way that is consistent with the objectives of the program.
(g) The participants on a CRP contract will not be in violation of the terms of the CRP contract if:
(1) During the final year of the CRP contract period the land is enrolled in the Environmental Quality Incentives Program or Conservation Stewardship Program, as specified in parts 1466 and 1470 of this chapter, and the participant begins establishment of a practice under such programs; or
(2) During the 3 years prior to the end of the CRP contract period, the participant begins the certification process under the Organic Foods Production Act of 1990.
(a) As agreed between CCC and the participant, a CRP contract may be modified in order to:
(1) Decrease acreage in CRP, provided that such modification will be considered a partial termination for purposes of § 1410.32(e);
(2) Permit the production of an agricultural commodity under exceptional circumstances during a crop year on all or part of the land subject to the CRP contract;
(3) Facilitate the practical administration of CRP; or
(4) During the last 2 years of the CRP contract period, facilitate a transition of land subject to the contract to a beginning, socially disadvantaged, or veteran farmer or rancher for the purpose of returning some or all of the land into production using sustainable grazing or crop production methods. For purposes of this paragraph (a)(4), “sustainable grazing and crop production methods” will be considered methods that would be designed as part of an overall plan defined on an ecosystem level to be useful in the creation of integrated systems of plant and animal production practices that have a site specific application that would:
(i) Enhance the environment and the natural resource base;
(ii) Use nonrenewable resources efficiently; and
(iii) Sustain the economic viability of the farming operation.
(b) CCC may modify CRP contracts to add or substitute practices when:
(1) The installed practice failed to adequately provide for the desired environmental benefit through no fault of the participant; or
(2) The installed measure deteriorated because of conditions beyond the control of the participant; and
(3) Another practice will achieve at least the same level of environmental benefit.
(c) Offers to extend contracts may be made as allowed by law.
(d) For the transfer of land into WRP, ACEP, or other Federal or State programs:
(1) CCC may terminate or modify a CRP contract in whole or in part when the land is transferred into WRP, ACEP, or other Federal or State programs.
(2) For contracts terminated or modified for enrollment in other Federal or State programs, participants will not be required to refund CRP payments or pay interest and liquidated damages to CCC, as otherwise required under this part.
(3) Notwithstanding paragraph (d)(2) of this section, participants must refund CRP signup incentive payments if land in CRP containing a wetland reserve easement is enrolled in ACEP.
(e) During the final year of the CRP contract period, CCC will allow an owner or operator to make conservation and land improvements for economic use that facilitate maintaining protection of enrolled land after expiration of the CRP contract, but only under the following conditions:
(1) All provisions are identified in an approved CRP conservation plan;
(2) Land improved in accordance with paragraph (e) of this section will not be eligible to be re-enrolled in CRP for 5 years after end of the CRP contract period; and
(3) CCC will reduce the final annual rental payment otherwise payable under the CRP contract by an amount commensurate with the economic value of the activity carried out.
(a) Cost-share payments will be made available to the participant if an eligible practice, or an identifiable unit thereof, including fencing and water distribution, has been installed in compliance with the appropriate standards and specifications. Cost-share payments are not subject to the provisions of § 1410.42(d).
(b) Except as provided in paragraph (c) of this section, cost-share payments will not be made to the same owner or operator on the same acreage for any eligible practices that have been previously established, or for which such owner or operator has received cost-share assistance from any other Federal agency.
(c) Cost-share payments may be authorized for the replacement or restoration of practices for which cost-share payments have been previously allowed under CRP, only if:
(1) Replacement or restoration of the practice is needed to achieve adequate erosion control, enhance water quality, wildlife habitat, or increase protection of public wellheads, or other conservation measures approved by CCC;
(2) The failure of the original practice was due to reasons beyond the control of the participant; and
(3) The benefits that would be received from the replacement or restoration of the practice outweighs the cost of replacing or restoring the practice.
(d) Limitations on cost-share payments include:
(1) The cost-share payment made to a participant will not exceed the participant's actual contribution to the eligible costs of establishing the practice.
(2) The amount of the cost-share payments, including practice incentive payments, may not be an amount that, when added to such assistance from other sources, exceeds 100 percent of
(e) CCC will not make cost-share payments with respect to a CRP contract if any other Federal cost-share assistance has been, or is being, made with respect to the land subject to such CRP contract. Participants must refund to CCC all cost-share payments received under this part if other Federal cost-share assistance is received with respect to the same land.
(f) CCC may make cost-share payments for thinning of existing tree stands to benefit wildlife habitat and other resource conditions on enrolled land.
(g) In addition to cost-share payments, a practice incentive payment will be made available to a participant to whom CCC has made a cost-share payment after a determination that an eligible practice has been installed in compliance with the appropriate standards and specifications. The practice incentive payment will be considered a cost-share payment for purposes of this part, and is not subject to the provisions of § 1410.42(d). A practice incentive payment will be provided only for land enrolled under:
(1) Continuous sign-up as provided in § 1410.30(b); or
(2) The Conservation Reserve Enhancement Program as provided in § 1410.90.
(a) CCC will not pay more than 50 percent of either the actual or average cost of installing eligible practices specified in the conservation plan.
(b) The average cost of performing a practice may be based on recommendations from the State Technical Committee. Such cost may be the average cost in a State, a county, or a part of a State or county.
(c) If there is any other sources of cost-share assistance:
(1) A participant may, in addition to any payment under this part, receive cost-share assistance, rental or easement payments, tax benefits, or other payments from a State or a private organization in return for enrolling lands in CRP.
(2) A participant may not receive or retain CRP cost-share payments if other Federal cost-share assistance is provided for such acreage under any law.
(d) Notwithstanding paragraphs (a) and (b) of this section, cost-share payments for eligible seed related to the establishment of approved cover will not exceed 50 percent of the actual cost of the eligible seed mixture.
(e) Practice incentive payments will not exceed an amount equal to 50 percent of the actual cost of installing the eligible practice specified in the conservation plan.
(a) Subject to the availability of funds, annual rental payments will be made in such amount and in accordance with such time schedule as specified in the CRP contract.
(b) Annual rental payments are based on a weighted average soil rental rate, marginal pastureland rental rate, or grassland rate, as appropriate, and may include an incentive payment as a portion of the annual payment for specified practices. A per-acre national maximum rental payment rate may also be established by CCC for certain categories of CRP offers and contracts.
(c) The annual rental payment will be divided among the participants on a CRP contract as agreed to in such CRP contract.
(d) Limitations on annual rental payments include:
(1) The maximum amount of annual rental payments that a person or entity may receive, directly or indirectly, under CRP for any fiscal year must not exceed $50,000. The regulations in part 1400 of this chapter will be used to determine if the limit has been reached or exceeded.
(2) Notwithstanding paragraph (d)(1) of this section, annual rental payments received by a rural water district or association for land enrolled in CRP for the purpose of protecting a wellhead may exceed $50,000.
(e) In the case of a contract succession, annual rental payments will be divided between the predecessor and the successor participants as agreed to among the participants and approved by CCC. If there is no agreement among the participants, annual rental payments will be divided in such manner deemed appropriate by CCC, and such distribution may be prorated based on the actual days of ownership of the property by each party.
(f) CCC will prepare a schedule for each county that shows the maximum soil rental rate CCC may pay and which may be supplemented to reflect special contract requirements. Such schedule may be calculated for cropland based on the relative productivity of soils within the county using NRCS data and local FSA average cash rental estimates. For marginal pastureland, rental rates will be based on estimates of the prevailing rental values of marginal pastureland in riparian areas. Grassland rental rates will be based on not more than 75 percent of the estimated grazing value of the land. The schedule will be available in the local FSA office and will indicate, when appropriate, that:
(1) Offers by producers who request rental payments greater than the maximum payment rate for their offer will be rejected;
(2) Offers submitted under continuous signup authorized at § 1410.30(b) may be accepted without further evaluation when the requested payment rate is less than or equal to the maximum payment rate for the offer; and
(3) Otherwise qualifying offers will be ranked competitively based on factors established under § 1410.31 in order to provide the most cost-effective environmental benefits.
(g) In the case of an owner or operator who transfers acreage to a wetland reserve easement in accordance with § 1410.10, annual rental payments will be prorated based on the actual number of days the transferred acreage was enrolled in CRP.
(a) Benefits under this part will not be available to persons or entities whose average adjusted gross income exceeds $900,000 for the 3 taxable years preceding the most immediately preceding complete taxable year, or who otherwise do not meet the AGI requirements specified in part 1400 of this chapter.
(b) The limit specified in paragraph (a) of this section may be waived in accordance with part 1400, subpart F, of this chapter.
(a) A signup incentive payment will be made to eligible participants only for the initial enrollment of certain land that is enrolled under:
(1) A continuous signup authorized in § 1410.30(b) for land to be devoted to particular uses as determined by CCC; and
(2) A Conservation Reserve Enhancement Program as specified in § 1410.90 for land to be devoted to particular uses as determined by CCC.
(b) The signup incentive payment will be:
(1) An amount equal to 32.5 percent of the amount of the first annual rental payment for the land referred to in paragraph (a) of this section, as determined by CCC;
(2) Divided among the participants on a CRP contract in accordance with their share of the annual rental payment as agreed to in such CRP contract;
(3) Considered an annual rental payment and thus subject to the provisions in § 1410.42(d); and
(4) Made only after the CRP contract is approved by CCC.
(c) A signup incentive payment will not be made for land that was previously enrolled in CRP or land currently enrolled in CRP that is re-enrolled.
(d) CCC may make incentive payments to owners and operators of enrolled land in an amount sufficient to encourage proper tree thinning and other practices to improve the condition of resources, promote forest management, or enhance wildlife habitat. Incentive payments for such tree thinning and other practices will:
(1) Not exceed 100 percent of the total cost of the practice;
(2) Only be available for practices outlined in the tree planting plan under the approved CRP conservation plan;
(3) Only be made to the extent that funds are available; and
(4) Not exceed $200,000 per person or entity.
(e) Additional financial incentives may be provided to participants whose contracts are expected to provide especially high environmental benefits. Such incentives will be considered annual rental payments and subject to the provisions in § 1410.42(d).
(a) If a new owner or operator purchases or obtains the right and interest in, or right to occupancy of, the land subject to a CRP contract, such new owner or operator may be approved by CCC as a participant to a new CRP contract for the transferred land. Such new owner or operator must assume all obligations of the CRP contract of the previous participant.
(b) Cost-share payments will be made by CCC to the participant who established the practice.
(c) Annual rental payments to be paid during the fiscal year when the land was transferred will be divided between the new participant and the previous participant in the manner specified in § 1410.42.
(d) If a participant transfers all or part of the right and interest in, or right to occupancy of, land subject to a CRP contract and the new owner or operator does not become a successor to such CRP contract within 60 days, or such other time period as CCC determines to be appropriate, then such CRP contract will be terminated with respect to the affected portion of such land and the original participant:
(1) Forfeits all rights to any future payments for that acreage; and
(2) Will refund all previous payments received under the CRP contract by the participant(s) or prior participants, plus interest and liquidated damages, except as otherwise agreed to by CCC.
(e) Federal agencies acquiring property, by foreclosure or otherwise, that contains CRP contract acreage cannot be a party to the CRP contract by succession. However, through an addendum to the CRP contract, if the current operator of the property is one of the CRP contract participants, such operator may continue to receive payments under such CRP contract if:
(1) The property is maintained in accordance with the terms of the CRP contract;
(2) Such operator continues to be the operator of the property; and
(3) Ownership of the property remains with such Federal agency.
(a) If a participant fails to carry out the terms and conditions of a CRP contract, CCC may terminate the CRP contract in whole or in part.
(b) If the CRP contract is terminated in whole or in part by CCC in accordance with paragraph (a) of this section, the participant will:
(1) Forfeit all rights to further payments under such CRP contract for the terminated acres, and refund all payments previously received for the terminated acres, plus interest; and
(2) Pay liquidated damages to CCC in an amount as specified in the contract.
If, after a CRP contract is approved by CCC, it is discovered that such CRP contract is found to contain material errors of fact or is not in conformity with this part, CCC may terminate or offer to modify the CRP contract in whole or in part.
The provisions of part 718 of this title relating to performance based upon the action or advice of an authorized representative of the U.S. Department of Agriculture are applicable to this part.
(a) Any representative of the U.S. Department of Agriculture, or designee thereof, will, for purposes related to CRP, be provided by the producer or participant, as the case may be, with access to land that is:
(1) The subject of an offer for a contract under this part; or
(2) Under a CRP contract or otherwise subject to this part.
(b) For land identified in paragraph (a) of this section, the producer or participant will provide the representative with access to examine records for the land to determine land classification, erosion rates, or for other purposes, and to determine whether the terms and conditions of the CRP contract are being met.
(a) Payments received under this part will be divided as specified in the applicable CRP contract and CCC will ensure that producers who would have an interest in acreage being offered receive treatment that is equitable. CCC may refuse to enter into a contract when there is a disagreement among producers seeking enrollment as to a producer's eligibility to participate in the CRP contract as a tenant and there is insufficient evidence to indicate whether the producer seeking participation as a tenant does or does not have an interest in the acreage offered for enrollment in CRP.
(b) CCC may remove an operator or tenant from a CRP contract when:
(1) The operator or tenant requests in writing to be removed from the CRP contract;
(2) The operator or tenant files for bankruptcy and the trustee or debtor in possession fails to affirm the contract, to the extent permitted by applicable bankruptcy laws;
(3) The operator or tenant dies during the CRP contract period and the administrator of the estate fails to succeed to the contract; or
(4) A court of competent jurisdiction orders the removal from the CRP contract of the operator or tenant and such order is received by CCC.
(c) In addition to paragraph (b) of this section, tenants must maintain their tenancy throughout the CRP contract period in order to remain on a CRP contract. Tenants who fail to maintain tenancy on the acreage under CRP contract, including failure to comply with applicable State law, may be removed from a CRP contract by CCC. CCC will assume the tenancy is being maintained unless notified otherwise by a party to the CRP contract.
Subject to part 3 of this title, any payment or portion thereof due any person under this part will be allowed without regard to questions of title under State law, and without regard to any claim or lien in favor of any creditor, except agencies of the United States Government.
Participants may assign the right to receive cash payments, in whole or in
(a) Except as provided in paragraph (b) of this section, a participant or producer seeking participation may appeal or request reconsideration of an adverse determination in accordance with the administrative appeal regulations at parts 11 and 780 of this title.
(b) Determinations by NRCS assigned to make such determination for CCC may be appealed in accordance with procedures established in part 614 of this title.
(a) If CCC determines that a person has employed a scheme or device to defeat the purposes of this part, or any part of any CCC or USDA program, payment otherwise due or paid such person during the applicable period may be required to be refunded with interest as determined by CCC.
(b) A scheme or device includes, but is not limited to, coercion, fraud, misrepresentation, depriving any other person of cost-share, incentive, or annual rental payments, or obtaining a payment that otherwise would not be payable.
(c) A new owner or operator or tenant of land subject to a CRP contract, and who succeeds to the CRP contract, must report in writing to CCC any interest of any kind in such land that is retained by a previous participant. The interest will include a present, future, or conditional interest, reversionary interest, or any option, future or present, on such land, and any interest of any lender in the land where the lender has, will, or can legally obtain, a right of occupancy to such land or an interest in the equity in the land other than an interest in the appreciation in the value of the land occurring after the loan was made. Failure to fully disclose interest will be considered a scheme or device.
If CCC determines that any participant has knowingly supplied false information or has knowingly filed a false claim, such participant will be ineligible for payments under this part with respect to the fiscal year in which the false information or claim was filed and the CRP contract may be terminated, in which case a full refund of all prior payments may be demanded. False information or false claims include, but are not limited to, claims for payment for practices that do not comply with the conservation plan. Any amounts paid under these circumstances must be refunded, plus interest as determined by CCC and any amounts otherwise due to the participant will be withheld. The remedies provided for in this section will be in addition to any and all other remedies, criminal and civil, that may apply.
(a) Except as otherwise provided in this part, in the case of death, incompetency, or disappearance of any participant, any payments due under this part will be paid to the participant's successor(s), as specified in part 707 of this title.
(b) Unless otherwise specified in this part, payments under this part will be subject to the requirements of part 12 of this title concerning highly erodible land and wetland conservation and payments.
(c) Any remedies permitted CCC under this part will be in addition to any other remedy, including, but not limited to, criminal remedies, or actions for damages in favor of CCC, or the United States, as may be permitted by law.
(d) When an owner loses control of CRP acreage due to foreclosure and the new owner chooses not to continue the contract in accordance with § 1410.51, refunds may not be required from any participant on the contract to the extent CCC determines that waiver of such refund is appropriate.
(e) Cropland enrolled in CRP will be classified as cropland for the time period it is enrolled in CRP. After the CRP contract ends, such land will be removed from the classification of cropland if the county committee determines the land no longer meet the definition of cropland in part 718 of this title.
(f) As determined by CCC, incentives may be authorized to foster opportunities for Indian Tribes and beginning, limited resource, socially disadvantaged, and veteran farmers and ranchers, and to enhance long-term environmental goals.
(a) Unless specified in this part or otherwise approved by CCC, no uses of any kind are authorized on CRP acreage during the contract period.
(b) Commercial shooting preserves may be operated on CRP acreage provided:
(1) The commercial shooting preserve is licensed by a State agency such as the State fish and wildlife agency or State department of natural resources;
(2) The commercial shooting preserve is operated in a manner consistent with the applicable State agency rules governing commercial shooting preserves; and
(3) The CRP cover is maintained according to the conservation plan.
(c) No barrier fencing or boundary limitations that prohibit wildlife access to or from the CRP acreage are allowed, unless required by State law.
(d) Wind turbines and associated access to the wind turbines may be installed on CRP acreage in numbers and locations as determined appropriate by CCC considering the location, size, and other physical characteristics of the land, the extent to which the land contains threatened or endangered wildlife and wildlife habitat, and the purposes of CRP, but only in exchange for a 25 percent reduction in the annual rental payment for the acres covered by the wind turbine and associated access acreage.
(e) The sale of carbon, water quality, or environmental credits may be permitted by CCC.
(f) There are specific activities that are permitted on specific land:
(1) The permitted activities provisions of paragraphs (f)(2) and (3) of this section do not apply to land enrolled under:
(i) A grassland signup authorized by § 1410.30(c);
(ii) The Soil Health and Income Protection Pilot Program described in § 1410.70;
(iii) The Conservation Reserve Enhancement Program described in § 1410.90:
(A) Except for land enrolled under Conservation Reserve Enhancement Program agreements executed before December 20, 2018; provided, that such agreements may be amended by mutual agreement to disallow such otherwise permitted activities; or
(B) Unless the approved Conservation Reserve Enhancement Program agreement under which the land was enrolled specifically permits such activity; and
(iv) A State Acres for Wildlife Enhancement project, unless the State Acres for Wildlife Enhancement project under which the land was enrolled specifically permits such activity.
(2) The following activities may be permitted on CRP acreage according to an approved conservation plan, without any reduction to the annual rental payment:
(i) Emergency haying, emergency grazing, or emergency use of the forage in response to a localized or regional drought, flooding, wildfire, or other emergency as determined by CCC on all practices, outside the primary nesting season, when:
(A) All or any part of the county in which the CRP acreage is located is designated as D2 (severe drought) or greater according to the United States Drought Monitor;
(B) There is at least a 40 percent loss in forage production in the county in which the CRP acreage is located; or
(C) CCC determines that CRP can assist in the response to a natural disaster event without permanent damage to the established cover;
(ii) Emergency grazing on all practices during the primary nesting season if payments are authorized for the county under the Livestock Forage Disaster Program under part 1416 of this chapter, at 50 percent of the normal carrying capacity determined in accordance with part 1416 of this chapter;
(iii) Emergency haying on certain practices, as determined by CCC, only outside the primary nesting season, if payments are authorized for the county under the Livestock Forage Disaster Program under part 1416 of this chapter, but on not more than 50 percent of the eligible CRP contract acres;
(iv) Grazing of all practices only outside the primary nesting season if included as an approved CRP contract management activity in accordance with § 1410.22;
(v) The intermittent and seasonal grazing of vegetative buffers, only outside the primary nesting season, that are incidental to agricultural production on land adjacent to the buffer provided such grazing:
(A) Does not destroy the permanent vegetative cover; and
(B) Retains suitable vegetative structure for wildlife cover and shelter outside the primary nesting season; and
(vi) Grazing on all practices only outside the primary nesting season if conducted by a beginning farmer or rancher who is a participant on the CRP contract with a share of the rental payment greater than zero.
(3) The following activities may be permitted on CRP acreage according to an approved conservation plan, but only in exchange for a 25 percent reduction to the annual rental payment for the acres on which the permitted activity occurred:
(i) Grazing of all practices not more frequently than every other year on the same land, except that during the primary nesting season the grazing will be subject to a 50 percent reduction in the stocking rate, as determined by CCC;
(ii) Haying and other commercial use (including the managed harvesting of biomass, but not the harvesting of vegetative cover) of all practices, on the condition the activity:
(A) Is completed only outside the primary nesting season;
(B) Occurs not more than once every 3 years; and
(C) Maintains 25 percent of the total CRP contract acres unharvested, in accordance with a conservation plan that provides for wildlife cover and shelter; and
(iii) Annual grazing of all practices, only outside the primary nesting season for the control of invasive species.
(g) Not withstanding paragraph (f) of this section, haying and grazing will not be permitted on any land enrolled in CRP if such haying and grazing for that year would cause long-term damage to the vegetative cover on that land.
(a) To be eligible for the Transition Incentives Program, all the following must be met:
(1) The land must be enrolled in CRP;
(2) The conditions for the timing of the sale or lease of the land and to whom it must be sold or leased are:
(i) Beginning on the date of the end of the CRP contract period, the land must be sold or leased (under a long-term lease, or a lease with an option to purchase the land, including a lease with a term of less than 5 years and an option to purchase the land) to a beginning, veteran, or socially disadvantaged farmer or rancher who will return some or all of the land to production using sustainable grazing or crop production methods; and
(ii) The sale or lease, as applicable, must take effect on the day immediately after the end of the CRP contract period;
(3) The CRP contract is modified in accordance with § 1410.33(a)(4);
(4) The land is not subject to an easement or other restriction that prohibits the use of the land allowed under this section; and
(5) The beginning, veteran, or socially disadvantaged farmers or ranchers must:
(i) Certify that they meet the definition of either a beginning or veteran farmer or rancher as defined in part 718 of this title, or a socially disadvantaged farmer or rancher as defined in § 1410.2;
(ii) Obtain an approved conservation plan prior to approval of the Transition Incentives Program contract; and
(iii) Implement sustainable grazing or crop production on land not re-enrolled in CRP in compliance with the conservation plan by the time specified in the conservation plan.
(b) Beginning in the last 2 years of the CRP contract period, the beginning, veteran, or socially disadvantaged farmer or rancher may:
(1) In conjunction with the contract participants, make conservation and land improvements, including preparing to plant a crop, that are consistent with the conservation plan; and
(2) Begin the organic certification process under the Organic Foods Production Act of 1990.
(c) Eligible beginning, veteran, or socially disadvantaged farmers or ranchers may be eligible immediately to re-enroll certain partial field conservation practices in CRP, in accordance with the conservation plan and the provisions of this part, following the expiration of the CRP contract, provided that the beginning, veteran, or socially disadvantaged farmer or rancher has control of the land and meets all other qualifying conditions specified in this part.
(d) Eligible beginning, veteran, or socially disadvantaged farmers or ranchers will be eligible to enroll land in the Environmental Quality Incentives Program or the Conservation Stewardship Program, as specified in parts 1466 and 1470 of this chapter, provided that their offer to enroll otherwise meets all program conditions, and provided that the CRP contract has expired and the beginning, veteran, or socially disadvantaged farmer or rancher is either leasing or has possession of the property.
(e) As an incentive for selling or leasing land to a beginning, veteran, or socially disadvantaged farmer or rancher who is not a family member of the previous participants, CCC will pay 2 years of additional CRP annual rental payments at the same contract rate to the previous participants. The previous participants must certify in writing that the beginning, veteran, or socially disadvantaged farmer or rancher is not a family member.
(f) The previous participants and the eligible beginning, veteran, or socially disadvantaged farmer or rancher must agree to be jointly and severally responsible for complying with both the provisions of the Transition Incentives Program contract and the provisions of this part, and must also agree to be jointly and severally responsible for any payment adjustments that may result from violations of the terms or conditions of the Transition Incentives Program contract or this part.
(a) Enrollments under the Soil Heath and Income Protection Pilot Program will be administered under the provisions of this part, except where specifically provided otherwise.
(b) Notwithstanding § 1410.6(b) and (c), to be eligible under the Soil Health
(1) Is physically located within a Soil Health and Income Protection Pilot Program pilot area specified by CCC;
(2) Has been annually planted or considered planted to an agricultural commodity each of the 3 crop years immediately preceding the year in which the offer for enrollment is submitted; and
(3) Is verified to be less productive land, as compared to other land on the farm from which the land is offered for enrollment.
(c) Notwithstanding paragraph (b) of this section, land will be ineligible for enrollment under the Soil Health and Income Protection Pilot Program if the land was enrolled in CRP in any of the 3 crop years immediately preceding the year in which the offer for enrollment is submitted. Further, not more than 15 percent of the eligible land on a farm may be enrolled in the Soil Health and Income Protection Pilot Program.
(d) Notwithstanding § 1410.30, offers for contracts under the Soil Health and Income Protection Pilot Program may be submitted only during signup periods as announced by CCC. Further, eligible land may only be enrolled under the Soil Health and Income Protection Pilot Program through December 31, 2020. Acreage determined eligible in accordance with paragraph (b) of this section may be automatically accepted in CRP without further evaluation if:
(1) A producer is eligible under § 1410.5; and
(2) The producer accepts either the maximum payment rate CCC is willing to pay to enroll the acreage in CRP, or a lesser rate.
(e) The approved cover for land enrolled under the Soil Health and Income Protection Pilot Program is the lowest practicable cost permanent vegetative cover.
(f) Notwithstanding § 1410.40, CCC will not provide any cost-share payments for planting the approved permanent vegetative cover, except as provided for in paragraph (g) of this section.
(g) Notwithstanding paragraph (f) of this section and § 1410.41, CCC will provide cost-share payments of 50 percent of the eligible actual cost of installation of the approved permanent vegetative cover to beginning, limited resource, socially disadvantaged, and veteran farmers and ranchers, upon a determination that the approved permanent vegetative cover has been planted.
(h) The contract period for land enrolled under the Soil Health and Income Protection Pilot Program will be for a term of 3, 4, or 5 years, as requested by the producer.
(i) The following uses are permitted on land enrolled under the Soil Health and Income Protection Pilot Program:
(1) Without any reduction in the annual rental payment, the land may be:
(i) Made available for a walk-in access program of the applicable State; and
(ii) Hayed or grazed outside the primary nesting season, provided adequate stubble height of the cover is maintained to protect the soil as specified in the conservation plan; and
(2) In exchange for a 25 percent reduction to the annual rental payment, and not being eligible to be insured or reinsured under the Federal Crop Insurance Act, the land may be harvested for seed outside the primary nesting season if included in the conservation plan.
(j) A CRP contract for land enrolled under the Soil Health and Income Protection Pilot Program may be terminated before the end of the CRP contract period by either:
(1) CCC, if CCC determines that such termination is appropriate; or
(2) The participant, upon the condition that all CCC payments made with respect to the CRP contract being terminated are refunded.
(a) Not withstanding § 1410.6(b) and (c), to be eligible under the CLEAR 30 Pilot Program, land must be:
(1) Physically located within a CLEAR 30 Pilot Program area, as announced by CCC;
(2) Devoted to a grass waterway, contour grass strip, prairie strip, filter strip, riparian buffer, wetland restoration practice, or other similar water quality practice that helps reduce sediment loadings, nutrient loadings, and harmful algal blooms; and
(3) Enrolled in CRP, in the final year of the CRP contract period, provided the scheduled expiration date of the current CRP contract is:
(i) On or after December 20, 2018; and
(ii) Before the effective starting date of the new CRP contract.
(b) The contract period for land enrolled under the CLEAR 30 Pilot Program will be 30 years.
(c) In addition to the provisions in § 1410.32 and elsewhere in this part, the CRP contract for land enrolled under the CLEAR 30 Pilot Program will:
(1) Permit repairs, improvements, and inspections on the land that are necessary to maintain existing public drainage systems; and
(2) Prohibit:
(i) Alteration of wildlife habitat and other natural features of the land, unless authorized by CCC and provided for in the conservation plan;
(ii) Mowing or spraying chemicals on the land, unless such action is authorized by CCC to:
(A) Comply with Federal or State noxious weed laws;
(B) Comply with a Federal or State emergency pest management program; or
(C) Meet habitat needs of specific wildlife; and
(iii) Adoption of any other practice or action that would tend to defeat the purpose of CRP.
(d) Land enrolled under the CLEAR 30 Pilot Program may be used for compatible economic uses, including but not limited to hunting and fishing, managed timber harvest, or periodic haying or grazing, provided the use is:
(1) Included in the conservation plan; and
(2) Consistent with the long-term protection and enhancement of the conservation resource for which the land was enrolled.
(e) Notwithstanding § 1410.30, offers for contracts under the CLEAR 30 Pilot Program may be submitted only during a time period, as determined and announced by CCC, and only within the final year of the contract period of the CRP contract under which the land is currently enrolled.
(f) In addition to the provisions in § 1410.52, upon a violation of the terms and conditions of a contract for land enrolled under the CLEAR 30 Pilot Program, CCC may require the participant to refund all or part of any payments received under CRP plus interest and liquidated damages.
(a) An agreement executed under the provisions of this section will not effect, modify, or otherwise interfere with any Conservation Reserve Enhancement Program agreement in effect on or before December 20, 2018. In order to implement other provisions of this section, the signatories to a Conservation Reserve Enhancement Program agreement in effect on or before December 20, 2018, may mutually agree in writing to modify such agreement in such a manner.
(b) CCC may enter into a Conservation Reserve Enhancement Program agreement with an eligible partner to cost-effectively assist in enrolling otherwise eligible land in CRP.
(c) To enter into a Conservation Reserve Enhancement Program agreement with CCC, eligible partners must provide required matching funds. Such matching funds provided by the
(1) 30 percent of the total cost of the project, unless a different amount is determined by negotiation between CCC and the eligible partner with whom CCC is entering into the Conservation Reserve Enhancement Program agreement, if the majority of the matching funds to carry out the agreement are provided by one or more eligible partners that are not nongovernmental organizations; or
(2) Not less than 30 percent of the total cost of the project, if a majority of the matching funds to carry out the agreement are provided by one or more nongovernmental organizations.
(d) Notwithstanding § 1410.40(d), cost-share payments, including practice incentive payments, from all sources may exceed 100 percent of the actual cost of establishing eligible practices, but only if specifically authorized by the Conservation Reserve Enhancement Program agreement. Furthermore, a participant may not receive or retain cost-share payments if other Federal cost-share assistance is provided for such acreage under any law.
(e) With regard only to land enrolled as a riparian buffer:
(1) The term “management” means an activity conducted by the owner or operator of the land after the riparian buffer is established to regularly maintain or enhance only the vegetative cover throughout the CRP contract period and in accordance with the conservation plan;
(2) Cost-share payments will be made available for approved management as provided for in the Conservation Reserve Enhancement Program agreement:
(i) If such activity has been completed in accordance with the conservation plan; and
(ii) In an amount as provided for in the agreement, but not greater than 100 percent of the normal and customary cost of such activity; but
(iii) No practice incentive payment will be made for such activity; and
(3) If provided for in the Conservation Reserve Enhancement Program agreement, a participant may plant food-producing woody plants as part of the approved cover, provided such plantings:
(i) Contribute to the conservation of soil, water quality, and wildlife habitat;
(ii) Are consistent with recommendations of the applicable State Technical Committee;
(iii) Are consistent with the FOTG; and
(iv) Are provided for in the conservation plan.
(f) Participants may harvest from the food-producing woody plants specified in paragraph (e)(3) of this section only if the following conditions are met:
(1) The criteria in paragraph (e)(3) of this section are met;
(2) The participant agrees to a reduction in the annual rental payment commensurate with the value of the crop harvested;
(3) All the food-producing woody plant species within 35 feet of the water body the riparian buffer is buffering are only native plant species;
(4) The harvesting will not damage the approved cover or otherwise have a negative impact on the resource concern being addressed by the riparian buffer; and
(5) The harvesting is conducted in accordance with the conservation plan.
(g) In the case of a Conservation Reserve Enhancement Program agreement whose purpose is to address regional drought concerns, CCC may:
(1) Enroll otherwise ineligible cropland, marginal pastureland, or grassland, on which the resource concerns identified in the Conservation Reserve Enhancement Program agreement can be addressed if the enrollment of such land is critical to the accomplishment of the purposes of the agreement; and
(2) Determine annual rental payments so as to be consistent with similar Conservation Reserve Enhancement Program agreements, and to ensure regional consistency regarding such payments.
(h) Notwithstanding § 1410.30, generally, enrollment under a Conservation Reserve Enhancement Program will be held on a continuous signup basis. However, the terms and conditions of the Conservation Reserve Enhancement Program agreement will determine the basis of enrollment.
__________________________________,
Farm Service Agency.
__________________________________,
Commodity Credit Corporation.
Federal Deposit Insurance Corporation (FDIC).
Final rule.
The FDIC is amending its deposit insurance assessment regulations to apply the community bank leverage ratio (CBLR) framework to the deposit insurance assessment system (CBLR Assessments final rule). The FDIC, the Board of Governors of the Federal Reserve System (Federal Reserve) and the Office of the Comptroller of the Currency (OCC) (collectively, the Federal banking agencies) are considering, and are expected to adopt, a final rule that provides for a simple measure of capital adequacy for certain community banking organizations (CBLR final rule). The CBLR Assessments final rule: prices all insured depository institutions (IDIs) that elect to use the CBLR framework as small institutions; makes technical amendments to the FDIC's assessment regulations to ensure that the assessment regulations continue to reference the prompt corrective action (PCA) regulations for the definitions of capital categories used in the deposit insurance assessment system; and clarifies that an IDI that elects to use the CBLR framework and also meets the definition of a custodial bank will have no change to its custodial bank deduction or reporting items required to calculate the deduction. The final rule does not make any changes to the FDIC's assessment methodology for small or large institutions.
The final rule is effective January 1, 2020.
Ashley Mihalik, Chief, Banking and Regulatory Policy Section, Division of Insurance and Research, (202) 898-3793,
The Federal Deposit Insurance Act (FDI Act) requires that the FDIC establish a risk-based deposit insurance
The primary objective of the CBLR Assessments final rule is to incorporate the CBLR framework
The FDIC assesses all IDIs an amount for deposit insurance equal to the bank's deposit insurance assessment base multiplied by its risk-based assessment rate.
On February 8, 2019, the Federal banking agencies published in the
In response to comments received on the CBLR NPR, the Federal banking agencies adopted a final rule (CBLR final rule) that makes several changes to the proposed CBLR framework.
Finally, the Federal banking agencies did not adopt use of the proposed proxy CBLR thresholds for the adequately capitalized, undercapitalized, and significantly undercapitalized PCA categories in the CBLR final rule.
Under the FDI Act, the FDIC has the authority to “establish separate risk-based assessment systems for large and small members of the Deposit Insurance Fund.”
Assessment rates for established small banks
On February 21, 2019, the FDIC published in the
The CBLR Assessments NPR also clarified that: (1) A bank that elects to use the CBLR framework and also meets the definition of a custodial bank under the FDIC's assessment regulations would have no change to its custodial bank deduction or reporting items required to calculate the deduction; and (2) the assessment regulations would continue to reference the PCA regulations for the definition of capital categories used in the deposit insurance assessment system, with technical amendments to align with the CBLR NPR.
The FDIC sought comment on every aspect of the CBLR Assessments NPR, including alternatives. The FDIC received one comment from a trade group that generally supported the FDIC's objective of maintaining fair and appropriate pricing of deposit insurance for institutions that elect to use the CBLR framework.
The CBLR Assessments final rule applies the CBLR framework, as adopted by the Federal banking agencies, to the deposit insurance assessment system in a way that, to the fullest extent practicable, reduces regulatory reporting burden consistent with the objective of EGRRCPA.
Under this CBLR Assessments final rule, the FDIC amends the definition of “small institution” to include, as proposed, all banks that elect to use the CBLR framework, even if such a bank would otherwise be classified as a “large institution” under the assessment regulations.
Under this final rule, the FDIC makes technical amendments to ensure that the assessment regulations will continue to reference the PCA regulations for the definitions of capital categories used in the deposit insurance assessment system. Capital categories for deposit insurance assessment purposes are defined by reference to the agencies' regulatory capital rules that are being amended by the CBLR final rule.
Through this CBLR Assessments final rule, the FDIC clarifies that any bank that elects to use the CBLR framework and also meets the definition of a custodial bank will experience no change in the reporting that is necessary to calculate and receive the custodial bank deduction under the assessment regulations. The final rule does not change the custodial bank deduction. As mentioned above, in calculating the assessment base for custodial banks, the FDIC excludes a certain amount of low-risk assets, which are reported in Schedule RC-R of the Call Report, subject to the deduction limit.
The FDIC is not adopting several changes to the deposit insurance assessment regulations that were proposed in the CBLR Assessments NPR because the CBLR framework, as adopted in the CBLR final rule, have made them unnecessary. For example, proposed amendments to the FDIC's assessment regulations that were related to the Federal banking agencies' definition of “tangible equity” and “community bank leverage ratio” in the CBLR NPR were not adopted, rendering proposed conforming changes in the assessment regulations unnecessary.
The FDIC received one comment noting that the flexibility proposed by the FDIC in the CBLR Assessments NPR to banks that elect to use the CBLR framework would be unnecessary if the CBLR and tier 1 leverage ratio are calculated in the same manner. The FDIC agrees.
The FDIC does not expect that changes to its assessment regulations under this final rule would have a material impact on aggregate assessment revenue or on rates paid by individual institutions. Based on Call Report data as of March 31, 2019, 5,221 out of 5,371 IDIs had less than $10 billion in total
As mentioned above, because the Federal banking agencies incorporate and refer to the generally applicable capital rule's leverage ratio as the CBLR, the CBLR final rule results in no change to the ratio that is utilized in the FDIC's pricing methodology, and therefore no changes are being made to the assessment methodology. Additionally, a custodial bank that elects to use the CBLR framework will be able to continue to report the custodial bank deduction for its assessment base, even though it will not separately report risk-weighted assets used in the calculation of the deduction, and will see no change to its assessment amount.
Finally, the FDIC does not believe that the final rule would affect a significant number of IDIs. As previously stated, the change to the definition of “small institution” for assessment purposes will only result in a change to assessments for a bank that elects to use the CBLR framework and would have otherwise been assessed as a large institution under current assessment regulations. Based on Call Report data as of March 31, 2019, only one bank that was assessed as a large institution also met the qualifying criteria to be eligible to opt into the CBLR framework. The annual insurance assessments paid by the institution as a result of the final rule is expected to decline by less than $4 million, or less than one percent of that institution's interest income earned in the prior year.
The FDIC solicited comments on several alternatives, including options to offset the impact that any differences in reporting under the CBLR framework and under the Federal banking agencies' generally applicable capital rule could have on the assessment amount of a bank that elects to use the CBLR framework. The FDIC received no comments on the alternatives presented and believes that the changes adopted in this final rule meet its stated policy objectives in the most appropriate and straightforward manner.
This rule will become effective on January 1, 2020.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601
As of March 31, 2019, the FDIC insured 5,371 institutions, of which 4,004 are considered small entities for the purposes of RFA.
As discussed in Section III, the final rule amends the FDIC's assessment regulations to price all banks that elect to adopt the CBLR framework as small banks. The assessment regulations have previously defined and will continue to define a small bank as generally having less than $10 billion in total assets. Small banking organizations, as defined by the SBA, must have less than $600 million in total assets. Thus, for purposes of the RFA, all small banking organizations are already priced as small banks under the assessment regulations. Electing to adopt the community bank leverage ratio framework will have no effect on the pricing of a small banking organization.
In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995,
Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA),
The amendments to the FDIC's deposit insurance assessment regulations under this final rule do not impose additional reporting, disclosures, or other new requirements. Nonetheless, the FDIC considered the requirements of RCDRIA when finalizing this rule with an effective date of January 1, 2020.
Section 722 of the Gramm-Leach-Bliley Act
For purposes of Congressional Review Act, the OMB makes a determination as to whether a final rule constitutes a “major” rule.
The Congressional Review Act defines a “major rule” as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in—(A) an annual effect on the economy of $100,000,000 or more; (B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions, or (C) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.
Bank deposit insurance, Banks, Banking, Savings associations.
For the reasons set forth above, the FDIC amends part 327 of title 12 of the Code of Federal Regulations as follows:
12 U.S.C. 1441, 1813, 1815, 1817-19, 1821.
(e)
(2) Except as provided in paragraph (e)(3) of this section, if, after December 31, 2006, an institution classified as large under paragraph (f) of this section (other than an institution classified as large for purposes of §§ 327.9(e) and 327.16(f)) reports assets of less than $10 billion in its quarterly reports of condition for four consecutive quarters, the FDIC will reclassify the institution as small beginning the following quarter.
(3) An insured depository institution that elects to use the community bank leverage ratio framework under 12 CFR 3.12(a)(3), 12 CFR 217.12(a)(3), or 12 CFR 324.12(a)(3), shall be classified as a small institution, even if that institution otherwise would be classified as a large institution under paragraph (f) of this section.
(z)
By order of the Board of Directors.
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for Bell Helicopter Textron Canada Limited (BHTC) Model 427 helicopters. This AD requires inspecting the inboard skin of the vertical fin around the four tailboom attachment points. This AD was prompted by reports of cracked vertical fin skins that resulted from metal fatigue. The actions of this AD are intended to prevent an unsafe condition on these products.
This AD is effective January 10, 2020.
The Director of the Federal Register approved the incorporation by reference of a certain document listed in this AD as of January 10, 2020.
For service information identified in this final rule, contact Bell Helicopter Textron Canada Limited, 12,800 Rue de l'Avenir, Mirabel, Quebec J7J1R4; telephone 450-437-2862 or 800-363-8023; fax 450-433-0272; or at
You may examine the AD docket on the internet at
Matt Fuller, Senior Aviation Safety Engineer, Safety Management Section, Rotorcraft Standards Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone 817-222-5110; email
On June 1, 2018, at 83 FR 25408, the
The NPRM was prompted by Canadian AD No. CF-2017-03, dated January 31, 2017 (Transport Canada AD CF-2017-03), issued by Transport Canada, which is the aviation authority for Canada, to correct an unsafe condition for BHTC Model 427 helicopters with vertical fin P/N 427-035-840-105 or P/N 427-035-840-109 installed. Transport Canada advises of three reports of cracked vertical fin skins that resulted from metal fatigue. If not detected, the crack may grow to a critical length, causing the fin to fail, separate from the helicopter, and damage the main or tail rotor blades, leading to their in-flight failure. Loss of the fin may also adversely affect the helicopter's directional stability, leading to loss of directional control, Transport Canada advises.
Transport Canada consequently requires repetitively inspecting the vertical fins for a crack, and if a crack is detected, replacing the fin before further flight.
After the NPRM was published, the FAA received comments from one commenter. However, the comment addressed neither the proposed actions nor the determination of the cost to the public. Therefore, the FAA has made no changes to this AD.
These helicopters have been approved by the aviation authority of Canada and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with Canada, Transport Canada, its technical representative, has notified the FAA about the unsafe condition described in the Transport Canada AD. The FAA is issuing this AD after evaluating all known relevant information and determined that an unsafe condition exists and is likely to exist or develop on other helicopters of these same type designs and that air safety and the public interest require adopting the AD requirements as proposed.
The FAA reviewed Bell Helicopter Alert Service Bulletin 427-15-38, Revision A, dated November 14, 2016, which specifies repetitive inspections of the vertical fins every 100 hours time-in-service (TIS) once the vertical fin has accumulated 1,500 hours TIS. This inspection also was incorporated in Chapter 4 of the maintenance manual. This service information also specifies serial numbers are to be assigned to vertical fins that do not have a serial number.
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
The FAA estimates that this AD affects 27 helicopters of U.S. Registry. The FAA estimates that operators may incur the following costs in order to comply with this AD. Labor costs are estimated at $85 per work-hour.
• Performing the visual inspection requires about 2.25 work-hours for an estimated cost of $191 per helicopter and $5,157 for the U.S. fleet.
• Replacing the fin requires about 4 work-hours, and parts cost about $10,000, for an estimated cost of $10,340 per helicopter.
• Assigning a serial number to the fin takes about 0.5 work-hours for an estimated cost of $43 per helicopter.
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.
The FAA is 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 helicopters identified in this rulemaking action.
This AD will not have federalism implications under Executive Order 13132. This AD will 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 that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
The FAA prepared an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD applies to Bell Helicopter Textron Canada Limited Model 427 helicopters with a vertical fin part number (P/N) 427-035-840-105 or P/N 427-035-840-109 installed, certificated in any category.
This AD defines the unsafe condition as a crack on the vertical fin skin. This condition could lead to structural failure of the fin, separation of the skin from the helicopter, damage to the main or tail rotor blades and loss of helicopter control.
This AD becomes effective January 10, 2020.
You are responsible for performing each action required by this AD within the specified compliance time unless it has already been accomplished prior to that time.
Within 25 hours time-in-service (TIS) or before the helicopter has accumulated 1,500 hours TIS, whichever occurs later, and thereafter at intervals not to exceed 100 hours TIS:
(1) Remove the vertical fin and clean the vertical fin attachment area with a soap solution to remove all traces of dirt, stains, exhaust residue, and oil. Rinse the area with water and let dry.
(i) Using a 10X power magnifying glass, visually inspect the inboard skin of the vertical fin for a crack around the four tailboom attachment points as depicted in Figure 1 of Bell Helicopter Alert Service Bulletin 427-15-38, Revision A, dated November 14, 2016. Pay particular attention to the upper aft attachment point.
(ii) If there is a crack, replace the vertical fin before further flight.
(2) If the vertical fin does not have a serial number, assign a serial number using the helicopter serial number, and permanently mark the new serial number on the vertical fin data plate. Create a component history card or equivalent record and annotate the serial number.
(1) The Manager, Safety Management Section, Rotorcraft Standards Branch, FAA, may approve AMOCs for this AD. Send your proposal to: Matt Fuller, Senior Aviation Safety Engineer, Safety Management Section, Rotorcraft Standards Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone 817-222-5110; email
(2) For operations conducted under a 14 CFR part 119 operating certificate or under 14 CFR part 91, subpart K, the FAA suggests you notify your principal inspector, or lacking a principal inspector, the manager of the local flight standards district office or certificate holding district office, before operating any aircraft complying with this AD through an AMOC.
The subject of this AD is addressed in Transport Canada AD No. CF-2017-03, dated January 31, 2017. You may view the Transport Canada AD on the internet at
Joint Aircraft Service Component (JASC) Code: 55, Empennage Structure.
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Bell Helicopter Alert Service Bulletin 427-15-38, Revision A, dated November 14, 2016.
(ii) [Reserved]
(3) For Bell Helicopter Textron Canada Limited service information identified in this AD, contact Bell Helicopter Textron Canada Limited, 12,800 Rue de l'Avenir, Mirabel, Quebec J7J1R4; telephone 450-437-2862 or 800-363-8023; fax 450-433-0272; or at
(4) You may view this service information at FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood Pkwy., Room 6N-321, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call 817-222-5110.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
In rule document 2019-24635 beginning on page 61538 in the issue of Wednesday, November 13, 2019, make the following corrections:
84 FR [INSERT FR PAGE NUMBER], November 13, 2019.
83 FR 12479, 3/22/18.
84 FR [INSERT FR PAGE NUMBER], November 13, 2019.
84 FR [INSERT FR PAGE NUMBER], November 13, 2019. Presumption of denial.
84 FR [INSERT FR PAGE NUMBER], November 13, 2019.
84 FR [INSERT FR PAGE NUMBER].
84 FR [INSERT FR PAGE NUMBER], November 13, 2019.
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for navigable waters within 100 yards of a work site pulling new overhead electrical cables along a line crossing the Menominee River in Menominee, MI. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by the installation of overhead electrical cables across the river. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port Lake Michigan (COTP).
This rule is effective from 7 a.m. on December 12, 2019, through 10 p.m. on December 21, 2019.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Chief Petty Officer Kyle Weitzell, Sector Lake Michigan Waterways Management Division, U.S. Coast Guard; telephone 414-747-7148, email
The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the COTP was made aware of this project to install new overhead electrical cables on November 19, 2019 and immediate action is needed to mitigate potential safety hazards associated with the process of pulling the new cables across the Menominee River. It is impracticable to publish an NPRM because we must establish this safety zone by December 12, 2019.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The COTP has determined that potential safety hazards associated with process of pulling the new cables across the Menominee River scheduled to take place on one day from December 12, 2019 through December 21, 2019, will be a safety concern for anyone within 100 yards from a work site involving the installation of new overhead electrical cables across the Menominee River between Menominee, MI and Marinette, WI. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while lines and electrical cables are being pulled across the river.
This rule establishes a safety zone from 7 a.m. on December 12, 2019 through 10 p.m. on December 21, 2019. The safety zone will cover all navigable waters of the Menominee River within 100 yards of a work site pulling new overhead electrical cables along a line crossing the river from coordinates 45.096326° N, 087.602092° W to 45.097197° N, 087.600601° W. This safety zone is intended to be enforced on one day during the aforementioned timeframe, dependent on weather conditions. The date and time of the enforcement period will be announced by the COTP by Broadcast Notice to Mariners. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while lines and electrical cables are being pulled across the river. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the COTP or a designated on-scene representative. The COTP or a designated on-scene representative may be contacted via VHF Channel 16.
We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 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. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the characteristics of the safety zone. The safety zone created by this rule will be relatively small and is designed to minimize its impact on navigable waters. This rule will prohibit entry into certain navigable waters of the Menominee River at Menominee, MI and Marinette, WI and is not anticipated to exceed twelve hours in duration. Thus, restrictions on vessel movement within that particular area are expected to be minimal. Under certain conditions, moreover, vessels may still transit through the safety zone when permitted by the COTP.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. 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 rule will not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.
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 rule. If the rule
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a 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 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. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does 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. If you believe this rule has implications for federalism or Indian tribes, please call or email the person listed in the
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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined 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 rule involves a safety zone not anticipated to last more than twelve hours that will prohibit entry within 100 yards of a work site crossing the Menominee River for the pulling of new overhead electrical cables across the river. It is categorically excluded from further review under paragraph L60(a) in Table 3-1 of U.S. Coast Guard Environmental Planning Implementing Procedures. A Record of Environmental Consideration supporting this determination will be available in the docket where indicated under
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
46 U.S.C. 70034, 70051; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1
(a)
(b)
(c)
(2) This safety zone is closed to all vessel traffic, except as may be permitted by the COTP or a designated on-scene representative.
(3) The “on-scene representative” of the COTP is any Coast Guard commissioned, warrant or petty officer who has been designated by the COTP to act on his or her behalf.
(4) Vessel operators desiring to enter or operate within the safety zone must contact the COTP or an on-scene representative to obtain permission to do so. The COTP or an on-scene representative may be contacted via VHF Channel 16. Vessel operators given permission to enter or operate in the safety zone must comply with all directions given to them by the COTP or an on-scene representative.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (FCC or Commission) adopts an Order that closes Lockbox 979096 and removes the relevant rule relating to the collection of payment for charges for certain international telecommunications services.
Effective January 6, 2020.
Warren Firschein, Office of Managing Director at (202) 418-2653 or Roland Helvajian, Office of Managing Director at (202) 418-0444.
This is a summary of the Commission's Order, FCC 19-113, MD Docket No. 19-333, adopted on November 7, 2019 and released on November 12, 2019. The full text of this document is available for public inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257), 445 12th Street SW, Washington, DC 20554, or by downloading the text from the Commission's website at
1. Section 603 of the Regulatory Flexibility Act, as amended, requires a regulatory flexibility analysis in notice and comment rulemaking proceedings. See 5 U.S.C. 603(a). As we are adopting these rules without notice and comment, no regulatory flexibility analysis is required.
2. This document does not contain new or modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).
3. The Commission will not send a copy of the Order pursuant to the Congressional Review Act,
4. In the Order, we reduce expenditures by the Commission and modernize procedures by removing § 1.1108 of our rules, 47 CFR 1.1108, which sets forth the charges for applications and other filings for international telecommunications services. The rule amendment reflects the closure of the P.O. Box
5. The FCC has historically performed the function of an accounting authority for international maritime mobile communications for those customers in the maritime mobile and maritime mobile-satellite radio services that had not otherwise designated any such accounting authority. This default function is referred to as the “accounting authority of last resort.” Essentially, this involves presenting telecommunications bills to U.S.-registered ships that have utilized telecommunications services from a foreign coast station or satellite, accepting payment, and remitting collected funds to the telecommunications provider. The Commission used P.O. Box 979096 to collect such payments.
6. On December 21, 2018, the Commission released a Second Report and Order in which it adopted its proposal to transition the functions and duties performed by the FCC as an accounting authority of last resort (84 FR 8994 (March 13, 2019)). The Commission also directed the staff to finalize details of the transition and publish the detailed transition and outreach plan. The detailed plan was released on April 22, 2019 in a Public Notice. The Public Notice indicated that the Commission would terminate its performance of the functions of an accounting authority at the close of business on April 22, 2020. The Public Notice also explained that no later than that date, users who have relied on the Commission as an accounting authority must affirmatively select an accounting authority, contract with such entity as their new accounting authority, and reactivate/recommission their terminal(s) to the new accounting authority's identification code (AAIC).
7. In the Order, we announce that we will close P.O. Box 979096, effective July 15, 2020, at which time the Commission will no longer handle such transactions, and parties will be expected to utilize other accounting authorities as provided in the Second Report and Order and the Public Notice. While we do not anticipate receiving payments after April 22, 2020, delaying the closure of the P.O. Box until after the Commission ceases to function as an accounting authority will allow us to coordinate with parties whose payments have been delayed and assist them in utilizing another accounting authority.
8. Closure of P.O. Box 979096 will reduce the agency's expenditures (including eliminating the annual fee for the bank's services). Because the Commission will no longer serve as an accounting authority, it will also provide no inconvenience to the Commission's regulatees, applicants, and the public. We amend our rules to reflect this change as indicated in the Appendix. We make this change without notice and comment because it is a rule of agency organization, procedure, or practice exempt from the general notice-and-comment requirements of the Administrative Procedure Act.
9.
Administrative practice and procedure.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 1 as follows:
47 U.S.C. chs. 2, 5, 9, 13; 28 U.S.C. 2461 note, unless otherwise noted.
Federal Deposit Insurance Corporation.
Notice of proposed rulemaking.
The Federal Deposit Insurance Corporation (FDIC) is seeking comment on proposed regulations clarifying the law that governs the interest rates State-chartered banks and insured branches of foreign banks (collectively, State banks) may charge. The proposed regulations would provide that State banks are authorized to charge interest at the rate permitted by the State in which the State bank is located, or one percent in excess of the ninety-day commercial paper rate, whichever is greater. The proposed regulations also would provide that whether interest on a loan is permissible under section 27 of the Federal Deposit Insurance Act would be determined at the time the loan is made, and interest on a loan permissible under section 27 would not be affected by subsequent events, such as a change in State law, a change in the relevant commercial paper rate, or the sale, assignment, or other transfer of the loan.
Comments will be accepted until February 4, 2020.
You may submit comments on the notice of proposed rulemaking using any of the following methods:
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•
•
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James Watts, Counsel, Legal Division, (202) 898-6678,
Federal law authorizes State banks to charge interest at the maximum rate permitted to any State-chartered or licensed lending institution in the State where the bank is located, or one percent in excess of the ninety-day commercial paper rate, whichever is greater. A bank's power to make loans implicitly carries with it the power to assign loans, and thus, a State bank's statutory authority to make loans at this rate necessarily includes the power to assign loans at the same rate. The ability of an assignee to enforce a loan's interest-rate terms is also consistent with fundamental principles of contract law.
Despite these clear authorities, recent developments have created uncertainty about the ongoing validity of interest-rate terms after a State bank sells, assigns, or otherwise transfers a loan. The decision of the U.S. Court of Appeals for the Second Circuit in
Section 27 of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831d) provides State banks the authority to charge interest at the rate allowed by the law of the State where the bank is located, or one percent more than the rate on ninety-day commercial paper, whichever is greater. The legal ambiguity generated by
Accordingly, the FDIC is proposing regulations that would implement section 27 of the FDI Act. The proposed regulations would implement the statutory provisions that authorize State banks to charge interest of up to the greater of: One percent more than the rate on 90-day commercial paper; or the rate permitted by the State in which the bank is located. The proposed
The statutory provisions that would be implemented by the proposed rule are patterned after, and have been interpreted consistently with, section 85 to provide competitive equality among federally-chartered and State-chartered depository institutions. While the proposed rule would implement the FDI Act, rather than section 85, the following background information is intended to frame the discussion of the proposed rule.
Section 30 of the National Bank Act was enacted in 1864 to protect national banks from discriminatory State usury legislation. The statute provided alternative interest rates that national banks were permitted to charge their customers pursuant to Federal law. Section 30 was later divided and renumbered, with the interest rate provisions becoming current sections 85 and 86. Under section 85, a national bank may:
Soon after the statute was enacted, the Supreme Court's decision in
Subsequently, the Supreme Court interpreted section 85 to allow national banks to “export” the interest rates of their home States to borrowers residing in other States. In
In the late 1970s, monetary policy was geared towards combating inflation and interest rates soared.
To promote competitive equality in the nation's banking system and reaffirm the principle that institutions offering similar products should be subject to similar rules, Congress incorporated language from section 85 into the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA)
(a) INTEREST RATES.—In order to prevent discrimination against State-chartered insured depository institutions, including insured savings banks, or insured branches of foreign banks with respect to interest rates, if the applicable rate prescribed by this subsection exceeds the rate such State bank or insured branch of a foreign bank would be permitted to charge in the absence of this subsection, such State bank or such insured branch of a foreign bank may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at a rate of not more than 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where such State bank or such insured branch of a foreign bank is located or at the rate allowed by the laws of the State, territory, or district where the bank is located, whichever may be greater.
As stated above, section 27(a) of the FDI Act was patterned after section 85.
Pursuant to section 525 of DIDCMA,
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal I) generally established a Federal framework for interstate branching for both State banks and national banks.
The laws of the host State regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches shall apply to any branch in the host State of an out-of-State national bank to the same extent as such State laws apply to a branch of a bank chartered by that State, except—
(i) when Federal law preempts the application of such State laws to a national bank.
Congress provided interstate State banks parity with interstate national banks three years later, through the Riegle-Neal Amendments Act of 1997 (Riegle-Neal II).
(j) ACTIVITIES OF BRANCHES OF OUT-OF-STATE BANKS—
(1) APPLICATION OF HOST STATE LAW—The laws of a host State, including laws regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches, shall apply to any branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of State national bank. To the extent host State law is inapplicable to a branch of an out-of- State State bank in such host State pursuant to the preceding sentence, home State law shall apply to such branch.
The FDIC has not issued regulations implementing sections 24(j) and 27 of the FDI Act, but these provisions have been interpreted in two published opinions of the FDIC's General Counsel. General Counsel's Opinion No. 10, published in April 1998, clarified that for purposes of section 27, the term “interest” includes those charges that a national bank is authorized to charge under section 85.
The question of where banks are “located” for purposes of sections 27 and 85 has been the subject of interpretation by both the OCC and FDIC. Following the enactment of Riegle-Neal I and Riegle-Neal II, the OCC has concluded that while “the mere presence of a host state branch does not defeat the ability of a national bank to apply its home state rates to loans made to borrowers who reside in that host state, if a branch or branches in a particular host state approves the loan, extends the credit, and disburses the proceeds to a customer, Congress contemplated application of the usury laws of that state regardless of the state of residence of the borrower.”
FDIC General Counsel's Opinion No. 11, published in May 1998, was intended to address questions regarding the appropriate State law, for purposes of section 27, that should govern the interest charges on loans made to customers of a State bank that is chartered in one State (its home State) but has a branch or branches in another State (its host State).
The effect of FDIC General Counsel's Opinions No. 10 and No. 11 was to promote parity between State banks and national banks with respect to interest charges. Importantly, in the context of interstate banking, the opinions confirm that section 27 of the FDI Act permits
Banks' power to make loans implicitly carries with it the power to assign loans,
The inherent authority of State banks to assign loans that they make is consistent with State banking laws, which typically grant State banks the power to sell or transfer loans, and more generally, to engage in banking activities similar to those listed in the National Bank Act and activities that are “incidental to banking.”
The ability of a nonbank assignee to enforce interest-rate terms is also consistent with fundamental principles of contract law. It is well settled that an assignee succeeds to all the assignor's rights in a contract, standing in the shoes of the assignor.
Section 27 does not state at what point in time the permissibility of interest should be determined in order to assess whether a State bank is taking or receiving interest in compliance with section 27. Situations may arise when the usury laws of the State where the bank is located change after a loan is made (but before the loan has been paid in full), and a loan's rate may be non-usurious under the old law but usurious under the new law. Similar issues arise where a loan is made in reliance on the Federal commercial paper rate, and that rate changes before the loan is paid in full. To fill this statutory gap and carry out the purpose of section 27, the FDIC concludes that the permissibility of interest under section 27 must be determined when the loan is made, not when a particular interest payment is “taken” or “received.” This interpretation protects the parties' expectations and reliance interests at the time when a loan is made, and provides a logical and fair rule that is easy to apply. Under the proposed regulation, the permissibility of interest is determined when a loan is made, and is not affected by later events such as a change in State law or the sale, assignment, or other transfer of the loan. The FDIC's interpretation of section 27 is based on the need for a workable rule to determine the timing of compliance with that section. This interpretation is not based on the common law “valid when made” rule, although it is consistent with it. That rule provides that usury must exist at the inception of the loan for a loan to be deemed usurious; as a corollary, if the loan was not usurious at inception, the loan cannot become usurious at a later time, such as upon assignment, and the assignee may lawfully charge interest at the rate contained in the transferred loan.
The ability of an assignee to rely on the enforceability and collectability in full of a loan that is validly made is also central to the stability and liquidity of the domestic loan markets. Restrictions on assignees' abilities to enforce interest rate terms would result in extremely distressed market values for many loans, frustrating the purpose of the FDI Act.
The FDIC has previously proposed to issue regulations implementing sections 24(j) and 27 of the FDI Act. In December 2004, a petition for rulemaking was filed with the FDIC seeking the issuance of regulations implementing sections 24(j) and 27 of the FDI Act, codifying the two longstanding opinions of the FDIC's General Counsel discussed above, and clarifying the interest rates that interstate State banks may charge. The petitioners were concerned, in particular, with restoring parity between State banks and national banks following the issuance of regulations by the OCC that preempted certain State laws with respect to national banks.
The FDIC held a public hearing on the petition on May 24, 2005, and a number of interested parties presented their views at the hearing or in writing. Following this hearing, the FDIC issued a notice of proposed rulemaking for regulations that would implement
In proposing regulations that would implement sections 24(j) and 27, the FDIC is now seeking to address a different concern. As discussed above, a recent court decision has created uncertainty as to the ability of assignees to enforce interest-rate provisions of loans originated by banks. This court held that, under the facts presented in that case, nonbank debt collectors who purchase debt
The FDIC also seeks to maintain parity between national banks and State banks with respect to interest rate authority. The OCC has taken the position that national banks' authority to charge interest at the rate established by section 85 includes the authority to assign the loan to another party at the contractual interest rate.
Finally, the regulations also implement section 24(j) (12 U.S.C. 1831a(j)) to provide that the laws of a State in which a State bank is not chartered in but in which it maintains a branch (host State), shall apply to any branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of-State national bank.
The FDIC has the authority to issue rules generally to carry out the provisions of the FDI Act.
Section 331.3 of the proposed rule implements section 24(j)(1) of the FDI Act, which establishes parity between State banks and national banks regarding the application of State law to interstate branches. If a State bank maintains a branch in a State other than its
Section 331.4 of the proposed rule implements section 27 of the FDI Act, which provides parity between State banks and national banks regarding the applicability of State law interest-rate restrictions. Paragraph (a) corresponds with section 27(a) of the statute, and provides that a State bank or insured branch of a foreign bank may charge interest of up to the greater of: 1 percent more than the rate on ninety-day commercial paper; or the rate allowed by the law of the State where the bank is located. Where a State constitutional provision or statute prohibits a State bank or insured branch of a foreign bank from charging interest at the greater of these two rates, the State constitutional provision or statute is expressly preempted by section 27.
In some instances, State law may provide different interest-rate restrictions for specific classes of institutions and loans. Paragraph (b) clarifies the applicability of such restrictions to State banks and insured branches of foreign banks. State banks and insured branches of foreign banks located in a State are permitted to charge interest at the maximum rate permitted to any State-chartered or licensed lending institution by the law of that State. Further, a State bank or insured branch of a foreign bank is subject only to the provisions of State law relating to the class of loans that are material to the determination of the permitted interest rate. For example, assume that a State's laws allow small State-chartered loan companies to charge interest at specific rates, and impose size limitations on such loans. State banks or insured branches of foreign banks located in that State could charge interest at the rate permitted for small State-chartered loan companies without being so licensed. However, in making loans for which that interest rate is permitted, State banks and insured branches of foreign banks would be subject to loan size limitations applicable to small State-chartered loan companies under that State's law. This provision of the proposed rule is intended to maintain parity between State banks and national banks, and corresponds with the authority provided
Paragraph (c) of section 331.4 clarifies the effect of the proposed rule's definition of the term
Paragraph (d) of proposed section 331.4 clarifies the authority of State banks and insured branches of foreign banks to charge interest to corporate borrowers. If the law of the State in which the State bank or insured branch of a foreign bank is located denies the defense of usury to corporate borrowers, then the State bank or insured branch would be permitted to charge any rate of interest agreed upon by a corporate borrower. This provision is also intended to maintain parity between State banks and national banks, and corresponds to authority provided to national banks under the OCC's regulations, at 12 CFR 7.4001(d).
Paragraph (e) clarifies that the determination of whether interest on a loan is permissible under section 27 of the FDI Act is made at the time the loan is made. This paragraph further clarifies that the permissibility under section 27 of interest on a loan shall not be affected by subsequent events, such as a change in State law, a change in the relevant commercial paper rate, or the sale, assignment, or other transfer of the loan. An assignee can enforce the loan's interest-rate terms to the same extent as the assignor. Paragraph (e) is not intended to affect the application of State law in determining whether a State bank or insured branch of a foreign bank is a real party in interest with respect to a loan or has an economic interest in a loan. The FDIC views unfavorably a State bank's partnership with a non-bank entity for the sole purpose of evading a lower interest rate established under the law of the entity's licensing State(s).
The proposed rule is intended to address uncertainty regarding the applicability of State law interest rate restrictions to State banks and other market participants. The proposed rule would reaffirm the ability of State banks to sell and securitize loans they originate. Therefore, as described in more detail below, the proposed rule should mitigate the potential for future disruption to the markets for loan sales and securitizations and a resulting contraction in availability of consumer credit.
The FDIC is not aware of any widespread or significant negative effects on credit availability or securitization markets having occurred to this point as a result of the
With regard to these two types of benefits, the
More specifically, some researchers have focused attention on the impact of the decision on so-called marketplace lenders. Since marketplace lending frequently involves a partnership in which a bank originates and immediately sells loans to a nonbank partner, any question about the nonbank's ability to enforce the contractual interest rate could adversely affect the viability of that business model. Thus, for example, regarding the Supreme Court's decision not to hear the appeal of the
Particularly in jurisdictions affected by
The FDIC also believes that an important benefit of the proposed rule is to uphold longstanding principles regarding the ability of banks to sell loans, an ability that has important safety-and-soundness benefits. By reaffirming the ability of State banks to assign loans at the contractual interest rate, the proposed rule should make State banks' loans more marketable, enhancing State banks' ability to
Similarly, the proposed rule is expected to preserve State banks' ability to manage their liquidity. This is important for a number of reasons. For example, the ability to sell loans allows State banks to increase their liquidity in a crisis, to meet unusual deposit withdrawal demands, or to pay unexpected debts. The practice is useful for many State banks, including those that prefer to hold loans to maturity. Any State bank could be faced with an unexpected need to pay large debts or deposit withdrawals, and the ability to sell or securitize loans is a useful tool in such circumstances.
Finally, the proposed rule would support State banks' ability to use loan sales and securitization to diversify their funding sources and address interest-rate risk. The market for loan sales and securitization is a lower-cost source of funding for State banks, and the proposed rule would support State banks' access to this market.
The FDIC is inviting comment on all aspects of the proposed rule.
The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities.
Generally, the FDIC considers a significant effect to be a quantified effect in excess of 5 percent of total annual salaries and benefits per institution, or 2.5 percent of total non-interest expenses. The FDIC believes that effects in excess of these thresholds typically represent significant effects for FDIC-supervised institutions. The FDIC has considered the potential impact of the proposed rule on small entities in accordance with the RFA. Based on its analysis and for the reasons stated below, the FDIC believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. Nevertheless, the FDIC is presenting and inviting comment on this initial regulatory flexibility analysis.
The Second Circuit's decision in
The policy objective of the proposed rule is to eliminate uncertainty regarding the enforceability of loans originated and sold by State banks. The FDIC is proposing regulations that would implement sections 24(j) and 27 of the FDI Act. For additional discussion of the objectives and legal basis of the proposed rule please refer to the
As of June 30, 2019, there were 4,206 State-chartered FDIC-insured depository institutions, of which 3,171 have been identified as “small entities” in accordance with the RFA.
The proposed rule clarifies that the determination of whether interest on a loan is permissible under section 27 of the FDI Act is made when the loan is made, and that the permissibility of interest under section 27 is not affected by subsequent events such as changes in State law or assignment of the loan. As described below, this would be expected to increase some small State
The FDIC is not aware of any broad effects on credit availability having occurred as a result of
The small State-chartered institutions that are affected would benefit from the ability to sell such loans while assigning to the buyer the right to enforce the contractual loan interest rate. Without the ability to assign the right to enforce the contractual interest rate, the sale value of such loans would be substantially diminished. The proposed rule is unlikely to pose any new reporting, recordkeeping, or other compliance requirements for small, FDIC-supervised institutions.
The FDIC has not identified any Federal statutes or regulations that would duplicate, overlap, or conflict with the proposed revisions.
The FDIC believes the proposed amendments will not have a significant economic impact on a substantial number of small FDIC-supervised banking entities and therefore believes that there are no significant alternatives to the proposal that would reduce the economic impact on small FDIC-supervised banking entities.
The FDIC invites comments on all aspects of the supporting information provided in this section, and in particular, whether the proposed rule would have any significant effects on small entities that the FDIC has not identified.
Section 302 of the Riegle Community Development and Regulatory Improvement Act (RCDRIA) requires that the Federal banking agencies, including the FDIC, in determining the effective date and administrative compliance requirements of new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations.
The proposed rule would not impose additional reporting or disclosure requirements on insured depository institutions, including small depository institutions, or on the customers of depository institutions. Accordingly, section 302 of RCDRIA does not apply. Nevertheless, the requirements of RCDRIA will be considered as part of the overall rulemaking process, and the FDIC invites comments that will further inform its consideration of RCDRIA.
In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501-3521, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The proposed rule would not require any information collections for purposes of the PRA, and therefore, no submission to OMB is required.
The FDIC has determined that the proposed rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999.
Section 722 of the Gramm-Leach-Bliley Act
• Has the FDIC organized the material to suit your needs? If not, how could the material be better organized?
• Are the requirements in the proposed regulation clearly stated? If not, how could the regulation be stated more clearly?
• Does the proposed regulation contain language or jargon that is unclear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand?
Banks, Banking, Deposits, Foreign banking, Interest rates.
12 U.S.C. 1819(a)(Tenth), 1820(g), 1831d.
(a)
(b)
(c)
For purposes of this part—
The laws of a host State shall apply to any branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of-State national bank. To the extent host State law is inapplicable to a branch of an out-of-State State bank in such host State pursuant to the preceding sentence, home State law shall apply to such branch.
(a)
(b)
(c)
(d)
(e)
By order of the Board of Directors.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve revisions to the Missouri State Implementation Plan (SIP) received on March 7, 2019. The submission revises a Missouri regulation that establishes emission limits for batch-type charcoal kilns based on operational parameters to reduce emissions of particulate matter (PM
Comments must be received on or before January 6, 2020.
You may send comments, identified by Docket ID No. EPA-R07-OAR-2019-0662 to
Tracey Casburn, Environmental Protection Agency, Region 7 Office, Air Quality Planning Branch, 11201 Renner Boulevard, Lenexa, Kansas 66219; telephone number (913) 551-7016; email address
Throughout this document “we,” “us,” and “our” refer to the EPA.
Submit your comments, identified by Docket ID No. EPA-R07-OAR-2019-0662, at
The state revised title 10, division 10 of the code of state regulations, 10 CSR 10-6.330 “Restriction of Emissions from Batch-Type Charcoal Kilns”, which establishes emission limits for batch-type charcoal kilns based on operational parameters to reduce emissions of PM
The revisions are administrative in nature and do not impact air quality. The EPA's analysis of the revisions can be found in the technical support document (TSD) included in this docket.
The State submission has met the public notice requirements for SIP submissions in accordance with 40 CFR 51.102. The submission also satisfied the completeness criteria of 40 CFR part 51, appendix V. The state provided public notice of the revisions from August 1, 2018, to October 4, 2018, and held a public hearing on September 27, 2018. The state received and addressed four comments. As explained in more detail in the TSD which is part of this docket, the SIP revision submission meets the substantive requirements of the CAA, including section 110 and implementing regulations.
The EPA is proposing to amend the Missouri SIP by approving the State's request to revise 10 CSR 10-6.330,”Restriction of Emissions From Batch-Type Charcoal Kilns.” Approval of these revisions will ensure consistency between state and federally-approved rules. The EPA has determined that these changes will not adversely impact air quality.
The EPA is processing this as a proposed action because we are soliciting comments on the action. Final rulemaking will occur after consideration of any comments.
In this document, the EPA is proposing to include regulatory text in an EPA final rule that includes incorporation by reference. In accordance with the requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference the Missouri State Implementation Plan and Supplemental modeling analyses described in the proposed amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these materials generally available through
Under the Clean Air Act (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, the EPA's role is to approve state choices, if they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866.
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of the National Technology Transfer and Advancement Act (NTTA) because this rulemaking does not involve technical standards; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Particulate matter, Volatile organic compounds.
For the reasons stated in the preamble, the EPA proposes to amend 40 CFR part 52 as follows:
42 U.S.C. 7401
(c) * * *
Environmental Protection Agency (EPA).
Proposed rule.
EPA is proposing significant new use rules (SNURs) under the Toxic Substances Control Act (TSCA) for certain chemical substances that were the subject of premanufacture notices (PMNs). They are either the subject of Orders issued by EPA under TSCA or have received a “not likely to present an unreasonable risk” determination pursuant to TSCA. This action would require persons who intend to manufacture (defined by statute to include import) or process any of these chemical substances for an activity that is proposed as a significant new use to notify EPA at least 90 days before commencing that activity. The required notification initiates EPA's evaluation of the use, under the conditions of use for that chemical substance, within the applicable review period. Persons may not commence manufacture or processing for the significant new use until EPA has conducted a review of the notice, made an appropriate determination on the notice, and has taken such actions as are required by that determination.
Comments must be received on or before January 6, 2020.
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPPT-2019-0530, by one of the following methods:
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Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
You may be potentially affected by this action if you manufacture, process, or use the chemical substances contained in this proposed rule. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Manufacturers or processors of one or more subject chemical substances (NAICS codes 325 and 324110),
This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements promulgated at 19 CFR 12.118 through 12.127 and 19 CFR 127.28. Chemical importers must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA. Importers of chemicals subject to final SNURs must certify their compliance with the SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of this proposed rule on or after January 6, 2020 are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)) (see 40 CFR 721.20), and must comply with the export notification requirements in 40 CFR part 707, subpart D.
1.
2.
EPA is proposing these SNURs under TSCA section 5(a)(2) for chemical substances that were the subject of PMNs. These proposed SNURs would require persons to notify EPA at least 90 days before commencing the manufacture or processing of a chemical substance for any activity proposed as a significant new use. Receipt of such notices would allow EPA to assess risks and, if appropriate, to regulate the significant new use before it may occur. Additional background regarding SNURs is more fully set out in the preamble to EPA's first direct final SNUR published in the
Section 5(a)(2) of TSCA (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including the four bulleted TSCA section 5(a)(2) factors listed in Unit III.
General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the proposed rule, recordkeeping requirements, and exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the rule. Provisions relating to user fees appear at 40 CFR part 700. Pursuant to 40 CFR 721.1(c), persons subject to SNURs must comply with the same SNUN requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A) (15 U.S.C. 2604(a)(1)(A)). In particular, these requirements include the information submission requirements of TSCA sections 5(b) and 5(d)(1) (15 U.S.C. 2604(b) and 2604(d)(1)), the exemptions authorized by TSCA sections 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA must either determine that the use is not likely to present an unreasonable risk of injury under the conditions of use for the chemical substance or take such regulatory action as is associated with an alternative determination before the manufacture or processing for the significant new use can commence. In the case of a determination other than not likely to present unreasonable risk, the applicable review period must also expire before manufacturing or processing for the new use may commence. If EPA determines that the use is not likely to present an unreasonable risk, EPA is required under TSCA section 5(g) to make public, and submit for publication in the
TSCA section 5(a)(2) states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:
• The projected volume of manufacturing and processing of a chemical substance.
• The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.
• The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.
• The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.
In determining significant new uses for the chemical substances that are the
EPA is proposing significant new use and recordkeeping requirements for certain chemical substances with additions to 40 CFR part 721, subpart E. In this unit, EPA provides the following information for each chemical substance:
• PMN number.
• Chemical name (generic name, if the specific name is claimed as CBI).
• Chemical Abstracts Service (CAS) Registry number (if assigned for non-confidential chemical identities).
• Basis for the SNUR or basis for the TSCA 5(e) Order.
• Potentially Useful Information. This is information identified by EPA that would help characterize the potential health and/or environmental effects of the chemical substance in support of a request by the PMN submitter to modify the Order, or if a manufacturer or processor is considering submitting a SNUN for a significant new use designated by the SNUR.
• CFR citation assigned in the regulatory text section of the proposed rule. The regulatory text section of each proposed rule specifies the activities that would be designated as significant new uses. Certain new uses, including exceedance of production volume limits (
These proposed rules include 19 PMN substances that are subject to Orders issued under TSCA section 5(e)(1)(A), as required by the determinations made under section 5(a)(3)(B). Those Orders require protective measures to limit exposures or otherwise mitigate the potential unreasonable risk. The proposed SNURs would identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the restrictions imposed by the underlying Orders, consistent with TSCA section 5(f)(4).
These proposed rules also include 8 PMN substances that received “not likely to present an unreasonable risk” determination in TSCA section 5(a)(3)(c). However, during the course of these reviews, EPA identified concerns for certain health and/or environmental risks if the chemicals were not used following the limitations identified by the submitters in the notices. EPA did not deem such uses as reasonably foreseen the TSCA section 5(a)(3)(C) determinations. The proposed SNURs would identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to those same limitations.
The chemicals subject to these proposed SNURs are as follows:
• No release of the PMN substance to surface waters that exceed 22 ppb.
The proposed SNUR would designate as a “significant new use” the absence of this protective measure.
1. No domestic manufacture of the PMN substance;
2. No use of the PMN substance other than as a thickener in paint;
3. No use of the PMN substance in concentrations greater than 1% in formulated product; and,
4. No manufacturing, processing, or use of the PMN substance that generates a dust, mist, or aerosol.
The proposed SNUR would designate as a “significant new use” the absence of these protective measures.
1. No manufacture the PMN substance with an average molecular weight less than 1,000 Daltons and with no more than 10% below 500 Daltons;
2. Use of the PMN substance only for the confidential use specified in the Order;
3. Use of National Institute for Occupational Safety and Health (NIOSH)-certified respirator with an Applied Protection Factor (APF) of at least 1,000 where there is potential for inhalation exposure or compliance with a NCEL of 0.039 mg/m
4. Establishment of a hazard communication program, including human health precautionary statements on each label and in the SDS; and
5. No release of the PMN substance into surface waters of the United States in concentrations that exceed 1 ppb.
The proposed SNUR would designate as a “significant new use” the absence of these protective measures.
1. Use of the PMN substance only for the use specified in the PMN; and
2. No use of the PMN substance in a consumer product.
The proposed SNUR would designate as a “significant new use” the absence of this protective measure.
• Use of a NIOSH-certified respirator with an APF of at least 50 where there is a potential for inhalation exposure.
The proposed SNUR would designate as a “significant new use” the absence of this protective measure.
1. No manufacture of the PMN substances without including engineering controls processes as described in the PMNs;
2. Refrain from manufacturing (including import), processing or using the PMN substances other than as identified in the Order;
3. No manufacture beyond the confidential annual manufacture volume identified in the Order (P-19-91 through P-19-93);
4. Submission to EPA of certain toxicity testing before exceeding the confidential manufacture volumes identified in the Order (P-19-86, P-19-87, P-19-89 through P-19-93, P-19-97, P-19-100 through P-19-108 and P-19-110);
5. Use of personal protective equipment for workers where there is a potential for dermal exposure for the PMN substances specified in the Order (P-19-91 through P-19-93);
6. Use of NIOSH-certified respirators for workers where there is a potential for inhalation exposure for the PMN substances specified in the Order or compliance with a NCEL of 0.0273 mg/m
7. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS;
8. No manufacture or use of the PMN substances other than in liquid formulations (P-86, P-19-87, P-19-89 and P-19-90); and
9. No release of the PMN substances resulting in a combined concentration of 14 parts per billion (ppb) (P-19-97, P-19-100 through P-19-108 and P-19-110).
The proposed SNUR would designate as a “significant new use” the absence protective measures.
1. Use of the PMN substance only for the use specified in the PMN; and
2. No use of the PMN substance in a consumer product.
The proposed SNUR would designate as a “significant new use” the absence of this protective measure.
• No manufacture, processing, or use of the PMN substance that results in inhalation exposures.
The proposed SNUR would designate as a “significant new use” the absence of this protective measure.
• No release of the PMN substance to surface waters that exceed 78 ppb.
The proposed SNUR would designate as a “significant new use” the absence of this protective measure.
During review of the PMNs submitted for the chemical substances that are subject to these proposed SNURs, EPA concluded that for 19 chemical substances regulation was warranted under TSCA section 5(e), pending the development of information sufficient to make reasoned evaluations of the health or environmental effects of the chemical substances. The basis for such findings is outlined in Unit IV. Based on these findings, TSCA section 5(e) Orders requiring the use of appropriate exposure controls were negotiated with the PMN submitters. As a general matter, EPA believes it is necessary to follow TSCA section 5(e) Orders with a SNUR that identifies the absence of those protective measures as Significant New Uses to ensure that all manufacturers and processors—not just the original submitter—are held to the same standard.
During review of the other eight chemical substances that are the subject of these SNURs and as further discussed in Unit IV, EPA identified certain circumstances that raised potential risk concerns. EPA determined that deviations from the limitations identified in the submissions could result in changes in the type or form of exposure to the chemical substances and/or increased exposures to the chemical substances and/or changes in the reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of the chemical substances, and therefore warranted SNURs. The SNURs would identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the certain limitations in the submission.
EPA is proposing these SNURs for specific chemical substances which have undergone premanufacture review because the Agency wants to achieve the following objectives with respect to the significant new uses that would be designated in this proposed rule:
• EPA would receive notice of any person's intent to manufacture or process a listed chemical substance for the described significant new use before that activity begins.
• EPA would be required to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing or processing a listed chemical substance for the described significant new use.
• EPA would be required to either determine that the prospective manufacture or processing is not likely to present an unreasonable risk, or to take necessary regulatory action associated with any other determination, before the described significant new use of the chemical substance occurs.
Issuance of a SNUR for a chemical substance does not signify that the chemical substance is listed on the TSCA Chemical Substance Inventory (TSCA Inventory). Guidance on how to determine if a chemical substance is on the TSCA Inventory is available on the internet at
To establish a significant new use, EPA must determine that the use is not ongoing. The chemical substances subject to this proposed rule have undergone premanufacture review. In cases where EPA has not received a notice of commencement (NOC) and the chemical substance has not been added to the TSCA Inventory, no person may commence such activities without first submitting a PMN. Therefore, for chemical substances for which an NOC has not been submitted EPA concludes that the designated significant new uses are not ongoing.
When chemical substances identified in this proposed rule are added to the TSCA Inventory, EPA recognizes that, before the rule is effective, other persons might engage in a use that has been identified as a significant new use. However, TSCA section 5(e) Orders have been issued for 19 of the 27 chemical substances, and the PMN submitters are prohibited by the TSCA section 5(e) Orders from undertaking activities which would be designated as significant new uses. The identities of 24 of the 27 chemical substances subject to this proposed rule have been claimed as confidential (per 40 CFR 720.85) for a chemical substance covered by this action. Based on this, the Agency believes that it is highly unlikely that any of the significant new uses
Therefore, EPA designates December 6, 2019 as the cutoff date for determining whether the new use is ongoing. The objective of EPA's approach is to ensure that a person cannot defeat a SNUR by initiating a significant new use before the effective date of the final rule.
Persons who begin commercial manufacture or processing of the chemical substances for a significant new use identified as of that date would have to cease any such activity upon the effective date of the final rule. To resume their activities, these persons would have to first comply with all applicable SNUR notification requirements and wait until EPA has conducted a review of the notice, made an appropriate determination on the notice, and has taken such actions as are required with that determination.
EPA recognizes that TSCA section 5 does not require developing any particular new information (
In the absence of a TSCA section 4 test rule covering the chemical substance, persons are required only to submit information in their possession or control and to describe any other information known to or reasonably ascertainable by them (see 40 CFR 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing. Unit IV. lists potentially useful information identified by EPA that would help characterize the potential health and/or environmental effects of the PMN/SNUN substance for all of the listed SNURs. EPA recognizes that the 2016 Lautenberg Amendments have led to modifications in our approach to testing requirements, including an increased consideration of alternatives to vertebrate testing. Descriptions of tests/information needs are provided for informational purposes only and EPA strongly encourages persons, before performing any testing, to consult with the Agency pertaining to protocol selection. Pursuant to TSCA section 4(h), which pertains to reduction of testing in vertebrate animals, EPA encourages consultation with the Agency on the use of alternative test methods and strategies (also called New Approach Methodologies, or NAMs), if available, to generate the potentially useful information. EPA encourages dialogue with Agency representatives to help determine how best the submitter can meet both the data needs and the objective of TSCA section 4(h). To access the OCSPP test guidelines referenced in this document electronically, please go to
The potentially useful information listed in Unit IV. may not be the only means of addressing the potential risks of the chemical substance. EPA recommends that potential SNUN submitters contact EPA early enough so that they will be able to conduct the appropriate tests.
SNUN submitters should be aware that EPA will be better able to evaluate SNUNs which provide detailed information on the following:
• Human exposure and environmental release that may result from the significant new use of the chemical substances.
According to 40 CFR 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 720.40 and 721.25. E-PMN software is available electronically at
EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers and processors of the chemical substances subject to this proposed rule. EPA's complete economic analysis is available in the docket under docket ID number EPA-HQ-OPPT-2019-0530.
Additional information about these statutes and Executive Orders can be found at
This proposed rule would establish SNURs for several new chemical substances that were the subject of PMNs and TSCA section 5(e) Orders. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011).
According to the PRA (44 U.S.C. 3501
The information collection activities in this proposed rule have already been approved by OMB pursuant to the PRA under OMB control number 2070-0012 (EPA ICR No. 574). This action does not impose any burden requiring additional OMB approval. If an entity were to submit a SNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN.
Send any comments about the accuracy of the burden estimate, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques, to the Director, Regulatory Support Division, Office of Mission Support (2822T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001. Please remember to include the OMB control number in any correspondence, but do not submit any completed forms to this address.
Pursuant to RFA section 605(b) (5 U.S.C. 601
Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government will be impacted by this action. As such, EPA has determined that this proposed rule would not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501
This proposed rule would not have a substantial direct effect on 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, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999).
This proposed rule would not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This proposed rule would not significantly nor uniquely affect the communities of Indian Tribal governments, nor would it involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175 (65 FR 67249, November 9, 2000), do not apply to this action.
This proposed rule is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.
This proposed rule is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this proposed rule is not expected to affect energy supply, distribution, or use and because this proposed rule is not a significant regulatory action under Executive Order 12866.
Since this proposed rule would not involve any technical standards, NTTAA section 12(d) (15 U.S.C. 272 note) does not apply to this action.
This proposed rule does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898 (59 FR 7629, February 16, 1994).
Environmental protection, Chemicals, Hazardous substances, Reporting and recordkeeping requirements.
Therefore, it is proposed that 40 CFR chapter I be amended as follows:
15 U.S.C. 2604, 2607, 2613, and 2625(c).
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(2) The significant new uses are:
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(A) As an alternative to the respirator requirements in paragraph (a)(2)(i) of this section, a manufacturer or processor may choose to follow the new chemical exposure limit (NCEL) provision listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.039 mg/m
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(A) As an alternative to the respirator requirements in paragraph (a)(2)(i) of this section, a manufacturer or processor may choose to follow the new chemical exposure limit (NCEL) provision listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.0273 mg/m
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(2) The significant new uses are:
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(A) As an alternative to the respirator requirements in paragraph (a)(2)(i) of this section, a manufacturer or processor may choose to follow the new chemical exposure limit (NCEL) provision listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.0273 mg/m
(ii)
(iii)
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(2) The significant new uses are:
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(A) As an alternative to the respirator requirements in paragraph (a)(2)(i) of this section, a manufacturer or processor may choose to follow the new chemical exposure limit (NCEL) provision listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.0273 mg/m
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Agricultural Marketing Service, USDA.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, this notice announces the Agricultural Marketing Service's (AMS) intention to request approval from the Office of Management and Budget, for an extension to the currently approved information collection in support of the Fair and Equitable Tobacco Reform Act of 2004, the Rural Development, Food and Drug Administrative, and Related Agencies Appropriations Act for 2002 (Appropriations Act), and the Tobacco Inspection Act and Regulations Governing the Tobacco Standards.
Comments received by February 4, 2020 will be considered.
Written comments may be submitted to the addresses specified below. All comments will be made available to the public. Please do not include personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publically disclosed. All comments may be posted on the internet and can be retrieved by most internet search engines. Comments may be submitted anonymously.
Comments, identified by AMS-CN-19-0085, may be submitted electronically through the
Shethir M. Riva, Director, Research and Promotion, Cotton and Tobacco Program, AMS, USDA, 100 Riverside Parkway, Suite 101, Fredericksburg, Virginia 22406, telephone (540) 361-2726, facsimile (540) 361-1199, or email at
The Department of Agriculture has submitted the following information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13. Comments are requested regarding whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used; ways to enhance the quality, utility and clarity of the information to be collected; and ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
Comments regarding this information collection received by January 6, 2020 will be considered. Written comments should be addressed to: Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), New Executive Office Building, 725 17th Street NW, Washington, DC 20502. Commenters are encouraged to submit their comments to OMB via email to:
An agency may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
Furthermore, FSIS will collection information to ensure that each establishment operating under the NSIS submit on an annual basis an attestation to the management member of the local FSIS circuit safety committee stating that it maintains a program to monitor and document any work-related conditions of establishment workers.
Food Safety and Inspection Service, USDA.
Notice.
The Food Safety and Inspection Service (FSIS) is announcing the 2020 rates it will charge meat and poultry establishments, egg products plants, and importers and exporters for providing voluntary, overtime, and holiday inspection and identification, certification, and laboratory services. The 2020 basetime, overtime, holiday, and laboratory services rates will be applied on January 5, 2020.
FSIS will charge the rates announced in this notice beginning January 5, 2020.
For further information contact Michael Toner, Director, Budget Division, Office of the Chief Financial Officer, FSIS, U.S. Department of Agriculture, Room 2159, South Building, 1400 Independence Avenue SW, Washington, DC 20250-3700; Telephone: (202) 690-8398, Fax: (202) 690-4155.
On April 12, 2011, FSIS published a final rule amending its regulations to establish formulas for calculating the rates it charges meat and poultry establishments, egg products plants, and importers and exporters for providing voluntary, overtime, and holiday inspection and identification, certification, and laboratory services (76 FR 20220).
In the final rule, FSIS stated that it would use the formulas to calculate the annual rates, publish the rates in
This notice provides the 2020 rates, which will be applied starting on January 5, 2020.
The following table lists the 2020 Rates per hour, per employee, by type of service:
The regulations state that FSIS will calculate the rates using formulas that include the Office of Field Operations (OFO) inspection program personnel's previous fiscal year's regular direct pay and regular hours (9 CFR 391.2, 391.3, 391.4, 590.126, 590.128, 592.510, 592.520, and 592.530). In 2013, an Agency reorganization eliminated the Office of International Affairs program office and transferred all of its inspection program personnel to OFO. Therefore, inspection program personnel's pay and hours are identified
FSIS determined the 2020 rates using the following calculations:
The calculation for the 2020 basetime rate per hour per program employee is:
[FY 2019 OFO Regular Direct Pay divided by the previous fiscal year's Regular Hours ($431,891,249/14,748,261)] = $29.28 + ($29.28 * 2.6% (calendar year 2020 Cost of Living Increase)) = $30.05 + $10.38 (benefits rate) + $2.49 (travel and operating rate) + $21.92 (overhead rate) + $0.02 (bad debt allowance rate) = $64.84, which is already divisible by 4.
The calculation for the 2020 overtime rate per hour per program employee is:
[FY 2019 OFO Regular Direct Pay divided by previous fiscal year's Regular Hours ($431,891,249/14,748,261)] = $29.28 + ($29.28 * 2.6% (calendar year 2020 Cost of Living Increase)) = $30.05 * 1.5 = $45.07 + $10.38 (benefits rate) + $2.49 (travel and operating rate) + $21.92 (overhead rate) + $0.02 (bad debt allowance rate) = $79.86 rounded up to $79.88, so that it is divisible by 4.
The calculation for the 2020 holiday rate per hour per program employee calculation is:
[FY 2019 OFO Regular Direct Pay divided by Regular Hours ($431,891,249/14,748,261)] = $29.28 + ($29.28 * 2.6% (calendar year 2019 Cost of Living Increase)) = $30.05 * 2 = $60.09 + $10.38 (benefits rate) + $2.49 (travel and operating rate) + $21.92 (overhead rate) + $0.02 (bad debt allowance rate) = $94.88, which is already divisible by 4.
The calculation for the 2020 laboratory services rate per hour per program employee is:
[FY 2019 OPHS Regular Direct Pay/OPHS Regular hours ($22,973,965/496,184)] = $46.30 + ($46.30 * 2.6% (calendar year 2020 Cost of Living Increase)) = $47.51 + $10.38 (benefits rate) + $2.49 (travel and operating rate) + $21.92 (overhead rate) + $0.02 (bad debt allowance rate) = $82.30, rounded up to 82.32, so that it is divisible by 4.
These rates are components of the basetime, overtime, holiday, and laboratory services rates formulas.
The calculation for the 2020 benefits rate per hour per program employee is:
[FY 2019 Direct Benefits/(Total Regular hours + Total Overtime hours + Total Holiday hours) ($184,242,174/18,205,950)] = $10.12 + ($10.12 * 2.6% (calendar year 2019 Cost of Living Increase)) = $10.38.
The calculation for the 2020 travel and operating rate per hour per program employee is:
[FY 2019 Total Direct Travel and Operating Costs/(Total Regular hours + Total Overtime hours + Total Holiday hours) ($44,335,973/18,205,950)] = $2.44 + ($2.44 * 2.3% (2020 Inflation) = $2.49.
The calculation for the 2020 overhead rate per hour per program employee is:
[FY 2019 Total Overhead/(Total Regular hours + Total Overtime hours + Total Holiday hours) ($ 390,080,911/18,205,950)] = $21.43 + ($21.43 * 2.3% (2019 Inflation) = $21.92.
The 2020 calculation for bad debt rate per hour per program employee is:
[FY 2019 Total Bad Debt/(Total Regular hours + Total Overtime hours + Total Holiday hours) = ($317,344/18,205,950)] = $0.02.
FSIS will make copies of this
No agency, officer, or employee of the USDA shall, on the grounds of race, color, national origin, religion, sex, gender identity, sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, or political beliefs, exclude from participation in, deny the benefits of, or subject to discrimination any person in the United States under any program or activity conducted by the USDA.
To file a complaint of discrimination, complete the USDA Program Discrimination Complaint Form, which may be accessed online at
Send your completed complaint form or letter to USDA by mail, fax, or email:
Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.), should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
Done at Washington, DC.
An application has been submitted to the Foreign-Trade Zones (FTZ) Board by the Greater Miami Foreign-Trade Zone, Inc., grantee of Foreign-Trade Zone 32, requesting authority to reorganize the zone to expand its service area under the alternative site framework (ASF) adopted by the FTZ Board (15 CFR Sec. 400.2(c)). The ASF is an option for grantees for the establishment or reorganization of zones and can permit significantly greater flexibility in the designation of new subzones or “usage-driven” FTZ sites for operators/users located within a grantee's “service area” in the context of the FTZ Board's standard 2,000-acre activation limit for a zone. The application was submitted pursuant to the Foreign-Trade Zones Act, as amended (19 U.S.C. 81a-81u), and the regulations of the FTZ Board (15 CFR part 400). It was formally docketed on December 3, 2019.
FTZ 32 was approved by the FTZ Board on September 6, 1977 (Board Order 123, 42 FR 46568, September 16, 1977) and reorganized under the ASF on December 20, 2012 (Board Order 1876, 78 FR 1197-1198, January 8, 2013). The zone currently has a service area that includes a portion of Miami-Dade County, Florida.
The applicant is now requesting authority to expand the service area of the zone to include all of Miami-Dade County, as described in the application. If approved, the grantee would be able to serve sites throughout the expanded service area based on companies' needs for FTZ designation. The application indicates that the proposed expanded service area is in or adjacent to the Miami U.S. Customs and Border Protection Port of Entry.
In accordance with the FTZ Board's regulations, Christopher Kemp of the FTZ Staff is designated examiner to evaluate and analyze the facts and information presented in the application and case record and to report findings and recommendations to the FTZ Board.
Public comment is invited from interested parties. Submissions shall be addressed to the FTZ Board's Executive Secretary and sent to:
A copy of the application will be available for public inspection in the “Reading Room” section of the FTZ Board's website, which is accessible via
Pursuant to Section 766.24 of the Export Administration Regulations, 15 CFR parts 730-774 (2019) (“EAR” or “the Regulations”), I hereby grant the request of the Office of Export Enforcement (“OEE”) to renew the temporary denial order issued in this matter on June 5, 2019. I find that
On March 17, 2008, Darryl W. Jackson, the then-Assistant Secretary of Commerce for Export Enforcement (“Assistant Secretary”), signed an order denying Mahan Airways' export privileges for a period of 180 days on the ground that issuance of the order was necessary in the public interest to prevent an imminent violation of the Regulations. The order also named as denied persons Blue Airways, of Yerevan, Armenia (“Blue Airways of Armenia”), as well as the “Balli Group Respondents,” namely, Balli Group PLC, Balli Aviation, Balli Holdings, Vahid Alaghband, Hassan Alaghband, Blue Sky One Ltd., Blue Sky Two Ltd., Blue Sky Three Ltd., Blue Sky Four Ltd., Blue Sky Five Ltd., and Blue Sky Six Ltd., all of the United Kingdom. The order was issued
This temporary denial order (“TDO”) was renewed in accordance with Section 766.24(d) of the Regulations.
The September 11, 2009 renewal order continued the denial order as to Mahan Airways, but not as to the Balli Group Respondents or Blue Airways of Armenia.
As part of the August 24, 2011 renewal, Kerman Aviation, Sirjanco Trading LLC, and Ali Eslamian were added as related persons. Mahan Air General Trading LLC, Equipco (UK) Ltd., and Skyco (UK) Ltd. were added as related persons by a modification order issued on April 9, 2012. Mehdi Bahrami was added as a related person as part of the February 4, 2013 renewal order.
On May 21, 2015, a modification order issued adding Al Naser Airlines, Ali Abdullah Alhay, and Bahar Safwa General Trading as respondents. As detailed in that order and discussed further
The December 11, 2018 renewal order continued the denial of the export privileges of Mahan Airways, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Mahan Air General Trading LLC, Mehdi Bahrami, Al Naser Airlines, Ali Abdullah Alhay, Bahar Safwa General Trading, Sky Blue Bird Group, and Issam Shammout.
On November 12, 2019, BIS, through OEE, submitted a written request for renewal of the TDO that issued on June 5, 2019. The written request was made more than 20 days before the TDO's scheduled expiration. Notice of the renewal request was provided to Mahan Airways, Al Naser Airlines, Ali Abdullah Alhay, and Bahar Safwa General Trading in accordance with Sections 766.5 and 766.24(d) of the Regulations. No opposition to the renewal of the TDO has been received. Furthermore, no appeal of the related person determinations made as part of the September 3, 2010, February 25, 2011, August 24, 2011, April 9, 2012, February 4, 2013, and July 13, 2015 renewal or modification orders has been made by Kosarian Fard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Mahan Air General Trading LLC, Mehdi Bahrami, Sky Blue Bird Group, or Issam Shammout.
Pursuant to Section 766.24, BIS may issue or renew an order temporarily denying a respondent's export privileges upon a showing that the order is necessary in the public interest to prevent an “imminent violation” of the Regulations. 15 CFR 766.24(b)(1) and 766.24(d). “A violation may be `imminent' either in time or degree of likelihood.” 15 CFR 766.24(b)(3). BIS may show “either that a violation is about to occur, or that the general circumstances of the matter under investigation or case under criminal or administrative charges demonstrate a likelihood of future violations.”
OEE's request for renewal is based upon the facts underlying the issuance of the initial TDO, and the renewal and modification orders subsequently issued in this matter, including the May 21, 2015 modification order and the renewal order issued on June 5, 2019, and the evidence developed over the course of this investigation, which indicate a blatant disregard of U.S. export controls and the TDO. The initial TDO was issued as a result of evidence that showed that Mahan Airways and other parties engaged in conduct prohibited by the EAR by knowingly re-exporting to Iran three U.S.-origin aircraft, specifically Boeing 747s (“Aircraft 1-3”), items subject to the EAR and classified under Export Control Classification Number (“ECCN”) 9A991.b, without the required U.S. Government authorization. Further evidence submitted by BIS indicated that Mahan Airways was involved in the attempted re-export of three additional U.S.-origin Boeing 747s (“Aircraft 4-6”) to Iran.
As discussed in the September 17, 2008 renewal order, evidence presented by BIS indicated that Aircraft 1-3 continued to be flown on Mahan Airways' routes after issuance of the TDO, in violation of the Regulations and the TDO itself.
The March 9, 2010 renewal order also noted that a court in the United Kingdom (“U.K.”) had found Mahan Airways in contempt of court on February 1, 2010, for failing to comply with that court's December 21, 2009 and January 12, 2010 orders compelling Mahan Airways to remove the Boeing 747s from Iran and ground them in the Netherlands. Mahan Airways and the Balli Group Respondents had been litigating before the U.K. court concerning ownership and control of Aircraft 1-3. In a letter to the U.K. court dated January 12, 2010, Mahan Airways' Chairman indicated,
The September 3, 2010 renewal order discussed the fact that Mahan Airways' violations of the TDO extended beyond operating U.S.-origin aircraft and attempting to acquire additional U.S.-origin aircraft. In February 2009, while subject to the TDO, Mahan Airways participated in the export of computer motherboards, items subject to the Regulations and designated as EAR99, from the United States to Iran, via the United Arab Emirates (“UAE”), in violation of both the TDO and the Regulations, by transporting and/or forwarding the computer motherboards from the UAE to Iran. Mahan Airways' violations were facilitated by Gatewick LLC, which not only participated in the transaction, but also has stated to BIS that it acted as Mahan Airways' sole booking agent for cargo and freight forwarding services in the UAE.
Moreover, in a January 24, 2011 filing in the U.K. court, Mahan Airways asserted that Aircraft 1-3 were not being used, but stated in pertinent part that the aircraft were being maintained in Iran especially “in an airworthy condition” and that, depending on the outcome of its U.K. court appeal, the aircraft “could immediately go back into service . . . on international routes into and out of Iran.” Mahan Airways' January 24, 2011 submission to U.K. Court of Appeal, at p. 25, ¶¶ 108, 110. This clearly stated intent, both on its own and in conjunction with Mahan Airways' prior misconduct and statements, demonstrated the need to renew the TDO in order to prevent imminent future violations. Two of these three 747s subsequently were
In addition, as first detailed in the July 1, 2011 and August 24, 2011 orders, and discussed in subsequent renewal orders in this matter, Mahan Airways also continued to evade U.S. export control laws by operating two Airbus A310 aircraft, bearing Mahan Airways' livery and logo, on flights into and out of Iran.
The February 4, 2013 renewal order laid out further evidence of continued and additional efforts by Mahan Airways and other persons acting in concert with Mahan, including Kral Aviation and another Turkish company, to procure U.S.-origin engines—two GE CF6-50C2 engines, with MSNs 517621 and 517738, respectively—and other aircraft parts in violation of the TDO and the Regulations.
On December 31, 2013, Kral Aviation was added to BIS's Entity List, Supplement No. 4 to Part 744 of the Regulations.
The July 31, 2013 renewal order detailed additional evidence obtained by OEE showing efforts by Mahan Airways to obtain another GE CF6-50C2 aircraft engine (MSN 528350) from the United States via Turkey. Multiple Mahan employees, including Mehdi Bahrami, were involved in or aware of matters related to the engine's arrival in Turkey from the United States, plans to visually inspect the engine, and prepare it for shipment from Turkey.
Mahan Airways sought to obtain this U.S.-origin engine through Pioneer Logistics Havacilik Turizm Yonetim Danismanlik (“Pioneer Logistics”), an aircraft parts supplier located in Turkey, and its director/operator, Gulnihal Yegane, a Turkish national who previously had conducted Mahan related business with Mehdi Bahrami and Ali Eslamian. Moreover, as referenced in the July 31, 2013 renewal order, a sworn affidavit by Kosol Surinanda, also known as Kosol Surinandha, Managing Director of Mahan's General Sales Agent in Thailand, stated that the shares of Pioneer Logistics for which he was the listed owner were “actually the property of and owned by Mahan.” He further stated that he held “legal title to the shares until otherwise required by Mahan” but would “exercise the rights granted to [him] exactly and only as instructed by Mahan and [his] vote and/or decisions [would] only and exclusively reflect the wills and demands of Mahan[.]”
The January 24, 2014 renewal order outlined OEE's continued investigation of Mahan Airways' activities and detailed an attempt by Mahan, which OEE thwarted, to obtain, via an Indonesian aircraft parts supplier, two U.S.-origin Honeywell ALF-502R-5 aircraft engines (MSNs LF5660 and LF5325), items subject to the Regulations, from a U.S. company located in Texas. An invoice of the Indonesian aircraft parts supplier dated March 27, 2013, listed Mahan Airways as the purchaser of the engines and included a Mahan ship-to address. OEE also obtained a Mahan air waybill dated March 12, 2013, listing numerous U.S.-origin aircraft parts subject to the Regulations—including, among other items, a vertical navigation gyroscope, a transmitter, and a power control unit—being transported by Mahan from Turkey to Iran in violation of the TDO.
The July 22, 2014 renewal order discussed open source evidence from the March-June 2014 time period regarding two BAE regional jets, items subject to the Regulations, that were painted in the livery and logo of Mahan Airways and operating under Iranian tail numbers EP-MOI and EP-MOK, respectively.
The January 16, 2015 renewal order detailed evidence of additional attempts by Mahan Airways to acquire items subject the Regulations in further violation of the TDO. Specifically, in March 2014, OEE became aware of an inertial reference unit bearing serial number 1231 (“the IRU”) that had been sent to the United States for repair. The IRU is a U.S.-origin item, subject to the Regulations, classified under ECCN 7A103, and controlled for missile technology reasons. Upon closer inspection, it was determined that IRU came from or had been installed on an Airbus A340 aircraft bearing MSN 056. Further investigation revealed that as of approximately February 2014, this aircraft was registered under Iranian tail number EP-MMB and had been painted in the livery and logo of Mahan Airways.
The January 16, 2015 renewal order also described related efforts by the Departments of Justice and Treasury to further thwart Mahan's illicit procurement efforts. Specifically, on August 14, 2014, the United States Attorney's Office for the District of Maryland filed a civil forfeiture complaint for the IRU pursuant to 22 U.S.C. 401(b) that resulted in the court issuing an Order of Forfeiture on December 2, 2014. EP-MMB remains listed as active in Mahan Airways' fleet and has been used on flights into and out of Iran as recently as December 19, 2017.
Additionally, on August 29, 2014, OFAC blocked the property and interests in property of Asian Aviation Logistics of Thailand, a Mahan Airways affiliate or front company, pursuant to Executive Order 13224. In doing so, OFAC described Mahan Airways' use of Asian Aviation Logistics to evade sanctions by making payments on behalf of Mahan for the purchase of engines and other equipment.
The May 21, 2015 modification order detailed the acquisition of two aircraft, specifically an Airbus A340 bearing MSN 164 and an Airbus A321 bearing MSN 550, that were purchased by Al Naser Airlines in late 2014/early 2015 and were under the possession, control, and/or ownership of Mahan Airways.
The May 21, 2015 modification order also laid out evidence showing the respondents' attempts to obtain other controlled aircraft, including aircraft physically located in the United States in similarly-patterned transactions during the same recent time period. Transactional documents involving two Airbus A320s bearing MSNs 82 and 99, respectively, again showed Ali Abdullah Alhay signing sales agreements for Al Naser Airlines.
The July 13, 2015 renewal order outlined evidence showing that Al Naser Airlines' attempts to acquire aircraft on behalf of Mahan Airways extended beyond MSNs 164 and 550 to include a total of nine aircraft.
The January 7, 2016 renewal order discussed evidence that Mahan Airways had begun actively flying EP-MMD on international routes into and out of Iran. Additionally, the January 7, 2016 order described publicly available aviation database and flight tracking information indicating that Mahan Airways continued efforts to acquire Iranian tail numbers and press into active service under Mahan's livery and logo at least two more of the Airbus A340 aircraft it had obtained from or through Al Naser Airlines: EP-MME (MSN 371) and EP-MMF (MSN 376), respectively.
The July 7, 2016 renewal order described Mahan Airways' acquisition of a BAE Avro RJ-85 aircraft (MSN 2392) in violation of the Regulations and its subsequent registration under Iranian tail number EP-MOR.
The December 30, 2016 renewal order outlined Mahan's continued operation of multiple Airbus aircraft, including EP-MMD (MSN 164), EP-MMF (MSN 376), and EP-MMH (MSN 391), which were acquired from or through Al Naser Airlines, as previously detailed in pertinent part in the July 13, 2015 and January 7, 2016 renewal orders. Publicly available flight tracking information showed that the aircraft were operated on flights into and out of Iran, including from/to Beijing, China, Kuala Lumpur, Malaysia, and Istanbul, Turkey.
The June 27, 2017 renewal order included similar evidence regarding Mahan Airways' operation of multiple Airbus aircraft subject to the Regulations, including, but not limited to, aircraft procured from or through Al Naser Airlines, on flights into and out of Iran, including from/to Moscow, Russia, Shanghai, China and Kabul, Afghanistan. The June 27, 2017 order also detailed evidence concerning a suspected planned or attempted diversion to Mahan of an Airbus A340 subject to the Regulations that had first been mentioned in OEE's December 13, 2016 renewal request.
The December 20, 2017 renewal order presented evidence that a Mahan employee attempted to initiate negotiations with a U.S. company for the purchase of an aircraft subject to the Regulations and classified under ECCN 9A610. Moreover, the order highlighted Al Naser Airlines' acquisition, via lease, of at least possession and/or control of a Boeing 737 (MSN 25361), bearing tail number YR-SEB, and an Airbus A320 (MSN 357), bearing tail number YR-SEA, from a Romanian company in violation of the TDO and the Regulations.
The December 20, 2017 renewal order also included evidence indicating that Mahan Airways was continuing to operate a number of aircraft subject to the Regulations, including aircraft originally procured from or through Al Naser Airlines, on flights into and out of Iran, including from/to Lahore, Pakistan, Shanghai, China, Ankara, Turkey, Kabul, Afghanistan, and Baghdad, Iraq.
The June 14, 2018 renewal order outlined evidence that Mahan began actively operating EP-MMT, an Airbus A340 aircraft (MSN 292) acquired in 2017 and previously registered in Kazakhstan under tail number UP-A4003, on international flights into and out of Iran.
The June 14, 2018 renewal order also noted OFAC's May 24, 2018 designation of Otik Aviation, a/k/a Otik Havacilik Sanayi Ve Ticaret Limited Sirketi, of Turkey, as an SDGT pursuant to Executive Order 13224, for providing material support to Mahan, as well as OFAC's designation as SDGTs of an additional twelve aircraft in which Mahan has an interest.
The December 11, 2018 renewal order detailed publicly available information showing that Mahan Airways had continued operating a number of aircraft subject to the EAR, including, but not limited to, EP-MMB, EP-MME, EP-MMF, and EP-MMQ, on international flights into and out of Iran from/to Istanbul, Turkey, Guangzhou, China, Bangkok, Thailand, and Dubai, UAE.
The December 11, 2018 order also noted OFAC's September 14, 2018 designation of Mahan-related entities as SDGTs pursuant to Executive Order 13224, namely, My Aviation Company Limited, of Thailand, and Mahan Travel and Tourism SDN BHD, a/k/a Mahan Travel a/k/a Mihan Travel & Tourism SDN BHD, of Malaysia.
The June 5, 2019 renewal order highlighted Mahan's continued violation of the TDO and the Regulations. An end-use check conducted by BIS in Malaysia in March 2019, uncovered evidence that on approximately ten occasions, Mahan had caused, aided and/or abetted the unlicensed export of U.S.-origin items subject to the Regulations from the United States to Iran via Malaysia. The items included helicopter shafts, transmitters, and other aircraft parts, some of which are listed on the Commerce Control List and controlled on anti-terrorism grounds. The June 5, 2019 order also detailed publicly available flight tracking information showing that Mahan continues to unlawfully operate a number of aircraft subject to the EAR on flights into and out of Iran, including on routes to and from Damascus Syria.
The June 5, 2019 order also described actions taken by both BIS and OFAC to thwart efforts by entities connected to or acting on behalf of Mahan Airways to violate U.S. export controls and sanctions related to Iran. On May 14, 2019, BIS added Manohar Nair, Basha Asmath Shaikh, and two co-located companies that they operate, Emirates Hermes General Trading and Presto Freight International, LLC, to the Entity List pursuant to Section 744.11 of the Regulations, including for engaging in activities to procure U.S.-origin items on Mahan's behalf.
OEE's November 12, 2019 renewal request and on-going investigation demonstrate that Mahan Airways continues to take actions in violation of the TDO and the Regulations, both directly and through its widespread network of procurement agents, front companies, and intermediaries. In June 2019, OEE became aware that U.S.-origin passenger flight and database management software subject to the Regulations was provided to a company in Turkey that was subsequently used to facilitate and service Mahan Airways operations into and out of Turkey in further violation of the Regulations.
Additionally, open source information, including flight tracking data and news articles published in October 2019, shows that Mahan Airways is now operating a U.S.-origin Boeing 747 on routes between Iranian airports in Tehran, Kish Island, and Mashhad. This aircraft, bearing Iranian tail number EP-MNB, appears to be one of the three aircraft that Mahan illegally acquired via Blue Airways of Armenia and U.K.-based Balli Group that resulted in the issuance of the original TDO.
Evidence also has been presented showing that as recently as on or about November 11, 2019, Mahan caused, aided and/or abetted the unlicensed export of a U.S.-origin atomic absorption spectrometer, an item subject to the Regulations, from the United States to Iran via the UAE. By transporting the item from the UAE to Iran, Mahan violated the plain language of the TDO, which specifically prohibits Mahan from, inter alia, transporting any item that is subject to the Regulations and has been exported from the United States.
Mahan Airways also continues to violate the TDO by operating a number of aircraft subject to the Regulations, including, but not limited to, EP-MME, EP-MMF, and EP-MMQ, aircraft originally acquired from Al Naser Airlines, on international flights into and out of Iran from/to Guangzhou, China, Istanbul, Turkey, and Kuala Lumpur, Malaysia. These flights have continued since the renewal request was submitted, including November 20-23, 2019.
Under the applicable standard set forth in Section 766.24 of the Regulations and my review of the entire record, I find that the evidence presented by BIS convincingly demonstrates that the denied persons have acted in violation of the Regulations and the TDO; that such violations have been significant, deliberate and covert; and that given the foregoing and the nature of the matters under investigation, there is a likelihood of imminent violations. Therefore, renewal of the TDO is necessary in the public interest to prevent imminent violation of the Regulations and to give notice to companies and individuals in the United States and abroad that they should continue to avoid dealing with Mahan Airways and Al Naser Airlines and the other denied persons, in connection with export and reexport transactions involving items subject to the Regulations and in connection with any other activity subject to the Regulations.
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the EAR, or engaging in any other activity subject to the EAR; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the EAR, or from any other activity subject to the EAR.
A. Export or reexport to or on behalf of a Denied Person any item subject to the EAR;
B. Take any action that facilitates the acquisition or attempted acquisition by a Denied Person of the ownership, possession, or control of any item subject to the EAR that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby a Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from a Denied Person of any item subject to the EAR that has been exported from the United States;
D. Obtain from a Denied Person in the United States any item subject to the EAR with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the EAR that has been or will be exported from the United States and which is owned, possessed or controlled by a Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by a Denied Person if such service involves the use of any item subject to the EAR that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
In accordance with the provisions of Sections 766.24(e) of the EAR, Mahan Airways, Al Naser Airlines, Ali Abdullah Alhay, and/or Bahar Safwa General Trading may, at any time, appeal this Order by filing a full written statement in support of the appeal with the Office of the Administrative Law Judge, U.S. Coast Guard ALJ Docketing Center, 40 South Gay Street, Baltimore, Maryland 21202-4022. In accordance with the provisions of Sections 766.23(c)(2) and 766.24(e)(3) of the EAR, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Mahan Air General Trading LLC, Mehdi Bahrami, Sky Blue Bird Group, and/or Issam Shammout may, at any time, appeal their inclusion as a related person by filing a full written statement in support of the appeal with the Office of the Administrative Law Judge, U.S. Coast Guard ALJ Docketing Center, 40 South Gay Street, Baltimore, Maryland 21202-4022.
In accordance with the provisions of Section 766.24(d) of the EAR, BIS may seek renewal of this Order by filing a written request not later than 20 days before the expiration date. A renewal request may be opposed by Mahan Airways, Al Naser Airlines, Ali Abdullah Alhay, and/or Bahar Safwa General Trading as provided in Section 766.24(d), by filing a written submission with the Assistant Secretary of Commerce for Export Enforcement, which must be received not later than seven days before the expiration date of the Order.
A copy of this Order shall be provided to Mahan Airways, Al Naser Airlines, Ali Abdullah Alhay, and Bahar Safwa General Trading and each related person, and shall be published in the
This Order is effective immediately and shall remain in effect for 180 days.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Brenda E. Brown, Office of AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, telephone: (202) 482-4735.
Each year during the anniversary month of the publication of an antidumping or countervailing duty order, finding, or suspended investigation, an interested party, as defined in section 771(9) of the Tariff Act of 1930, as amended (the Act), may request, in accordance with 19 CFR 351.213, that the Department of Commerce (Commerce) conduct an administrative review of that antidumping or countervailing duty order, finding, or suspended investigation.
All deadlines for the submission of comments or actions by Commerce discussed below refer to the number of calendar days from the applicable starting date.
In the event Commerce limits the number of respondents for individual examination for administrative reviews initiated pursuant to requests made for the orders identified below, Commerce intends to select respondents based on U.S. Customs and Border Protection (CBP) data for U.S. imports during the period of review. We intend to release the CBP data under Administrative Protective Order (APO) to all parties having an APO within five days of publication of the initiation notice and to make our decision regarding respondent selection within 21 days of publication of the initiation
In the event Commerce decides it is necessary to limit individual examination of respondents and conduct respondent selection under section 777A(c)(2) of the Act:
In general, Commerce finds that determinations concerning whether particular companies should be “collapsed” (
Pursuant to 19 CFR 351.213(d)(1), a party that requests a review may withdraw that request within 90 days of the date of publication of the notice of initiation of the requested review. The regulation provides that Commerce may extend this time if it is reasonable to do so. Determinations by Commerce to extend the 90-day deadline will be made on a case-by-case basis.
Section 504 of the Trade Preferences Extension Act of 2015 amended the Act by adding the concept of particular market situation (PMS) for purposes of constructed value under section 773(e) of the Act.
Neither section 773(e) of the Act nor 19 CFR 351.301(c)(2)(v) set a deadline for the submission of PMS allegations and supporting factual information. However, in order to administer section 773(e) of the Act, Commerce must receive PMS allegations and supporting factual information with enough time to consider the submission. Thus, should an interested party wish to submit a PMS allegation and supporting new factual information pursuant to section 773(e) of the Act, it must do so no later than 20 days after submission of initial Section D responses.
In
Note that, for any party Commerce was unable to locate in prior segments, Commerce will not accept a request for an administrative review of that party absent new information as to the party's
As explained in
Commerce no longer considers the non-market economy (NME) entity as an exporter conditionally subject to an antidumping duty administrative reviews.
All requests must be filed electronically in Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS) on Enforcement and Compliance's ACCESS website at
Commerce will publish in the
For the first administrative review of any order, there will be no assessment of antidumping or countervailing duties on entries of subject merchandise entered, or withdrawn from warehouse, for consumption during the relevant provisional-measures “gap” period of the order, if such a gap period is applicable to the period of review.
This notice is not required by statute but is published as a service to the international trading community.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
As a result of the determinations by the Department of Commerce (Commerce) and the U.S. International Trade Commission (ITC) that revocation of the antidumping duty (AD) order and countervailing duty (CVD) order on circular welded austenitic stainless pressure pipe (WSPP) from the People's Republic of China (China) would likely lead to a continuation or recurrence of dumping, countervailable subsidies, and material injury to an industry in the United States, Commerce is publishing a notice of continuation of the AD order and the CVD order.
Applicable December 6, 2019.
Eric B. Greynolds, AD/CVD Operations, Office III, and Thomas Hanna, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-6071 and (202) 482-0835, respectively.
On March 17, 2009, Commerce published in the
On June 13, 2019, Commerce received notices of intent to participate in the sunset reviews from Bristol Metals, LLC, Felker Brothers Corporation, and Webco Industries, Inc. within the deadline specified in 19 CFR 351.218(d)(1)(i).
On June 28, 2019, Commerce received complete and adequate substantive responses from the domestic interested parties filed within the 30-day deadline specified in 19 CFR 351.218(d)(3)(i).
As a result of its reviews, Commerce determined, pursuant to sections 751(c)(1) and 752(b) and (c) of the Act, that revocation of the
On November 25, 2019, the ITC published its determination that revocation of the
The merchandise covered by these orders is circular welded austenitic stainless pressure pipe not greater than 14 inches in outside diameter. This merchandise includes, but is not limited to, the American Society for Testing and Materials (ASTM) A-312 or ASTM A-778 specifications, or comparable domestic or foreign specifications. ASTM A-358 products are only included when they are produced to meet ASTM A-312 or ASTM A-778 specifications, or comparable domestic or foreign specifications.
Excluded from the scope are: (1) Welded stainless mechanical tubing, meeting ASTM A-554 or comparable domestic or foreign specifications; (2) boiler, heat exchanger, superheater, refining furnace, feedwater heater, and condenser tubing, meeting ASTM A-249, ASTM A-688 or comparable domestic or foreign specifications; and (3) specialized tubing, meeting ASTM A-269, ASTM A-270 or comparable domestic or foreign specifications.
The subject imports are normally classified in subheadings 7306.40.5005; 7306.40.5040, 7306.40.5062, 7306.40.5064, and 7306.40.5085 of the Harmonized Tariff Schedule of the United States (HTSUS). They may also enter under HTSUS subheadings 7306.40.1010; 7306.40.1015; 7306.40.5042, 7306.40.5044, 7306.40.5080, and 7306.40.5090. The HTSUS subheadings are provided for convenience and customs purposes only, the written description of the scope of these orders is dispositive.
As a result of the determinations by Commerce and the ITC that revocation of the
The effective date of the continuation of the
This notice also serves as the only reminder to parties subject to APO of their responsibility concerning the return, destruction, or conversion to judicial protective order of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to comply is a violation of the APO which may be subject to sanctions.
These five-year sunset reviews and this notice are in accordance with section 751(c) of the Act and published pursuant to section 777(i)(1) of the Act and 19 CFR 351.218(f)(4).
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of initiation of a status review; request for information.
We, NMFS, announce the initiation of a status review of queen conch (
We must receive your information no later than February 4, 2020.
You may submit information for us to use in our status review, identifying it as “Queen Conch Status Review (0648-XR071),” by either of the following methods:
Calusa Horn at the above address, by phone at 727-551-5782 or
This notice announces our status review of queen conch under the ESA. On February 27, 2012, we received a petition from WildEarth Guardians to list the queen conch as threatened or endangered throughout all or a significant portion of their range under the ESA. We determined that the petitioned action may be warranted and published a positive 90-day finding in the
WildEarth Guardians and Friends of Animals (Plaintiffs) filed suit on July 27, 2016, in the U.S. District Court for the District of Columbia, challenging our decision not to list queen conch as threatened or endangered under the ESA. On August 26, 2019, the court vacated our determination that listing queen conch was not warranted and remanded the determination back to the NMFS, based on our reliance on the SPR Policy's definition of “significant,” which was vacated nationwide in 2018 (though the policy otherwise remains in effect) as a result of litigation involving an unrelated listing determination by the United States Fish and Wildlife Service, of the Department of the Interior. (
Paragraph (a)(1) of section 4 of the ESA (16 U.S.C. 1533
With this notice, we commence a status review of queen conch to determine whether listing the species as endangered or threatened under the ESA is warranted. To ensure that our review of queen conch is informed by the best available scientific and commercial information, we are opening a 60-day public comment period. For the status review to be complete and based on the best available scientific and commercial information, we request information on the species from governmental agencies, the scientific community, industry, and any other interested parties. We seek information on: (1) Species abundance; (2) historical and current population trends; (3) landings and trade data; (4) distribution and population spatial structure; (5) reproduction and population densities; (6) larval dispersal and population connectivity; (7) genetics; (8) disease and parasites; (9) habitat stressors; and (10) the adequacy of existing regulatory mechanisms.
Our consideration of conservation measures, regulatory mechanisms, and other protective efforts will be guided by the Services “Policy for Evaluation of Conservation Efforts When Making Listing Decisions” (PECE) (68 FR 15100; March 28, 2003). The PECE established criteria to ensure the consistent and adequate evaluation of conservation efforts when making listing decisions
If you wish to provide your information for this status review, please submit it as described in the
The authority for this action is the Endangered Species Act of 1973, as amended (16. U.S.C. 1531
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The South Atlantic Fishery Management Council (Council) will hold a meeting of its Citizen Science Operations Committee via webinar.
The Citizen Science Operations Committee meeting will be held via webinar on Friday, January 24, 2020, from 1 p.m. until 3 p.m.
Julia Byrd, Citizen Science Program Manager, SAFMC; phone: (843) 302-8439 or toll free 866/SAFMC-10; fax: (843) 769-4520; email:
The Citizen Science Operations Committee serves as advisors to the Council's Citizen Science Program. Committee members include representatives from the Council's Citizen Science Advisory Panel, Southeast Regional Office, Southeast Fisheries Science Center, and Science and Statistical Committee. Their responsibilities include developing programmatic recommendations, reviewing policies, providing program direction/multi-partner support, identifying citizen science research needs, and providing general advice.
Items to be addressed during this webinar meeting include:
The meeting is physically accessible to people with disabilities. Requests for auxiliary aids should be directed to the Council office (see
16 U.S.C. 1801
Committee for Purchase From People Who Are Blind or Severely Disabled.
Deletions from the Procurement List.
This action deletes products and a service from the Procurement List that were furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S Clark Street, Suite 715, Arlington, Virginia 22202-4149.
Michael R. Jurkowski, Telephone: (703) 603-2117, Fax: (703) 603-0655, or email
On 10/18/2019, 11/1/2019 and 11/8/2019, the Committee for Purchase From People Who Are Blind or Severely Disabled published notice of proposed deletions from the Procurement List. After consideration of the relevant matter presented, the Committee has determined that the products and service listed below are no longer suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
I certify that the following action will not have a significant impact on a substantial number of small entities.
1. The action will not result in additional reporting, recordkeeping or other compliance requirements for small entities.
2. The action may result in authorizing small entities to furnish the products and service to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in connection with the products and service deleted from the Procurement List.
Accordingly, the following products and service are deleted from the Procurement List:
Committee for Purchase From People Who Are Blind or Severely Disabled.
Proposed deletions from the Procurement List.
The Committee is proposing to delete services from the Procurement List that were furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
Comments must be received on or before: January 5, 2020.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S. Clark Street, Suite 715, Arlington, Virginia 22202-4149.
For further information or to submit comments contact: Michael R. Jurkowski, Telephone: (703) 603-2117, Fax: (703) 603-0655, or email
This notice is published pursuant to 41 U.S.C. 8503(a)(2) and 41 CFR 51-2.3. Its purpose is to provide interested persons an opportunity to submit comments on the proposed actions.
The following services are proposed for deletion from the Procurement List:
9:00 a.m., Tuesday, December 10, 2019.
CFTC Headquarters, Lobby-Level Hearing Room, Three Lafayette Centre, 1155 21st Street NW, Washington, DC.
Open.
The Commodity Futures Trading Commission (“Commission” or “CFTC”) will hold this meeting to consider the following matters:
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•
•
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The agenda for this meeting will be available to the public and posted on the Commission's website at
Christopher Kirkpatrick, Secretary of the Commission, 202-418-5964.
5 U.S.C. 552b.
Bureau of Consumer Financial Protection.
Notice of approval of information collection requirements.
In accordance with the Paperwork Reduction Act of 1995 (PRA) and the Code of Federal Regulations, the Consumer Financial Protection Bureau (Bureau) is announcing Office of Management and Budget (OMB) approval of revised information collection requirements contained in a final rule published in the
Documentation prepared in support of these information collection requests is available at
Under the PRA (44 U.S.C. 3501
Office of the Secretary, Department of Education.
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing an extension of an existing information collection.
Interested persons are invited to submit comments on or before February 4, 2020.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Alfreida Pettiford, 202-245-6110.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also
Office of Fossil Energy, DOE.
Notice of change in control.
The Office of Fossil Energy (FE) of the Department of Energy (DOE) gives notice of receipt of a Notice of Change in Control (Notice) filed by Pieridae Energy (USA) Ltd. (Pieridae US) in the above-referenced docket on November 6, 2019. The Notice describes changes in the ownership of Pieridae Energy Limited, Pieridae US's parent company.
Protests, motions to intervene, or notices of intervention, as applicable, and written comments are to be filed using procedures detailed in the Public Comment Procedures section no later than 4:30 p.m., Eastern time, December 23, 2019.
The Notice was filed under section 3 of the Natural Gas Act (NGA), 15 U.S.C. 717b. In the Notice, Pieridae US states that it is wholly-owned by Pieridae Energy Limited (Pieridae). Pieridae US states that, on or about October 16, 2019, Pieridae completed an equity offering. Pieridae's shares became listed on the TSX (Venture) Exchange on or about October 24, 2019.
As a consequence of the offering, Pieridae US states that: (i) Erikson National Energy Inc., a Canadian corporation, acquired beneficial ownership representing approximately 14.7% or more of Pieridae's issued and outstanding common shares; and (ii) Alberta Investment Management Corporation, a Canadian corporation, acquired beneficial ownership representing approximately 10.53% or more of Pieridae's issued and outstanding common shares.
DOE/FE will review Pieridae US's Notice in accordance with its Procedures for Changes in Control Affecting Applications and Authorizations to Import or Export Natural Gas (CIC Procedures).
Interested persons will be provided 15 days from the date of publication of this notice in the
Filings may be submitted using one of the following methods: (1) Preferred method: Emailing the filing to
Pieridae US's Notice and any filed protests, motions to intervene, notices of intervention, and comments are available for inspection and copying in the Office of Regulation, Analysis, and Engagement docket room, Room 3E-042, 1000 Independence Avenue SW, Washington, DC 20585. The docket room is open between the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday, except Federal holidays.
The Notice and any filed protests, motions to intervene, notices of intervention, and comments will also be available electronically by going to the following DOE/FE Web address:
Office of Environmental Management, U.S. Department of Energy.
Record of Decision.
The U.S. Department of Energy (DOE) is issuing this Record of Decision (ROD) for the long-term management and storage of elemental mercury to meet the federal government's statutory responsibility for long-term storage of the elemental mercury generated within the United States. This ROD is issued for the
For copies of this Record of Decision, the Supplement Analysis, the
For further information on the management and storage of elemental mercury, please contact Dave Haught at
Pursuant to Section 5 of the Mercury Export Ban Act of 2008 (Pub. L. 110-414; MEBA), as amended by the Frank R. Lautenberg Chemical Safety for the 21st Century Act, (Pub. L. 114-182) (herein referred to as MEBA), the U.S. Department of Energy (DOE) was directed to designate a facility or facilities for the long-term management and storage of elemental mercury generated within the United States.
On July 2, 2009, DOE issued a Notice of Intent in the
On January 29, 2010, DOE issued a Notice of Availability in the
On January 28, 2011, DOE issued a Notice of Availability in the
On June 5, 2012, DOE issued a Notice of Intent in the
DOE prepared a
MEBA prohibits the export of elemental mercury from the United States (subject to certain essential-use exemptions). MEBA also prohibits, as of October 14, 2008, any Federal agency from conveying, selling, or distributing to any other Federal agency, any state or local government agency, or any private individual or entity any elemental mercury under the control or jurisdiction of the Federal agency (with certain limited exceptions). Banning the export of elemental mercury from the United States is expected to result in surplus inventories of elemental mercury.
Section 5 of MEBA directs DOE to designate a DOE facility or facilities for the long-term management and storage of elemental mercury generated within the United States. In the Final Elemental Mercury Storage EIS, DOE identified a need to provide such a facility capable of managing an elemental mercury inventory estimated to range up to 10,000 metric tons (11,000 tons) for a 40-year period of analysis. In the SA, DOE updated the projected inventory of elemental mercury that could need future storage to 6,800 metric tons (7,480 tons) for a 40-year period of analysis.
As identified in the Final Elemental Mercury Storage EIS, DOE proposes to construct one or more new facilities and/or select one or more existing facilities (including modification as needed) for the long-term management and storage of elemental mercury, as mandated by Section 5 of MEBA. Any such facility(ies) must comply with applicable requirements of Section 5 of MEBA, including the requirements of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (RCRA) (42 U.S.C. 6901
On March 20, 2009 (74 FR 11923), DOE published a Request for Expressions of Interest seeking potential locations for the elemental mercury storage facility(ies) from interested Federal agencies and the private sector. In addition, DOE issued an internal memorandum requesting that DOE site offices determine if they have a facility(ies) that could be used for elemental mercury storage. At the same time, DOE developed objective criteria for identifying candidate sites within the scope of the Final Elemental Mercury Storage EIS. In addition to the No Action Alternative, DOE evaluated seven government and commercial sites as the range of reasonable alternatives in the Final Elemental Mercury Storage EIS: The DOE Grand Junction Disposal Site, Grand Junction, Colorado; the DOE Hanford Site, Richland, Washington; Hawthorne Army Depot, Hawthorne, Nevada; Idaho Nuclear Technology and Engineering Center and Radioactive Waste Management Complex at the DOE Idaho National Laboratory, Idaho Falls, Idaho; DOE Kansas City Plant, Kansas City, Missouri; DOE Savannah River Site, Aiken, South Carolina; and WCS, Andrews, Texas. The Final Elemental Mercury Storage SEIS evaluated additional alternatives for a facility at and in the vicinity of WIPP.
Existing buildings at the candidate locations were considered in the Final Elemental Mercury Storage EIS to store the elemental mercury. Recognizing that existing buildings may not be available or adequate at some candidate locations, DOE also evaluated construction and operation of new facilities that would meet RCRA requirements.
The Final Elemental Mercury Storage EIS and SEIS evaluated the construction of a new facility and the use of existing facilities for the long-term management and storage of elemental mercury. The documents included the assessment of potential impacts from the transportation of the elemental mercury from the origin sites to the long-term storage location via either truck or rail. The analysis of potential environmental impacts included an evaluation of the following environmental resource areas: Land use and visual resources; geology, soils, and geologic hazards; water resources; meteorology, air quality, and noise; ecological resources; cultural and paleontological resources; site infrastructure; waste management; occupational and public health and safety; ecological impacts; socioeconomics; and environmental justice. Based on analyses in the Final EIS and Final SEIS, the potential impacts on the various resource areas at each analyzed site from construction and operation of an elemental mercury storage facility(ies) would range from none to minor.
The SA further evaluated whether the proposed change in the quantity of elemental mercury to be stored and managed (to 6,800 metric tons from 10,000 metric tons) and potential use of two existing facilities (Container Storage Building and Bin Storage Unit 1) rather than one at WCS represented a
Modification of the existing facilities would produce negligible quantities of nonhazardous waste. Operations of elemental mercury storage facilities are estimated to generate approximately 23 drums of hazardous waste and less than 16,000 gallons of liquid sanitary waste annually. Since elemental mercury storage would not involve any treatment or processing of elemental mercury, the rate of hazardous waste generation would be very low. Any hazardous waste would be disposed in a licensed facility. In addition, the existing sanitary waste systems at WCS have sufficient capacity to handle the projected liquid sanitary waste volume, therefore, the potential impacts to waste management would be negligible.
The potential impacts to occupational and public health and safety were presented in the Final Elemental Mercury Storage EIS, Final SEIS, and SA for normal operations, facility accidents, and intentional destructive acts. Normal operations would involve the receipt and long-term storage of elemental mercury. Exposures could arise during normal operating conditions from small amounts of mercury vapor accumulating in the storage areas. The estimated consequences to involved workers, noninvolved workers, or members of the public are predicted to be negligible.
Facility accidents could include elemental mercury spills inside or outside the storage building. The Final Elemental Mercury Storage EIS and Final SEIS report the potential risks to workers and the offsite public to be negligible-to-low for these spills for all alternatives. Similarly, the Final Elemental Mercury Storage EIS and SEIS report that human health risks of transportation accidents would be negligible-to-low for all alternatives. The Final Elemental Mercury Storage EIS and Final SEIS analyzed intentional destructive acts and found that, while the probability of an intentional destructive act cannot be determined, consequences of such an act, were one to occur, were expected to be similar for all alternatives.
Constructing a new building would produce additional environmental impacts. Therefore, although the construction impacts are anticipated to be minimal, alternatives involving no construction are environmentally preferable. Although storage of the entire inventory of elemental mercury in an existing building at WCS was not evaluated in the Final Elemental Mercury Storage EIS and Final SEIS, DOE has subsequently learned that the existing Container Storage Building and Bulk Storage Unit could be used to store the entire inventory of elemental mercury. Transportation of elemental mercury to any of these existing buildings would result in negligible-to-low human health risks from transportation accidents. The potential impacts of operating these elemental mercury storage buildings would be similar regardless of the location.
The No Action Alternative would not involve the construction of a new facility for consolidation and storage of the elemental mercury. However, the No Action Alternative would still include transportation to and from elemental mercury storage sites, as described in Section 4.2.9.4 of the Final Elemental Mercury Storage EIS, and therefore would not be significantly different than the transportation impacts under the action alternatives. Under the No Action Alternative, elemental mercury would be stored indefinitely at multiple non-DOE facilities; therefore, the biggest impact of the No Action Alternative would be widely dispersed storage. Taking this under consideration, the No Action Alternative would not be the environmentally preferable alternative.
MEBA prohibits the export of elemental mercury. Section 5 of the Act directs DOE to designate a facility(ies) for the long-term management and storage of elemental mercury generated within the United States. MEBA also requires that the facility(ies) be constructed and operated in accordance with the Solid Waste Disposal Act, as amended by RCRA.
DOE received five comment letters after publishing the Final Elemental Mercury Storage EIS and Final SEIS. They included: (1) One letter from an individual that agreed with the DOE preferred alternative of the WCS site, (2) one letter from an individual that did not agree with potential selection of the WCS site, (3) one letter from the Environmental Protection Agency that indicated the agency had no additional comments, (4) one letter that requested modifications to the EIS mailing list, and (5) one letter from the Texas Parks and Wildlife Department notifying DOE that the federal listing status of two species had changed since the issuance of the Draft EIS. Since the use of existing buildings at the WCS site would not impact ecological resources, this change to the federal listing status of two species would not affect the potential impacts presented in the Final Elemental Mercury Storage EIS or Final SEIS. DOE has considered these comments and finds that they do not present “significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts” within the meaning of 40 CFR 1502.9(c) and 10 CFR 1021.314(a) and therefore do not require preparation of a new or a supplemental EIS.
Based on consideration of the analysis in the Final Elemental Mercury Storage EIS, Final SEIS, and SA; DOE has decided to designate the WCS site near Andrews, Texas for the management and storage of up to 6,800 metric tons (7,480 tons) of elemental mercury and to manage and store the elemental mercury in leased portions of existing buildings, the Container Storage Building and Bin Storage Unit 1, at the WCS site. This decision is also based on other programmatic, policy, logistic, and cost considerations. For example, use of the Container Storage Building and Bin Storage Unit 1 avoids the costs associated with design and construction of a new facility and the utilization of an existing Basic Ordering Agreement with WCS simplifies the procurement process and allows DOE to mitigate some of the liabilities associated with the incentives added to MEBA, as amended by the Frank R. Lautenberg Chemical Safety for the 21st Century Act.
All practicable means to avoid or minimize environmental harm from the alternative selected have been adopted. Because the Final Elemental Mercury Storage EIS and Final SEIS identified that potential environmental impacts associated with long-term management and storage of 10,000 metric tons of elemental mercury would be negligible-to-low, mitigation measures would not be required as part of this ROD.
This is a supplemental notice in the above-referenced proceeding of Golden Fields Solar III, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is December 23, 2019.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that on November 15, 2019, Puget Sound Energy, Inc. (Puget), 10885 NE 4th Street, Bellevue, Washington 98004, filed in the above referenced docket an application pursuant to section 7(c) of the Natural Gas Act requesting authorization to amend its certificate issued in Docket No. CP06-465-000 to recomplete Well SU-50 at its Jackson Prairie Storage Facility located in Lewis County, Washington. Puget states the recompletion of Well SU-50 will increase operational efficiency and provide a backup gas recycle well. Puget estimates the cost of the project to be $701,714, all as more fully described in the application which is on file with the Commission and open to public inspection. The filing is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's website web at
Any questions regarding this application should be directed to Andrea Chambers, DLA Piper, LLP, 500 8th Street NW, Washington, DC 20004, by telephone at (202) 799-4130, or by emailing
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice the Commission staff will either: Complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding; or issue a Notice of Schedule for Environmental Review. If a Notice of Schedule for Environmental Review is issued, it will indicate, among other milestones, the anticipated date for the Commission staff's issuance of EA for this proposal. The filing of the EA in the Commission's public record for this proceeding or the issuance of a Notice of Schedule for Environmental Review will serve to notify federal and state agencies of the timing for the completion of all necessary reviews, and the subsequent need to complete all federal authorizations within 90 days of the date of issuance of the Commission staff's EA.
There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before the comment date stated below file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit 3 copies of filings made in the proceeding with the Commission and must provide a copy to the applicant and to every other party. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.
However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenters will be placed on the Commission's environmental mailing list and will be notified of any meetings associated with the Commission's environmental review process. Environmental commenters will not be required to serve copies of filed documents on all other parties. However, the non-party commenters will not receive copies of all documents filed by other parties or issued by the Commission and will not have the right to seek court review of the Commission's final order.
As of the February 27, 2018 date of the Commission's order in Docket No. CP16-4-001, the Commission will apply its revised practice concerning out-of-time motions to intervene in any new Natural Gas Act section 3 or section 7 proceeding.
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the eFiling link at
On October 8, 2019, Pumped Hydro Storage LLC filed an application for a preliminary permit, pursuant to section 4(f) of the Federal Power Act (FPA), proposing to study the feasibility of the Montezuma Pumped Storage Project (Montezuma Project or project) to be located near Maricopa, Pinal County, Arizona. The sole purpose of a preliminary permit, if issued, is to grant the permit holder priority to file a license application during the permit term. A preliminary permit does not authorize the permit holder to perform any land-disturbing activities or otherwise enter upon lands or waters owned by others without the owners' express permission.
The proposed project would consist of the following: (1) A new rockfill, concrete-face impoundment, 3,000 feet by 110 feet creating an upper reservoir with a maximum elevation of 3,000 feet above mean sea level (MSL), and a usable storage capacity of 9,500 acre-feet; (2) a new rockfill, concrete-face impoundment, 4,000 feet by 130 feet creating a lower reservoir with a maximum elevation of 1,350 feet MSL, and a usable storage capacity of 9,500 acre-feet; (3) two 32-foot-diameter, 7,000-foot-long reinforced concrete penstocks; (4) a powerhouse constructed of reinforced concrete with approximate dimensions of 900 feet by 150 feet and 150 feet high, and containing six turbine-generator units with a total installed capacity of 2100 megawatts; (5) a tailrace constructed of reinforced concrete with approximate dimensions of 1,200 feet by 50 feet by 50 feet; (6) a 500-kilovolt substation; (7) a 500-kilovolt, 11-mile-long transmission line; (8) a 500-kilovolt, 8-mile-long transmission line; (9) one 24-inch-diameter, ductile iron pipe pipeline connecting the project to the existing City of Phoenix 91st Avenue Wastewater Treatment Plant; (10) one 24-inch-diameter, ductile iron pipe pipeline connecting the project to the existing Salt River Project irrigation canal; (11) one 24-inch-diameter, ductile iron pipe pipeline connecting the project to the existing Gila River Indian Community irrigation canal; (12) one 24-inch-diameter, ductile iron pipe pipeline connecting the project to a new water supply well in Santa Cruz Wash; (13) one steel casing water supply well in Santa Cruz wash rated at 2,000 gallons-per-minute; (14) one 1-million-gallon steel overflow tank; (15) six agricultural fields, 2-square-miles in area, that would be irrigated with excess water from the steel overflow tank; and (16) appurtenant facilities. The proposed project would produce about 9,600 megawatt hours of energy daily. The estimated annual generation of the Montezuma Project would be 3,504 gigawatt-hours.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, notices of intent, and competing applications using the Commission's eFiling system at
More information about this project, including a copy of the application, can be viewed or printed on the eLibrary link of Commission's website at
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified date(s). Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that on November 18, 2019, Portland Natural Gas Transmission System (PNGTS), 700 Louisiana Street, Suite 700, Houston, Texas 77002-2700, filed in the above referenced docket an application pursuant to section 7(c) of the Natural Gas Act (NGA) and Part 157 of the Commission's regulations requesting authorization to construct its Westbrook XPress Project Phases II and III. Specifically, PNGTS proposes to: (1) Install an additional 15,900 horsepower compressor unit and appurtenances at its Westbrook Compressor Station; (2) modify certain facilities at the Westbrook Compressor Station; and (3) modify certain facilities at its Westbrook Metering and Regulating Station, all located in Cumberland County, Maine. The project will increase the certificated capacity on PNGTS' wholly-owned northern system by 80,998 thousand cubic feet per day (Mcf/d) and increase PNGTS's certificated capacity on its system jointly-owned with Maritimes & Northeast Pipeline, L.L.C. by 50,119 Mcf/d. PNGTS estimates the cost to be approximately $117.3 million, all as more fully described in the application which is on file with the Commission and open to public inspection. The filing is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's website web at
Any questions regarding this application should be directed to Robert Jackson, Manager, Certificates & Regulatory Administration, Portland Natural Gas Transmission System, 700 Louisiana Street, Suite 700, Houston, Texas 77002-2700, by telephone at (832) 320-5487 or by email at
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice the Commission staff will either: complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding; or
There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before the comment date stated below file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit 3 copies of filings made in the proceeding with the Commission and must provide a copy to the applicant and to every other party. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.
However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenters will be placed on the Commission's environmental mailing list and will be notified of any meetings associated with the Commission's environmental review process. Environmental commenters will not be required to serve copies of filed documents on all other parties. However, the non-party commenters will not receive copies of all documents filed by other parties or issued by the Commission and will not have the right to seek court review of the Commission's final order.
As of the February 27, 2018 date of the Commission's order in Docket No. CP16-4-001, the Commission will apply its revised practice concerning out-of-time motions to intervene in any new Natural Gas Act section 3 or section 7 proceeding.
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the eFiling link at
Notice: Section 309(a) of the Clean Air Act requires that EPA make public its comments on EISs issued by other Federal agencies. EPA's comment letters on EISs are available at:
Wednesday, December 11, 2019 at 10:00 a.m.
1050 First Street NE, Washington, DC.
This Meeting Will Be Closed to the Public.
Compliance matters pursuant to 52 U.S.C. 30109. Matters relating to internal personnel decisions, or internal rules and practices.
Matters concerning participation in civil actions or proceedings or arbitration.
Judith Ingram, Press Officer, Telephone: (202) 694-1220.
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in paragraph 7 of the Act.
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington DC 20551-0001, not later than December 23, 2019.
1.
Information covered under 5 U.S.C. 552b (c)(4).
Kimberly Weaver, Director, Office of External Affairs, (202) 942-1640.
Agency for Toxic Substances and Disease Registry (ATSDR), Department of Health and Human Services (HHS).
Notice with comment period.
The Agency for Toxic Substances and Disease Registry (ATSDR), within the Department of Health and Human Services (HHS), announces the opening of a docket to obtain comments on Draft Toxicological Profiles for 1,2-Dichloropropane, 1,1-Dichloroethene, Di(2-ethylhexyl)phthalate (DEHP), DDT/DDE/DDD, Chlorobenzene, Hexachlorobutadiene, and 1,1,2-Trichloroethane.
Written comments must be received on or before March 5, 2020.
You may submit comments, identified by docket number ATSDR-2019-0008, by any of the following methods:
•
•
Susan Ingber, Agency for Toxic Substances and Disease Registry, Division of Toxicology and Human Health Sciences, 1600 Clifton Rd. NE, Mail Stop S102-1, Atlanta, GA 30329-4027, Email:
ATSDR has updated these profiles based on availability of new health effects information since their initial release. On March 21, 2016 ATSDR announced that it was preparing to develop Draft Toxicological Profiles for public comment release (81 FR 15110), which include those profiles mentioned above. All toxicological profiles issued as “Drafts for Public Comment” represent the result of ATSDR's evidence-based evaluations to provide important toxicological information on priority hazardous substances. ATSDR is seeking public comments and additional information or reports on studies about the health effects of 1,2-dichloropropane, 1,1-dichloroethene, di(2-ethylhexyl)phthalate (DEHP), DDT, DDE, DDD, chlorobenzene, hexachlorobutadiene, and 1,1,2-trichloroethane for review and potential inclusion in the profiles. ATSDR considers key studies for these substances during the profile development process. This document solicits any relevant, additional studies. ATSDR will evaluate the quality and relevance of such data or studies for possible inclusion into the profile.
Interested persons or organizations are invited to participate by submitting written views, information, and data.
Please note that comments received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure. Comments will be posted on
The Superfund Amendments and Reauthorization Act of 1986 (SARA) [42 U.S.C. 9601
In addition, CERCLA provides ATSDR with the authority to prepare toxicological profiles for substances not found on the SPL. CERCLA authorizes ATSDR to establish and maintain an inventory of literature, research, and studies on the health effects of toxic substances (CERCLA Section 104(i)(1)(B); 42 U.S.C. 9604(i)(1)(B)); to respond to requests for health consultations (CERCLA Section 104(i)(4); 42 U.S.C. 9604(i)(4)); and to support the site-specific response actions conducted by the agency.
These Draft Toxicological Profiles will be available online at
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS)
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on Requirements for the Importation of Nonhuman Primates into the United States. This information collection contains the reporting and documentation requirements for registered importers of nonhuman primates, as outlined in 42 Code of Federal Regulations part 71.53 Requirements for importers of nonhuman primates.
CDC must receive written comments on or before February 4, 2020.
You may submit comments, identified by Docket No. CDC-2019-0110 by any of the following methods:
•
•
Submit all comments through the Federal eRulemaking portal (
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, of the Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Requirements for the Importation of Nonhuman Primates into the United States (OMB Control No. 0920-0263, Exp. 08/31/2020)—Revision—National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC).
Under the 42 CFR 71.53, CDC collects information pertaining to importers and imported nonhuman primates. This information collection enables CDC to evaluate compliance with pre-arrival of shipment notification requirements, to investigate the number and species of imported nonhuman primates, and to
Since May 1990, CDC has monitored the arrival and/or uncrating of certain shipments of non-human primates imported in to the United States. In February 2013, CDC promulgated two regulations pertaining to the importation of nonhuman primates. The first rule, Establishment of User Fees for Filovirus Testing of Nonhuman Primate Liver Samples, outlines a process by which importers can send liver tissues to CDC from primates that die during importation from reasons other than trauma (2/12/2013, Vol.78, No. 29, p.9828). CDC performs these tests due to the absence of a private sector option. The second rule, Requirements for Importers of Nonhuman Primates, consolidates into 42 CFR 71.53 the requirements previously found in 42 CFR part 71.53 with those found in the Special Permit to Import Cynomolgus, African Green, or Rhesus Monkeys into the United States (2/15/2013, Vol. 78, No. 32/p. 11522). It also rescinded the six-month special-permit requirements for cynomolgus, African green, and rhesus monkeys and extended the time period for registration/permit renewal from 180 days to two years, reducing much of the respondent burden. CDC feels these regulatory changes and reporting requirements balance the public health risks posed by the importation of nonhuman primates with the burden imposed on regulating their importation.
All registered importers of non-human primates are required by 42 CFR part 71.53 to maintain certain disease control procedures and keep certain records. Standard business practices likely dictate that importers already keep records on the origin, transportation, and disposition of the nonhuman primates. Thus, CDC asks for information which should already be maintained by the importers and need only be assembled and reported. The estimate of burden hours and costs reflects assembling and reporting only. CDC requests approval for an estimated 185 annual burden hours. There is no cost to respondents other than their time.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Assessment of Technical Assistance and Training (TTA) Approaches to Accelerate Comprehensive Cancer Control Outcomes. CDC is requesting to collect information about TTA offered using case studies and a web-based survey to assess whether a specific cooperative agreement has been implemented as intended, and has contributed to National Comprehensive Cancer Control Program (NCCCP) awardees' achievements in program goals and outcomes.
CDC must receive written comments on or before February 4, 2020.
You may submit comments, identified by Docket No. CDC-2019-0105 by any of the following methods:
•
•
Submit all comments through the Federal eRulemaking portal (
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road, NE, MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Assessment of Technical Assistance and Training (TTA) Approaches to Accelerate Comprehensive Cancer Control Outcomes (OMB Control No. 0920-1193)—Reinstatement with Change—National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP), Centers for Disease Control and Prevention (CDC).
Cancer is the second leading cause of death in the United States, and health care costs for cancer care are expected to rise to $158 billion by 2020. Addressing this public health problem requires primary prevention, early detection and treatment, support for cancer survivors, and a reduction in health disparities. Providing support to state, tribal, territorial and local organizations to implement evidence-based strategies has the potential to impact population-level cancer outcomes and reduce the burden of cancer.
The Centers for Disease Control and Prevention's (CDC) National Comprehensive Cancer Control Program (NCCCP) has been a primary funder for state and community-based cancer control interventions since its inception in the late 1990s. The program supports states and communities in developing a comprehensive approach to cancer prevention and control that includes supporting an infrastructure for state, local, and population-based interventions and multi-sectoral partnerships and coalitions. Currently, NCCCP supports 66 cancer control program grantees including programs in all 50 states, the District of Columbia, and in a number of tribes, tribal organizations, and U.S. Associated Pacific Islands/territories. In addition, CDC's Office on Smoking and Health (OSH) also has worked to build state health department infrastructure and capacity to conduct coordinated comprehensive tobacco prevention and control activities which contribute to cancer health outcomes.
In striving to build capacity and maximize the impact of CDC's funded programs, CDC has focused on developing and implementing innovative programs to enhance TTA delivered to NCCCP awardees. CDC funds two awardees under a cooperative agreement—Provision of Technical Assistance and Training to Assure Comprehensive Cancer Control Outcomes (DP18-1805). DP18-1805 awardees are charged with developing and delivering high-quality TTA for NCCCP funded programs, coalition members, and partners focused on improving implementation of evidence-based strategies for cancer prevention and control. The TTA activities DP18-1805 awardees implement include; (1) conducting needs assessments, (2)
CDC proposes to conduct an assessment DP18-1805 to: (1) Document the nature of the TTA provided by DP18-1805 awardees and the extent to which the cooperative agreement was able to achieve planned short-term outcomes, and (2) identify the extent to which DP18-1805 TTA efforts contributed to NCCCP funded programs' achievement in program outcomes. There are no other data collection efforts currently underway to assess implementation or perceived effectiveness of TTA administered under DP18-1805.
This information collection request will involve two complementary data collection efforts: (1) Case studies of DP18-1805 awardees (consisting of interviews with DP18-1805 program managers/directors, evaluators, and partners) and (2) a cross-sectional web-based survey administered to NCCCP program directors, coalition members, and partners. The case studies will be used to explore how DP18-1805 awardees are implementing their respective cooperative agreements and administering TTA to NCCCP awardees; the factors that affect the implementation of specific TTA components; and the extent to which they were able to achieve planned short-term outcomes. The web-based survey will inform CDC's understanding of the reach of DP18-1805 TTA efforts; elicit information from NCCCP programs and coalitions about the TTA received, including type, dosage, frequency and format; and assess the perceptions of the effectiveness of the TTA. CDC will use findings from the assessment to inform development of future TTA efforts to more effectively and efficiently support NCCCP's partner organizations.
OMB approval is requested for three years. Participation is voluntary and respondents will not receive incentives for participation. There are no costs to respondents other than their time. CDC requests approval for an estimated 152 annual burden hours associated with this activity.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Coal Workers' Health Surveillance Program (CWHSP). The CWHSP is a congressionally-mandated medical examination program for monitoring the health of coal miners and was originally established under the Federal Coal Mine Health and Safety Act of 1969 with all subsequent amendments (the Act).
CDC must receive written comments on or before February 4, 2020.
You may submit comments, identified by Docket No. CDC-2019-0109 by any of the following methods:
•
•
Submit all comments through the Federal eRulemaking portal (
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS-
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Coal Workers' Health Surveillance Program (CWHSP), (OMB Control No. 0920-0020, Exp. 09/30/2021)—Revision—National Institute for Occupational Safety and Health (NIOSH), Centers for Disease Control and Prevention (CDC).
NIOSH would like to submit an Information Collection Request (ICR) to revise the data collection instruments being utilized within the Coal Workers' Health Surveillance Program (CWHSP). The CWHSP is a congressionally-mandated medical examination program for monitoring the health of coal miners, and was originally established under the Federal Coal Mine Health and Safety Act of 1969 with all subsequent amendments (the Act). The Act provides the regulatory authority for the administration of the CWHSP. This Program, which operates in accordance with 42 CFR part 37, is useful in providing information for protecting the health of and also in documenting trends and patterns in the prevalence of coal workers' pneumoconiosis (`black lung' disease) among U.S. coal miners.
HHS proposes to revise the CWHSP regulations (42 CFR part 37) by adding a provision to allow NIOSH to suspend or revoke physician B Reader certification for any B Reader suspected of violating the B Reader Code of Ethics or routinely providing chest radiograph classifications in practice that are determined by the CWHSP to be inaccurate. In addition to the B Reader provisions, HHS would also amend existing regulatory text to allow compensation for pathologists who perform autopsies on coal miners at a market rate, on a discretionary basis as needed for public health purposes. These changes to 42 CFR 37 have necessitated this revision ICR.
The total estimated annualized burden hours of 11,757 is based on the following collection instruments:
• Coal Mine Operator Plan (2.10) and Coal Contractor Plan (2.18)—Under 42 CFR part 37, every coal operator and coal contractor in the U.S. must submit a plan approximately every four years, providing information on how they plan to notify their miners of the opportunity to obtain the medical examination. Completion of this form with all requested information (including a roster of current employees) takes approximately 30 minutes.
• Radiographic Facility Certification Document (2.11)—X-ray facilities seeking NIOSH approval to provide miner radiographs under the CWHSP must complete an approval packet including this form which requires approximately 30 minutes for completion.
• Miner Identification Document (2.9)—Miners who elect to participate in the CWHSP must fill out this document which requires approximately 20 minutes. This document records demographic and occupational history, as well as information required under the regulations in relation to the examinations.
• Chest Radiograph Classification Form (2.8)—NIOSH utilizes a radiographic classification system developed by the International Labor Office (ILO) in the determination of pneumoconiosis among coal miners. Physicians (B Readers) fill out this form regarding their interpretations of the radiographs (each image has at least two separate interpretations, and approximately 7% of the images require additional interpretations). Based on prior practice it takes the physician approximately three minutes per form.
• Physician Application for Certification (2.12)—Physicians taking the B Reader examination are asked to complete this registration form which provides demographic information as well as information regarding their medical practices. It typically takes the physician about 10 minutes to complete this form.
• Spirometry Facility Certification Document (2.14)—This form is analogous to the Radiographic Facility Certification Document (2.11) and records the spirometry facility equipment/staffing information. Spirometry facilities seeking NIOSH approval to provide miner spirometry testing under the CWHSP must complete an approval packet which includes this form. It is estimated that it will take approximately 30 minutes for this form to be completed at the facility.
• Respiratory Assessment Form (2.13)—This form is designed to assess respiratory symptoms and certain medical conditions and risk factors. It is estimated that it will take approximately five minutes for this form to be administered to the miner by an employee at the facility.
• Spirometry Results Notification Form (2.15)—This form is used to: Collect information that will allow NIOSH to identify the miner in order to provide notification of the spirometry test results; assure that the test can be done safely; record certain factors that can affect test results; provide documentation that the required components of the spirometry examination have been transmitted to NIOSH for processing; and conduct quality assurance audits and interpretation of results. It is estimated that it will take the facility approximately 20 minutes to complete this form.
• Pathologist Invoice—Under the NCWAS, the invoice submitted by the pathologist must contain a statement that the pathologist is not receiving any other compensation for the autopsy. Each participating pathologist may use their individual invoice as long as this statement is added. It is estimated that only five minutes is required for the pathologist to add this statement to the standard invoice that they routinely use.
• Pathologist Report—Under the NCWAS the pathologist must submit information found at autopsy, slides, blocks of tissue, and a final diagnosis
• Consent, Release and History Form (2.6)—This form documents written authorization from the next of kin to perform an autopsy on the deceased miner. A minimum of essential information is collected regarding the deceased miner including an occupational history and a smoking history. From past experience, it is estimated that 15 minutes is required for the next-of-kin to complete this form.
• DRAFT Authorization for Payment of Autopsy Form (2.XX)—Revised 42 CFR part 37.204 outlines a need for a physician pathologist to obtain written authorization from NIOSH and agreement regarding payment amount for services specified in § 37.202(a) by completing the Authorization for Payment of Autopsy form and submitting it to the CWHSP for authorization prior to completing an autopsy on a coal miner. This is a new form. It will be completed by the pathologist who intends on conducting an autopsy and the form will collect: Demographic information on the deceased miner, characteristics of the miner's pneumoconiosis (if known by the pathologist), demographic and medical licensure information from the requesting pathologist, and proposed payment amount to complete the autopsy in accordance with § 37.203. It is estimated that 15 minutes is required for the pathologist to complete this form.
There are no costs to respondents other than their time. The total estimated burden being requested is 11,757 hours.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled “Asthma Information Reporting System (AIRS)” (OMB Control No. 0920-0853; expiration date 5/31/2020). The purpose of AIRS is to collect performance measure and surveillance data designed to increase the efficiency and effectiveness of state, local and territorial asthma programs and to monitor the impact of state, local, territorial and national programs.
CDC must receive written comments on or before February 4, 2020.
You may submit comments, identified by Docket No. CDC-2019-0106 by any of the following methods:
•
•
Submit all comments through the Federal eRulemaking portal (
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Asthma Information and Reporting System (AIRS)—Revision—National Center for Environmental Health (NCEH), Centers for Disease Control and Prevention (CDC).
In 1999, the CDC began its National Asthma Control Program (NACP), a public health approach to address the burden of asthma. The program supports the proposed objectives of “Healthy People 2030” for asthma, and is based on the public health principles of surveillance, partnerships, interventions, and evaluation. The CDC requests a three-year approval to revise the “Asthma Information Reporting System (AIRS)” (OMB Control No. 0920-0853; expiration date 5/31/2020). Specifically, CDC seeks to make the following changes:
• Increase the number of respondents from 25 to 30.
• Increase the burden from 89 hours to 105 hours.
• Reduce and consolidate the required performance measures (PMs), from 18 to eight core measures.
• Change the collection method for receipt of PMs from an Excel spreadsheet to a newly developed electronic reporting tool (SharePoint site).
• Include instructions for the newly developed electronic reporting tool that will be utilized to report the eight core PMs.
• Change the collection method for receipt of surveillance data, from uploading to a SharePoint site to submitting by email to a dedicated mailbox.
• Update the estimated annualized cost to the government to reflect current funding for the cooperative agreement, updated salaries for staff, and contractor costs for development of the new electronic reporting tool.
The three-year approval will allow CDC to continue to monitor states' program planning and delivery of public health activities and the programs' collaboration with health care systems through a new five-year cooperative agreement—
The goal of this data collection is to provide NCEH with routine information about the activities and performance of the state, local and territorial recipients funded under the NACP through an annual reporting system. NACP requires recipients to report activities related to partnerships, infrastructure, evaluation and interventions to monitor the programs' performance in reducing the burden of asthma. AIRS also includes two forms to collect aggregate emergency department (ED) visits and hospital discharge (HD) data from recipients.
AIRS was first approved by OMB in 2010 to collect data in a web-based system to monitor and guide participating state health departments. Since implementation in 2010, AIRS and the technical assistance provided by CDC staff have provided states with uniform data reporting methods and linkages to other states' asthma program information and resources. Thus, AIRS has saved state resources and staff time when asthma programs embark on asthma activities similar to those conducted elsewhere.
In the past three years, AIRS data were used to:
• Serve as a resource to NCEH when addressing congressional, departmental and institutional inquiries.
• Help the branch align its current interventions with CDC goals and allowed the monitoring of progress toward these goals.
• Allow the NACP and the state asthma programs to make more informed decisions about activities to achieve objectives.
• Facilitate communication about interventions across states and enable inquiries regarding interventions by populations with a disproportionate burden, age groups, geographic areas and other variables of interest.
• Provide feedback to the grantees about their performance relative to others through the distribution of two written reports and several presentations (webinar and in-person) summarizing the results.
• Customize and provide technical assistance and support materials to address implementation challenges.
There will be no cost to respondents other than their time to complete the PM Reporting Tool, ED Visits Reporting Form, and HD Reporting Form, on an annual basis. The estimated annualized time burden is 105 hours.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, the CDC announces the following meeting for the Board of Scientific Counselors, Center for Preparedness and Response, (BSC, CPR). This meeting is open to the public, limited only by the space available. The meeting room accommodates up to 60 people. Public participants should pre-register for the meeting (see
Dial in number: 1-888-790-2046; Participant code: 5041683.
The meeting will be held on January 23, 2020, 12:30 p.m. to 5:00 p.m., EST; and January 24, 2020, 8:30 a.m. to 2:30 p.m., EST.
Centers for Disease Control and Prevention (CDC), Global Communications Center, Building 19, Auditorium B3, 1600 Clifton Road NE, Atlanta, Georgia 30329-4027.
Dometa Ouisley, Office of Science and Public Health Practice, CDC, 1600 Clifton Road NE, Mailstop H21-6, Atlanta, Georgia 30329-4027; Telephone: (404) 639-7450; Fax: (404) 471-8772; Email:
Members of the public that wish to attend this meeting in person should pre-register by submitting the following information by email, facsimile, or phone (see Contact Person for More Information) no later than 12:00 noon (EDT) Friday, January 17, 2020:
The Director, Strategic Business Initiatives Unit, Office of the Chief Operating Officer, Centers for Disease Control and Prevention, has been delegated the authority to sign
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing efforts to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies to take this opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction
CDC must receive written comments on or before February 4, 2020.
You may submit comments, identified by Docket No. CDC-2019-0108 by any of the following methods:
•
•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS-D74, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Developmental Projects to Improve the National Health and Nutrition Examination Survey and Related Programs, (OMB Control No. 0920-1208 Exp. Date 12/31/2020)—Revision—National Center for Health Statistics (NCHS), Centers for Disease Control and Prevention (CDC).
Section 306 of the Public Health Service (PHS) Act (42 U.S.C. 242k), as amended, authorizes that the Secretary of Health and Human Services (DHHS), acting through NCHS, shall collect statistics on the extent and nature of illness and disability; environmental, social and other health hazards; and determinants of health of the population of the United States. The Division of Health and Nutrition Examination Surveys (DHNES) has conducted national surveys and related projects periodically between 1970 and 1994, and continuously since 1999. The mission of DHNES programs is to produce descriptive statistics which measure the health and nutrition status of the general population. The continuous operation of DHNES programs presents unique challenges in testing new survey content and activities, such as outreach or participant screening etc.
This generic request covers developmental projects to help evaluate and enhance DHNES existing and proposed data collection activities to increase research capacity and improve data quality. The information collected through this Generic Information Collection Request will not be used to make generalizable statements about the population of interest or to inform public policy. However, methodological findings from these projects may be reported.
The purpose and use of projects under this NHANES generic clearance would include developmental projects necessary for activities such as; testing new procedures, equipment, technology and approaches that are going to be folded into NHANES or other NCHS programs; designing and testing examination components or survey questions; creating new studies including biomonitoring and clinical measures; creating new cohorts, including a pregnancy and/or a birth—24 month cohort; testing of the cognitive and interpretive aspects of survey methodology; feasibility testing of proposed new components or modifications to existing components; testing of human-computer interfaces/usability; assessing the acceptability of proposed NHANES components among likely participants; testing alternative approaches to existing NHANES procedures, including activities related to improving nonresponse; testing the use of or variations/adjustments in incentives; testing content of web based surveys; testing the feasibility of obtaining bodily fluid specimens (blood, urine, semen, saliva, breastmilk) and tissue sample (swabs); testing digital imaging technology and related procedures (
The types of participants covered by the NHANES generic may include current or past NHANES participants; family or household members of NHANES participants; individuals eligible to be participants in NHANES, but who did not screen into the actual survey; convenience samples; volunteers; subject matter experts or
There is no cost to respondents other than their time. A three-year clearance is requested. The estimated annualized burden hours for this generic data collection is 59,465.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled Emergency Epidemic Investigation Data Collections (OMB control number 0920-1011), for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on September 4, 2019 to obtain comments from the public and affected agencies. CDC did not receive comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570 or send an email to
Emergency Epidemic Investigation Data Collections (OMB Control No. 0920-1011, Exp. 01/31/2020)—Extension—Center for Surveillance, Education, and Laboratory Services (CSELS), Centers for Disease Control and Prevention (CDC).
CDC previously conducted Emergency Epidemic Investigations (EEIs) under Office of Management and Budget (OMB) Control Number 0920-0008. In 2013, CDC received OMB approval (OMB Control Number 0920-1011) for a new OMB generic clearance for a three-year period to collect vital information during EEIs in response to urgent outbreaks or events (
Supporting effective emergency epidemic investigations is one of the most important ways that CDC protects the health of the public. CDC is frequently called upon to conduct EEIs at the request of local, state, or international health authorities seeking support to respond to urgent outbreaks or urgent public health-related events. In response to external partner requests, CDC provides necessary epidemiologic support to identify the agents, sources, modes of transmission, or risk factors to effectively implement rapid prevention and control measures to protect the public's health. Data collection is a critical component of the epidemiologic support provided by CDC; data are
Successful investigations are dependent on rapid and flexible data collection that evolves during the investigation and is customized to the unique circumstances of each outbreak or event. Data collection elements will be those necessary to identify the agents, sources, mode of transmission, or risk factors. Examples of potential data collection methods include telephone or face-to-face interview; email, web or other type of electronic questionnaire; paper-and-pencil questionnaire; focus groups; medical record review; laboratory record review; collection of clinical samples; and environmental assessment. Respondents will vary depending on the nature of the outbreak or event; examples of potential respondents include health care professionals, patients, laboratorians, and the general public. Participation in EEIs is voluntary and there are no anticipated costs to respondents other than their time. CDC will use the information gathered during EEIs to rapidly identify and effectively implement measures to minimize or prevent public harm.
CDC projects 60 EEIs in response to outbreaks or events characterized by undetermined agents, undetermined sources, undetermined transmission, or undetermined risk factors annually. The projected average number of respondents is 200 per EEI, for a total of 12,000 respondents. CDC estimates the average burden per response is 0.5 hours and each respondent will be asked to respond once. Therefore, the total estimated annual burden hours are 6,000. These estimates are based on the reported burden for EEIs that have been performed during the previous two years. OMB approval is requested for three years.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled CDC/ATSDR Formative Research and Tool Development to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on August 23, 2019 to obtain comments from the public and affected agencies. CDC did not receive comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570 or send an email to
CDC/ATSDR Formative Research and Tool Development—(OMB Control No. 0920-1154, Exp. 1/31/2020)—Extension—Office of Science (OS), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC) requests approval for an extension of a generic clearance for CDC/ATSDR Formative Research and Tool Development. This information collection request is designed to allow CDC to conduct formative research information collection activities used to inform many aspects of surveillance, communications, health promotion, and research project development at CDC. Formative research is the basis for developing effective strategies including communication channels, for influencing behavior change. It helps researchers identify and understand the characteristics—interests, behaviors and needs—of target populations that influence their decisions and actions.
Formative research is integral in developing programs as well as improving existing and ongoing programs. Formative research looks at the community in which a public health intervention is being or will be implemented and helps the project staff
At CDC, formative research is necessary for developing new programs or adapting programs that deal with the complexity of behavior, social context, cultural identity, and health care that underlie the epidemiology of diseases and conditions in the U.S. CDC conducts formative research to develop public-sensitive communication messages and user friendly tools prior to developing or recommending interventions, or care. Sometimes these studies are entirely behavioral but most often they are cycles of interviews and focus groups designed to inform the development of a product. Products from these formative research studies will be used for prevention of disease. Findings from these studies may also be presented as evidence to disease-specific National Advisory Committees, to support revisions to recommended prevention and intervention methods, as well as new recommendations.
Much of CDC's health communication takes place within campaigns that have fairly lengthy planning periods—timeframes that accommodate the standard Federal process for approving data collections. Short term qualitative interviewing and cognitive research techniques have previously proven invaluable in the development of scientifically valid and population-appropriate methods, interventions, and instruments.
This request includes studies investigating the utility and acceptability of proposed sampling and recruitment methods, intervention contents and delivery, questionnaire domains, individual questions, and interactions with project staff or electronic data collection equipment. These activities will also provide information about how respondents answer questions, and ways in which question response bias and error can be reduced.
This request also includes collection of information from public health programs to assess needs related to initiation of a new program activity or expansion or changes in scope or implementation of existing program activities to adapt them to current needs. The information collected will be used to advise programs and provide capacity-building assistance tailored to identify needs.
Overall, these development activities are intended to provide information that will increase the success of the surveillance or research projects through increasing response rates and decreasing response error, thereby decreasing future data collection burden to the public. The studies that will be covered under this request will include one or more of the following investigational modalities: (1) Structured and qualitative interviewing for surveillance, research, interventions and material development, (2) cognitive interviewing for development of specific data collection instruments, (3) methodological research (4) usability testing of technology-based instruments and materials, (5) field testing of new methodologies and materials, (6) investigation of mental models for health decision-making, to inform health communication messages, and (7) organizational needs assessments to support development of capacity. Respondents who will participate in individual and group interviews (qualitative, cognitive, and computer assisted development activities) are selected purposively from those who respond to recruitment advertisements. In addition to utilizing advertisements for recruitment, respondents who will participate in research on survey methods may be selected purposively or systematically from within an ongoing surveillance or research project.
Participation of respondents is voluntary. There is no cost to participants other than their time. The total estimated annual burden is 20,000 hours.
Centers for Medicare & Medicaid Services, HHS.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by February 4, 2020.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at website address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William N. Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
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2.
3.
4.
5.
Centers for Medicare & Medicaid Services, HHS.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by February 4, 2020.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the
1. Access CMS' website address at website address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William N. Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
CMS generally conducts program audits at the parent organization level in an effort to reduce burden and, for routine audits, subjects each sponsoring organization to all applicable program area protocols. For example, if a sponsoring organization does not offer a special needs plan, or an accrediting organization has deemed a special needs plan compliant with CMS regulations and standards, CMS would not apply the SNPCC protocol. Likewise, CMS would not apply the ODAG audit protocol to an organization that offers only a standalone prescription drug plan since that organization does not offer the MA benefit. Conversely, ad hoc audits resulting from referral may be limited in scope and, therefore, all program area protocols may not be applied.
In addition, as part of the robust program audit process, CMS also requires sponsoring organizations that have undergone a program audit and found to have deficiencies to undergo a validation audit to ensure correction. The validation audit uses the same audit protocols, but only tests the elements where deficiencies were found as opposed to re-administering the entire audit. Finally, CMS conducts annual industry-wide timeliness monitoring of all Part C organizations by using a subset of the ODAG protocol. However, sponsoring organizations that successfully submitted all of their Part C data in response to a program audit in the prior year are excluded from submitting new data for the timeliness monitoring effort in the year following their program audit.
The information gathered during this program audit will be used by the Medicare Parts C and D Oversight and Enforcement Group (MOEG) within the Center for Medicare (CM) and CMS Regional Offices to assess sponsoring organizations' compliance with Medicare program requirements. If outliers or other data anomalies are detected, Regional Offices will work in collaboration with MOEG and other divisions within CMS for follow-up and resolution. Additionally, MA and Part D organizations will receive the audit results and will be required to implement corrective action to correct any identified deficiencies.
Centers for Medicare & Medicaid Services, HHS.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by January 6, 2020.
When commenting on the proposed information collections, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be received by the OMB desk officer via one of the following transmissions: OMB, Office of Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax Number: (202) 395-5806
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at website address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William Parham at (410) 786-4669.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
1.
Office of Child Support Enforcement, Administration for Children and Families, HHS.
Request for public comment.
The Office of Child Support Enforcement (OCSE), Administration for Children and Families (ACF), U.S. Department of Health and Human Services (HHS), is requesting a three-year extension of the forms OCSE-21-U4: Transmittal and Notice of Approval of State Plan Material for: Title IV-D of the Social Security Act and OCSE-100: State Plan (OMB #0970-0017, expiration 7/31/2020).
Copies of the proposed collection of information can be obtained and comments may be forwarded by emailing
Sections 452, 454, and 466 of the Social Security Act
Food and Drug Administration, HHS.
Notice; establishment of a public docket; request for comments.
The Food and Drug Administration (FDA) announces a forthcoming public advisory committee meeting of the Anesthetic and Analgesic Drug Products Advisory Committee and the Drug Safety and Risk Management Advisory Committee. The general function of the committees is to provide advice and recommendations to FDA on regulatory issues. The meeting will be open to the public. FDA is establishing a docket for public comment on this document.
The meeting will be held on January 14, 2020, from 8 a.m. to 5:30 p.m.
FDA White Oak Campus, 10903 New Hampshire Ave., Bldg. 31 Conference Center, the Great Room (Rm. 1503), Silver Spring, MD 20993-0002. Answers to commonly asked questions including information regarding special accommodations due to a disability, visitor parking, and transportation may be accessed at:
FDA is establishing a docket for public comment on this meeting. The docket number is FDA-2019-N-5552. The docket will close on January 13, 2020. Submit either electronic or written comments on this public meeting by January 13, 2020. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before January 13, 2020. The
Comments received on or before December 30, 2019, will be provided to the committees. Comments received after that date will be taken into consideration by FDA. In the event that the meeting is cancelled, FDA will continue to evaluate any relevant applications or information, and consider any comments submitted to the docket, as appropriate.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” FDA will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Kalyani Bhatt, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 31, Rm. 2417, Silver Spring, MD 20993-0002, 301-796-9001, Fax: 301-847-8533, email:
FDA intends to make background material available to the public no later than 2 business days before the meeting. If FDA is unable to post the background material on its website prior to the meeting, the background material will be made publicly available at the location of the advisory committee meeting, and the background material will be posted on FDA's website after the meeting. Background material is available at
Persons attending FDA's advisory committee meetings are advised that FDA is not responsible for providing access to electrical outlets.
For press inquiries, please contact the Office of Media Affairs at
FDA welcomes the attendance of the public at its advisory committee meetings and will make every effort to accommodate persons with disabilities. If you require accommodations due to a disability, please contact Kalyani Bhatt (see
FDA is committed to the orderly conduct of its advisory committee meetings. Please visit our website at
Notice of this meeting is given under the Federal Advisory Committee Act (5 U.S.C. app. 2).
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or the Agency) has determined the regulatory review period for PALYNZIQ and is publishing this notice of that determination as required by law. FDA has made the determination because of the submission of applications to the Director of the U.S. Patent and Trademark Office (USPTO), Department of Commerce, for the extension of a patent which claims that human biological product.
Anyone with knowledge that any of the dates as published (see
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before February 4, 2020. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Beverly Friedman, Office of Regulatory Policy, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6250, Silver Spring, MD 20993, 301-796-3600.
The Drug Price Competition and Patent Term Restoration Act of 1984 (Pub. L. 98-417) and the Generic Animal Drug and Patent Term Restoration Act (Pub. L. 100-670) generally provide that a patent may be extended for a period of up to 5 years so long as the patented item (human drug product, animal drug product, medical device, food additive, or color additive) was subject to regulatory review by FDA before the item was marketed. Under these acts, a product's regulatory review period forms the basis for determining the amount of extension an applicant may receive.
A regulatory review period consists of two periods of time: A testing phase and an approval phase. For human biological products, the testing phase begins when the exemption to permit the clinical investigations of the biological product becomes effective and runs until the approval phase begins. The approval phase starts with the initial submission of an application to market the human biological product and continues until FDA grants permission to market the biological product. Although only a portion of a regulatory review period may count toward the actual amount of extension that the Director of USPTO may award (for example, half the testing phase must be subtracted as well as any time that may have occurred before the patent was issued), FDA's determination of the length of a regulatory review period for a human biological product will include all of the testing phase and approval phase as specified in 35 U.S.C. 156(g)(1)(B).
FDA has approved for marketing the human biologic product PALYNZIQ (pegvaliase-pqpz). PALYNZIQ is indicated to reduce blood phenylalanine concentrations in adult patients with phenylketonuria who have uncontrolled blood phenylalanine concentrations greater than 600 micromole/L on existing management. Subsequent to this approval, the USPTO received patent term restoration applications for PALYNZIQ (U.S. Patent Nos. 7,534,595 and 7,537,923) from Biomarin Pharmaceutical Inc., and the USPTO requested FDA's assistance in determining a patent's eligibility for patent term restoration. In a letter dated May 13, 2019, FDA advised the USPTO that this human biological product had undergone a regulatory review period and that the approval of PALYNZIQ represented the first permitted
FDA has determined that the applicable regulatory review period for PALYNZIQ is 3,803 days. Of this time, 3,474 days occurred during the testing phase of the regulatory review period, while 329 days occurred during the approval phase. These periods of time were derived from the following dates:
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2.
3.
This determination of the regulatory review period establishes the maximum potential length of a patent extension. However, the USPTO applies several statutory limitations in its calculations of the actual period for patent extension. In its applications for patent extension, this applicant seeks 1,743 days of patent term extension.
Anyone with knowledge that any of the dates as published are incorrect may submit either electronic or written comments and, under 21 CFR 60.24, ask for a redetermination (see
Submit petitions electronically to
Food and Drug Administration, HHS.
Notice, establishment of a public docket; request for comments.
The Food and Drug Administration (FDA) announces a forthcoming joint public advisory committee meeting of the Anesthetic and Analgesic Drug Products Advisory Committee and the Drug Safety and Risk Management Advisory Committee. The general function of the committees is to provide advice and recommendations to FDA on regulatory issues. The meeting will be open to the public. FDA is establishing a docket for public comment on this document.
The meeting will be held on January 15, 2020, from 8 a.m. to 5:30 p.m.
FDA White Oak Campus, 10903 New Hampshire Ave., Bldg. 31 Conference Center, the Great Room (Rm. 1503), Silver Spring, MD 20993-0002. Answers to commonly asked questions including information regarding special accommodations due to a disability, visitor parking, and transportation may be accessed at:
FDA is establishing a docket for public comment on this meeting. The docket number is FDA-2019-N-5611. The docket will close on January 14, 2020. Submit either electronic or written comments on this public meeting by January 14, 2020. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before January 14, 2020. The
Comments received on or before December 31, 2019, will be provided to the committees. Comments received after that date will be taken into consideration by FDA. In the event that the meeting is cancelled, FDA will continue to evaluate any relevant applications or information, and consider any comments submitted to the docket, as appropriate.
You may submit comments as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” FDA will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Moon Hee V. Choi, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 31, Rm. 2417, Silver Spring, MD 20993-0002, 301-796-9001, Fax: 301-847-8533, email:
During the afternoon session, the committees will discuss NDA 209653, for an extended-release oral tablet formulation of oxycodone, submitted by Intellipharmaceutics Corp., with the management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. The product has been formulated with properties intended to deter abuse, and the applicant has submitted data to support these abuse-deterrent properties for this product. The committees will be asked to discuss whether the applicant has demonstrated abuse-deterrent properties for their product that would support labeling, as well as to discuss the overall risk-benefit profile of the product.
FDA intends to make background material available to the public no later than 2 business days before the meeting. If FDA is unable to post the background material on its website prior to the meeting, the background material will be made publicly available at the location of the advisory committee meeting, and the background material will be posted on FDA's website after the meeting. Background material is available at
Persons attending FDA's advisory committee meetings are advised that FDA is not responsible for providing access to electrical outlets.
For press inquiries, please contact the Office of Media Affairs at
FDA welcomes the attendance of the public at its advisory committee meetings and will make every effort to accommodate persons with disabilities. If you require accommodations due to a disability, please contact Moon Hee V. Choi (see
FDA is committed to the orderly conduct of its advisory committee meetings. Please visit our website at
Notice of this meeting is given under the Federal Advisory Committee Act (5 U.S.C. app. 2).
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In compliance with the requirement for opportunity for public comment on proposed data collection projects of the Paperwork Reduction Act of 1995, HRSA announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, HRSA seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments on this ICR should be received no later than February 4, 2020.
Submit your comments to
To request more information on the proposed project or to obtain a copy of the data collection plans and draft instruments, email
When submitting comments or requesting information, please include the information request collection title for reference.
This ICR is for continuation of a web-based data collection system, the Reviewer Recruitment Module (RRM), used to gather critical reviewer information. The RRM uses standardized categories of information in drop down menu format for data such as the following: Degree, specialty, occupation, work setting, and in select instances, affiliations with organizations and institutions that serve special populations. Some program regulations require that objective review panels contain consumers of health services. Other demographic data may be voluntarily provided by a potential reviewer. Defined data elements assist HRSA in finding and selecting expert reviewers for objective review committees.
HRSA maintains a roster of approximately 9,000 qualified individuals who served on HRSA objective review committees. The web-based RRM simplifies reviewer registration entry using a user-friendly Graphical User Interface with a few data drop down menu choices, a search engine that supports key word queries in the actual resume or Curriculum Vitae text, and also permits reviewers to access and update their information as needed. The RRM is 508 compliant and accessible by the general public via a link on the HRSA “Grants” internet site, or by keying the RRM URL into their browser. The RRM is accessible using any of the commonly used internet browsers.
All HRSA reviewers must possess the technical skill and ability to access the internet on a secure desktop laptop or touch pad, and either a land line or Voice Over Internet Protocol capability in order to participate in HRSA objective review committees. Reviewers are professionals with expertise and experience consistent with the HRSA mission. Certain legislation requires HRSA programs to include consumers of specific health care services in the objective review committee.
HRSA specifically requests comments on (1) the necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
This notice is being published less than 15 days prior to the meeting due to the timing limitations imposed by the review and funding cycle.
This notice is being published less than 15 days prior to the meeting due to the timing limitations imposed by the review and funding cycle.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Advisory Council on Aging.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
In the interest of security, NIH has instituted stringent procedures for entrance onto the NIH campus. All visitor vehicles, including taxicabs, hotel, and airport shuttles will be inspected before being allowed on campus. Visitors will be asked to show one form of identification (for example, a
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Advisory Council on Aging.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
In the interest of security, NIH has instituted stringent procedures for entrance onto the NIH campus. All visitor vehicles, including taxicabs, hotel, and airport shuttles will be inspected before being allowed on campus. Visitors will be asked to show one form of identification (for example, a government-issued photo ID, driver's license, or passport) and to state the purpose of their visit.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Advisory Council on Alcohol Abuse and Alcoholism.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Advisory Council for Biomedical Imaging and Bioengineering.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications and the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Closed: 1:30 p.m. to 3:30 p.m.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Information is also available on the Institute's/Center's home page:
In compliance with Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 concerning opportunity for public comment on proposed collections of information, the Substance Abuse and Mental Health Services Administration (SAMHSA) will publish periodic summaries of proposed projects. To request more information on the proposed projects or to obtain a copy of the information collection plans, call the SAMHSA Reports Clearance Officer on (240) 276-1243.
Comments are invited on: (a) Whether the proposed collections of information are necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
In 2009 the SAMHSA created a Technical Assistance Center to assist in the implementation of the Supplemental Security Income (SSI)/Social Security Disability Insurance (SSDI) Outreach, Access, and Recovery (SOAR) effort in all states. The primary objective of SOAR is to improve the allowance rate for the Social Security Administration's (SSA) disability benefits for people who are experiencing or at risk of homelessness, and who have serious mental illnesses.
During the SOAR training, the importance of keeping track of SSI/SSDI applications through the process is stressed. In response to requests from states implementing SOAR, the Technical Assistance Center under SAMHSA's direction developed a web-based data form that case workers can use to track the progress of submitted applications, including decisions received from SSA either on initial application or on appeal. This password-protected web-based data form is hosted on the SOAR website (
There are two parts to the SOAR Web-based Data Form. Part I of the SOAR Web-based Data Form is intended for SOAR-trained case workers to enter the outcomes of SOAR-assisted SSI/SSDI applications. Part II of the SOAR Web-based Data Form includes two sections reserved for SOAR State Team Leads to report annually. The first section of Part II collects quantitative summary data from states that do not track SOAR-assisted SSI/SSDI applications using the SOAR Web-based Data Form Part I. The second section of Part II collects qualitative (open-ended) questions on annual SOAR accomplishments, identified challenges, and collaborations.
Data from Part I of the SOAR Web-based Data Form can be compiled into reports on decision results and the use of SOAR critical components, such as the SSA-1696 Appointment of Representative, which allows SSA to communicate directly with the case worker assisting with the application. These reports will be reviewed by agency directors, SOAR state-level leads, and the SAMHSA SOAR Technical Assistance Center to quantify the success of the effort overall and to identify areas where additional technical assistance is needed.
There are no proposed changes to Part I of this form. These questions will be answered by all 700 case worker respondents, on average 3 times per year. There are no proposed changes to Part II. These questions will be answered by 75 respondents once per year.
Send comments to Summer King, SAMHSA Reports Clearance Officer, Room 15E-57B, 5600 Fishers Lane, Rockville, MD 20857
U.S. Citizenship and Immigration Services, Department of Homeland Security.
60-Day notice.
The Department of Homeland Security (DHS), U.S. Citizenship and Immigration (USCIS) invites the general public and other Federal agencies to comment upon this proposed revision of a currently approved collection of information or new collection of information. In accordance with the Paperwork Reduction Act (PRA) of 1995, the information collection notice is published in the
Comments are encouraged and will be accepted for 60 days until February 4, 2020.
All submissions received must include the OMB Control Number 1615-0095 in the body of the letter, the agency name and Docket ID USCIS-2008-0027. To avoid duplicate submissions, please use only
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USCIS, Office of Policy and Strategy, Regulatory Coordination Division, Samantha Deshommes, Chief, 20 Massachusetts Avenue NW, Washington, DC 20529-2140, telephone number 202-272-8377 (This is not a toll-free number. Comments are not accepted via telephone message). Please note contact information provided here is solely for questions regarding this notice. It is not for individual case status inquiries. Applicants seeking information about the status of their individual cases can check Case Status Online, available at the USCIS website at
Under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-12, DHS is required to provide 60-day notice in the
USCIS is proposing several changes to the Form I-290B Instructions. USCIS proposes to clarify the AAO's procedures pertaining to the consideration of evidence submitted for the first time on appeal and the requirement that affected parties address each ground of ineligibility raised in the unfavorable decision. USCIS proposes to permit affected parties to waive the “initial field review” of their appeal for faster processing. USCIS proposes to explain its standard of review for appeals of discretionary decisions. USCIS also proposes to clarify that it does not have appellate jurisdiction over Adam Walsh Act “no-risk” determinations. USCIS is proposing these changes to better inform affected parties of administrative appellate procedures and facilitate the AAO's review of the substantive merits of appeals. The specific changes proposed are discussed as follows:
The proposed Form I-290B and instructions state that appeals must address each ground of ineligibility identified in the unfavorable decision. If an affected party does not address one or more ground(s) of ineligibility in the unfavorable decision, the issue(s) may be deemed waived for the appeal. Further, the proposed form and instructions explain that a waived ground of ineligibility may form the sole basis for a dismissed appeal.
The proposed Form I-290B and instructions permit affected parties to waive the “initial field review” (IFR) process. The regulations at 8 CFR 103.3(a)(2)(ii)-(v) provide that an appeal to the AAO be reviewed by the officer that made the unfavorable decision (or by the officer with jurisdiction over the matter in cases where the affected party has moved) before the appeal is sent to the AAO. The officer reviews the appeal to determine whether to take favorable action (
Unless favorable action is taken, the IFR process delays the adjudication of appeals, because of the additional step prior to AAO review. Many stakeholders are not aware of the IFR process, and they contact the AAO for case status inquiries when the AAO has yet to receive the appeal. This delay often causes frustration. Further, affected parties sometimes send supplemental materials to the AAO when the appeal itself is at a USCIS service center or field office pending IFR. Other times, affected parties incorrectly send materials to a service center or field office when the appeal has already been transferred to the AAO.
USCIS proposes to provide affected parties with the option to waive the IFR process in order to have their case reviewed sooner by the AAO. However, USCIS acknowledges that taking advantage of this option means that the affected party will give up the opportunity to have favorable action taken more quickly on their case during IFR. In addition, by waiving IFR and having the appeal sent directly to the AAO, the affected party waives review by the officer who made the unfavorable decision of whether an untimely appeal meets the requirements of a motion to reopen or a motion to reconsider under 8 CFR 103.3(a)(2)(v)(B)(
DHS regulations do not provide for the submission of evidence in support of a standard appeal. The regulations allow for the submission of a brief only.
In 1991, the Immigration and Naturalization Service amended the instructions to Form I-290B to include the option of submitting new evidence with the appeal brief. The reason for this change was the implementation of the IFR process. The submission of evidence on appeal permitted the immigration officer who issued the unfavorable decision to decide during IFR whether to treat the appeal as a motion to reopen or forward the appeal to the AAO for review. 54 FR 29344 (Proposed Rule); 55 FR 20767-01 (Final Rule).
In
For these reasons, except in exigent circumstances and at USCIS discretion, the AAO will not consider evidence submitted for the first time on appeal if:
• The affected party was put on notice of an evidentiary requirement (by statute, regulation, form instructions, RFE, NOID, notice of intent to revoke, etc.);
• The affected party was given a reasonable opportunity to provide the evidence; and
• The evidence was reasonably available to the affected party at the time it was supposed to have been submitted.
USCIS also proposes to clarify on Form I-290B that if the affected party elects to submit evidence on appeal, the evidence must be submitted concurrently with the appeal in order for the officer who issued the unfavorable decision (or the officer with jurisdiction over the matter in cases where the affected party has moved) to review the new evidence for favorable action as a motion to reopen. If the affected party elects to submit a brief or evidence after the filing of the appeal, the affected party must submit it directly to the AAO.
For USCIS discretionary decisions, the officer generally identifies and weighs the applicable positive and negative factors, which may include the alien's conduct, character, relationships, ties to the United States, medical condition, and other humanitarian factors.
A majority of discretionary immigration benefits are not subject to review on appeal.
The AAO may review questions of law, policy, fact, and discretion
While
To that end, DHS proposes to revise the instructions for Form I-290B to inform affected parties that the AAO will review discretionary USCIS decisions using the abuse of discretion standard of review. This means that the AAO will not overrule the an exercise of discretion unless there is a firm conviction the decision is grossly unsound, unreasonable, contrary to law, or unsupported by the evidence. This level of review is appropriate because the AAO should not overturn a reasonable exercise of discretion simply because the appeals officer in his or her discretion would have reached a different result.
The proposed Form I-290B Instructions clarify that the AAO does not have jurisdiction over appeals of “no risk” determinations under the Adam Walsh Child Protection and Safety Act of 2006, Public Law 109-248, 120 Stat. 587 (AWA). Section 402(a)(2) of the AWA bars approval of family-based visa petitions filed by U.S. citizens who have been convicted of a “specified offense against a minor” unless the DHS Secretary, in his or her “sole and unreviewable discretion,” determines that the U.S. citizen poses “no risk” to the beneficiary of the petition.
The AAO's appellate jurisdiction is based on a delegation of authority from the Secretary of Homeland Security.
Regarding AWA “no risk” determinations, in
This clarification has been added to the Form I-290B Instructions because in the past, the AAO is aware that it incorrectly reviewed at least one appeal of an AWA “no risk” determination, in addition to multiple cases that were properly certified for review. Additionally, the AAO had posted inconsistent information on the USCIS website regarding AWA jurisdiction. Consequently, to reduce stakeholder confusion regarding this issue, this proposed language has been included in the update to the Form I-290B Instructions.
This proposed Form revision is a procedural rule and as a rule “of agency organization, procedure, or practice,” is exempt from the APA and USCIS is not required to provide notice and an opportunity to comment prior to its issuance.
To the extent the proposed revisions are not procedural, they are still exempt from notice-and-comment rulemaking because they are, at most, “interpretive.” Interpretive rules, which “merely explain, but do not add to, the substantive law that already exists in the form of a statute or legislative rule.”
You may access the information collection instrument with instructions, or additional information by visiting the Federal eRulemaking Portal site at:
Written comments and suggestions from the public and affected agencies should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
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Bureau of Land Management, Interior.
Public Land Order.
This Public Land Order (PLO) extends the duration of the withdrawal created by PLO No. 7419, issued effective December 9, 1999, for an additional 20-year term. The extension is necessary for the Department of the Air Force (DAF), Nellis Air Force Base (AFB), to continue providing safety buffers from potentially hazardous areas, protect populated areas, and comply with Department of Defense Directive No. 6055.09E regarding ammunition and explosive safety standards on lands adjacent to the Live Ordnance Loading Areas at Nellis AFB, northeast of Las Vegas, Clark County, Nevada. The safety buffer zone includes security patrol roads and a security checkpoint.
This PLO takes effect on December 10, 2019.
Tom Seley, Project Manager, at email
This Order extends the existing withdrawal to continue its protective purpose and reserve the lands for use by the DAF, Nellis AFB.
By virtue of the authority vested in the Secretary of the Interior by Section 204(f) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. 1714(f), it is ordered as follows:
1. Public Land Order No. 7419 (64 FR 69025 (1999)), which withdrew public lands from settlement, sale, location, or entry under the United States mining laws but not from leasing under the mineral leasing laws for the DAF Nellis AFB, with the legal land description amended as described in the November 19, 2018,
2. This withdrawal extended by this Order will expire on December 9, 2039, unless, as a result of a review conducted prior to the expiration date pursuant to Section 204(f) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. 1714(f), the Secretary determines that the withdrawal shall be further extended.
Bureau of Land Management, Interior.
Notice of availability.
In accordance with the National Environmental Policy Act of 1969, as amended, the Bureau of Land Management (BLM) has prepared a Final Supplemental Environmental Impact Statement (EIS) analyzing the potential impacts of the United States Gypsum Company (USG) Mine Expansion and Modernization Project (Project), and by this notice is announcing its availability.
The BLM will not issue a final decision on the proposal for a minimum of 30 days after the date that the Environmental Protection Agency publishes its Notice of Availability in the
Copies of the Final Supplemental EIS are available for public inspection in the BLM El Centro Field Office at 1661 S 4th St, El Centro, CA 92243; at the BLM-California Desert District Office, 22835 Calle San Juan de los Lagos, Moreno Valley, CA 92553; and electronically on the project website:
Compact disc copies of the Final Supplemental EIS are available by request.
Miriam Liberatore, BLM Project Manager, by telephone at (541) 618-2400; by mail at Bureau of Land Management, Medford District Office, 3040 Biddle Road, Medford, OR 97504; or by email at
Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service (FRS) at 1-800-877-8339 to contact Ms. Liberatore during normal business hours. The FRS is available 24 hours a day, 7 days a week, to leave a message. You will receive a reply during normal business hours.
The Project is located in southwestern Imperial County, California, and involves both the Plaster City Wallboard Plant (processing plant) and Plaster City Quarry (quarry). The processing plant is located on Evan Hewes Highway approximately 18 miles west of the city of El Centro. The quarry is located on Split Mountain Road approximately 26 miles northwest of Plaster City. Both sites are located within the BLM's California Desert Conservation Area.
A joint Draft Environmental Impact Report/Environmental Impact Statement (EIR/EIS) was published in 2006, and a Final EIR/EIS was published in 2008. The BLM did not issue a Record of Decision and the United States Army Corps of Engineers (USACE) was not a party to the EIR/EIS. This Supplemental EIS revises and supplements the 2008 Final EIR/EIS, updating conditions and effects that have changed since 2008, and includes the USACE and the United States Environmental Protection Agency (USEPA) as Cooperating Agencies.
Certain aspects of the Project originally analyzed in the 2006 Draft EIR/EIS and 2008 Final EIR/EIS have been implemented under the conditions and approvals provided by Imperial County and were not subject to the jurisdiction of the BLM or the USACE. The BLM will use the Final Supplemental EIS to support its decisions on the Mining Plan of Operations and on rights-of-way (ROW) applications to construct, operate, maintain, and decommission: (a) A new water line with associated buried electrical service between the quarry and a proposed new well (CACA-56477); (b) A new water line between US Gypsum's processing plant and the Imperial Irrigation District (IID) Westside Main Canal; and (c) A replacement line between USG's processing plant and existing wells in Ocotillo (CACA-44014).
The USACE will use the Final Supplemental EIS to support its decision on an application by USG for a permit under Section 404 of the Clean Water Act (CWA). The USEPA has authority to review projects requiring a CWA 404 permit, but does not have a direct permitting role in the project.
The Final Supplemental EIS considers the Proposed Action, a No-Action Alternative, and six action alternatives. Alternative 1, Proposed Action, would expand the quarry as described in the Mining Plan of Operations, replace the existing water line, and install a new water line between the quarry and the new well. Alternative 2, No Action, would continue operations as they currently are permitted without expanding the quarry or replacing the existing water line. Alternative 3, Partial IID Water Supply, would provide for a new water line between the processing plant and the IID Westside Main Canal to partially replace processing water from a groundwater source with a surface water source. Alternative 4, Full IID Water Supply, would fully replace the processing water with surface water. Alternatives 5 through 8 are variations on the mining plan proposed in the Mining Plan of Operations. The BLM has selected Alternative 3, Partial IID Water Supply, as the Agency-Preferred Alternative in the Final Supplemental EIS.
The BLM published a Notice of Availability of the Draft Supplemental EIS in the
National Park Service, Interior.
Notice.
The National Park Service is soliciting comments on the significance of properties nominated before November 9, 2019, for listing or related actions in the National Register of Historic Places.
Comments should be submitted by December 23, 2019.
Comments may be sent via U.S. Postal Service and all other carriers to the National Register of Historic Places, National Park Service, 1849 C St. NW, MS 7228, Washington, DC 20240.
The properties listed in this notice are being considered for listing or related actions in the National Register of Historic Places. Nominations for their consideration were received by the National Park Service before November 9, 2019. Pursuant to Section 60.13 of 36 CFR part 60, written comments are being accepted concerning the significance of the nominated properties under the National Register criteria for evaluation.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Nominations submitted by State Historic Preservation Officers:
Additional documentation has been received for the following resource:
Section 60.13 of 36 CFR part 60.
Bureau of Reclamation, Upper Colorado Basin, Interior Region 7.
Notice of intent; request for scoping comments.
The Bureau of Reclamation (Reclamation) intends to prepare an Environmental Impact Statement (EIS) on the Lake Powell Pipeline (LPP) Project. Reclamation is requesting public scoping comments to identify significant issues or other alternatives to be addressed in the EIS.
Submit comments on or before January 10, 2020.
Three scoping meetings will be held during the scoping period from 6:00 p.m. to 8:00 p.m. on January 7-9, 2020.
Provide written scoping comments and requests to be added to the mailing list to Mr. Rick Baxter,
The three scoping meetings will be held at the following locations:
Mr. Rick Baxter, Program Manager, Bureau of Reclamation, Provo Area Office, 302 East Lakeview Parkway, Provo, UT 84606; telephone (801) 379-1078; facsimile (801) 379-1159; email
Reclamation is issuing this notice pursuant to the National Environmental Policy Act of 1969, as amended (NEPA), 42 U.S.C. 4321
Reclamation will prepare an EIS for the LPP Project as proposed by the Utah Board of Water Resources (UBWR). The LPP is a proposed 140-mile, 69-inch-diameter water delivery pipeline that begins at Lake Powell near Glen Canyon Dam in Page, Arizona, and ends at Sand Hollow Reservoir near St. George, Utah. The pipeline would deliver up to 86,249 acre-feet of water from Lake Powell to Sand Hollow Reservoir. UBWR proposes building the LPP in order to bring a second source of water to Washington and Kane Counties in Utah to meet future water demands, diversify the regional water supply portfolio, and enhance the water supply reliability.
UBWR previously proposed a pipeline project with an intake at Lake Powell that included a hydroelectric peaking station at Hurricane Cliffs, Utah. The Federal Energy Regulatory Commission (FERC) was the lead Federal agency for that project because it would have required a hydroelectric license issued by the FERC. The UBWR withdrew its application to the FERC on September 25, 2019, and the project was terminated effective October 10, 2019. (
Two pipeline alignments have been proposed: The Southern Alternative and the Highway Alternative. Both alternatives begin and end in the same locations. The Southern Alternative would travel south of the Kaibab Indian Reservation while the alignment for the Highway Alternative would cross lands held in trust by the United States for the benefit of the Kaibab Band of Paiute Indians, following Arizona State Route 389. The Southern Alternative would cross land administered by the BLM in Utah and Arizona and would require multiple right-of-way (ROW) grants and an amendment to the Arizona Strip Resource Management Plan (RMP), because a small portion of the pipeline would go outside an approved utility corridor.
The Highway Alternative would cross BLM and Tribal trust lands, which would require the BLM and BIA to issue ROW grants and require a tribal resolution from the Kaibab Band of Paiute Indians. Both alternatives would cross lands administered by Reclamation and the NPS, requiring Reclamation to issue a license agreement and the NPS to issue a ROW permit under either alternative.
In addition, UBWR has requested a water exchange contract with Reclamation. Under the exchange contract, UBWR would forbear the diversion of a portion of the natural flows to which UBWR is entitled and allow these flows to contribute to meeting the Endangered Species Act Upper Colorado River Recovery Implementation Program requirements in the Green River. In exchange, UBWR would deplete an equal amount of water released from Flaming Gorge Dam throughout the year and available at Lake Powell. This exchange contract would not entitle UBWR to call for releases from Flaming Gorge.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Office of Surface Mining Reclamation and Enforcement, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the Office of Surface Mining Reclamation and Enforcement (OSMRE) are proposing to renew an information collection.
Interested persons are invited to submit comments on or before January 6, 2020.
Send written comments on this information collection request (ICR) to the Office of Management and Budget's Desk Officer for the Department of the Interior by email at
To request additional information about this ICR, contact Mark Gehlhar by email at
In accordance with the Paperwork Reduction Act of 1995, we provide the general public and other Federal agencies with an opportunity to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
A Federal Register notice with a 60-day public comment period soliciting comments on this collection of information was published on October 2, 2018 (83 FR 49572). No comments were received.
We are again soliciting comments on the proposed ICR that is described below. We are especially interested in public comment addressing the following issues: (1) Is the collection necessary to the proper functions of the OSMRE; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the OSMRE enhance the quality, utility, and clarity of the information to be collected; and (5) how might the OSMRE minimize the burden of this collection on the respondents, including through the use of information technology.
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Office of Surface Mining Reclamation and Enforcement, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the Office of Surface Mining Reclamation and Enforcement (OSMRE) are proposing to renew an information collection.
Interested persons are invited to submit comments on or before January 6, 2020.
Send written comments on this information collection request (ICR) to the Office of Management and Budget's Desk Officer for the Department of the Interior by email at
To request additional information about this ICR, contact Mark Gehlhar by email at
In accordance with the Paperwork Reduction Act of 1995, we provide the general public and other Federal agencies with an opportunity to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
A
We are again soliciting comments on the proposed ICR that is described below. We are especially interested in public comment addressing the following issues: (1) Is the collection necessary to the proper functions of the OSMRE; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the OSMRE enhance the quality, utility, and clarity of the information to be collected; and (5) how might the OSMRE minimize the burden of this collection on the respondents, including through the use of information technology.
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Office of Surface Mining Reclamation and Enforcement, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the Office of Surface Mining Reclamation and Enforcement (OSMRE) are proposing to renew an information collection.
Interested persons are invited to submit comments on or before January 6, 2020.
Send written comments on this information collection request (ICR) to the Office of Management and Budget's Desk Officer for the Department of the Interior by email at
To request additional information about this ICR, contact Mark Gehlhar by email at
In accordance with the Paperwork Reduction Act of 1995, we provide the general public and other Federal agencies with an opportunity to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
A
We are again soliciting comments on the proposed ICR that is described below. We are especially interested in public comment addressing the following issues: (1) Is the collection necessary to the proper functions of the OSMRE; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the OSMRE enhance the quality, utility, and clarity of the information to be collected; and (5) how might the OSMRE minimize the burden of this collection on the respondents, including through the use of information technology.
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
On the basis of the record
The Commission, pursuant to sections 705(b) and 735(b) of the Act (19 U.S.C. 1671d(b) and 19 U.S.C. 1673d(b)), instituted these investigations effective April 30, 2019, following receipt of petitions filed with the Commission and Commerce by Hirsh Industries LLC, Des Moines, Iowa. The final phase of the investigations was scheduled by the Commission following notification of preliminary determinations by Commerce that imports of VMFCs from China were subsidized within the meaning of section 703(b) of the Act (19 U.S.C. 1671b(b)) and sold at LTFV within the meaning of 733(b) of the Act (19 U.S.C. 1673b(b)). Notice of the scheduling of the final phase of the Commission's investigations and of a public hearing to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the
The Commission made these determinations pursuant to sections 705(b) and 735(b) of the Act (19 U.S.C. 1671d(b) and 19 U.S.C. 1673d(b)). It completed and filed its determinations in these investigations on December 2, 2019. The views of the Commission are contained in USITC Publication 4995 (December 2019), entitled
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined to affirm with modification a final initial determination (“FID”) of the presiding administrative law judge (“ALJ”) finding no violation of section 337 of the Tariff Act of 1930, as amended. The investigation is terminated.
Houda Morad, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 708-4716. Copies of non-confidential documents filed in connection with this investigation are or will be available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 205-2000. General information concerning the Commission may also be obtained by accessing its internet server at
The Commission instituted this investigation on May 1, 2018, based on a complaint, as amended, filed by Bracco Diagnostics Inc. of Monroe Township, New Jersey (“Bracco”).
On February 8, 2019, the ALJ issued an initial determination (“ID”) (Order No. 27) finding by summary determination that Jubilant's RUBY
The ALJ conducted an evidentiary hearing on February 11-12 and 15-17, 2019, and on August 1, 2019, issued the FID finding no violation of section 337. Specifically, the FID finds that the domestic industry requirement is satisfied and that all the asserted claims are infringed but invalid as obvious over the prior art. The FID also contains the ALJ's Recommended Determination (“RD”) recommending, should the Commission find a section 337 violation, that the Commission issue a limited exclusion order (“LEO”) barring entry of articles that infringe the asserted claims. The RD does not recommend that the Commission issue a cease and desist order or impose a bond during the period of Presidential review. Furthermore, as directed by the Commission, the RD provides findings with respect to the public interest and recommends a determination that the public interest factors do not preclude entry of the proposed LEO.
On August 14, 2019, both Bracco and the Commission's Investigative Attorney (“IA”) filed petitions for review of the FID. Bracco petitioned for review of the FID's findings with respect to invalidity, while the IA petitioned for review of the FID's findings with respect to domestic industry. On August 22, 2019, the parties filed responses to the respective petitions.
On September 30, 2019, the Commission determined to review the FID in part with respect to invalidity and domestic industry.
Having considered the FID, the parties' petitions, responses thereto, and the record in this investigation, the Commission has determined to affirm with modification the FID's findings and conclusion of no violation of section 337. Specifically, as explained in the Commission Opinion issued concurrently herewith, the Commission has determined to affirm with modification and to supplement the FID's findings with respect to the invalidity of the asserted patent claims. The Commission has further determined to affirm in part and vacate in part the FID's findings with respect to the domestic industry requirement. All findings in the FID that are not inconsistent with the Commission's final determination are affirmed. The investigation is terminated except with respect to the declassification proceeding presently before the Commission.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in part 210 of the Commission's Rules of Practice and Procedure (19 CFR part 210).
By order of the Commission.
Civil Rights Division, Department of Justice.
60-Day notice.
The Department of Justice (DOJ), Civil Rights Division, Federal Coordination and Compliance Section, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
The Department of Justice encourages public comment and will accept input until February 4, 2020.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Christine Stoneman, Acting Chief, Federal Coordination and Compliance Section, 950 Pennsylvania Avenue NW-4CON, Washington, DC 20002 (phone: 202-307-2222).
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
1.
2.
3.
4.
Information is used to find jurisdiction to investigate the alleged discrimination, to seek whether a referral to another agency is necessary and to provide information needed to initiate investigation of the complaint. Respondents are individuals.
5.
6.
If additional information is required contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and
U.S. Nuclear Regulatory Commission.
Direct transfer of license; order.
The U.S. Nuclear Regulatory Commission (NRC) is issuing an order approving the direct transfer of Facility Operating License Nos. DPR-39 and DPR-48 for Zion Nuclear Power Station (ZNPS), Units 1 and 2, respectively, and the general license for the ZNPS independent spent fuel storage installation (ISFSI) from the current holder, Zion
The order was issued on November 26, 2019, and is effective for one year.
Please refer to Docket ID NRC-2019-0236 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
•
•
•
John B. Hickman, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-3017; email:
The text of the order is attached.
For the Nuclear Regulatory Commission.
In the Matter of: Zion
Zion
ZNPS Units 1 and 2 were both Westinghouse 3250 MWt pressurized-water reactors. Unit 1 was granted an operating license on October 19, 1973 and was shut down on February 21, 1997. Unit 2 was granted an operating license on November 14, 1973 and was shut down on September 19, 1996.
In February 1998, pursuant to Title 10 of the
By letter dated July 24, 2018 (ADAMS Accession No. ML18211A303), as supplemented by letters dated January 21, 2019 (ADAMS Accession No. ML19028A175) and February 8, 2019 (ADAMS Accession No. ML19043A673), ZS requested, on behalf of itself and EGC (collectively, the applicants), pursuant to Section 184 of the Atomic Energy Act of 1954, as amended, and Section 50.80, “Transfer of licenses,” of 10 CFR, that the U.S. Nuclear Regulatory Commission (NRC, the Commission) consent to the transfer to EGC of Facility Operating License Nos. DPR-39 and DPR-48 for ZNPS, Units 1 and 2, respectively, and the generally licensed ZNPS ISFSI, which are currently held by ZS. Specifically, ZS intends to transfer its NRC-licensed possession, maintenance, and decommissioning authorities back to EGC upon the completion of the decommissioning activities at the ZNPS site. The application proposed no physical or operational changes to the facilities.
The NRC published a notice, “Zion Nuclear Power Station, Units 1 and 2: Zion Solutions, LLC, Application for direct transfer of facility operating license and conforming amendment; opportunity to comment, request a hearing, and petition for leave to intervene,” in the
Pursuant to 10 CFR 50.80, no license, or any right thereunder, shall be transferred, directly or indirectly, through transfer of control of the license, unless the Commission gives its consent in writing. Upon review of the information in the application and other information before the Commission, and relying upon the representations and agreements contained in the application, the NRC staff has determined that EGC is
Upon review of the application for conforming amendments to the ZNPS licenses to reflect the transfer to EGC, the NRC staff determined the following:
(1) The application for the proposed license amendments complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations set forth in 10 CFR Chapter I.
(2) There is reasonable assurance that the activities authorized by the proposed license amendments can be conducted without endangering the health and safety of the public, and that such activities will be conducted in compliance with the Commission's regulations.
(3) The issuance of the proposed license amendments will not be inimical to the common defense and security or to the health and safety of the public.
(4) The issuance of the proposed license amendments is in accordance with 10 CFR part 51 of the Commission's regulations and all applicable requirements have been satisfied.
The findings set forth above are supported by an NRC safety evaluation dated November 26, 2019, which is available at ADAMS Accession No. ML19228A131.
Accordingly, pursuant to Sections 161b, 161i, and 184 of the Act, 42 U.S.C. Sections 2201(b), 2201(i), and 2234; and 10 CFR 50.80,
Prior to the consummation of the license transfer from ZS to EGC, EGC shall provide satisfactory documentary evidence to the Director of the Office of Nuclear Material Safety and Safeguards at the NRC that it has obtained or continues to possess the appropriate amount of insurance required of a licensee under 10 CFR part 140 and 10 CFR 50.54(w), consistent with the exemptions issued to ZNPS on December 21, 1999.
For further details with respect to this Order, see the application dated July 24, 2018 (ADAMS Accession No. ML18211A303), the supplements dated January 21, 2019 (ADAMS Accession No. ML19028A175) and February 8, 2019 (ADAMS Accession No. ML 19043A673), and the NRC's safety evaluation dated November 26, 2019 (ADAMS Accession No. ML19228A131), which are available for public inspection at the NRC's Public Document Room located at One White Flint North, Public File Area O1-F21, 11555 Rockville Pike (First Floor), Rockville, Maryland. Publicly available documents created or received at the NRC are accessible electronically through ADAMS in the NRC Library at
Dated at Rockville, Maryland, this 26th day of November, 2019.
For the Nuclear Regulatory Commission
/RA/
Nuclear Regulatory Commission.
Direct and indirect transfer of licenses; order.
The U.S. Nuclear Regulatory Commission (NRC) is issuing the Order approving the application filed by FirstEnergy Nuclear Operating Company (FENOC), acting on behalf of itself and FirstEnergy Nuclear Generation, LLC (FENGen), (together, the Applicants) on April 26, 2019, as supplemented. The application seeks an NRC order consenting to the direct and indirect transfer of licenses for Beaver Valley Power Station, Unit Nos. 1 and 2; Davis-Besse Nuclear Power Station, Unit No. 1; and Perry Nuclear Power PIant, Unit No. 1, and their respective generally licensed independent spent fuel storage installations (ISFSIs) (together, the Facilities). Specifically, the Applicants requested a direct transfer of operating authority for the Facilities from FENOC to an as-yet unnamed company, herein identified as OpCo; a direct transfer of ownership of the Facilities from FENGen to an as-yet unnamed company, herein identified as OwnerCo; and an indirect transfer of ownership of the Facilities to an as-yet unnamed parent company, herein identified as New HoldCo (FirstEnergy Corp. is currently the ultimate parent company). The Applicants also requested the NRC's prior written consent and issuance of conforming amendments to the licenses. No physical changes to the Facilities or operational changes were proposed in the application. The Order is effective upon issuance.
The Order was issued on December 2, 2019, and is effective for one year.
Please refer to Docket ID NRC-2019-0137 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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•
•
Bhalchandra K. Vaidya, telephone: 301-
The text of the Order is attached.
The documents identified in the following table are available to interested persons through one or more of the following methods, as indicated.
In the Matter of Firstenergy Nuclear Operating Company, Firstenergy Nuclear Generation, LLC; Beaver Valley Power Station, Unit Nos. 1 and 2 and its generally licensed ISFSI, Docket Nos. 50-334, 50-412, and 72-1043, License Nos. DPR-66 and NPF-73; Davis-Besse Nuclear Power Station, Unit No. 1 and its generally licensed ISFSI, Docket Nos. 50-346 and 72-14, License No. NPF-3; Perry Nuclear Power Plant, Unit No. 1 and its generally licensed ISFSI, Docket Nos. 50-440 and 72-69; License No. NPF-58
FirstEnergy Nuclear Operating Company (FENOC) and FirstEnergy Nuclear Generation, LLC (FENGen) (together, the Applicants) operate and own, respectively, Beaver Valley Power Station (BVPS), Unit Nos. 1 and 2, and its generally licensed independent spent fuel storage installation (ISFSI); Davis-Besse Nuclear Power Station, Unit No. 1 (DBNPS) and its generally licensed ISFSI; and Perry Nuclear Power PIant, Unit No. 1 (PNPP) and its generally licensed ISFSI (together, the Facilities). Specifically, they are co-holders of:
(1) Renewed Facility Operating License Nos. DPR-66 and NPF-73 for BVPS, Units 1 and 2, respectively, located in Beaver County, Pennsylvania;
(2) Renewed Facility Operating License No. NPF-3 for DBNPS, located in Ottawa County, Ohio; and
(3) Facility Operating License No. NPF-58 for PNPP, located in Lake County, Ohio.
By application dated April 26, 2019 (Agencywide Documents Access and Management System (ADAMS) Accession No. ML19116A087), as supplemented by letters dated May 31, 2019; August 2, 2019; August 29, 2019; September 25, 2019 (two submissions); and October 17, 2019 (ADAMS Accession Nos. ML19151A531, ML19214A100, ML19241A462, ML19268A053, ML19268B133, and ML19290D432, respectively), the Applicants requested, pursuant to Section 184 of the Atomic Energy Act of 1954, as amended, and Section 50.80, “Transfer of licenses,” of Title 10 of the
On March 31, 2018, FirstEnergy Solutions Corp. (FES), together with FENOC, FENGen, and FES's other subsidiaries, filed voluntary petitions for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division (Bankruptcy Court). By letter dated April 2, 2018 (ADAMS Accession No. ML18094A661), in accordance with 10 CFR 50.54(cc)(1), FENOC notified the NRC of the bankruptcy filing. The proposed direct and indirect license transfers would support the emergence from bankruptcy of the Applicants, along with FES and other affiliated companies that are currently debtors in the bankruptcy process, pursuant to the Eighth Amended Joint Plan of Reorganization (the Bankruptcy Reorganization Plan) filed with the Bankruptcy Court on October 11, 2019, and the Revised Eighth Amended Plan filed with the Bankruptcy Court on October 14, 2019, and confirmed by the Bankruptcy Court on October 16, 2019, as noted in the Applicants' supplemental letter dated October 17, 2019.
Under the Bankruptcy Reorganization Plan, at emergence from bankruptcy, a new privately-held holding company, New HoldCo, will be formed with shares initially held by certain current creditors of one or more of FES, FENOC, FENGen, or FirstEnergy Generation, LLC (FG) (a sister company of FENGen holding fossil fuel generation assets) and management of the new holding company. Both OpCo and OwnerCo will become wholly-owned subsidiaries of New HoldCo. New HoldCo will also have ultimate ownership of FES's existing non-nuclear generating assets as well as the retail and wholesale load-serving business.
A notice of the application and opportunity to request a hearing and to comment on the application was published in the
Pursuant to 10 CFR 50.80, no license for a production or utilization facility, or any right thereunder, shall be transferred, either voluntarily or involuntarily, directly or indirectly, through transfer of control of the license to any person, unless the Commission gives its consent in writing. Upon review of the information in the application for license
Upon review of the information in the application for conforming amendments, as supplemented, the NRC staff has determined that:
(1) The application for conforming license amendments complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations set forth in 10 CFR Chapter I.
(2) The Facilities will operate in conformity with the application, the provisions of the Act, and the rules and regulations of the Commission.
(3) There is reasonable assurance that the activities authorized by the amendments can be conducted without endangering the health and safety of the public and that such activities will be conducted in compliance with the Commission's regulations.
(4) The issuance of the amendments will not be inimical to the common defense and security or to the health and safety of the public.
(5) The issuance of the amendments is in accordance with 10 CFR part 51 of the Commission's regulations and all applicable requirements have been satisfied.
The findings set forth above are supported by an NRC staff safety evaluation dated the same date as this Order, which is available at ADAMS Accession No. ML19305B131 (non-proprietary).
Accordingly, pursuant to Sections 161b, 161i, and 184 of the Atomic Energy Act of 1954, as amended, 42 U.S.C. 2201(b), 2201(i), and 2234; and 10 CFR 50.80, 10 CFR 72.50, and 10 CFR 50.90,
1. OwnerCo and OpCo shall provide satisfactory documentary evidence to the Director of the NRC Office of Nuclear Reactor Regulation that, as of the date of the license transfer, the licensees reflected in the amended licenses have obtained the appropriate amount of insurance required of a licensee under 10 CFR part 140 and 10 CFR 50.54(w).
2. On or by the closing date of the license transfer transaction, the Applicants shall take all necessary steps to ensure that the provisional trust agreement submitted on September 25, 2019, to address the shortfall identified for BVPS, Unit 1 is implemented and maintained consistent with the safety evaluation supporting this Order.
3. The NRC staff's approval of these license transfers is subject to the Commission's authority to rescind, modify, or condition the approved transfers based on the outcome of any post-effectiveness hearing on the license transfer application.
This Order is effective upon issuance.
For further details with respect to this Order, see the application dated April 26, 2019, as supplemented by letters dated May 31, 2019; August 2, 2019; August 29, 2019; September 25, 2019 (two submissions); and October 17, 2019, and the NRC safety evaluation dated the same date as this Order, which are available for public inspection at the NRC's Public Document Room (PDR) located at One White Flint North, Public File Area 01 F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available documents created or received at the NRC are accessible electronically through ADAMS in the NRC Library at
Dated at Rockville, Maryland this 2nd day of December 2019.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 2, 2019, it filed with the Postal Regulatory Commission a
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe C2 Exchange, Inc. (the “Exchange” or “C2”) proposes to update various C2 Rules and Chapters to reflect
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
In 2016, the Exchange's parent company, Cboe Global Markets, Inc. (formerly named CBOE Holdings, Inc.) (“Cboe Global”), which is also the parent company of Cboe C2 Exchange, Inc. (“C2”), acquired Cboe EDGA Exchange, Inc. (“EDGA”), Cboe EDGX Exchange, Inc. (“EDGX” or “EDGX Options”), Cboe BZX Exchange, Inc. (“BZX” or “BZX Options”), and Cboe BYX Exchange, Inc. (“BYX” and, together with Cboe Options, C2, EDGX, EDGA, and BZX, the “Cboe Affiliated Exchanges”). On October 7, 2019, Cboe Options migrated its trading platform to the same system used by the Cboe Affiliated Exchanges. In connection with this technology migration, Cboe Options updated and reorganized its rulebook, which became effective upon the technology migration.
The Exchange now proposes to reorganize various Chapters in its Rulebook that incorporate Cboe Options chapters by reference in order to correspond to the post-migration structure of the Cboe Options rulebook. The proposed rule change also updates cross-references to Cboe Options rules and chapters that have been relocated in the Cboe Options post-migration rulebook. It also proposes to delete certain Chapters that incorporate by reference Cboe Option's chapters that are no longer holistically in the Cboe Options rulebook as a result of the reorganization of the rules under such chapters to various other Cboe Options rules and chapters. The proposed rule change moves and, where applicable, removes the rules as follows:
The majority
As stated in the table above, the proposed rule change also incorporates Cboe Options Rule 9.20, which governs customer disclosures during Global Trading Hours, into C2 Chapter 9 by reference to Cboe Options Chapter 9. Current Rule 3.19 is identical to Cboe Options Rule 9.20. Therefore, the proposed rule change essentially just relocates current Rule 3.19 to Rule 9.20 in order to include Cboe Options Rule 9.20 in C2 Chapter 9's incorporation of Cboe Options Chapter 9 by reference, as it is within the same category of exchange rules otherwise incorporated into C2 Chapter 9 by reference to Cboe Options Chapter 9 (
The proposed changes to remove certain C2 Chapters are of a non-substantive nature because they delete C2 Chapters that incorporate by reference certain Cboe Options chapters that are no longer applicable as a result of the reorganization of the Cboe Options rulebook. The proposed rule change removes current C2 Chapter 10 which incorporates (former) Cboe Options Chapter 10 by reference. The Exchange notes that prior to reorganization, Cboe Options Chapter 10 contained only three rules (Cboe Options Rules 10.1, 10.2, and 10.3). As a result of Cboe Option's reorganization, Cboe Options Rule 10.1 was relocated to
Likewise, the proposed change removes current C2 Chapter 24 which incorporates (former) Cboe Options Chapter 24 by reference. As indicated in the table above, a majority of the Cboe Options rules under former Cboe Options Chapter 24 were relocated to Cboe Options Chapter 4, Section B and Chapter 8, and thus covered under proposed C2 Chapters 4 and 5. The Exchange notes that former Cboe Options Rule 24.8 (governing the meaning of premium bids and offers for index options) and former Cboe Options Rule 24.14 (governing limitation of liability of Reporting Authority for indexes underlying options) were not relocated into either of these Chapters, and instead incorporated into Cboe Options Rules 5.3(a) and 1.12, respectively. Because the current C2 Rules do not incorporate post-migration Cboe Options Chapter 5 or Chapter 1 by reference, like the proposed rule change described above, the proposed rule change simply updates the language under current C2 Rule 6.3(a) to be consistent with the rule text under corresponding Cboe Options Rule 5.3(a), which now accounts for index options (from former Cboe Options Rule 24.8), and adds Rule 6.45, which is identical to the rule text under Cboe Options Rule 1.12 (former Cboe Options Rule 24.14). The proposed rule change does not incorporate former Cboe Options Rule 24.8.01 (current Cboe Options Rule 5.85(e)) nor former Cboe Options Rule 24.22 (current Cboe Options Rule 5.92) because both rules are specific to trading on open outcry which is not applicable to C2. The proposed change also removes the language under current C2 Chapter 24 which provides that Cboe Options Rules 24.6 (Days and Hours of Business); 24.7 (Trading Halts, Suspensions, or Primary Market Closure); 24.13 (Trading Rotations); 24.15 (Automatic Execution of Index Options); 24.19 (Multi-Class Broad-Based Index Option Spread Orders); 24.20 (SPX Combination Orders); and 24.21 (Index Crowd Space Dispute Resolution Procedures) do not apply to C2, because, as a result of the reorganization of the Cboe Options rulebook, each of these rules has either been deleted from the Cboe Options rulebook or relocated into another Cboe Options chapter that C2 does not incorporate by reference. The Exchange notes that the proposed rule changes described above do not make any substantive changes to the manner in which Cboe Options rules apply to C2.
Additionally, as a result of the reorganization of the Cboe Options rulebook, rules in certain former chapters that the Exchange does not currently incorporate by reference, such as chapters that had governed types of options specific to trading on Cboe Options (
The proposed rule change also updates certain rules under current C2 Rule 17.50 (proposed C2 Rule 13.15) to reflect recent changes to the corresponding Cboe Options rules.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
As stated, the proposed rule change generally makes no substantive changes to the rules. The proposed rule change is merely intended to reorganize C2 Chapters and update their numbers,
Additionally, the Exchange notes that the removal of a referral to the BCC for subsequent offenses under the proposed MRVP Rules 13.15(g)(14) and (g)(19) is substantively identical to the corresponding rules of Cboe Options, which have previously been filed with the Commission. As a result, the Exchange believes that the proposed change provides consistency between the rules and disciplinary process of the Exchange and its affiliate exchange, Cboe Options, which removes impediments to and perfects the mechanism of a free and open market and a national market system by making it easier for participants across the affiliated exchanges to understand and adhere to the disciplinary rules.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange reiterates that the proposed rule change is being proposed as a result of the recent technology migration and the related reorganization of the Cboe Options rulebook, and not as a competitive filing. The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition because it merely reorganizes and updates its Chapters and Rules that incorporate Cboe Options chapters and rules by reference to align with the reorganized, post-migration Cboe Options rulebook that became effective October 7, 2019. The same rules that apply to C2 Trading Permit Holders today will apply to C2 Trading Permit Holders in the same manner upon effectiveness of this rule filing. Likewise, the proposed rule change to the C2 MRVP is also not intended to address competitive issues and will not impose any burden on intramarket competition because it does not impact trading on the Exchange but, rather, is concerned only with facilitating easier understanding of and adherence to the disciplinary rules for participants across the Exchange and Cboe Options. The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition because the proposed rules are substantively the same as the Exchange's current rules, and the proposed change to the MRVP is substantively the same as the Cboe Options MRVP, all of which have been previously filed with the Commission.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing,
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Securities and Exchange Commission.
Notice; correction.
The Securities and Exchange Commission published a document in the
Christopher W. Chow, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549, (202) 551-5622.
In the
Securities and Exchange Commission (“Commission”).
Notice.
Notice of application for an order under sections 17(d) and 57(i) of the Investment Company Act of 1940 (the “Act”) and rule 17d-1 under the Act to permit certain joint transactions otherwise prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
Applicants request an order to permit business development companies (“BDCs”) and closed-end management investment companies to co-invest in portfolio companies with each other and with certain affiliated investment funds and accounts.
Blackstone Alternative Alpha Fund (“BAAF”); Blackstone Alternative Alpha Fund II (“BAAF II”); Blackstone Alternative Alpha Master Fund (“BAAF Master Fund”); Blackstone Alternative Multi-Strategy Fund (“BAMSF”, and together with BAAF, BAAF II and the BAAF Master Fund, the “BAAM Regulated Funds”); Blackstone Alternative Asset Management, L.P. (“BAAM”), the investment adviser to BAAF, BAAF II and BAAF Master Fund; Blackstone Alternative Investment Advisors LLC (“BAIA”), the investment adviser to BAMSF; the investment advisers set forth in Schedule A to the application (together with BAAM and BAIA, the “BAAM Advisers”); the Existing Affiliated Investors set forth on Schedule A to the application.
The application was filed on October 24, 2018, and amended on June 3, 2019 and September 10, 2019.
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on December 27, 2019, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0-5 under the Act, hearing requests should state the nature of the writer's interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Secretary, U.S. Securities and Exchange Commission, 100 F St. NE, Washington, DC 20549-1090.
Asen Parachkevov, Senior Counsel, or Kaitlin Bottock, Branch Chief, at (202) 551-6821 (Chief Counsel's Office, Division of Investment Management).
The following is a summary of the application. The complete application may be obtained via the Commission's website by searching for the file number, or for an applicant using the Company name box, at
1. BAAF, BAAF II and BAAF Master Fund, each a Massachusetts business trust, are externally managed, non-diversified, closed-end management investment companies. Each of BAAF's, BAAF II's and BAAF Master Fund's investment objective is to seek to earn attractive long-term risk-adjusted returns by primarily investing in non-traditional or “alternative” strategies. BAAF and BAAF II are “feeder” funds that invest substantially all of their assets in BAAF Master Fund. Each of BAAF, BAAF II and BAAF Master Fund have a six-member Board, of which four members are Non-Interested Trustees.
“Non-Interested Trustees” means the Non-Interested Trustees of the BAAM Regulated Funds and any other Regulated Fund who are not “interested persons” within the meaning of section 2(a)(19) of the Act.
2. BAMSF, a Massachusetts business trust, is currently the sole series of Blackstone Alternative Investment Funds, and operates as a diversified, open-end management investment company. BAMSF's investment objective is to seek capital appreciation primarily through investing in non-traditional or “alternative” strategies. BASMF has a six-member Board, of which four members are Non-Interested Trustees.
3. Each Adviser
The term “Primary Adviser” means any future investment adviser that (i) controls, is controlled by or is under common control with an Adviser, (ii) is registered as an investment adviser under the Advisers Act, and (iii) is not an Adviser. For the avoidance of doubt, a Primary Adviser will not be treated as an Adviser under the requested Order, but will be subject to conditions 2(c)(iv) and 15 of the requested Order. A Primary Adviser will not rely on the requested Order with respect to any investment vehicles it manages other than to the extent those vehicles are sub-advised by an Adviser.
4. The BAAM Advisers operate as a self-contained advisory business within Blackstone's hedge fund solutions group. Each BAAM Adviser is under common control with BAAM and BAIA, the Adviser to each of the BAAM Regulated Funds, and collectively the BAAM Advisers conduct a single advisory business for purposes of the requested Order. The BAAM Advisers are each either separately registered as investment advisers with the Commission, or are relying advisers that rely on the registration of another BAAM Adviser. No BAAM Adviser is a relying adviser of any Blackstone-affiliated investment adviser from outside of the self-contained group.
5. Applicants seek an order to permit one or more Regulated Funds
Section 2(a)(48) of the Act defines a BDC to be any closed-end investment company that operates for the purpose of making investments in securities described in sections 55(a)(1) through 55(a)(3) of the Act and makes available significant managerial assistance with respect to the issuers of such securities.
“Future Affiliated Investor” means an entity (i)(A) whose investment adviser is an Adviser or (B) whose investment adviser is a Primary Adviser and whose sub-adviser is an Adviser (a “Sub-Advised Affiliated Investor”), and (ii) that either (A) would be an investment company but for an exemption in section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act or (B) relies on the rule 3a-7 exemption thereunder from investment company status, and (iii) that intends to participate in the Co-Investment Program.
“Affiliated Proprietary Account” means any account of an Adviser or its affiliates or any company that is an indirect, wholly- or majority-owned subsidiary of an Adviser or its affiliates, which, from time to time, may hold various financial assets in a principal capacity. For the avoidance of doubt, none of the Regulated Funds, the Existing Affiliated Investors or any Future Affiliated Investors shall be deemed to be Affiliated Proprietary Accounts for purposes of the requested Order.
6. For purposes of the requested Order, “Co-Investment Transaction” means any transaction in which one or more Regulated Funds (or one or more Wholly-Owned Investment Subsidiaries, as defined below) participates together with one or more other Regulated Funds (or one or more Wholly-Owned Investment Subsidiaries, as defined below) and/or one or more Affiliated Investors in reliance on the requested Order. “Potential Co-Investment Transaction”
7. Applicants state that a Regulated Fund may, from time to time, form a special purpose subsidiary (a “Wholly-Owned Investment Subsidiary”).
The term “SBIC Subsidiary” means a Wholly-Owned Investment Subsidiary that is licensed by the Small Business Administration (the “SBA”) to operate under the Small Business Investment Act of 1958, as amended, (the “SBA Act”) as a small business investment company (a “SBIC”).
8. When considering Potential Co-Investment Transactions for any Regulated Fund, an Adviser will consider only the Objectives and Strategies,
9. With respect to participation in a Potential Co-Investment Transaction by a Regulated Fund, the applicable Adviser will present each Potential Co-Investment Transaction and the proposed allocation of each investment opportunity to the Eligible Trustees. The Required Majority of a Regulated Fund will approve each Co-Investment Transaction prior to any investment by the Regulated Fund.
10. Applicants state that the majority of the BAAM Advisers' employees work on matters for Close Affiliates
11. Applicants submit that, in the event that a Potential Co-Investment Transaction would be within the investment objectives and strategies of the Sub-Advised Affiliated Investor, the respective Adviser shall have the primary responsibility for the investment, including making the initial investment recommendation, and day-to-day monitoring of the investment. Applicants further note that the Adviser will be responsible for complying with the conditions of the requested Order. Applicants state that if the Adviser and Primary Adviser agree that the Sub-Advised Affiliated Investor should invest in the Potential Co-Investment Transaction and at what size of investment, then the Adviser would, consistent with the conditions of the requested Order, determine an allocation for the Regulated Funds and Affiliated Investors, including such Sub-Advised Affiliated Investor.
12. Applicants acknowledge that some of the Affiliated Investors may not be funds advised by an Adviser because they are Affiliated Proprietary Accounts. Applicants do not believe the participation of these Affiliated Proprietary Accounts in Co-Investment Transactions should raise issues under the conditions of the requested Order because allocation policies and procedures of the account owners provide that investment opportunities are offered to client accounts before they are offered to Affiliated Proprietary Accounts.
13. Under condition 16, if an Adviser or its principals, or any person controlling, controlled by, or under common control with the Adviser or its principals, and any Affiliated Investor (collectively, the “Holders”) own in the aggregate more than 25 percent of the outstanding voting shares of a Regulated Fund (“Shares”), then the Holders will vote such Shares as directed by an independent third party when voting on (1) the election of directors; (2) the removal of one or more directors; or (3) all other matters under either the Act or applicable state law affecting the Board's composition, size or manner of election.
14. Applicants state that from time to time the Regulated Funds and Affiliated
15. Applicants propose that Follow-On Investments would be divided into two categories depending on whether the prior investment was a Co-Investment Transaction or a Pre-Boarding Investment.
16. A Regulated Fund would be permitted to invest in Standard Review Follow-Ons either with the approval of the Required Majority under Condition 9(c) or without Board approval under Condition 9(b) if it is (i) a Pro Rata Follow-On Investment
“Joint Transaction No-Action Letters” means SMC Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000).
17. Applicants propose that Dispositions
18. A Regulated Fund may participate in a Standard Review Disposition either with the approval of the Required Majority under Condition 7(d) or without Board approval under Condition 7(c) if (i) the Disposition is a Pro Rata Disposition
19. No Eligible Trustee will have a financial interest in any Co-Investment Transaction, other than indirectly through share ownership in one of the Regulated Funds.
1. Section 57(a)(4) of the Act prohibits certain affiliated persons of a BDC from participating in joint transactions with the BDC or a company controlled by a BDC in contravention of rules as prescribed by the Commission. Under section 57(b)(2) of the Act, any person who is directly or indirectly controlling, controlled by, or under common control with a BDC is subject to section 57(a)(4) of the Act. Section 57(i) of the Act provides that, until the Commission prescribes rules under section 57(a)(4) of the Act, the Commission's rules under section 17(d) of the Act
2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit affiliated persons of a registered investment company from participating in joint transactions with the company unless the Commission has granted an order permitting such transactions. In passing upon applications under rule 17d-1, the Commission considers whether the company's participation in the joint transaction is consistent with the provisions, policies, and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of other participants.
3. Applicants state that certain transactions effected as part of the Co-Investment Program may be prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 thereunder without a prior exemptive order of the Commission to the extent that the Affiliated Investors fall within the category of persons described by section 17(d) or section 57(b) of the Act, as modified by rule 57b-1 thereunder with respect to a Regulated Fund. Applicants believe that the proposed terms and conditions will ensure would ensure that the conflicts of interest that section 17(d) and section 57(a)(4) of the Act were designed to prevent would be addressed and the standards for an order under rule 17d-1 under the Act are met.
Applicants agree that any Order granting the requested relief shall be subject to the following conditions:
1. (a) Each Adviser will establish, maintain and implement policies and procedures reasonably designed to ensure that each Adviser is promptly notified, for each Regulated Fund the Adviser manages, of all Potential Co-Investment Transactions
(b) When an Adviser to a Regulated Fund is notified of a Potential Co-Investment Transaction under condition 1(a), such Adviser will make an independent determination of the appropriateness of the investment for the Regulated Fund in light of the Regulated Fund's then-current circumstances.
2. (a) If the Adviser deems a Regulated Fund's participation in any Potential Co-Investment Transaction to be appropriate for the Regulated Fund, it will then determine an appropriate level of investment for the Regulated Fund.
(b) If the aggregate amount recommended by the applicable Adviser to be invested by the applicable Regulated Fund in the Potential Co-Investment Transaction, together with the amount proposed to be invested by the other participating Regulated Funds and Affiliated Investors, collectively, in the same transaction, exceeds the amount of the investment opportunity, then the investment opportunity will be allocated among them pro rata based on each participant's Available Capital
(c) After making the determinations required in conditions 1 and 2(a), the applicable Adviser will distribute written information concerning the Potential Co-Investment Transaction (including the amount proposed to be invested by each participating Regulated Fund and Affiliated Investor) to the Eligible Trustees of each participating Regulated Fund for their consideration. A Regulated Fund will co-invest with one or more other Regulated Funds and/or one or more Affiliated Investors only if, prior to the Regulated Fund's participation in the Potential Co-Investment Transaction, a Required Majority concludes that:
(i) The terms of the Potential Co-Investment Transaction, including the consideration to be paid, are reasonable and fair to the Regulated Fund and its shareholders and do not involve overreaching in respect of the Regulated Fund or its shareholders on the part of any person concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(A) The interests of the shareholders of the Regulated Fund; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by any other Regulated Funds or Affiliated Investors would not disadvantage the Regulated Fund, and participation by the Regulated Fund would not be on a basis different from or less advantageous than that of other Regulated Funds or Affiliated Investors; provided that, if any other Regulated Fund or Affiliated Investor, but not the Regulated Fund itself, gains the right to nominate a director for election to a portfolio company's board of directors or the right to have a board observer or any similar right to participate in the governance or management of the portfolio company, such event shall not be interpreted to prohibit the Required Majority from reaching the conclusions required by this condition (2)(c)(iii), if:
(A) The Eligible Trustees will have the right to ratify the selection of such director or board observer, if any;
(B) the applicable Adviser agrees to, and does, provide periodic reports to the Regulated Fund's Board with respect to the actions of such director or the information received by such board observer or obtained through the exercise of any similar right to participate in the governance or management of the portfolio company; and
(C) any fees or other compensation that any Affiliated Investor or any Regulated Fund or any affiliated person of any Affiliated Investor or any Regulated Fund receives in connection with the right of an Affiliated Investor or a Regulated Fund to nominate a director or appoint a board observer or otherwise to participate in the governance or management of the portfolio company will be shared proportionately among the participating Affiliated Investors (who each may, in turn, share its portion with its affiliated persons), and the participating Regulated Funds in accordance with the amount of each party's investment; and
(iv) the proposed investment by the Regulated Fund will not benefit the Advisers, the Affiliated Investors, the
(A) to the extent permitted by condition 15;
(B) to the extent permitted by section 17(e) or 57(k) of the Act, as applicable;
(C) indirectly, as a result of an interest in the securities issued by one of the parties to the Co-Investment Transaction; or
(D) in the case of fees or other compensation described in condition 2(c)(iii)(C).
3. Each Regulated Fund has the right to decline to participate in any Potential Co-Investment Transaction or to invest less than the amount proposed.
4. The applicable Adviser will present to the Board of each Regulated Fund, on a quarterly basis, a record of all investments in Potential Co-Investment Transactions made by any of the other Regulated Funds or Affiliated Investors during the preceding quarter that fell within the Regulated Fund's then-current Objectives and Strategies and Board Established Criteria that were not made available to the Regulated Fund, and an explanation of why the investment opportunities were not offered to the Regulated Fund. All information presented to the Board pursuant to this condition will be kept for the life of the Regulated Fund and at least two years thereafter, and will be subject to examination by the Commission and its staff.
5. Except for Follow-On Investments made in accordance with Condition 9 and 10,
6. A Regulated Fund will not participate in any Potential Co-Investment Transaction unless the terms, conditions, price, class of securities to be purchased, settlement date, and registration rights will be the same for each participating Regulated Fund and Affiliated Investor. The grant to an Affiliated Investor or another Regulated Fund, but not the Regulated Fund, of the right to nominate a director for election to a portfolio company's board of directors, the right to have an observer on the board of directors or similar rights to participate in the governance or management of the portfolio company will not be interpreted so as to violate this condition 6, if conditions 2(c)(iii)(A), (B) and (C) are met.
7. Standard Review Dispositions
(a) If any Regulated Fund or any Affiliated Investor elects to sell, exchange or otherwise dispose of an interest in a security and one or more Regulated Funds and Affiliated Investors have previously participated in a Co-Investment Transaction with respect to the issuer, then:
(i) The Adviser to such Regulated Fund or Affiliated Investor
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to participation by such Regulated Fund in the Disposition.
(b) Each Regulated Fund will have the right to participate in such Disposition on a proportionate basis, at the same price and on the same terms and conditions as those applicable to the Affiliated Investors and any other Regulated Fund.
(c) A Regulated Fund may participate in such a Disposition without obtaining prior approval of the Required Majority if:
(i) (A) The participation of each Regulated Fund and Affiliated Investor in such Disposition is proportionate to its then-current holding of the security (or securities) of the issuer that is (or are) the subject of the Disposition;
(ii) each security is a Tradable Security and (A) the Disposition is not to the issuer or any affiliated person of the issuer; and (B) the security is sold for cash in a transaction in which the only term negotiated by or on behalf of the participating Regulated Funds and Affiliated Investors is price.
(d) In all other cases, the Adviser will provide its written recommendation as to the Regulated Fund's participation to the Eligible Trustees and the Regulated Fund will participate in such Disposition solely to the extent that a Required Majority determines that it is in the Regulated Fund's best interests. Each Affiliated Investor and each Regulated Fund will bear its own expenses in connection with any such disposition.
8. Enhanced Review Dispositions.
(a) If any Regulated Fund or Affiliated Investor elects to sell, exchange or otherwise dispose of a Pre-Boarding Investment in a Potential Co-Investment Transaction and the Regulated Funds and Affiliated Investors have not previously participated in a Co-Investment Transaction with respect to the issuer:
(i) The Adviser to such Regulated Fund or Affiliated Investor will notify each Regulated Fund that holds an investment in the issuer of the proposed Disposition at the earliest practical time;
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to participation by such Regulated Fund in the Disposition; and
(iii) the Advisers will provide to the Board of each Regulated Fund that holds an investment in the issuer all information relating to the existing investments in the issuer of the Regulated Funds and Affiliated Investors, including the terms of such investments and how they were made, that is necessary for the Required Majority to make the findings required by this condition.
(b) The Adviser will provide its written recommendation as to the Regulated Fund's participation to the Eligible Trustees, and the Regulated Fund will participate in such Disposition solely to the extent that a Required Majority determines that:
(i) The Disposition complies with Condition 2(c)(i), (ii), (iii)(A), and (iv).
(ii) the making and holding of the Pre-Boarding Investments were not prohibited by section 57 or rule 17d-1, as applicable, and records the basis for the finding in the Board minutes.
(c) The Disposition may only be completed in reliance on the Order if:
(i) Each Regulated Fund has the right to participate in such Disposition on a proportionate basis, at the same price and on the same terms and Conditions as those applicable to the Affiliated Investors and any other Regulated Fund;
(ii) All of the Affiliated Investors' and Regulated Funds' investments in the issuer are Pre-Boarding Investments;
(iii) Independent counsel to the Board advises that the making and holding of the investments in the Pre-Boarding Investments were not prohibited by section 57 (as modified by rule 57b-1) or rule 17d-1, as applicable;
(iv) All Regulated Funds and Affiliated Investors that hold Pre-Boarding Investments in the issuer immediately before the time of completion of the Co-Investment Transaction hold the same security or securities of the issuer. For the purpose of determining whether the Regulated Funds and Affiliated Investors hold the same security or securities, they may disregard any security held by some but not all of them if, prior to relying on the Order, the Required Majority is presented with all information necessary to make a finding, and finds, that: (A) Any Regulated Fund's or Affiliated Investor's holding of a different class of securities (including for this purpose a security with a different maturity date) is immaterial
(d) The Affiliated Investors, the other Regulated Funds and their affiliated persons (within the meaning of section 2(a)(3)(C) of the Act), individually or in the aggregate, do not control the issuer of the securities (within the meaning of section 2(a)(9) of the Act).
9. Standard Review Follow-Ons.
(a) If any Regulated Fund or Affiliated Investor desires to make a Follow-On Investment in an issuer and the Regulated Funds and Affiliated Investors holding investments in the issuer previously participated in a Co-Investment Transaction with respect to the issuer:
(i) The Adviser to each such Regulated Fund or Affiliated Investor will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time; and
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund.
(b) A Regulated Fund may participate in the Follow-On Investment without obtaining prior approval of the Required Majority if:
(i) (A) The proposed participation of each Regulated Fund and each Affiliated Investor in such investment is proportionate to its outstanding investments in the issuer or the security at issue, as appropriate,
(ii) it is a Non-Negotiated Follow-On Investment.
(c) In all other cases, the Adviser will provide its written recommendation as to the Regulated Fund's participation to the Eligible Trustees and the Regulated Fund will participate in such Follow-On Investment solely to the extent that a Required Majority makes the determinations set forth in Condition 2(c). If the only previous Co-Investment Transaction with respect to the issuer was an Enhanced Review Disposition the Eligible Trustees must complete this review of the proposed Follow-On Investment both on a stand-alone basis and together with the Pre-Boarding Investments in relation to the total economic exposure and other terms of the investment.
(d) If, with respect to any such Follow-On Investment:
(i) The amount of the opportunity proposed to be made available to any Regulated Fund is not based on the Regulated Funds' and the Affiliated Investors' outstanding investments in the issuer or the security at issue, as appropriate, immediately preceding the Follow-On Investment; and
(ii) if the aggregate amount recommended by the applicable Adviser to be invested by the applicable Regulated Fund in the Potential Co-Investment Transaction, together with the amount proposed to be invested by the other participating Regulated Funds and Affiliated Investors, collectively, in the same transaction, exceeds the amount of the investment opportunity;
then the Follow-On Investment opportunity will be allocated among them pro rata based on Available Capital (as described in greater detail in this Application) up to the amount proposed to be invested by each.
(e) The acquisition of Follow-On Investments as permitted by this Condition will be considered a Co-Investment Transaction for all purposes and subject to the other Conditions set forth in this application.
10. Enhanced Review Follow-Ons.
(a) If any Regulated Fund or Affiliated Investor desires to make a Follow-On Investment in an issuer that is a Potential Co-Investment Transaction and the Regulated Funds and Affiliated Investors holding investments in the issuer have not previously participated in a Co-Investment Transaction with respect to the issuer:
(i) The Adviser to each such Regulated Fund or Affiliated Investor will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time;
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund; and
(iii) the Advisers will provide to the Board of each Regulated Fund that holds an investment in the issuer all information relating to the existing investments in the issuer of the Regulated Funds and Affiliated Investors, including the terms of such investments and how they were made, that is necessary for the Required Majority to make the findings required by this Condition.
(b) The applicable Adviser will provide its written recommendation as to the Regulated Fund's participation to the Eligible Trustees, and the Regulated Fund will participate in such Follow-On Investment solely to the extent that a Required Majority reviews the proposed Follow-On Investment both on a stand-alone basis and together with the Pre-Boarding Investments in relation to the total economic exposure and other terms and makes the determinations set forth in Condition 2(c). In addition, the Follow-On Investment may only be completed in reliance on the Order if the Required Majority of each
(c) The Follow-On Investment may only be completed in reliance on the Order if:
(i) All of the Affiliated Investors' and Regulated Funds' investments in the issuer are Pre-Boarding Investments;
(ii) Independent counsel to the Board of each Regulated Fund that holds an investment in the issuer advises that the making and holding of the investments in the Pre-Boarding Investments were not prohibited by section 57 (as modified by rule 57b-1) or rule 17d-1, as applicable;
(iii) All Regulated Funds and Affiliated Investors that hold Pre-Boarding Investments in the issuer immediately before the time of completion of the Co-Investment Transaction hold the same security or securities of the issuer. For the purpose of determining whether the Regulated Funds and Affiliated Investors hold the same security or securities, they may disregard any security held by some but not all of them if, prior to relying on the Order, the Required Majority is presented with all information necessary to make a finding, and finds, that: (A) Any Regulated Fund's or Affiliated Investor's holding of a different class of securities (including for this purpose a security with a different maturity date) is immaterial in amount, including immaterial relative to the size of the issuer; and (B) the Board records the basis for any such finding in its minutes. In addition, securities that differ only in respect of issuance date, currency, or denominations may be treated as the same security; and
(iv) The Affiliated Investors, the other Regulated Funds and their affiliated persons (within the meaning of section 2(a)(3)(C) of the Act), individually or in the aggregate, do not control the issuer of the securities (within the meaning of section 2(a)(9) of the Act).
(d) If, with respect to any such Follow-On Investment:
(i) The amount of the opportunity proposed to be made available to any Regulated Fund is not based on the Regulated Funds' and the Affiliated Investors' outstanding investments in the issuer or the security at issue, as appropriate, immediately preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the Advisers to be invested in the Follow-On Investment by the participating Regulated Funds and any participating Affiliated Investors, collectively, exceeds the amount of the investment opportunity,
then the Follow-On Investment opportunity will be allocated among them pro rata based on Available Capital (as described in greater detail in this application).
(e) The acquisition of Follow-On Investments as permitted by this Condition will be considered a Co-Investment Transaction for all purposes and subject to the other Conditions set forth in the application.
11. The Non-Interested Trustees of each Regulated Fund will be provided quarterly for review all information concerning Potential Co-Investment Transactions that fell within the Regulated Fund's then-current Objectives and Strategies and Board-Established Criteria, including investments in Potential Co-Investment Transactions made by other Regulated Funds or Affiliated Investors that the Regulated Fund considered but declined to participate in, and concerning Co-Investment Transactions in which the Regulated Fund participated, so that the Non-Interested Trustees may determine whether all Potential Co-Investment Transactions and Co-Investment Transactions during the preceding quarter, including those Potential Co-Investment Transactions which the Regulated Fund considered but declined to participate in, comply with the conditions of the Order. In addition, the Non-Interested Trustees will consider at least annually: (a) The continued appropriateness for the Regulated Fund of participating in new and existing Co-Investment Transactions, and (b) the continued appropriateness of any Board-Established Criteria.
12. Each Regulated Fund will maintain the records required by section 57(f)(3) of the Act as if each of the Regulated Funds were a BDC and each of the investments permitted under these conditions were approved by the Required Majority under section 57(f) of the Act.
13. No Non-Interested Trustee of a Regulated Fund will also be a director, general partner, managing member or principal, or otherwise an “affiliated person” (as defined in the Act) of any of the Affiliated Investors.
14. The expenses, if any, associated with acquiring, holding or disposing of any securities acquired in a Co-Investment Transaction (including, without limitation, the expenses of the distribution of any such securities registered for sale under the 1933 Act) will, to the extent not payable by the Advisers under their respective investment advisory agreements with Affiliated Investors and the Regulated Funds, be shared by the Regulated Funds and the Affiliated Investors in proportion to the relative amounts of the securities held or to be acquired or disposed of, as the case may be.
15. Any transaction fee
16. If the Holders own in the aggregate more than 25% of the Shares, then the Holders will vote such Shares as directed by an independent third party when voting on (1) the election of trustees; (2) the removal of one or more trustees; or (3) all other matters under either the Act or applicable state law affecting the Board's composition, size or manner of election.
17. Each Regulated Fund's chief compliance officer, as defined in rule 38a-1(a)(4) under the Act, will prepare an annual report for its Board each year
18. The Affiliated Proprietary Accounts will not be permitted to invest in a Potential Co-Investment Transaction except to the extent the aggregate demand from the Regulated Funds and the other Affiliated Investors is less than the total investment opportunity.
For the Commission, by the Division of Investment Management, under delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Phlx Rule 507, titled “Application for Approval as an SQT, RSQT, or RSQTO and Assignment in Options.”
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Phlx Rule 507, titled “Application for Approval as an SQT, RSQT, or RSQTO and Assignment in Options.” Specifically, the Exchange proposes to delete Commentaries .02 (Maximum Number of Quoters (“MNQ”) in Equity Options), .03 (Increasing the MNQ in Exceptional Circumstances), and .04 (Announcing Regarding, or Changes to MNQs) to Rule 507. The term “MNQ” refers to the maximum number of participants that may be assigned in a particular equity option at any one time. The MNQ level for options trading on the Exchange is 30 for all equity options listed for trading on the Exchange.” The Exchange believes that its proposal will promote liquidity on Phlx.
In 2006, the Exchange filed an amendment to Phlx Rule 507 to enable the Exchange to manage its quotation traffic and bandwidth capacity by limiting the number of streaming quote market participants that may be assigned to a particular option at a given point in time.
Since the adoption of this provision the Exchange has amended Phlx Rule 507
The Chicago Board Options Exchange, Incorporated (“Cboe”) also had a similar limit that it imposed on its market making participants within its former Rule 8.3A, which limited the number of market participants that could quote
After careful analysis, the Exchange no longer desires to limit the number of quoters on Phlx. The Exchange believes that allowing additional market making firms to be assigned to quote in options series would foster competition. With this proposal there would be no limit on the amount of SQTs and RSQTs that would be permitted to submit quotations into Phlx. The Exchange believes that allowing any SQT or RSQT that is eligible pursuant to Rule 507 to submit quotations would increase the available liquidity on Phlx. Similar to Cboe, Phlx represents that it has capacity to handle any additional quoters due to the elimination of the MNQ. Phlx monitors System capacity in other ways, making a MNQ no longer necessary.
In conjunction with the elimination of Commentary .02 to Rule 507, the Exchange proposes to eliminate Commentaries .03 and .04 of Phlx Rule 507 as these provisions, which relate to increasing the MNQ and announcing the changes to the MNQ, would be rendered irrelevant with the removal of the limit. The Exchange also proposes to amend Rule 507(b)(iii) to remove rule text which references a limitation on the number of positions available while retaining the criteria in Rule 507(b)(iii) for consideration of new applicants.
The Exchange notes that this proposal would be immediately effective. The Exchange would issue an Options Trader Alert to members noting that the Exchange is removing the limitation on the maximum number of quoters. SQTs and RSQTs would be able to apply to make markets in any options series. All new applicants for trading privileges will be subject to the process for assignment described in Rule 507. The Exchange considers all applicants for assignment in options using the objective criteria set forth in Exchange Rule 507(b). The objective criteria are used by the Exchange in determining the most beneficial assignment of options for the Exchange and the public.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
Allowing additional market making firms to be assigned to quote in options series would foster competition. Removing the MNQ limitation for all equity options traded on the Exchange, is pro-competitive, because it adds depth and liquidity to the Exchange's markets by permitting additional participants to compete on the Exchange. With this proposal there would be no limit on the amount of SQTs and RSQTs that would be permitted to submit quotations into Phlx. The Exchange believes that allowing any SQT or RSQT that is eligible pursuant to Rule 507 to submit quotations would increase the available liquidity on Phlx. Finally, Phlx represents that it has capacity to handle any additional quoters due to the elimination of the MNQ. Phlx monitors System capacity in other ways, making a MNQ no longer necessary.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange's proposal does not impose a burden on intra-market competition because removing the MNQ limitation for all equity options traded on the Exchange, is pro-competitive, because it adds depth and liquidity to the Exchange's markets by permitting additional participants to compete on the Exchange. The Exchange's proposal does not impose a burden on inter-market competition because there would be no limit on the amount of SQTs and RSQTs that would be permitted to submit quotations into Phlx. The Exchange believes that allowing any SQT or RSQT that is eligible pursuant to Rule 507 to submit quotations would increase the available liquidity on Phlx to the benefit of all market participants. Phlx represents that it has capacity to handle any additional quoters due to the elimination of the MNQ. Phlx monitors System capacity in other ways, making a MNQ no longer necessary.
No written comments were either solicited or received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rule 71 to remove the preamble that such rule is not applicable to trading on the Pillar trading platform. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend Rule 71 (Precedence of Highest Bid and Lowest Offer) to remove the preamble that such rule is not applicable to trading on the Pillar trading platform.
Rule 71 is applicable only to manual trading on the Trading Floor
In 2017, in anticipation of the transition to the Pillar trading platform, the Exchange amended Rule 71 to include a preamble that it was not applicable to trading UTP Securities
In preparation for the transition of Exchange-listed securities to the Pillar trading platform, the Exchange amended the preambles to specified rules to provide that such rules were not applicable to trading on the Pillar trading platform.
Because on the Pillar trading platform, Exchange-listed securities continue to be eligible for manual trading on the Trading Floor and UTP Securities are eligible for crossing transactions, the Exchange proposes to amend Rule 71 to delete the preamble in its entirety. The Exchange believes that deleting the preamble will promote transparency in Exchange rules that the rules governing manual trading on the Trading Floor have not changed even with the transition to the Pillar trading platform.
To further promote transparency, the Exchange proposes to amend Rule 71 to specify that the bids and offers referenced in that Rule that are binding are “verbal” bids and offers. Orders entered electronically on the Exchange are governed by Rule 7P under the Pillar platform rules. The Exchange believes that this proposed amendment will promote transparency and clarity in Exchange rules that Rule 71 addresses manual trading only, and is not applicable to the electronic entry of orders.
The proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that deleting the preamble to Rule 71 would remove impediments to and perfect the mechanism of a free and open market and a national market system because manual trading continues on the Exchange, even after the transition to the Pillar trading platform, and Rule 71 governs such trading. Removing the preamble would therefore promote clarity and transparency in Exchange rules that the rules governing manual trading on the Trading Floor have not changed with the transition to the Pillar trading platform. The Exchange further believes that amending the rule to add the term “verbal” before “bids” and “offers” would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would promote clarity and transparency in Exchange rules that Rule 71 concerns only manual trading, and is not applicable to the electronic entry of orders.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change is not designed to address any competitive issues. Rather, the proposed rule change is designed to promote clarity and transparency that with the transition to the Pillar trading platform, the rules governing manual trading have not changed. Accordingly, the proposed rule change removes a preamble that was inadvertently included for securities that continue to be eligible for manual trading.
No written comments were solicited or received with respect to the proposed rule change.
Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to: Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Acting under the authority of and in accordance with section 1(b) of Executive Order 13224 of September 23, 2001, as amended by Executive Order 13268 of July 2, 2002, and Executive Order 13284 of January 23, 2003, I hereby determine that the person known as Amadou Kouffa, also known as Hamadou Kouffa, also known as Hamadoun Kouffa, also known as Amadou Barry, is a foreign person who is a leader of an entity whose property and interests in property are blocked pursuant to a determination by the Secretary of State pursuant to Executive Order 13224.
Consistent with the determination in section 10 of Executive Order 13224 that prior notice to persons determined to be subject to the Order who might have a constitutional presence in the United States would render ineffectual the blocking and other measures authorized in the Order because of the ability to transfer funds instantaneously, I determine that no prior notice needs to be provided to any person subject to this determination who might have a constitutional presence in the United States, because to do so would render ineffectual the measures authorized in the Order.
This notice shall be published in the
The Office of the Federal Register received this document for publication on December 3, 2019.
Decatur & Eastern Illinois Railroad, L.L.C. (DEIR), a Class III rail carrier, has filed a verified notice of exemption under 49 CFR 1150.41 for it to (1) acquire from NRG, Inc. (NRG), an approximately 53-mile line of railroad extending between milepost 286.0 near Metcalf, Ill., and approximately milepost 338.95 (east of Oak Avenue) in Neoga, Ill., (the Line) and (2) replace NRG's corporate subsidiary, Eastern Illinois Railroad Company (EIRC), as operator on the Line.
The verified notice states that DEIR, NRG, and EIRC are in the process of completing terms of an Agreement for Sale and Purchase of Business Assets (the Agreement). Pursuant to the Agreement, ownership of the Line will transfer from NRG to DEIR, and DEIR will replace EIRC as the operator on the Line. DEIR states that EIRC, as a party to the Agreement, has consented to the proposed change in operators.
DEIR certifies that the transaction does not include an interchange commitment.
DEIR further certifies that its projected annual revenues resulting from the transaction will not result in its becoming a Class I or Class II rail carrier. DEIR states, however, that its annual operating revenues will exceed $5 million. Accordingly, in compliance with 49 CFR 1150.42(e), DEIR submitted a letter on November 1, 2019, certifying that it posted the required 60-day labor notice of this transaction at the workplace of EIRC employees on the Line.
Under 49 CFR 1150.42(b), a change in operator requires that notice be given to shippers. DEIR states that notice of the proposed transaction was provided to
The earliest this transaction may be consummated is December 31, 2019 (60 days after the certification under 49 CFR 1150.42(e) was filed). DEIR states that it expects to consummate the transaction on that date.
If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions for stay must be filed no later than December 24, 2019 (at least seven days before the exemption becomes effective).
All pleadings, referring to Docket No. FD 36364, must be filed with the Surface Transportation Board either via e-filing or in writing addressed to 395 E Street SW, Washington, DC 20423-0001. In addition, a copy of each pleading must be served on DEIR's representative, Robert A. Wimbish, Fletcher & Sippel LLC, 29 North Wacker Drive, Suite 800, Chicago, IL 60606.
According to DEIR, this action is categorically excluded from environmental review under 49 CFR 1105.6(c) and from historic preservation reporting requirements under 49 CFR 1105.8(b)(1).
Board decisions and notices are available at
By the Board, Allison C. Davis, Director, Office of Proceedings.
Davenport Industrial Railroad, LLC (DIR), a noncarrier, has filed a verified notice of exemption under 49 CFR 1150.31 to lease from the City of Davenport (the City) and operate an approximately 2.8-mile rail line (the Line).
DIR states that it is finalizing the terms of a lease with the City, under which, among other things, DIR would assume a leasehold interest in, and provide common carrier service over, the Line.
DIR certifies that, as a result of this transaction, its projected revenue will not exceed $5 million annually and will not result in its becoming a Class I or Class II carrier. DIR states that the agreement between the City and DIR does not include any provision or agreement that would limit future interchange with a third-party connecting carrier.
According to DIR, it anticipates consummating the transaction on January 1, 2020, to coincide with SDR's discontinuance of service. The transaction may be consummated on or after December 22, 2019, the effective date of the exemption (30 days after the verified notice was filed).
If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions to stay must be filed no later than December 13, 2019 (at least seven days before the exemption becomes effective).
All pleadings, referring to Docket No. FD 36367, must be filed with the Surface Transportation Board either via e-filing or in writing addressed to 395 E Street SW, Washington, DC 20423-0001. In addition, a copy of each pleading must be served on DIR's representative, Robert A. Wimbish, Fletcher & Sippel LLC, 29 North Wacker Drive, Suite 800, Chicago, IL 60606-3208.
According to DIR, this action is categorically excluded from environmental review under 49 CFR 1105.6(c) and from historic reporting under 49 CFR 1105.8(b).
Board decisions and notices are available at
By the Board, Allison C. Davis, Director, Office of Proceedings.
Office of the United States Trade Representative.
Notice of determination, request for comments, and notice of public hearing.
The U.S. Trade Representative has determined that France's Digital Services Tax is unreasonable or discriminatory and burdens or restricts U.S. commerce. The U.S. Trade Representative proposes action in the form of additional duties of up to 100 percent on products of France to be drawn from the preliminary list in the Annex to this notice. The Office of the United States Trade Representative (USTR) seeks comments on this proposed action, as well as on other options including the imposition of fees or restrictions on services of France. The interagency Section 301 Committee will hold a public hearing in connection with the action to be taken under Section 301.
To be assured of consideration, the following schedule applies:
You should submit written comments through the Federal eRulemaking Portal:
For procedural questions concerning the submission of written comments or participating in the public hearing, please contact the USTR Section 301 line at (202) 395-5725. For questions concerning the investigation, please
On March 6, 2019, the Government of France released a proposal for a 3 percent levy on revenues that certain companies generate from providing certain digital services to, or aimed at, persons in France (the Digital Services Tax, or the DST). The two houses of the French parliament passed DST bills on April 9 and May 21, 2019, and agreed on a final bill on July 4. President Emmanuel Macron signed the bill into law on July 24.
On July 10, 2019, USTR initiated an investigation of the French DST pursuant to section 302(b)(1)(A) of the Trade Act of 1974, as amended (the Trade Act). The notice of initiation (84 FR 34042) solicited written comments on,
1. Discrimination: Available evidence, including statements by French officials, indicates that the DST will amount to de facto discrimination against U.S. companies. For example, the revenue thresholds have the effect of subjecting to the DST larger companies, which, in the covered sectors, tend to be U.S. companies, while exempting smaller companies, particularly those that operate only in France.
2. Retroactivity: The DST would be a substantively new tax that applies retroactively to January 1, 2019. This feature calls into question the fairness of the DST. Further, since the tax is retroactive, companies covered by the DST may not track the data necessary to calculate their potential liability back to the beginning of 2019.
3. Unreasonable tax policy: The DST appears to diverge from norms reflected in the U.S. tax system and the international tax system in several respects. These apparent departures include: Extraterritoriality; taxing revenue not income; and a purpose of penalizing particular technology companies for their commercial success.
Under Section 303 of the Trade Act, the U.S. Trade Representative requested consultations with the Government of France regarding the issues involved in the investigation. Consultations were held on November 14, 2019.
Based on information obtained during the investigation, including the public submissions and the public hearing, USTR and the Section 301 Committee have prepared a comprehensive report on the acts, policies, and practices under investigation. The report is posted on the USTR website. The report supports findings that the French DST is unreasonable or discriminatory and burdens or restricts U.S. commerce.
Based on the information obtained during the investigation and the advice of the Section 301 Committee, and as reflected in the publicly available report on the findings in the investigation, the U.S. Trade Representative has made the following determination under sections 301(b) and 304(a) of the Trade Act (19 U.S.C. 2411(b) and 2414(a)): The act, policy, or practice covered in the investigation, namely the French DST, is unreasonable or discriminatory and burdens or restricts U.S. commerce, and is thus actionable under section 301(b) of the Trade Act. In particular:
1. The French DST is intended to, and by its structure and operation does, discriminate against U.S. digital companies, including due to the selection of services covered and the revenue thresholds.
2. The French DST's retroactive application is unusual and inconsistent with prevailing tax principles and renders the tax particularly burdensome for covered U.S. companies.
3. The French DST's application to revenue rather than income contravenes prevailing tax principles and is particularly burdensome for covered U.S. companies.
4. The French DST's application to revenues unconnected to a physical presence in France contravenes prevailing international tax principles and is particularly burdensome for covered U.S. companies.
5. The French DST's application to a small group of digital companies contravenes international tax principles counseling against targeting the digital economy for special, unfavorable tax treatment.
Section 301(b) provides that upon determining that the acts, policies, and practices under investigation are actionable and that action is appropriate, the U.S. Trade Representative shall take all appropriate and feasible action authorized under section 301(c), subject to the specific direction, if any, of the President regarding such action, and all other appropriate and feasible action within the power of the President that the President may direct the U.S. Trade Representative to take under section 301(b), to obtain the elimination of that act, policy, or practice.
Section 301(c)(1)(B) of the Trade Act authorizes the U.S. Trade Representative to impose duties on the goods of the foreign country subject to the investigation. Pursuant to sections 301(b) and (c), the U.S. Trade Representative proposes to determine that action is appropriate and that appropriate action would include the imposition of additional
In determining the appropriate action, the U.S. Trade Representative may take account of the level of harm to the U.S. economy caused by France's DST. USTR seeks public comments on the level of harm, including DST payments owed by U.S. companies, the annual growth rate of such payments, and other effects, such as compliance costs.
The Annex to this notice contains a preliminary list of 63 tariff subheadings, with an estimated import trade value for calendar year 2018 of approximately $2.4 billion. The U.S. Trade Representative proposes to draw a final list of products subject to additional duties from this preliminary list.
Section 301(c)(1)(B) of the Trade Act also authorizes the U.S. Trade Representative to impose fees or restrictions on the services of the goods of the foreign country subject to the investigation. In light of the fact that the actionable act, policy, or practice of France involves a tax on U.S. service providers, the U.S. Trade Representative is considering whether to impose fees or restrictions on services of France. As noted below, USTR invites public comments on this matter.
In accordance with section 304(b) of the Trade Act (19 U.S.C. 2414(b)), USTR invites comments from interested persons with respect to whether action is appropriate, and if so, the appropriate action to be taken. To be assured of consideration, you must submit written comments on the proposed action in response France's acts, policies, and practices by January 6, 2020, and post-hearing rebuttal comments by January 14, 2020.
USTR requests comments with respect to any issue related to the action to be taken in this investigation. With respect to action in the form of additional duties, USTR invites comments regarding:
• The specific products to be subject to increased duties, including whether products listed in the Annex should be retained or removed, or whether products not currently on the list should be added.
• The level of the increase, if any, in the rate of duty.
• The level of the burden or restriction on the U.S. economy resulting from the DST.
• The appropriate aggregate level of trade to be covered by additional duties.
In commenting on the inclusion or removal of particular products on the list of products subject to the proposed additional duties, USTR requests that commenters address specifically whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of France's acts, policies, and practices, and whether imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers.
With respect to action in the form of fees or restrictions on services of France, USTR seeks comments on issues such as:
• Which services would be covered by a fee or restriction.
• If a fee is imposed, the rate (flat or percentage) of the fee, and the basis upon which any fee would be applied.
• If a restriction is imposed, the form of such restriction.
• Whether imposing fees or restrictions on services of France would be practicable or effective to obtain the elimination of France's acts, policies, and practices.
The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, beginning at 9:30 a.m. on Tuesday, January 7, 2020. You must submit requests to appear at the hearing by December 30, 2019. The request to appear must include a summary of testimony, and may be accompanied by a pre-hearing submission. Remarks at the hearing may be no longer than five minutes to allow for possible questions from the Section 301 Committee.
All submissions must be in English and sent electronically via
All submissions must be in English and sent electronically via
The
File names should reflect the name of the person or entity submitting the comments. Please do not attach separate cover letters to electronic submissions; rather, include any information that might appear in a cover letter in the comments themselves. Similarly, to the extent possible, please include any exhibits, annexes, or other attachments in the same file as the comment itself, rather than submitting them as separate files.
USTR will post submissions in the docket for public inspection, except BCI. You can view submissions on the
All products that are classified in the 8-digit subheadings of the HTS that are listed in this Annex are covered by the proposed action. The product descriptions that are contained in this Annex are provided for informational purposes only, and are not intended to delimit in any way the scope of the proposed action. Any questions regarding the scope of a particular HTS subheading should be referred to U.S. Customs and Border Protection. In the product descriptions, the abbreviation “nesoi” means “not elsewhere specified or included”.
Office of the United States Trade Representative.
Notice.
In accordance with the Harmonized Tariff Schedule of the United States (HTSUS), the Office of the United States Trade Representative (USTR) is providing notice of its determination of the trade surplus in certain sugar and syrup goods and sugar-containing products of Chile, Morocco, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Peru, Colombia and Panama. The level of a country's trade surplus in these goods relates to the quantity of sugar and syrup goods and sugar-containing products for which the United States grants preferential tariff treatment under (i) the United States-Chile Free Trade Agreement (Chile FTA); (ii) the United States-Morocco Free Trade Agreement (Morocco FTA); (iii) the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR); (iv) the United States-Peru Trade Promotion Agreement (Peru TPA); (v) the United States-Colombia Trade Promotion Agreement (Colombia TPA); and (vi) the United States-Panama Trade Promotion Agreement (Panama TPA).
This notice is applicable on January 1, 2020.
Dylan T. Daniels, Office of Agricultural Affairs, (202) 395-6095 or
Pursuant to section 201 of the United States-Chile Free Trade Agreement Implementation Act (Pub. L. 108-77; 19 U.S.C. 3805 note), Presidential Proclamation No. 7746 of December 30, 2003 (68 FR 75789) implemented the Chile FTA on behalf of the United States and modified the HTSUS to reflect the tariff treatment provided for in the Chile FTA.
Note 12(a) to subchapter XI of HTSUS chapter 99 requires USTR annually to publish a determination of the amount of Chile's trade surplus, by volume, with all sources for goods in Harmonized System (HS) subheadings 1701.11, 1701.12, 1701.91, 1701.99, 1702.20, 1702.30, 1702.40, 1702.60, 1702.90, 1806.10, 2101.12, 2101.20, and 2106.90, except that Chile's imports of goods classified under HS subheadings 1702.40 and 1702.60 that qualify for preferential tariff treatment under the Chile FTA are not included in the calculation of Chile's trade surplus. Proclamation 8771 of December 29, 2011 (77 FR 413) reclassified HS subheading 1701.11 as 1701.13 and 1701.14. Note 12(b) to subchapter XI of HTS chapter 99 provides duty-free treatment for certain sugar and syrup goods and sugar-containing products of Chile entered under subheading 9911.17.05 in any calendar year (CY) (beginning in CY2015) shall be the quantity of goods equal to the amount of Chile's trade surplus in subdivision (a) of the note.
During CY2018, the most recent year for which data is available, Chile's imports of the sugar and syrup goods and sugar-containing products described above exceeded its exports of those goods by 533,054 metric tons according to data published by its customs authority, the Servicio Nacional de Aduana. Based on this data, USTR has determined that Chile's trade surplus is negative. Therefore, in accordance with U.S. Note 12(b) to subchapter XI of HTS chapter 99, goods of Chile are not eligible to enter the United States duty-free under subheading 9911.17.05 in CY2020.
Pursuant to section 201 of the United States-Morocco Free Trade Agreement Implementation Act (Pub. L. 108-302; 19 U.S.C. 3805 note), Presidential
Proclamation No. 7971 of December 22, 2005 (70 FR 76651) implemented the Morocco FTA on behalf of the United States and modified the HTSUS to reflect the tariff treatment provided for in the Morocco FTA.
Note 12(a) to subchapter XII of HTSUS chapter 99 requires USTR annually to publish a determination of the amount of Morocco's trade surplus, by volume, with all sources for goods in HS subheadings 1701.11, 1701.12, 1701.91, 1701.99, 1702.40, and 1702.60, except that Morocco's imports of U.S. goods classified under HS subheadings 1702.40 and 1702.60 that qualify for preferential tariff treatment under the Morocco FTA are not included in the calculation of Morocco's trade surplus. Proclamation 8771 of December 29, 2011 (77 FR 413) reclassified HS subheading 1701.11 as 1701.13 and 1701.14.
Note 12(b) to subchapter XII of HTS chapter 99 provides duty-free treatment for certain sugar and syrup goods and sugar-containing products of Morocco entered under subheading 9912.17.05 in an amount equal to the lesser of Morocco's trade surplus or the specific quantity set out in that note for that calendar year.
Note 12(c) to subchapter XII of HTS chapter 99 provides preferential tariff treatment for certain sugar and syrup goods and sugar-containing products of Morocco entered under subheading 9912.17.10 through 9912.17.85 in an amount equal to the amount by which Morocco's trade surplus exceeds the
During CY2018, the most recent year for which data is available, Morocco's imports of the sugar and syrup goods and sugar-containing products described above exceeded its exports of those goods by 682,067 metric tons according to data published by its customs authority, the Office des Changes. Based on this data, USTR has determined that Morocco's trade surplus is negative. Therefore, in accordance with U.S. Note 12(b) and U.S. Note 12(c) to subchapter XII of HTS chapter 99, goods of Morocco are not eligible to enter the United States duty-free under subheading 9912.17.05 or at preferential tariff rates under subheading 9912.17.10 through 9912.17.85 in CY2020.
Pursuant to section 201 of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (Pub. L. 109-53; 19 U.S.C. 4031), Presidential Proclamation No. 7987 of February 28, 2006 (71 FR 10827), Presidential Proclamation No. 7991 of March 24, 2006 (71 FR 16009), Presidential Proclamation No. 7996 of March 31, 2006 (71 FR 16971), Presidential Proclamation No. 8034 of June 30, 2006 (71 FR 38509), Presidential Proclamation No. 8111 of February 28, 2007 (72 FR 10025), Presidential Proclamation No. 8331 of December 23, 2008 (73 FR 79585), and Presidential Proclamation No. 8536 of June 12, 2010 (75 FR 34311), implemented the CAFTA-DR on behalf of the United States and modified the HTS to reflect the tariff treatment provided for in the CAFTA-DR.
Note 25(b)(i) to subchapter XXII of HTSUS chapter 98 requires USTR annually to publish a determination of the amount of each CAFTA-DR country's trade surplus, by volume, with all sources for goods in HS subheadings 1701.12, 1701.13, 1701.14, 1701.91, 1701.99, 1702.40, and 1702.60, except that each CAFTA-DR country's exports to the United States of goods classified under HS subheadings 1701.12, 1701.13, 1701.14, 1701.91, and 1701.99 and its imports of goods classified under HS subheadings 1702.40 and 1702.60 that qualify for preferential tariff treatment under the CAFTA-DR are not included in the calculation of that country's trade surplus.
U.S. Note 25(b)(ii) to subchapter XXII of HTS chapter 98 provides duty-free treatment for certain sugar and syrup goods and sugar-containing products of each CAFTA-DR country entered under subheading 9822.05.20 in an amount equal to the lesser of that country's trade surplus or the specific quantity set out in that note for that country and that calendar year.
During CY2018, the most recent year for which data is available, Costa Rica's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 128,888 metric tons according to data published by the Costa Rican Customs Department, Ministry of Finance. Based on this data, USTR has determined that Costa Rica's trade surplus is 128,888 metric tons. The specific quantity set out in U.S. Note 25(b)(ii) to subchapter XXII of HTSUSUS chapter 98 for Costa Rica for CY2020 is 14,080 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of Costa Rica that may be entered duty-free under subheading 9822.05.20 in CY2020 is 14,080 metric tons (
During CY2018, the most recent year for which data is available, the Dominican Republic's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 4,520 metric tons according to data published by the National Direction of Customs (DGA). Based on this data, USTR has determined that the Dominican Republic's trade surplus is 4,520 metric tons. The specific quantity set out in U.S. Note 25(b)(ii) to subchapter XXII of HTSUS chapter 98 for the Dominican Republic for CY2020 is 12,800 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of the Dominican Republic that may be entered duty-free under subheading 9822.05.20 in CY2020 is 4,520 metric tons (
During CY2018, the most recent year for which data is available, El Salvador's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 348,974 metric tons according to data published by the Central Bank of El Salvador. Based on this data, USTR has determined that El Salvador's trade surplus is 348,974 metric tons. The specific quantity set out in U.S. Note 25(b)(ii) to subchapter XXII of HTSUS chapter 98 for El Salvador for CY2020 is 36,040 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of El Salvador that may be entered duty-free under subheading 9822.05.20 in CY2020 is 36,040 metric tons (
During CY2018, the most recent year for which data is available, Guatemala's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 1,332,419 metric tons according to data published by the Asociacion de Azucareros de Guatemala (ASAZGUA) and Bank of Guatemala. Based on this data, USTR has determined that Guatemala's trade surplus is 1,332,419 metric tons. The specific quantity set out in U.S. Note 25(b)(ii) to subchapter XXII of HTSUS chapter 98 for Guatemala for CY2020 is 49,820 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of Guatemala that may be entered duty-free under subheading 9822.05.20 in CY2020 is 49,820 metric tons (
During CY2018, the most recent year for which data is available, Honduras' exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 112,634 metric tons according to data published by the Central Bank of Honduras. Based on this data, USTR has determined that Honduras' trade surplus is 112,634 metric tons. The specific quantity set out in U.S. Note 25(b)(ii) to subchapter XXII of HTSUS chapter 98 for Honduras for CY2020 is 10,240 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of Honduras that may be entered duty-free under subheading 9822.05.20 in CY2020 is 10,240 metric tons (
During CY2018, the most recent year for which data is available, Nicaragua's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 321,187 metric tons
Pursuant to section 201 of the United States-Peru Trade Promotion Agreement Implementation Act (Pub. L. 110-138; 19 U.S.C. 3805 note), Presidential Proclamation No. 8341 of January 16, 2009 (74 FR 4105) implemented the Peru TPA on behalf of the United States and modified the HTSUS to reflect the tariff treatment provided for in the Peru TPA.
Note 28(c) to subchapter XXII of HTSUS chapter 98 requires USTR annually to publish a determination of the amount of Peru's trade surplus, by volume, with all sources for goods in HS subheadings 1701.12, 1701.13, 1701.14, 1701.91, 1701.99, 1702.40, and 1702.60, except that Peru's imports of U.S. goods classified under HS subheadings 1702.40 and 1702.60 that are originating goods under the Peru TPA and Peru's exports to the United States of goods classified under HS subheadings 1701.12, 1701.13, 1701.14, 1701.91, and 1701.99 are not included in the calculation of Peru's trade surplus.
Note 28(d) to subchapter XXII of HTSUS chapter 98 provides duty-free treatment for certain sugar goods of Peru entered under subheading 9822.06.10 in an amount equal to the lesser of Peru's trade surplus or the specific quantity set out in that note for that calendar year.
During CY2018, the most recent year for which data is available, Peru's imports of the sugar and syrup goods and sugar-containing products described above exceeded its exports of those goods by 264,340 metric tons according to data published by the Superintendencia Nacional de Administración Tributaria (SUNAT). Based on this data, USTR has determined that Peru's trade surplus is negative. Therefore, in accordance with U.S. Note 28(d) to subchapter XXII of HTSUS chapter 98, goods of Peru are not eligible to enter the United States duty-free under subheading 9822.06.10 in CY2020.
Pursuant to section 201 of the United States-Colombia Trade Promotion Agreement Implementation Act (Pub. L. 112-42; 19 U.S.C. 3805 note), Presidential Proclamation No. 8818 of May 14, 2012 (77 FR 29519) implemented the Colombia TPA on behalf of the United States and modified the HTSUS to reflect the tariff treatment provided for in the Colombia TPA.
Note 32(b) to subchapter XXII of HTSUS chapter 98 requires USTR annually to publish a determination of the amount of Colombia's trade surplus, by volume, with all sources for goods in HS subheadings 1701.12, 1701.13, 1701.14, 1701.91, 1701.99, 1702.40 and 1702.60, except that Colombia's imports of U.S. goods classified under subheadings 1702.40 and 1702.60 that are originating goods under the Colombia TPA and Colombia's exports to the United States of goods classified under subheadings 1701.12, 1701.13, 1701.14, 1701.91 and 1701.99 are not included in the calculation of Colombia's trade surplus.
Note 32(c)(i) to subchapter XXII of HTSUS chapter 98 provides duty-free treatment for certain sugar goods of Colombia entered under subheading 9822.08.01 in an amount equal to the lesser of Colombia's trade surplus or the specific quantity set out in that note for that calendar year.
During CY2018, the most recent year for which data is available, Colombia's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 515,636 metric tons according to data published by Global Trade Atlas (GTA) and the Colombian Directorate of National Taxes and Customs (DIAN). Based on this data, USTR has determined that Colombia's trade surplus is 515,636 metric tons. The specific quantity set out in U.S. Note 32(c)(i) to subchapter XXII of HTSUS chapter 98 for Colombia for CY2020 is 56,000 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of Colombia that may be entered duty-free under subheading 9822.08.01 in CY2020 is 56,000 metric tons (
Pursuant to section 201 of the United States-Panama Trade Promotion Agreement Implementation Act (Pub. L. 112-43; 19 U.S.C. 3805 note), Presidential Proclamation No. 8894 of October 29, 2012 (77 FR 66505) implemented the Panama TPA on behalf of the United States and modified the HTSUS to reflect the tariff treatment provided for in the Panama TPA.
Note 35(a) to subchapter XXII of HTSUS chapter 98 requires USTR annually to publish a determination of the amount of Panama's trade surplus, by volume, with all sources for goods in HS subheadings 1701.12, 1701.13, 1701.14, 1701.91, 1701.99, 1702.40 and 1702.60, except that Panama's imports of U.S. goods classified under subheadings 1702.40 and 1702.60 that are originating goods under the Panama TPA and Panama's exports to the United States of goods classified under subheadings 1701.12, 1701.13, 1701.14, 1701.91 and 1701.99 are not included in the calculation of Panama's trade surplus.
Note 35(c) to subchapter XXII of HTSUS chapter 98 provides duty-free treatment for certain sugar goods of Panama entered under subheading 9822.09.17 in an amount equal to the lesser of Panama's trade surplus or the specific quantity set out in that note for that calendar year.
During CY2018, the most recent year for which data is available, Panama's exports of the sugar and syrup goods and sugar-containing products described above exceeded its imports of those goods by 29,552 metric tons according to data published by the National Institute of Statistics and Census, Office of the General Comptroller of Panama. Based on this data, USTR has determined that Panama's trade surplus is 29,552 metric tons. The specific quantity set out in U.S. Note 35(c) to subchapter XXII of HTSUS chapter 98 for Panama for CY2020 is 545 metric tons. Therefore, in accordance with that note, the aggregate quantity of goods of Panama that may be entered duty-free under subheading 9822.09.17 in CY2020 is 545 metric tons (
Federal Aviation Administration (FAA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FAA invites public comments about our intention to request the Office of Management and Budget (OMB) approval new information collection. The
Written comments should be submitted by January 3, 2020.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the attention of the Desk Officer, Department of Transportation/FAA, and sent via electronic mail to
Michael Helwig by email at:
Federal Highway Administration (FHWA), DOT.
Notice of limitation on claims for judicial review of actions by FHWA and other Federal agencies.
This notice announces actions taken by FHWA and other Federal agencies that are final. The actions relate to a proposed highway project, Kirby-Whitten Parkway (Shelby Farms Parkway), from Walnut Grove Road to Macon Road in Memphis, Shelby County, Tennessee. Those actions grant licenses, permits, and approvals for the project. The FHWA's Record of Decision (ROD) provides details on the Selected Alternative for the proposed improvements.
By this notice, FHWA is advising the public of final agency actions subject to 23 U.S.C. 139(
For FHWA: Ms. Theresa Claxton; Program Development Team Leader; Federal Highway Administration; Tennessee Division Office; 404 BNA Drive, Building 200, Suite 508; Nashville, Tennessee 37217; Telephone (615) 781-5770; email:
Notice is hereby given that FHWA and other Federal agencies have taken final agency actions subject to 23 U.S.C. 139(
This notice applies to all Federal agency decisions that are final as of the issuance date of this notice and all laws under which such actions were taken, including but not limited to:
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Maritime Administration, DOT.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirements of the coastwise trade laws to allow the carriage of no more than twelve passengers for hire on vessels, which are three years old or more. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before January 6, 2020.
You may submit comments identified by DOT Docket Number MARAD-2019-0185 by any one of the following methods:
•
•
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel DRAGONFLY is:
The complete application is available for review identified in the DOT docket as MARAD-2019-0185 at
Please submit your comments, including the attachments, following the instructions provided under the above heading entitled
Go to the docket online at
Yes. Be aware that your entire comment, including your personal identifying information, will be made publicly available.
If you wish to submit comments under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Department of Transportation, Maritime Administration, Office of Legislation and Regulations, MAR-225, W24-220, 1200 New Jersey Avenue SE, Washington, DC 20590. Include a cover letter setting forth with specificity the basis for any such claim and, if possible, a summary of your submission that can be made available to the public.
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
By Order of the Maritime Administrator.
Maritime Administration, DOT.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirements of the coastwise trade laws to allow the carriage of no more than twelve passengers for hire on vessels, which are three years old or more. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before January 6, 2020.
You may submit comments identified by DOT Docket Number MARAD-2019-0186 by any one of the following methods:
•
•
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel LALA is:
The complete application is available for review identified in the DOT docket as MARAD-2019-0186 at
Please submit your comments, including the attachments, following the instructions provided under the above heading entitled
Go to the docket online at
Yes. Be aware that your entire comment, including your personal identifying information, will be made publicly available.
If you wish to submit comments under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Department of Transportation, Maritime Administration, Office of Legislation and Regulations, MAR-225, W24-220, 1200 New Jersey Avenue SE, Washington, DC 20590. Include a cover letter setting forth with specificity the basis for any such claim and, if possible, a summary of your submission that can be made available to the public.
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121.
By Order of the Maritime Administrator.
Internal Revenue Service (IRS), Treasury.
Final regulations.
This document contains final regulations implementing the base erosion and anti-abuse tax, designed to prevent the reduction of tax liability by certain large corporate taxpayers through certain payments made to foreign related parties and certain tax credits. These final regulations also provide reporting requirements related to this tax. This tax was added to the Internal Revenue Code (the “Code”) as part of the Tax Cuts and Jobs Act. This document finalizes the proposed regulations published on December 21, 2018. The final regulations affect corporations with substantial gross receipts that make payments to foreign related parties. The final regulations also affect any reporting corporations required to furnish information relating to certain related-party transactions and information relating to a trade or business conducted within the United States by a foreign corporation.
Concerning §§ 1.59A-1 through 1.59A-10, Azeka J. Abramoff, Sheila Ramaswamy, or Karen Walny at (202) 317-6938; concerning the services cost method exception, L. Ulysses Chatman at (202) 317-6939; concerning §§ 1.383-1, 1.1502-2, 1.1502-4, 1.1502-43, 1.1502-47, 1.1502-59A, 1.1502-100, and 1.6655-5, Julie Wang at (202) 317-6975 or John P. Stemwedel at (202) 317-5024; concerning §§ 1.6038A-1, 1.6038A-2, and 1.6038A-4, Brad McCormack or Anand Desai at (202) 317-6939 (not toll-free numbers).
On December 21, 2018, the Department of the Treasury (“Treasury Department”) and the IRS published proposed regulations (REG-104259-18) under section 59A, and proposed amendments to 26 CFR part 1 under sections 383, 1502, 6038A, and 6655 in the
A public hearing was held on March 25, 2019. The Treasury Department and the IRS also received written comments with respect to the proposed regulations. Comments outside the scope of this rulemaking are generally not addressed but may be considered in connection with future guidance projects. All written comments received in response to the proposed regulations are available at
The final regulations retain the basic approach and structure of the proposed regulations, with certain revisions. This Summary of Comments and Explanation of Revisions discusses those revisions as well as comments received in response to the solicitation of comments in the notice of proposed rulemaking accompanying the proposed regulations.
Proposed § 1.59A-1 provides general definitions under section 59A. Proposed § 1.59A-1(b)(17) provides a definition of the term “related party.” The proposed regulations generally define a related party with respect to an applicable taxpayer as (a) any 25-percent owner of the taxpayer, (b) any person related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or any 25-percent owner of the taxpayer, or (c) a controlled taxpayer within the meaning of § 1.482-1(i)(5).
The proposed regulations' definition of “related party” is identical to the definition provided by section 59A(g), except with respect to the relatedness standard under section 482. Specifically, the proposed regulations provide a more precise citation to the section 482 regulations (“a controlled taxpayer within the meaning of § 1.482-1(i)(5)”) than the general cross-reference that is provided in section 59A(g)(1)(C) (“any other person who is related (within the meaning of section 482) to the taxpayer”).
Comments recommended that the final regulations modify the definition of “related party” to exclude related publicly traded companies or otherwise provide an exception for payments between publicly traded companies. These comments suggested that payments between related publicly traded companies do not result in base erosion. The comments explained that the boards of directors of publicly traded companies generally have fiduciary obligations to shareholders to act in the best interest of the company and are subject to regulatory oversight. On this basis, the comments asserted that a domestic corporation cannot artificially shift profits to a foreign corporation in this situation. Comments also noted that the Treasury Department and the IRS have provided relief for publicly traded companies in circumstances where there is no explicit legislative history or statutory authority to do so, such as where minority shareholders of publicly traded companies must be identified.
The Treasury Department and the IRS have determined that it is not appropriate to modify the statutory definition of a related party to exclude publicly traded companies because this recommendation is inconsistent with the statutory language of section 59A(g). Section 59A(g) sets forth specific limits on the definition of a “related party” that include a corporation and its 25-percent owner. Under the proposal recommended by the comments, section 59A would not apply to any less than 100 percent owned affiliate, so long as other “public” shareholders owned some interest in the corporation. The corporate laws of a state of the United States or a foreign jurisdiction may, and often do, impose certain duties on the board of directors of a company, including obligations with respect to the interests of minority shareholders. These companies are also subject to securities laws in the United States. Notwithstanding this regulatory environment, the Code includes many provisions that apply to related parties, and none of those provisions are limited to corporations that are 100 percent related.
For example, section 267(a) generally applies to transactions among greater than 50 percent controlled parties. Section 482 provides a test that can be satisfied by a quantitative measure of ownership or a qualitative test of control (“two or more organizations, trades, or businesses . . . owned or controlled directly or indirectly by the same interests”), that, as interpreted by regulations, can apply at well below a 100 percent relatedness standard.
Finally, the Treasury Department and IRS concluded that a rule that confers special status on payments to a publicly traded foreign corporation that is related (using a 25 percent or greater standard) to the payor would not be analogous to the rules in § 1.367(e)-1(d)(3) or § 1.382-2T(j), which provide special rules that pertain to shareholders that own less than 5 percent of publicly traded corporations, in light of challenges in determining the identity of such shareholders.
For these reasons, the final regulations do not modify the relatedness thresholds that are set forth in section 59A and the proposed regulations.
Proposed § 1.59A-2 contains rules for determining whether a taxpayer is an applicable taxpayer on which the BEAT may be imposed, including rules relating to the gross receipts test, base erosion percentage test, and the determination of the aggregate group for purposes of applying these tests.
Section 59A(e)(1)(A) excludes corporations that are (1) regulated investment companies (“RICs”), (2) real estate investment trusts (“REITs”), or (3) S corporations from the definition of an applicable taxpayer. A comment requested that the final regulations clarify that controlled RICs and REITs are similarly excluded from the aggregate group for purposes of the gross receipts test and base erosion percentage test. The comment implied that the Treasury Department and the IRS did not intend for RICs and REITs to be part of an aggregate group because RICs and REITs are not subject to the BEAT as separate taxpayers. The proposed regulations do not exclude RICs and REITs from membership in an aggregate group. A corporation is an applicable taxpayer if it is not one of the excluded categories of corporations (RIC, REIT, or S corporation), it satisfies the gross receipts test in section 59A(e)(1)(B), and it satisfies the base erosion percentage test in section 59A(e)(1)(C). The proposed regulations provide that when applying the gross receipts test and the base erosion percentage test with respect to a particular corporation for purposes of section 59A, those tests are applied on the basis of that corporation and members of that corporation's aggregate group. The proposed regulations define an aggregate group by reference to section 1563(a) in a manner consistent with section 59A(e)(3), which references section 1563(a) indirectly. The section 1563(a) definition refers to controlled groups of corporations, whether brother-sister groups or parent-subsidiary groups. Section 1563(c) provides special rules excluding certain categories of stock in a corporation from the aggregation rules in section 1563(a) (for example, certain stock held by an organization to which section 501 applies). None of those provisions exclude the stock of, or held by, a RIC or REIT. Moreover, just as the gross receipts and deductions of non-applicable taxpayers (such as partnerships) can inure to the benefit of an applicable taxpayer (such as a domestic corporation that is a partner in a partnership), so too can the gross receipts and deductions of a controlled RIC or REIT that is a member of a corporation's aggregate group inure to the benefit of that corporation. Because of these considerations, the final regulations do not adopt this recommendation.
Similarly, another comment requested that the final regulations exclude from the aggregate group foreign government owners of stock of corporations when the foreign government is treated as a corporation under section 892 and the regulations thereunder. The comment cited the exclusion from section 1563(a) of certain stock held by an organization to which section 501 applies, and suggested that a foreign government should be provided similar treatment because a foreign government, like a section 501 organization, does not have private shareholders. In addition, the comment asserted that it cannot be engaged in direct commercial activities with respect to its portfolio companies and that its investment managers consist of separate teams.
The Treasury Department and the IRS have determined that it is not appropriate to provide a regulatory exception from the aggregate group rules for entities that are commonly controlled by a foreign government shareholder and that are treated as corporations under section 892. Congress provided that the activities of an aggregate group are fully taken into account when applying the gross receipts test and the base erosion percentage test to a corporation. The fact that a common shareholder of a different chain of corporations may be more passive than other common shareholders, or that the common shareholder's investment teams are within different lines of a management structure does not change the fact the common shareholder has economic interests in the subsidiary corporation that is within the statutory aggregate group definition adopted for section 59A. Accordingly, the final regulations do not adopt this recommendation.
To determine gross receipts, section 59A(e)(2)(B) provides for “rules similar to the rules” of section 448(c)(3)(B), (C), and (D). Accordingly, these final regulations provide rules that are similar to, but not necessarily the same as, the rules of section 448(c)(3) and the implementing regulations. Proposed § 1.59A-1(b)(13) defines the term “gross receipts” for purposes of section 59A by reference to § 1.448-1T(f)(2)(iv), which provides that gross receipts include total sales, net of returns and allowances, and all amounts received for services. Section 1.448-1T(f)(2)(iv) further provides that gross receipts are not reduced by cost of goods sold (“COGS”) or reduced by the cost of property sold if such property is described in section 1221(a)(1), (3), (4), or (5) (types of property excluded from the definition of a capital asset). Separately, § 1.448-1T(f)(2)(iv) provides that gross receipts from the sale of capital assets or a sale of property described in section 1221(a)(2) (relating to property used in a trade or business) are reduced by the adjusted basis of the property sold. Section 1.448-1T(f)(2)(iv) further provides that gross receipts include income from investments, but not the repayment of a loan or similar instrument.
Comments observed that, pursuant to the definition of gross receipts in the proposed regulations, banks that originate and then sell loans are required to include the gross proceeds from the sale of the loan in their gross receipts because banks generally treat loans originated in the ordinary course of business as ordinary assets under section 1221(a)(4). These comments contrasted a situation where a bank originates and holds a loan to maturity, in which case the proceeds the bank receives upon repayment are not
The final regulations do not adopt the approach suggested by these comments. The final regulations continue to define the term “gross receipts” by cross-referencing to § 1.448-1T(f)(2)(iv), and those rules are used to determine how an item is included in gross receipts. The rules in section 59A for implementing the gross receipts test are similar to the rules described in section 448(c).
Section 59A determines the status of a corporation as an applicable taxpayer on the basis of the aggregate group rules by taking into account the gross receipts and base erosion payments of each member of the aggregate group. However, each taxpayer must compute the amount of gross receipts and base erosion payments for its aggregate group using its own taxable year and based on those corporations that are members of the aggregate group at the end of the taxable year.
The proposed regulations provide rules for determining whether the gross receipts test and base erosion percentage test are satisfied for purposes of section 59A with respect to a specific taxpayer when other members of its aggregate group have different taxable years.
Comments expressed concern regarding the potential administrative burdens of treating all members of a taxpayer's aggregate group as having the same taxable year as the taxpayer. These comments argued that, in many cases, companies do not maintain monthly accounting records as detailed as they do on a quarterly basis (for publicly traded companies) or an annual basis (for privately held companies). Also, comments noted that this rule does not take into account the effect of deductions that are determined on a yearly basis or subject to annual limitations, such as under section 163(j).
Comments requested that the determination of gross receipts and the base erosion percentage of a taxpayer's aggregate group be made on the basis of the taxpayer's taxable year and the taxable year of each member of its aggregate group that ends with or within the applicable taxpayer's taxable year (the “with-or-within method”). With respect to members of an aggregate group with different taxable years, the Treasury Department and the IRS appreciate the concerns raised regarding the potential administrative burden of proposed § 1.59A-2(e)(3)(vii) and believe that the approach described in the comments represents a reasonable approach. The final regulations, therefore, adopt the with-or-within method, for purposes of section 59A only, to determine the gross receipts and the base erosion percentage of an aggregate group.
The proposed regulations provide that, for purposes of section 59A, transactions that occur between members of the aggregate group that were members of the aggregate group at the time of the transaction are not taken into account for purposes of determining the gross receipts and base erosion percentage of an aggregate group.
A comment requested clarity on determining whether transactions between members of an aggregate group are disregarded. Specifically, the comment requested clarity on whether a transaction is disregarded when both parties to the transaction are members of the aggregate group at the time of the transaction, or whether it is also a condition that both parties to the transaction must also be members of the aggregate group on the last day of the taxpayer's taxable year.
As requested by the comment, the final regulations clarify that a transaction between parties is disregarded for purposes of section 59A when determining the gross receipts and base erosion percentage of an aggregate group if both parties were members of the aggregate group at the time of the transaction, without regard to whether the parties were members of the aggregate group on the last day of the taxpayer's taxable year.
For purposes of determining the base erosion percentage, comments also expressed concern about including the base erosion tax benefits and deductions of a member when the taxable year of the member begins before January 1, 2018. The comments noted that this taxable year of the member is not otherwise subject to section 59A because of the effective date in section 14401(e) of the Act. However, one comment agreed with including these base erosion tax benefits and deductions in the aggregate group of a taxpayer for a taxable year of the taxpayer to which section 59A applies.
The Treasury Department and the IRS agree with comments that it is not appropriate for a taxpayer to include base erosion tax benefits and deductions attributable to a taxable year of a member of its aggregate group that begins before the effective date of section 59A when determining the base erosion percentage of the aggregate group. Accordingly, when determining the base erosion percentage of an aggregate group, the final regulations exclude the base erosion tax benefits and deductions attributable to the taxable year of a member of the aggregate group that begins before January 1, 2018.
Comments also addressed the following issues with respect to the aggregate group rules in the proposed regulations: (1) How to take into account transactions when a member joins or leaves an aggregate group, (2) the treatment of predecessors of a taxpayer, (3) the determination of the aggregate group of a consolidated group, and (4) the treatment of short taxable years. The Treasury Department and the IRS continue to study the recommendations provided in several comments relating to these issues. Therefore, the Treasury Department and the IRS are issuing the 2019 proposed regulations to further address aggregate group issues.
To determine the base erosion percentage for the year, the taxpayer (or in the case of a taxpayer that is a member of an aggregate group, the aggregate group) must determine the amount of base erosion tax benefits in the numerator and the total amount of certain deductions, including base erosion tax benefits, in the denominator. The proposed regulations provide rules for determining the total amount of the deductions that are included in the denominator of the base erosion percentage computation in the case of transactions that are marked to market. In determining the amount of the deduction that is used for purposes of the base erosion percentage test, the proposed regulations require the combination of all items of income, deduction, gain, or loss on each marked transaction for the year (“the BEAT Netting Rule”), such as from a payment, accrual, or mark.
A comment requested guidance clarifying whether the BEAT Netting Rule applies to physical securities such as stocks, bonds, repurchase agreements, and securities loans with respect to which a taxpayer applies a mark-to-market method of accounting. The comment questioned whether the BEAT Netting Rule should apply to these types of positions. The comment acknowledged that the BEAT Netting Rule produces an appropriate result with respect to derivatives by avoiding double-counting of both a current mark-to-market loss as well as a future payment to which the current loss relates. Unlike in the case of many derivatives, the comment observed that transactions involving stocks, bonds, repurchase agreements, and securities loans generally do not result in a loss of value to the holder of the relevant instrument that is subsequently realized in the form of a payment made by the holder and that effectively gives rise to an offsetting mark-up of the instrument.
To illustrate this observation, the comment provided the following example. On January 1, 2018, a dealer buys one share of stock in Company XYZ for $100. Then, during 2018, Company XYZ pays dividends of $1 with respect to the share. On December 31, 2018, the share price of Company XYZ is $90. Finally, on January 1, 2019, the dealer sells the share of Company XYZ stock for $90. The comment noted that in the absence of the BEAT Netting Rule, the amount of the dealer's deduction after marking the stock to market on December 31, 2018, would be $10. With the application of the BEAT Netting Rule, however, the comment noted that the amount of the deduction that will be included in the base erosion percentage denominator is $9. According to this comment, the BEAT Netting Rule may not be necessary to avoid the double-counting of deductions
Proposed § 1.59A-2(e)(3)(vi) applies to any position with respect to which the taxpayer (or in the case of a taxpayer that is a member of an aggregate group, a member of the aggregate group) applies a mark-to-market method of accounting. Therefore, the BEAT Netting Rule in the proposed regulations applies to stocks, bonds, repurchase agreements, and securities lending transactions that the taxpayer marks to market, rendering further clarification unnecessary. The Treasury Department and the IRS have determined that the applicability of the BEAT Netting Rule should not be limited in the manner suggested by the comment. In addition to avoiding the double counting that the comment acknowledged, the proposed regulations adopt the BEAT Netting Rule to enhance administrability and reduce compliance burden. That is, having a single rule apply to all transactions that are marked to market will enhance administrability, especially given the challenges in (a) distinguishing the specific financial transactions that should qualify for exclusion; (b) determining whether a distribution or payment received on an excluded instrument is duplicative of other inclusions or deductions; and (c) determining the extent to which a payment ultimately gives rise to an offsetting decline in the value of the instrument. For these reasons, the BEAT Netting Rule in the final regulations does not exclude physical securities.
Another comment recommended that the BEAT Netting Rule should not be mandatory and should instead be included in the final regulations as only a safe harbor. The comment reasoned that section 59A is generally applied on a gross basis and that requiring taxpayers to offset deductions and losses with income and gain when determining the base erosion percentage is inconsistent with a gross approach. The BEAT Netting Rule was adopted to ensure that taxpayers do not overstate the amount of deductions includible in the denominator with respect to transactions subject to a mark-to-market method of accounting. If the BEAT Netting Rule were provided as a safe harbor in the final regulations, as this comment requested, taxpayers could inappropriately inflate the denominator of the base erosion percentage by treating multiple marks as separate deductions. Therefore, the final regulations do not adopt this comment.
As discussed in Part III.D of this Summary of Comments and Explanation of Revisions, the taxpayer must also determine the amount of base erosion tax benefits in the numerator to determine the base erosion percentage for the year. Proposed § 1.59A-3(b)(2)(iii) also applies the BEAT Netting Rule for purposes of determining the amount of base erosion payments that result from transactions that are marked to market. A comment expressed concern that this rule could result in mark-to-market losses being treated as base erosion payments and recommended the withdrawal of proposed § 1.59A-3(b)(2)(iii), although the comment observed that if the Treasury Department and the IRS were to adopt the comment to make the qualified derivative payments (“QDP”) exception available to securities loans (which is discussed in Part VII of this Summary of Comments and Explanation of Revisions), that change would make this issue moot. The Treasury Department and the IRS do not view this concern to be valid, considering that a mark-to-market loss arising from a deemed sale or disposition of a third-party security held by a taxpayer is not within the general definition of a base erosion payment because the loss is not attributable to any payment made to a foreign related party. Rather, the mark-to-market loss is attributable to a decline in the market value of the security. The Treasury Department and the IRS also note that the BEAT Netting Rule will apply primarily for purposes of determining the amount of deductions that are taken into account in the denominator of the base erosion percentage. The Treasury Department and the IRS agree with the comment that the QDP exception of § 1.59A-3(b)(3)(ii) eliminates most mark-to-market transactions from characterization as a base erosion payment, including as a result of the expansion of the QDP exception to apply to the securities leg of a securities loan. See Part VII of this Summary of Comments and Explanation of Revisions for a discussion of the qualification of the securities leg of a securities loan for the QDP exception. Thus, the BEAT Netting Rule will apply only in limited circumstances such as when the taxpayer fails to properly report a QDP. The final regulations therefore continue to apply the BEAT Netting Rule for purposes of determining the amount of base erosion payments that result from transactions that are marked to market.
Proposed § 1.59A-3 contains rules for determining whether a payment or accrual gives rise to a base erosion payment and the base erosion tax benefits that arise from base erosion payments.
Proposed § 1.59A-3(b)(1) defines a base erosion payment as a payment or accrual by the taxpayer to a foreign related party that is described in one of four categories: (1) A payment with respect to which a deduction is allowable; (2) a payment made in connection with the acquisition of depreciable or amortizable property; (3) premiums or other consideration paid or accrued for reinsurance that is taken into account under section 803(a)(1)(B) or 832(b)(4)(A); or (4) a payment resulting in a reduction of the gross receipts of the taxpayer that is with respect to certain surrogate foreign corporations or related foreign persons.
The Conference Report to the Act states that base erosion payments do not include any amounts that constitute reductions to determine gross income including payments for COGS (except for reductions to determine gross income for certain surrogate foreign corporations). Conf. Rep. at 657. The proposed regulations do not contain a provision that expressly provides that amounts paid or accrued to a related foreign person that result in reductions to determine gross income are not treated as base erosion payments (except in the case of certain surrogate foreign corporations). A comment requested that, in order to provide more certainty to taxpayers, the final regulations expressly reflect that payments that result in reductions to determine gross income are not subject to section 59A. In response to this comment, § 1.59A-3(b) has been modified to explicitly clarify that payments resulting in a reduction to determine gross income, including COGS, are not treated as base erosion payments within the meaning of section 59A(d)(1) or (2).
The proposed regulations do not establish any specific rules for determining whether a payment is treated as a deductible payment. However, the preamble to the proposed regulations states that, except as otherwise provided in the proposed regulations, the determination of whether a payment or accrual by the taxpayer to a foreign related party is
Similarly, because existing tax law generally applies, the amounts of income and deduction for purposes of section 59A are generally determined on a gross basis under the Code and regulations. The proposed regulations generally do not permit netting of income and expense in determining amounts of base erosion payments. Comments to the proposed regulations requested guidance regarding (1) transactions involving a middle-man or a passthrough payment, (2) divisions of revenues in connection with global service arrangements, and (3) the general netting of income and expense.
Several comments requested additional guidance relating to transactions or arrangements in which a taxpayer serves as a so-called middle-man for a payment to a foreign related party or makes a so-called passthrough payment to a foreign related party that may frequently arise in connection with global services and similar businesses. Broadly, the comments considered situations where a domestic corporation makes a deductible payment to a foreign related party, and that foreign related party in turn makes corresponding payments to unrelated third parties. Comments that addressed this concern arose in a variety of industries and business models. In some situations, the comments observed that business exigencies require the domestic corporation to make payments to the foreign related party. For example, in a business involving the physical delivery of goods within a foreign jurisdiction, a domestic corporation may subcontract with its foreign related party to perform the foreign in-country delivery function. Another example involves global service contracts that may be entered into by a domestic corporation and a client that does business in multiple jurisdictions, and may require services in connection with the client's global operations that are also subcontracted to foreign related parties. Some more specific comments observed that this global services situation may arise in connection with U.S.-based manufacturers that sell manufactured products to unrelated global customers and simultaneously enter into contracts to provide services for the product in multiple jurisdictions in connection with the sale of equipment. The comments observed that these service contracts, like other global services contracts, frequently involve subcontracting with a foreign related party to perform the services in foreign jurisdictions.
Multiple comments requested that the final regulations provide that the definition of a base erosion payment does not include payments made pursuant to a contract when a taxpayer makes a corresponding payment to a foreign related party for third party costs. Other comments requested that the final regulations more specifically exempt the types of business models discussed in the comment letters. For example, some comments recommended that the final regulations provide an exception to the term “base erosion payment” for payments made by a taxpayer to a foreign related party with respect to services performed for an unrelated party, provided that the foreign related party performs the services outside of the United States. Other comments recommended a similar exception that would apply only to services that are performed in connection with tangible property produced or manufactured by the taxpayer (or a related party). These comments observed that Congress intended to exclude manufacturers from the BEAT because it effectively created an exception for COGS, and that this exception should be carried through to services in connection with manufacturing.
Other comments recommended an exception to the definition of base erosion payment for payments to foreign related parties that are mandated under regulatory requirements. In other situations, comments observed that regulatory considerations affect the decision by the domestic corporation to make a payment to the foreign related party. An example includes a global dealing operation where a U.S. securities dealer has a client who wants to trade its securities on a foreign securities exchange that requires a locally registered dealer; for those trades, a foreign related party of the U.S. securities dealer conducts those trades. Other examples involving regulatory considerations include U.S. life sciences companies that, in connection with obtaining food and drug approval to sell a product in a foreign market, use a foreign related party to conduct clinical trials in that market because foreign regulators require testing on local patients.
The final regulations do not adopt a general exception to the definition of a base erosion payment in situations when the foreign related payee also makes payments to unrelated persons. The BEAT statute and the legislative history contain no indication of such an exception. Moreover, this recommended exception is inconsistent with the statutory framework of the BEAT. If traced to the ultimate recipient, most expenses of a taxpayer could be linked to a payment to an unrelated party, through direct tracing or otherwise, leaving a residual of profit associated with the payment. Accordingly, adopting such an exception would have the effect of eliminating a significant portion of service payments to foreign related parties from the BEAT because it would impose the BEAT on the net rather than the gross amount of the payment. The only net income based concept included in the BEAT statute is the treatment of payments covered by the services cost method (“SCM”) exception. For a further discussion of the SCM exception, see Part IV.C.1 of this Summary of Comments and Explanation of Revisions.
The final regulations also do not adopt a narrower regulatory exception for payments that arise in similar circumstances but that are also associated with manufacturing or the production of tangible property. The Treasury Department and the IRS do not view the presence or absence of manufacturing as bearing on the statutory definition of a base erosion payment for services. Further, the Treasury Department and the IRS do not view the fact that payments that reduce gross receipts, such as COGS, are not base erosion payments under section 59A(d)(1) as demonstrating Congressional intent to exclude services that do not qualify as COGS from the definition of a base erosion payment under section 59A(d)(1) if those services have a connection to manufacturing operations. Congress included a single specific exception for services—the SCM exception. For a further discussion
The final regulations do not adopt a narrower exception for payments to foreign related parties that arise because of non-tax business considerations, including a non-tax foreign regulatory requirement. The Treasury Department and the IRS recognize that there may be non-tax reasons that compel a taxpayer to perform a particular global service outside the United States. For example, an international delivery service may need to engage a foreign related party in the destination country to deliver goods in a foreign jurisdiction.
The final regulations do not adopt this recommended exception because it would require rules to distinguish between the conditions under which a domestic corporation is compelled to operate through a foreign related party and the conditions under which a domestic corporation operates through a foreign related party as a result of a business choice. This distinction would be inherently subjective. For example, in a global service business that provides services to a global client that has operations around the world, the decision to provide personnel on-site in a foreign location may or may not be compelled by the business needs of its client. Similarly, in the case of the back-office functions of a global services business, those functions may be performed in the United States or in a location outside of the United States; the location of those services may or may not be compelled by the business needs of their client. Moreover, even if there is a compelling reason to operate the activities outside the United States, a base erosion payment exists only if a taxpayer makes a payment to a foreign related party. Thus, if a foreign branch of the domestic corporation performs services in the foreign jurisdiction, there will be no payment or accrual to a foreign related party. Finally, there is no indication that Congress intended to create a broad services exception, outside of the SCM exception, even though these global services conditions are common in the modern economy.
Comments requested that final regulations provide an exception from the term “base erosion payment” for revenue sharing payments or arrangements, including allocations with respect to global dealing operations. Specifically, some comments recommended that the final regulations provide that a payment is not a base erosion payment in a situation where the domestic corporation records revenue from transactions with third party customers, and in turn the domestic corporation makes payments to a foreign related party. Other comments recommended that payments by the domestic corporation to foreign related parties should not be base erosion payments if the parties have adopted a profit split as their best method of pricing the related-party transactions for purposes of section 482. Some of these comments asserted that parties to such payments could be viewed as splitting the customer revenue for purposes of section 59A. Under this view, the payments received by the foreign related party would be treated as received directly from the third-party customer, with the result that there would be no corresponding deductible payment from the domestic corporation to the foreign related party.
Other comments more specifically addressed this issue in the narrower context of a global dealing operation within the meaning of proposed § 1.482-8(a)(2)(i). These comments requested that payments made pursuant to a global dealing operation not be treated as base erosion payments.
The final regulations do not adopt the recommendations to specifically exclude from the definition of a base erosion payment transactions that are priced based on the profit split or similar transfer pricing method that is used for purposes of section 482. Under section 482, the parties to a controlled transaction apply the best method to determine if the parties are compensated at arm's length. However, the use of a particular method, whether the profit split method or another method, does not change the contractual relationship between the parties. Accordingly, the final regulations do not adopt this recommendation because the proper characterization depends on the underlying facts and the relationships between the parties.
Similarly, with respect to a global dealing operation, the final regulations do not adopt the comment to provide that global dealing operations do not give rise to base erosion payments because the proper characterization depends on the underlying facts. Under general tax principles, and consistent with proposed § 1.863-3(h), a global dealing operation in which participants manage a single book of assets, bear risk, and share in trading profits may be viewed as co-ownership of the trading positions or similar arrangement, with no deductible payments made by any participants for purposes of section 59A. In contrast, where non-U.S. participants are compensated for services performed, the arrangement may be more properly characterized as trading income to the U.S. participant and a deductible payment to the foreign participant for purposes of section 59A.
To the extent that an amount is treated under general U.S. federal income tax law as received by a U.S. person as an agent for, and is remitted to, a foreign related party, see also Part IV.A (How Base Erosion Payments are Determined in General) of this Summary of Comments and Explanation of Revisions, which discusses the addition of § 1.59A-3(b)(2)(i) to clarify that the determination of whether a payment or accrual by the taxpayer to a foreign related party is described in one of four categories of a base erosion payment is made under general U.S. federal income tax law, including agency principles.
Proposed § 1.59A-3(b)(ii) generally states that the amount of any base erosion payment is determined on a gross basis, regardless of any contractual or legal right to make or receive payments on a net basis, except as otherwise provided in paragraph (b)(2)(iii) of that section, which addresses mark-to-market positions, or as permitted by the Code or regulations. As explained in the preamble to the proposed regulations, the BEAT statutory framework is based on including the gross amount of base erosion payments in the BEAT's expanded modified taxable income base. REG-104259-18, 83 FR 65956, 65968 (December 21, 2018).
Numerous comments recommended that the final regulations permit netting for purposes of section 59A. Generally, netting would allow a taxpayer to determine the amount of a base erosion payment by reducing the amount of that payment by the amount of another corresponding obligation.
A comment asserted that netting should be permitted for all base erosion payments other than with respect to reinsurance payments. The comment explained that the plain language of section 59A(d)(1) provides that only amounts paid or accrued are taken into account; this comment interpreted this language to mean the net amount paid or accrued. Because section 59A(d)(3) refers to gross premiums in the reinsurance context, the comment maintained that netting is permitted for other base erosion payments. This comment also noted that netting was provided under proposed section 4491, an inbound base erosion provision
Some comments recommended that the final regulations permit netting when the foreign related party payee has a corresponding obligation to make payments to an unrelated third party payee. Some of these comments asserted that base erosion payments arise because of commercial and regulatory efficiency and expediency, rather than because of tax planning. These comments recommended that netting be permitted in ordinary course transactions. Other comments recommended that the final regulations permit netting for deductible amounts owed by a domestic corporation to a foreign related party if the foreign related party also owes amounts to the domestic corporation and the obligations are settled on a net basis.
The Treasury Department and the IRS have determined that it is appropriate to retain the approach in the proposed regulations that the amount of a base erosion payment is determined on a gross basis, except as provided in the BEAT Netting Rule and to the extent permitted by the Code or regulations. See part III.D of this Summary of Comments and Explanation of Revisions (Mark-to-market deductions). As explained in the preamble to the proposed regulations, amounts of income and deduction are generally determined on a gross basis under the Code. REG-104259-18, 83 FR 65956, 65968 (December 21, 2018). For example, whether the amount of income or deductions with respect to financial contracts that provide for offsetting payments is taken into account on a gross or net basis is determined under generally applicable federal income tax law. Section 59A does not change that result.
The final regulations are consistent with the statutory framework of section 59A. Section 59A specifically addresses deductible payments and other statutorily defined base erosion payments, and imposes tax on an increased base of modified taxable income, but at a lower tax rate than the corporate income tax rate set forth in section 11. If regulations provided that statutorily defined base erosion payments could be reduced by offsetting amounts received, then the regulations would substantially limit the scope of section 59A. Section 11 imposes a tax on a corporation's taxable income. Taxable income is defined as gross income minus the deductions allowed by chapter 1 of the Code. Section 63. Gross income is generally defined as income from whatever source derived. Section 61. The amount of income and deductions are generally determined on a gross basis under the Code. Nothing in section 59A evidences Congressional intent to alter this framework. In fact, section 59A(c) determines modified taxable income from the starting point of taxable income as defined in section 63.
A netting rule would have the same effect as allowing a deduction from gross income because it would reduce the amount of a taxpayer's modified taxable income, and in that sense would conflict with section 59A(c)(1) (disallowing a deduction for base erosion tax benefits). Congress determined that certain deductions, namely those that are within the statutory definition of a base erosion payment, should not be allowed for purposes of the tax imposed under section 59A, and therefore, limited the availability of these deductions. Permitting netting of items of gross income and deductions to determine the amount of a base erosion payment would frustrate Congress' purpose in enacting section 59A.
In addition, the other provisions of the Code and regulations that are cited by comments are irrelevant to the analysis of section 59A and do not provide support for adopting a netting rule for purposes of section 59A. Whereas sections 163(j) and 951A refer explicitly to net amounts, section 59A explicitly refers to a deduction allowable under Chapter 1 of the Code. Section 250 provides rules for determining whether services are for “foreign use” by contemplating services provided to and from a related party that are substantially similar. This destination-based rule is entirely different from the construct of section 59A, and, moreover, section 59A contains no similar language contemplating payments to and from a related party. Proposed section 4491 would have operated through the regular income tax system and would have represented a fundamentally different approach to inbound base erosion than section 59A; therefore, that proposed revision to the Code is not relevant here. The aggregation rule in § 1.482-1T(f)(2)(i)(B) does not involve the treatment of payments to foreign related parties, and thus is not relevant for purposes of analyzing the meaning of section 59A.
Some comments also cited the heading to section 59A(h) (exception for certain payments made in the ordinary course of trade or business) as support for a regulatory exception for ordinary course transactions for which a taxpayer has not adopted a mark-to-market method of accounting. Specifically, these comments suggested that Congress did not intend for section 59A(h)(2)(A)(i) to limit the QDP exception to only transactions that are marked-to-market. The citations to the heading to section 59A(h) are inconsistent with the statutory rule in section 59A(h), which provides a narrowly defined exception applicable to derivative payments under specific circumstances.
Another comment recommended that the final regulations permit netting in the narrow context of related-party hedging transactions. The comment observed that the QDP exception applies to related-party hedging transactions when the taxpayer uses a mark-to-market method of accounting. The comment asserted that there is no policy rationale for limiting netting relief to taxpayers that use a mark-to-market method of accounting; therefore, the comment requested that the QDP exception be expanded to also apply to taxpayers that apply the mark-to-market method for financial accounting purposes. Alternatively, the comment recommended that taxpayers engaged in related- party hedging transactions be permitted to net income items against deduction items.
The final regulations do not provide for a netting rule for related-party hedging transactions. As discussed in Part IV.A.3.a of this Summary of Comments and Explanation of Revisions, permitting netting for related-party hedging transactions would be inconsistent with the statutory framework of section 59A. Furthermore, this recommendation would eliminate or substantially modify one of the three statutory requirements for the QDP exception (that is, use of the mark-to-market accounting method).
Finally, some comments recommended that the final regulations clarify when netting is permitted under the Code and regulations, including confirming that netting is permitted for notional principal contracts and for cost sharing transaction payments under § 1.482-7(j)(3)(i). The Treasury Department and the IRS decline to provide such specific guidance because
Section 59A(d) defines a base erosion payment to include any amount paid or accrued by a taxpayer to a foreign related party with respect to which a deduction is allowable. Proposed § 1.59A-3(b)(1)(i) repeats this statutory language. Proposed § 1.59A-3(b)(2)(i) provides that “an amount paid or accrued” includes an amount paid or accrued using any form of consideration, including cash, property, stock, or the assumption of a liability. In explaining this provision, the preamble to the proposed regulations states that “a base erosion payment also includes a payment to a foreign related party resulting in a recognized loss; for example, a loss recognized on the transfer of property to a foreign related party.” REG-104259-18, 83 FR 65956, 65960 (December 21, 2018).
This principle would apply if, for example, a taxpayer transfers to a foreign related party (a) built-in-loss property as payment for a deductible service provided by the foreign related party to the taxpayer (the latter of which may also be a base erosion payment), (b) built-in-loss property as payment for a good or service that the taxpayer is required to capitalize (for example, COGS) such that the payment is not deductible to the taxpayer (the latter of which is not a base erosion payment), or (c) depreciated nonfunctional currency as a payment for a nonfunctional currency denominated amount owed by a taxpayer.
Comments requested that the final regulations revise the definition of a base erosion payment to exclude losses recognized on the sale or exchange of property by a taxpayer to a foreign related party. According to these comments, a payment made with, or a sale of, built-in-loss property is not encompassed within the statutory definition of a base erosion payment. Comments stated that both the statutory and proposed regulations' definition contain two requirements for a payment to be a base erosion payment: There must be (i) an amount paid or accrued by the taxpayer to a foreign person that is a related party of the taxpayer; and (ii) a deduction must be allowable with respect to that amount.
Regarding the first requirement—that there must be an amount paid or accrued by the taxpayer to a foreign related party—when a U.S. taxpayer sells property to a foreign related party for cash, the comments noted that no payment or accrual has taken place by the U.S. taxpayer for purposes of section 59A; rather, the U.S. taxpayer is receiving a cash payment in exchange for the transferred property, and is not making a payment. Thus, the comments argued, the first requirement for a base erosion payment, that a payment or accrual exists, has not been met.
Regarding the second requirement—that a deduction must be allowable with respect to that amount—comments argued that even if a payment is found to have been made to the foreign related party, the deduction for the loss on the built-in-loss property is not with respect to this payment. That is, the comments argued that the loss deduction is not attributable to any “payment” made to the foreign related party (the form of consideration in the transaction); rather, the loss is attributable to the taxpayer's basis in the built-in loss property. Although that built-in-loss is recognized in connection with the transfer to a foreign related party, and thus could meet the statutory requirement as allowed “with respect to” the payment, the comments recommended a narrower interpretation that views the recognized loss as arising independently from the payment, that is viewed as merely a corollary consequence unrelated to the payment being made to the foreign related party.
The final regulations adopt the recommendation provided in these comments. The final regulations clarify the definition of a base erosion payment in § 1.59A-3(b)(1)(i) and (b)(2)(ix) to provide that a loss realized from the form of consideration provided to the foreign related party is not itself a base erosion payment. For the reasons described in the comments and discussed in this Part of the Summary of Comments and Explanation of Revisions, this treatment aligns the definition of base erosion payment with the economics of the payment made by the applicable taxpayer to the foreign related party. That is, the term “base erosion payment” does not include the amount of built-in-loss because that built-in-loss is unrelated to the payment made to the foreign related party. This rule applies regardless of whether the loss realized from the form of consideration provided to the foreign related party is itself consideration for an underlying base erosion payment. To the extent that a transfer of built-in-loss property results in a deductible payment to a foreign related party that is a base erosion payment, the final regulations clarify that the amount of the base erosion payment is limited to the fair market value of that property.
The proposed regulations limit the ability of a taxpayer to eliminate base erosion tax benefits by transferring depreciable or amortizable property to another member of the taxpayer's aggregate group. Specifically, proposed § 1.59A-3(b)(2)(vii) provides that if a taxpayer holds depreciable or amortizable property that produces depreciation or amortization deductions that are base erosion tax benefits to the taxpayer, those depreciation or amortization deductions will continue to be treated as a base erosion tax benefit for the acquirer if the taxpayer transfers the property to another member of its aggregate group.
The Treasury Department and the IRS are aware of similar transactions involving a domestic corporation that ordinarily acquires, from a foreign related party, property that is subject to an allowance for depreciation or amortization in the hands of the domestic corporation. In the transaction, the domestic corporation inserts into its supply chain a second domestic corporation, with a principal purpose of avoiding base erosion payments. Specifically, the second domestic corporation, a dealer in property that avails itself of the exclusion of COGS from the definition of a base erosion payment in section 59A(d)(1) and (2), acquires the property from the foreign related party and in turn resells the property to the first domestic corporation. The Treasury Department and the IRS view this type of transaction as already within the scope of the anti-abuse rule set forth in proposed § 1.59A-9(b)(1) (transactions involving unrelated persons, conduits, or intermediaries), and have added an example to the final regulations clarifying the application of this anti-abuse rule to similar fact patterns.
The proposed regulations provide that a payment or accrual by a taxpayer to a foreign related party may be a base erosion payment regardless of whether
The proposed regulations do not include any specific exceptions for these types of transactions even though (a) the transferor of the assets acquired by the domestic corporation may not recognize gain or loss, (b) the acquiring domestic corporation may take a carryover basis in the depreciable or amortizable assets, and (c) the importation of depreciable or amortizable assets into the United States in these transactions may increase the regular income tax base as compared to the non-importation of those assets. In the preamble to the proposed regulations, the Treasury Department and the IRS also note that for transactions in which a taxpayer that owns stock in a foreign related party receives depreciable property from the foreign related party as an in-kind distribution subject to section 301, there is no base erosion payment because there is no consideration provided by the taxpayer to the foreign related party in exchange for the property. REG-104259-18, 83 FR 65956, 65960 (December 21, 2018). Thus, there is no payment or accrual in that transaction.
The preamble to the proposed regulations requests comments about the treatment of payments or accruals that consist of non-cash consideration. REG-104259-18, 83 FR 65956, 65960 (December 21, 2018). Comments have suggested that corporate nonrecognition transactions or transactions in which U.S. taxpayers do not obtain a step-up in the tax basis of an acquired asset should not be treated as a base erosion payment. They argued that these nonrecognition transactions should not be treated as a payment or accrual. Based on this position, some comments argued either that the Treasury Department and the IRS do not have the authority to treat nonrecognition transactions as base erosion payments or that the better policy is to exclude nonrecognition transactions from the definition of base erosion payments. Furthermore, comments argued that nonrecognition provisions such as sections 332, 351, and 368 reflect the judgment of Congress that certain corporate transactions such as the formation and dissolution of businesses and the readjustment of continuing interests in property do not warrant the imposition of tax. They also argued that the legislative history of section 59A does not suggest that Congress intended for it to apply to nonrecognition transactions.
With regard to section 332 liquidations, comments argued that a section 332 liquidation should not be treated as a base erosion payment when a section 301 distribution is not. Furthermore, comments argued that transactions in which stock is merely deemed to be exchanged, like certain section 351 transactions or section 332 liquidations, should not be treated as base erosion payments since there is no actual transfer of shares.
Comments also argued that nonrecognition transactions are not base eroding. Comments asserted that inbound nonrecognition transactions are often used in post-acquisition restructurings, as well as in other internal restructurings to better align a multinational organization's legal structure with its commercial operations. Comments also argued that treating these transactions as base erosion payments would provide a disincentive to move intangible property and other income-producing property into the United States, contrary to the goals of the Act.
Furthermore, comments argued that amortization of a carryover tax basis of an asset acquired by a U.S. taxpayer from a related party in a nonrecognition transaction would not create the same base erosion concerns as other types of deductions. However, comments acknowledged that, if final regulations adopted a broad exception for nonrecognition transactions, taxpayers could abuse that exception by engaging in certain basis step-up transactions immediately before an inbound nonrecognition transfer. Comments suggested that augmenting the conduit anti-abuse rule of proposed § 1.59A-9 may be sufficient to prevent these types of transactions. Alternatively, comments also suggested that, to delineate cases of potential abuse, a rule similar to the 5-year active trade or business rules in § 1.355-3 could apply to specify instances when assets would qualify as not being “recently stepped up assets.”
Comments generally supported the statement in the preamble to the proposed regulations that a section 301 distribution is not treated as a base erosion payment because there is no exchange, and requested that the exclusion be included in the final regulations as well as the preamble. Comments also requested that the definition of a base erosion payment also exclude exchanges (including section 302 and 304 transactions) that are treated as section 301 distributions pursuant to section 302(d).
Comments have generally acknowledged that the taxable transfer of depreciable or amortizable property in exchange for stock should be subject to the BEAT. For example, comments stated that the transfer of assets to a corporation that is partially taxable to the transferor pursuant to section 351(b) or 356 as a result of the receipt of “boot” by the transferor is appropriately treated as a base erosion payment. The amount of the base erosion payment could be determined based on the gain or increase in basis of the property, the amount of boot allocated to the property, or by treating all of the boot as paid for depreciable or amortizable property first, to the extent thereof. Comments also requested clarity on the treatment of the assumption of liabilities pursuant to a nonrecognition transaction. One comment requested that the assumption of liabilities in a nonrecognition transaction be excluded from the definition of a base erosion payment to the extent that the assumption is not treated as money or other property. This comment suggested that, if the Treasury Department and the IRS are concerned about abusive transactions, an anti-abuse rule could be designed to treat certain liabilities as base erosion payments.
Similarly, comments stated that the taxable transfer of assets to a domestic corporation in exchange for stock, such as in a so-called “busted section 351 transaction,” should be subject to the BEAT. Comments also discussed whether a taxable distribution to a domestic corporation in a section 331 liquidation of a foreign corporation should be subject to the BEAT. These comments acknowledged that taxable transactions generally give rise to base erosion payments and did not take a view on whether section 331 liquidations should be subject to the BEAT. Accordingly, comments requested that nonrecognition transactions be excluded from the definition of a base erosion payment only to the extent that the U.S. taxpayer obtains a carryover basis in the acquired asset. Alternatively, comments have requested a safe harbor that would exclude nonrecognition transactions that are part of post-acquisition restructuring to allow taxpayers to transfer into the United States
Finally, comments have noted that a nonrecognition transaction involving a U.S. branch of a foreign corporation may not qualify for the ECI exception under proposed § 1.59A-3(b)(3)(iii) for payments that are treated as effectively connected income in the hands of the payee, because the ECI exception under proposed § 1.59A-3(b)(3)(iii) is predicated on the payment or accrual being subject to U.S. federal income taxation, which cannot occur when the transaction is not taxable.
Consistent with these comments, the final regulations generally exclude amounts transferred to, or exchanged with, a foreign related party in a transaction described in sections 332, 351, and 368 (“corporate nonrecognition transaction”) from the definition of a base erosion payment. In light of the comments, the Treasury Department and the IRS have determined a limited exclusion of corporate nonrecognition transactions is consistent with the underlying anti-base erosion purpose of the BEAT, tends to reduce disincentives for taxpayers to move intangible property and other income-producing property into the United States in corporate nonrecognition treatment transactions, and is consistent with the general treatment of corporate nonrecognition transactions under other sections of the Code. However, the Treasury Department and the IRS have determined that it is not appropriate to apply this exception to the transfer of other property, or property transferred in exchange for other property, in a corporate nonrecognition transaction. Solely for purposes of determining what is a base erosion payment, “other property” has the meaning of other property or money, as used in sections 351(b), 356(a)(1)(B), and 361(b), as applicable, including liabilities described in section 357(b). However, other property does not include the sum of any money and the fair market value of any property to which section 361(b)(3) applies. Other property also includes liabilities that are assumed by the taxpayer in a corporate nonrecognition transaction, but only to the extent of the amount of gain recognized under section 357(c).
For example, if a foreign corporation transfers depreciable property to its wholly owned domestic subsidiary in a transaction to which section 351 applies, and if the foreign corporation receives subsidiary common stock and cash in exchange, the cash may be treated as a base erosion payment, while the common stock is not. Similarly, property transferred in a section 351 or 368 transaction in exchange, in whole or in part, for other property may be a base erosion payment if it otherwise meets the definition of a base erosion payment. For example, if a domestic corporation transfers property to its wholly-owned foreign subsidiary in a transaction to which section 351 applies, and if the domestic corporation receives common stock in the foreign corporation and other property consisting of depreciable property, the property transferred by the domestic corporation may be a base erosion payment. These rules apply without regard to whether or not gain or loss is recognized in the transaction.
When a taxpayer transfers other property to a foreign related party, or transfers property to a foreign related party in exchange for other property, the determination of the amount of property that is treated as received from the foreign related party in exchange for the property transferred to the foreign related party is based on U.S. federal income tax law. See, for example, Rev. Rul. 68-55, 1968-1 C.B. 140.
Consistent with concerns raised by comments, the Treasury Department and the IRS are concerned that the exclusion of nonrecognition transactions could lead to inappropriate results in certain situations. An example of an inappropriate result is the sale of depreciable property between foreign related parties shortly before a nonrecognition transaction, which could step up the taxpayer's basis in the property and increase depreciation or amortization deductions of the domestic corporation after the nonrecognition transaction relative to the alternative in which the step-up basis transactions did not occur. Accordingly, the Treasury Department and the IRS have determined that it is appropriate to specifically address these transactions with an anti-abuse rule.
Because the final regulations provide an exception for corporate nonrecognition transactions, it is not necessary for the final regulations to include other suggested modifications, such as (i) modifying the ECI exception for nonrecognition transactions involving U.S. branches, (ii) providing a safe harbor that would exclude nonrecognition transactions that are part of a post-acquisition restructuring, or (iii) clarifying that nonrecognition transactions that occurred before the effective date of the BEAT are not treated as base erosion payments.
The final regulations also clarify the treatment of distribution transactions, such as distributions described in section 301, and redemption transactions, such as redemptions described in section 302. A distribution with respect to stock for which there is no consideration (a “pure distribution”) is not treated as an exchange. Accordingly, the final regulations provide that a pure distribution of property made by a corporation to a shareholder with respect to its stock is not an amount paid or accrued by the shareholder to the corporation. These pure distributions include distributions under section 301, without regard to the application of section 301(c) to the shareholder (addressing distributions in excess of earnings and profits). § 1.59A-3(b)(2)(ii). However, unlike a pure distribution, a redemption of stock in exchange for property constitutes an exchange. Accordingly, the final regulations provide that a redemption of stock by a corporation within the meaning of section 317(b) (such as a redemption described in section 302(a) and (d) or section 306(a)(2)), or an exchange of stock described in section 304 or section 331, is an amount paid or accrued by the shareholder to the corporation (or by the acquiring corporation to the transferor in a section 304 transaction).
Section 59A applies to foreign corporations that have income that is subject to net income taxation as effectively connected with the conduct of a trade or business in the United States, taking into account any applicable income tax treaty of the United States. The proposed regulations generally provide that a foreign corporation that has interest expense allocable under section 882(c) to income that is effectively connected with the conduct of a trade or business within the United States will have a base erosion payment to the extent the interest expense results from a payment or accrual to a foreign related party. The amount of interest that will be treated as
If a foreign corporation uses the three-step method described in § 1.882-5(b) through (d), the proposed regulations provide that interest on direct allocations and on U.S.-booked liabilities that is paid or accrued to a foreign related party will be a base erosion payment.
If a foreign corporation determines its interest expense under the separate currency pools method described in § 1.882-5(e), the proposed regulations provide that the amount of interest expense that is a base erosion payment is equal to the sum of (1) the interest expense on direct allocations paid or accrued to a foreign related party and (2) the interest expense in each currency pool multiplied by the ratio of average foreign related-party liabilities over average total liabilities for that pool.
Comments requested that a consistent method apply to determine the portion of interest allocated to a U.S. branch that is treated as paid to a foreign related party. The comments noted that the methods in the proposed regulations may produce meaningfully different amounts of base erosion payments depending on which method the taxpayer uses to determine its branch interest expense. Comments noted that a branch that uses the method described in § 1.882-5(b) through (d) may have a lower amount of base erosion payments than a branch using the method described in § 1.882-5(e) or a permanent establishment applying a U.S. tax treaty, although those differences will ultimately depend on the composition of the counterparties of the U.S.-booked liabilities and the excess U.S.-connected liabilities (as foreign related parties or not foreign related parties). See also Part IV.B.5 of this Summary of Comments and Explanation of Revisions for a discussion of interest allowed to permanent establishments applying a U.S. tax treaty. The comments argued that these differences are not supported by tax policy.
Comments generally requested a rule permitting or requiring foreign corporations to use U.S.-booked liabilities to determine the portion of U.S. branch interest expense that is treated as paid to foreign related parties, consistent with the method described in the proposed regulations for corporations that determine U.S. branch interest expense using the method described in § 1.882-5(b) through (d), even if the U.S. branch uses a different method to determine its interest expense. The comments argued that U.S. assets are used to determine the amount of leverage that is properly allocable to a U.S. branch, and, as a result, U.S.-booked liabilities should determine the amount of interest treated as a base erosion payment. Specifically with regard to banks, a comment argued that banks are highly regulated with limited or no ability to manipulate U.S.-booked liabilities, and, as a result, should be permitted to use U.S.-booked liabilities to determine the amount of U.S. branch interest expense treated as paid to foreign related parties.
The Treasury Department and the IRS agree that the rules for determining the portion of U.S. branch interest paid to foreign related parties should be consistent, regardless of whether taxpayers apply the method described in § 1.882-5(b) through (d) or § 1.882-5(e). For purposes of section 59A, the Treasury Department and the IRS agree that the starting point for determining the identity of the recipient should be the U.S. booked liabilities of the U.S. branch. The final regulations, therefore, provide that the amount of U.S. branch interest expense treated as paid to a foreign related party is the sum of: (1) The directly allocated interest expense that is paid or accrued to a foreign related party, (2) the interest expense on U.S.-booked liabilities that is paid or accrued to a foreign related party, and (3) the interest expense on U.S.-connected liabilities in excess of interest expense on U.S.-booked liabilities multiplied by the ratio of average foreign related-party interest over average total interest (excluding from this ratio interest expense on U.S. booked liabilities and interest expense directly allocated).
The Treasury Department and the IRS recognize that § 1.882-5 provides certain simplifying elections for determining the interest deduction of a foreign corporation. The proposed regulations request comments about similar simplifying elections for determining the portion of U.S.-connected liabilities that are paid to a foreign related party for purposes of section 59A. REG-104259-18, 83 FR 65956, 65960 (December 21, 2018).
Comments, in response to the request for comments on simplifying conventions, indicated that it may be difficult for foreign corporations to determine their worldwide ratio of liabilities owed to foreign related parties over total liabilities (“worldwide liabilities ratio”). For example, they argued that U.S. branches of foreign banks typically do not have full access to information about the bank's global operations and funding arrangements. These comments argued that even if a U.S. branch does have that information, U.S. tax law may treat some transactions as debt that non-U.S. tax law does not, or may integrate some hedging costs that are not integrated for non-U.S. tax purposes, or vice-versa. These comments further observed that if the taxpayer is using the fixed ratio election for purposes of § 1.882-5, the taxpayer would not be required to obtain that information or reconcile the home office balance sheet to U.S. tax law principles for purposes of § 1.882-5. Thus, the comments argued that attempting to reconstruct a global balance sheet and payments under U.S. tax principles for purposes of proposed § 1.59A-3 is burdensome and should not be required.
The comments also requested various simplifying elections for determining the amount of U.S. branch interest treated as paid to foreign related parties, including (a) computing the worldwide ratio by reference to interest expense rather than worldwide liabilities (“worldwide interest ratio”), (b) using financial accounting books and records rather than U.S. tax principles to determine a worldwide ratio, or (c)
The final regulations adopt the comment recommending that taxpayers apply the worldwide ratio to determine the amount of a U.S. branch's interest expense paid to foreign related parties by reference to a worldwide ratio of interest expense, rather than a worldwide ratio of liabilities.
The Treasury Department and the IRS recognize that it may be difficult for foreign corporations to determine their worldwide interest ratio under U.S. tax principles, as indicated by the comments. Accordingly, for simplicity and to reduce the administrative burden on taxpayers, the final regulations adopt the comment to allow taxpayers to elect to determine their worldwide interest ratio using their applicable financial statements as described in section 451(b)(3).
The final regulations do not adopt a fixed ratio or safe harbor for the worldwide interest ratio as suggested in comments because the actual worldwide interest ratio of an enterprise may vary significantly from one industry to another and from one taxpayer to another. As a result, it is not possible to establish a single safe harbor that appropriately takes into account the differing position of industries and taxpayers while protecting the interests of the government. The Treasury Department and the IRS recognize that § 1.882-5 provides other safe harbors, such as the fixed ratio safe harbor for determining the ratio of liabilities to assets of 95 percent for banks and 50 percent for other taxpayers. § 1.882-5(c)(4). In the context of determining the portion of a U.S. branch's interest expense that is deemed attributed to foreign related parties (versus other persons), the Treasury Department and the IRS determined that there is not a sufficient basis to establish a safe harbor because different taxpayers could have different internal capital structures.
One comment suggested that a U.S. branch of a bank should be permitted to assume that 85 percent of its funding is from unrelated lenders because regulations under section 884 provide a safe harbor assumption that 85 percent of a bank's capital can be deemed to come from deposits (and thus eligible for the bank deposit interest exemption from the tax imposed by section 881(a)).
The final regulations also revise § 1.59A-3(b)(4)(1) to take into account the expansion of the exception for certain total loss-absorbing capacity securities to include foreign issuers. See Part IV.C.5 of this Summary of Comments and Explanation of Revisions (Exception for Interest on Certain Instruments Issued by Globally Systemically Important Banking Organizations).
Finally, a comment recommended that the final regulations revise proposed § 1.59A-3(b)(4)(i)(D), which provides that to the extent that a taxpayer makes an election to reduce its U.S.-connected liabilities pursuant to § 1.884-1(e)(3), the reduction is treated as proportionally reducing all liabilities for purposes of determining the amount of allocable interest expense that is treated as a base erosion payment. The comment argued that § 1.59A-3(b)(4)(i)(D) is inconsistent with § 1.884-1(e)(3), which applies for all purposes of the Code, and which the comment asserted does not require proportionate reduction. In response to this comment, the final regulations do not include the rule in proposed § 1.59A-3(b)(4)(i)(D). The Treasury Department and the IRS are considering § 1.884-1(e)(3) for possible future guidance.
The proposed regulations provide a specific rule for determining the amount of base erosion payments attributable to interest and deductions allocated to a permanent establishment under a U.S. income tax treaty. Certain U.S. income tax treaties provide alternative approaches for the allocation or attribution of business profits of an enterprise of one contracting state to its permanent establishment in the other contracting state on the basis of assets used, risks assumed, and functions performed by the permanent establishment. These treaties allow notional payments that take into account interbranch transactions and value the interbranch transactions using the most appropriate arm's length method for those transactions. A treaty-based expense allocation or attribution method does not itself create legal obligations between the U.S. permanent establishment and the rest of the enterprise. The proposed regulations reflect that under a treaty-based expense allocation or attribution method, amounts equivalent to deductible payments may be allowed in computing the business profits of an enterprise with respect to transactions between the permanent establishment and the home office or other branches of the foreign corporation (“internal dealings”). The deductions from internal dealings would not be allowed under the Code and regulations. The proposed regulations provide that deductions from internal dealings allowed in computing the business profits of the permanent establishment are base erosion payments.
The proposed regulations distinguish between the allocations of expenses and internal dealings. The allocation and apportionment of expenses of the
Comments noted that internal dealings are a fiction and do not involve an actual payment or accrual under general U.S. tax principles. The comments suggested that internal dealings should be relevant only for purposes of determining the profit attributable to the permanent establishment and should not be recognized for other purposes. They noted that the OECD 2010 Report on the Attribution to Profits to Permanent Establishments (“2010 OECD Report”) states that recognizing internal dealings by a permanent establishment “is relevant only for the attribution of profits” and “does not carry wider implications as regards, for example, withholding taxes.” 2010 OECD Report (July 22, 2010), Part IV, C-1(iii)(f), section 166. Thus, comments suggested that internal dealings should not be relevant for BEAT purposes.
The Treasury Department and the IRS disagree that internal dealings are not relevant for purposes of determining a foreign corporation's base erosion payments. Unlike the allocation of a foreign corporation's deductions to a U.S. branch under the Code and regulations, internal dealings are not a mere allocation of expenses, but rather are determined on the basis of assets used, risks assumed, and functions performed by the permanent establishment in a manner consistent with the arm's length principle. Deductions determined under internal dealings, like deductions determined under the Code and regulations, reduce the U.S. income tax base of the permanent establishment. Because internal dealings are not an allocation of expenses, the foreign corporation's worldwide ratio may not be an appropriate measure of related party payments. Instead, in the proposed regulations, the Treasury Department and the IRS determined that it is appropriate to look to the internal dealings, rather than the foreign corporation's worldwide expenses, for purposes of determining base erosion payments.
However, the Treasury Department and the IRS recognize that interest expense allowed to a permanent establishment as internal dealings often represents interest expense on back-to-back loans between (1) the permanent establishment and the home office, and (2) the home office and another entity. Furthermore, unlike other deductions that are often based on payments to the home office or to another branch for goods or services or the use of intellectual property unique to the home office or branch, money is fungible. A permanent establishment may be indifferent to whether its capital comes from the home office or a loan from another entity.
The Treasury Department and the IRS have determined that interest expense determined under § 1.882-5 generally provides a reasonable estimate of the amount of interest of the foreign corporation that should be allocated to the permanent establishment based on the assets of the permanent establishment. Accordingly, it is appropriate to treat interest expense determined in accordance with a U.S. tax treaty (including interest expense determined by internal dealings) in a manner consistent with the treatment of interest expense determined under § 1.882-5, to the extent it would have been allocated to the permanent establishment under § 1.882-5. In effect, the internal dealing permits the permanent establishment to replace an external borrowing with an internal dealing, and this internal dealing should be treated as creating additional interest expense paid to the home office, and thus treated as a base erosion payment to a foreign payee. Accordingly, interest expense determined in accordance with a U.S. tax treaty (including interest expense determined by internal dealings) that is in excess of the amount that would have been allocated to the permanent establishment under § 1.882-5 is treated as interest expense paid by the permanent establishment to the home office or another branch of the foreign corporation.
Specifically, the final regulations treat interest expense determined in accordance with a U.S. tax treaty (including interest expense determined by internal dealings) in a manner consistent with the treatment of interest expense determined under § 1.882-5, to the extent of the hypothetical amount of interest expense that would have been allocated to the permanent establishment under § 1.882-5 (the “hypothetical § 1.882-5 interest expense”). For purposes of this calculation, the hypothetical § 1.882-5 interest expense cannot exceed the amount of interest expense determined under the U.S. tax treaty. Interest expense in excess of the hypothetical § 1.882-5 interest expense is treated as interest expense paid by the permanent establishment to the home office or another branch of the foreign corporation, and therefore is treated as a base erosion payment.
Accordingly, under the final regulations, a foreign corporation determines its hypothetical § 1.882-5 interest expense by calculating the amount of interest that would have been allocated to effectively connected income if the foreign corporation determined its interest expense under § 1.882-5.
In this regard, the Treasury Department and the IRS observe that corporations eligible for benefits under a U.S. income tax treaty are permitted to choose whether to apply the treaty or the Code and regulations to calculate interest expense allocable to a permanent establishment or U.S. branch, and understand that many corporations eligible for treaty benefits calculate interest expense allocated to a U.S. branch or permanent establishment under both § 1.882-5 and the applicable treaty to determine whether to claim treaty benefits. Additionally, the Treasury Department and the IRS also understand that corporations that determine interest expense allowed to a permanent establishment under a U.S. income tax treaty may nonetheless be required to allocate interest to the permanent establishment under § 1.882-5 for state or local tax purposes.
Comments requested that the final regulations provide relief from the application of the BEAT for hedging
The final regulations do not adopt this recommendation. The status of an item as a deduction is determined under U.S. federal income tax law, not industry practice or financial accounting treatment. Although the legislative history of section 59A states that base erosion payments do not include any amount that constitutes reductions to determine gross income, including payments for COGS, these statements are in the context of U.S. federal income tax law, which sets forth the tax law for deductions. In addition, section 59A(d)(1) refers to “deductions allowable under this chapter,” that is, chapter 1 (normal taxes and surtaxes) of Subtitle A (income taxes) of the Code, which includes section 1 through section 1440Z-2. Congress did not indicate that the definition of a reduction to determine gross income or COGS for purposes of section 59A should be derived from financial accounting principles. In the absence of clear Congressional intent otherwise, the Treasury Department and the IRS believe that whether an amount constitutes a reduction to determine gross income or COGS must be determined under established principles of U.S. federal income tax law. Consequently, if related-party hedging payments are not properly treated as reductions to determine gross income for tax purposes, these payments are not excluded from the definition of base erosion payments. See also Part IV.A.3.b of this Summary of Comments and Explanation of Revisions (Netting of income and expense; Hedging transactions).
Comments addressed the impact of the BEAT on domestic corporate captive finance subsidiaries that purchase property (business equipment) from a foreign related party and then lease the property to unrelated third party end users. The comments requested that the final regulations permit taxpayers using this type of business model to treat the depreciation deductions attributable to the leased property as COGS for purposes of the BEAT. The comments premised this requested treatment on the theory that the cost of the leased property and its associated depreciation deductions are directly correlated with the rental income generated from leasing the property and on the unique nature of this particular business model.
The final regulations do not include an exception from the definition of base erosion payments for the transactions described in these comments. Under section 59A(d)(2), the deduction allowed for depreciation with respect to property acquired from a foreign related party is a base erosion tax benefit, notwithstanding that the property acquired by the taxpayer is used in an income-generating business in the United States, such as the leasing of the business equipment to unrelated third party lessees of the property or operating the business equipment itself as a service for unrelated third parties.
One comment recommended that the final regulations clarify the treatment of research and experimental (“R&E”) expenditures after such costs are required to be amortized in taxable years beginning after December 31, 2021, under section 174. The comment recommended clarification that after the change to section 174 is in effect, the BEAT payment associated with R&E expenses is limited to the amount of amortization. The final regulations do not adopt this comment because the Treasury Department and the IRS view § 1.59A-3(b)(1)(i) and § 1.59A-3(c)(1)(i) as sufficiently clear in setting forth that a base erosion payment to a foreign related party does not result in a base erosion tax benefit until the deduction is “allowed under chapter 1 of subtitle A of the [Code].”
Proposed § 1.59A-3(b)(3)(i) provides that a base erosion payment does not result from amounts paid or accrued to a foreign related party for services that are eligible for the SCM exception described in proposed § 1.59A-3(b)(3)(i)(B), but only to the extent of the total services cost of those services. Any amount paid or accrued to a foreign related party in excess of the total services cost of services eligible for the SCM exception (the mark-up component) remains a base erosion payment. Proposed § 1.59A-3(b)(3)(i)(B) provides that the SCM exception applies if all of the requirements of § 1.482-9(b), which describes the SCM, are satisfied, with two exceptions. First, the requirements of § 1.482-9(b)(5), commonly referred to as the business judgment rule, do not apply. Second, the books and records requirement described in § 1.482-9(b)(6) is replaced with the requirements of proposed § 1.59A-3(b)(3)(i)(C). Section 1.482-9(b)(4) provides that certain activities, including research, development, and experimentation, are not eligible for the SCM. As a result, payments for these services do not qualify for the SCM exception described in proposed § 1.59A-3(b)(3)(i)(B).
Comments supported the SCM exception and recommended that final regulations adopt this approach. The final regulations continue to provide that the SCM exception is available for the cost portion of a payment that otherwise meets the requirements for the SCM exception. A comment recommended that the final regulations provide examples or clarification as to the requirement in proposed § 1.59A-3(b)(3)(i)(C) that taxpayers' books and records provide sufficient documentation to allow verification of the methods used to allocate and apportion the costs to the services in question in accordance with § 1.482-9(k). The final regulations include additional detail on the documentation required to satisfy this requirement. § 1.59A-3(b)(3)(i)(C).
Comments also recommended that the final regulations extend the SCM exception to the cost element of payments for other types of services that are not eligible for the SCM. Some comments suggested that an exception
Comments suggested that applying the SCM exception to only some services will lead to inequitable results for services companies as compared to similarly situated U.S. manufacturers and distributors because the definition of base erosion payments does not include payments included in COGS, but there is not a similar rule for the costs in a services business. Comments also claimed that, relative to manufacturers or distributors, service companies are more constrained in where they operate. Comments also asserted that no base erosion could result from an expansion of the SCM exception because only the cost element of the service fee would be subject to the exception.
The comments suggesting that an exception should be available for excluded activities that otherwise would be eligible for the SCM also asserted that the list of excluded activities serves a similar purpose as the business judgment rule, which is to identify services for which total services costs can constitute an inappropriate reference point for determining profitability or that should be subject to a more robust transfer pricing analysis. Comments suggested that § 1.482-9(b)(4) is essentially a list of specific activities for which the SCM is unavailable because they are deemed to contribute significantly to key competitive advantages, core capabilities, or fundamental risks of success or failure of the business. These comments suggested that when section 59A(d) states that the exception therein is based on compliance with the services cost exception in section 482 “(determined without regard to the requirement that the services not contribute significantly to fundamental risks of business success or failure)”, that language was intended to disregard the list of excluded activities.
The comments requesting an expansion of the SCM exception for research and experimentation services also asserted that extending the SCM exception to these services would reduce the incentive to move intangible property offshore and would broaden the U.S. tax base by encouraging U.S. ownership and exploitation of newly created intangible property.
Section 59A(d)(5)(A) sets forth the parameters under which certain services—those that are eligible for the SCM without regard to the business judgment rule—are eligible for the SCM exception. The Treasury Department and IRS have considered the policy considerations that the comments raised for expanding the SCM exception, but have determined that the recommendation to expand the SCM exception is inconsistent with the parameters that Congress set forth in section 59A(d)(5). Further, the Treasury Department and IRS disagree with the premise in the comments that the list of excluded activities serves the same purpose as the business judgment rule. While certain services that are ineligible for the SCM as a result of being on the list of excluded activities also may be ineligible for the SCM as a result of failing the business judgment rule, the list of excluded activities from the SCM provides an objective list of categories that tend to be high margin or for which the cost of the services tends to be an inappropriate reference point for the price of those services.
For a discussion of QDPs, see Part VII of this Summary of Comments and Explanation of Revisions.
Proposed § 1.59A-3(b)(3)(iii) generally provides that a base erosion payment does not result from amounts paid or accrued to a foreign related party that are subject to tax as income effectively connected with the conduct of a trade or business in the United States (ECI). Comments recommended that final regulations adopt this rule. Accordingly, this rule is unchanged in the final regulations.
Several comments recommended that final regulations include a similar exception from the definition of a base erosion payment for payments made by a domestic corporation to a controlled foreign corporation (CFC) that result in a subpart F or global intangible low tax income (GILTI) inclusion. Another comment requested that this exception be extended to apply to payments made to a passive foreign investment company (PFIC) when a U.S. person has made a qualified electing fund (QEF) election, and the payment is included in the electing U.S. person's gross income. The comments asserted that payments that give rise to a subpart F or GILTI inclusion do not erode the U.S. tax base, and accordingly, warrant a base erosion payment exception under the same policy rationale for granting this type of exception in the proposed regulations for ECI, section 988 losses, and interest paid with respect to total loss-absorbing capacity (TLAC) securities. Finally, comments noted that proposed regulations under section 267A provide an exception for certain payments that result in income inclusions under section 951 and section 951A and suggested equivalent treatment was justified in the case of the BEAT.
The final regulations do not include a subpart F, GILTI, or PFIC exception to base erosion payment status. The Treasury Department and the IRS have determined that the reasons for adopting the other exceptions cited in the comments (such as the ECI exception and the exception under section 267A) do not warrant a subpart F, GILTI, or QEF exception from base erosion payment status.
First, comments have misinterpreted the underlying policy rationale for providing an ECI exception in the proposed regulations. The proposed regulations' ECI exception was adopted in part based upon the determination that it would be appropriate in defining a base erosion payment to consider the U.S. federal tax treatment of the foreign recipient—particularly, whether a payment received by a foreign related party was subject to tax on a net basis in substantially the same manner as amounts paid to a U.S. person. In contrast to the tax directly imposed on a foreign person with respect to its ECI under sections 871(b) and 882(a), a CFC receiving a base erosion payment is not directly subject to U.S. taxation. Rather, the U.S. shareholder is subject to tax under the subpart F or GILTI regime (or the PFIC rules). Thus, the CFC recipient
In addition, a foreign corporation that is engaged in a U.S. trade or business is itself subject to section 59A. In contrast, because neither a CFC nor a PFIC is subject to section 59A, the CFC or PFIC can make payments to a foreign related party without any BEAT consequences.
The ECI exception was also adopted to achieve symmetry with proposed § 1.59A-2(c), which treats foreign corporations as outside of the controlled group, except to the extent that the foreign corporation has ECI. Because foreign corporations with ECI are treated as part of the aggregate group in determining whether a taxpayer will ultimately be subject to the BEAT, the ECI exception to base erosion payment status is necessary to ensure that the foreign corporation is treated equivalently to a domestic member of its aggregate group receiving deductible payments.
The Treasury Department and the IRS further disagree with the premise that the approaches in the proposed regulations with respect to TLAC interest and section 988 losses support an exception for subpart F or GILTI income in the final regulations. With respect to TLAC, the preamble to the proposed regulations notes that the TLAC exception is appropriate because of the special status of TLAC as part of a global system to address bank solvency and the precise limits that regulations place on the terms of TLAC securities. REG-104259-18, 83 FR 65956, 65963 (December 21, 2018).
With respect to section 988, the preamble to the proposed regulations states that the exception is based on a determination that the losses did not present the same base erosion concerns as other types of losses that arise in connection with payments to a foreign related party.
The Treasury Department and the IRS also disagree with the premise that the approach in the proposed hybrid regulations under section 267A provides support for a regulatory exception. Section 267A(b)(1) expressly provides that the disqualified related-party amount does not include any payment to the extent that the payment is included in the gross income of a United States shareholder under section 951(a). Whereas Congress expressly provided an exception for subpart F in section 267A, Congress did not provide a similar exception for purposes of section 59A. The Treasury Department and the IRS have determined that the inclusion of a similar exception in another section of the Act, but not in section 59A, reflects Congressional intent to not provide a GILTI or subpart F exception for purposes of section 59A. In addition, section 59A(c)(4)(B) provides that a deduction under section 250 (providing a domestic corporation a deduction for a portion of its GILTI amount) is not included in the denominator for purposes of the base erosion percentage; this shows that Congress considered the interaction between section 59A and GILTI, but did not provide an exception from the term base erosion payment for payments subject to tax under section 951A.
Finally, with respect to the suggested GILTI exception, the Treasury Department and the IRS are concerned that a GILTI exception would be difficult to administer because it would require a determination of whether a particular payment to a CFC is included in the taxpayer's GILTI inclusion, but a taxpayer's GILTI inclusion often cannot be traced to particular payments to a CFC because a taxpayer's GILTI inclusion amount depends on multiple factors. A GILTI exception would also need to take into account differences in effective and marginal tax rates under GILTI, BEAT, and regular corporate income tax.
For the foregoing reasons, the final regulations do not provide a regulatory exception to the definition of a base erosion payment for a payment that may give rise to subpart F, GILTI, or PFIC inclusions.
Proposed § 1.59A-3(b)(3)(iv) provides that exchange losses from section 988 transactions described in § 1.988-1(a)(1) are excluded from the definition of base erosion payments. Proposed § 1.59A-2(e)(3)(ii)(D) provides that an exchange loss from a section 988 transaction (including with respect to transactions with persons other than foreign related parties) is not included in the denominator when calculating the base erosion percentage. The preamble to the proposed regulations requests comments on whether the denominator should exclude only section 988 losses with respect to foreign related-party transactions. REG-104259-18, 83 FR 65956, 65963 (December 21, 2018). Comments recommended that section 988 losses should not be excluded from the denominator of the base erosion percentage because excluding all section 988 losses is not consistent with the statute. Some comments, however, recommended that section 988 losses with respect to transactions with foreign related parties that are also excluded from the numerator should continue to be excluded from the denominator, and that this approach would be symmetrical with the approach in the statute for deductions for qualified derivative payments and for amounts eligible for the SCM exception. The final regulations adopt this recommendation.
Proposed § 1.59A-3(b)(3)(v) provides that the amount paid or accrued to a foreign related party with respect to total loss-absorbing capacity (“TLAC”) securities is not a base erosion payment, but only to the extent of the amount of TLAC securities required by the Board of Governors of the Federal Reserve (Federal Reserve Board) under subpart P of 12 CFR part 252.
Comments requested that the TLAC exception be expanded to include TLAC issued to comply with foreign laws and regulations that are similar to the TLAC requirements prescribed by the Federal Reserve Board. One comment observed that an exception for interest on TLAC that is issued to comply with foreign
The Treasury Department and the IRS generally agree with comments that the special status of TLAC as part of the global system to address bank solvency applies equally to TLAC securities whether issued pursuant to U.S. law or foreign law. Consistent with comments, the final regulations expand the scope of the TLAC exception to include internal securities issued by GSIBs pursuant to laws of a foreign country that are comparable to the rules established by the Federal Reserve Board (“foreign TLAC”), where those securities are properly treated as indebtedness for U.S. federal income tax purposes.
Comments also recommended that the final regulations increase the specified minimum amount of interest eligible for the TLAC exception to permit an additional “buffer” amount of TLAC that exceeds the minimum amount required to satisfy regulatory requirements (such as 115 percent of the specified minimum amount or a buffer equal to 1 to 1.5 percent of the risk-weighted assets). Comments explained that the inputs used to determine the minimum amount of TLAC needed to satisfy regulatory requirements change on a daily basis; as a result, the amount of TLAC securities needed also may change on a daily basis. The comments also noted that market issues dictate a certain lead time to issue TLAC securities. As a result, comments stated that it is the market expectation and practice that GSIBs operate with a buffer, which helps to ensure that TLAC does not fall below the minimum amount when risk-weighted assets or total leverage increase. Finally, the comments asserted that because the cost of issuing TLAC securities significantly exceeds the cost of issuing non-loss absorbing securities, banks are commercially incentivized to issue no more TLAC securities than necessary.
Because of the special status of TLAC as part of a global system to address bank solvency and the specific requirements established by the Board and other regulators, the Treasury Department and the IRS recognize that it is necessary and appropriate to take into account the market practices that have been adopted to prevent TLAC from falling below the specified minimum amount as required by regulations. For these reasons, the final regulations adopt the recommendation to provide a 15 percent buffer on the specified minimum amount of interest eligible for the exception. This buffer applies for both TLAC and foreign TLAC.
The Treasury Department and the IRS decline to expand the TLAC exception to cover interest payments on debt to foreign related parties that may satisfy regulatory capital requirements other than TLAC. The TLAC exception was adopted because of the unique role of TLAC securities in the global banking system for GSIBs; while other regulatory capital requirements may also serve an important role in bank regulation, the Treasury Department and the IRS are cognizant that the BEAT applies as a general matter to interest paid to foreign related parties, and have thus limited this regulatory exception to only those specific securities that are issued as part of the integrated international financial regulation and supervision system.
Comments recommended that the final regulations increase the specified minimum amount of interest eligible for the TLAC exception to permit interest with respect to TLAC debt in place during a three-year transition period before the year in which a corporation is required to have issued TLAC. The final regulations do not extend the TLAC exception to cover TLAC issued during a pre-effective date or transition period before being required to comply with the regulations prescribed by the Federal Reserve Board, because in that situation all of the debt is discretionary rather than mandatory. Further, there is no clear objective metric to scope discretionary issuances during a pre-effective period.
A comment recommended modifying the limitation on the exclusion for internal TLAC when a portion of the internal TLAC is held by the U.S. branch of a foreign person such that interest payments on the internal TLAC is also eligible for the ECI exception. The comment recommended that interest on the internal TLAC be first attributed to TLAC held by the U.S. branch of a foreign person, and thus excluded from the definition of a base erosion payment on the basis of the interest being ECI; and then only the incremental interest expense in excess of the amount payable to that branch would be subject to the TLAC scaling ratio limitation. The final regulations do not further expand the TLAC exception through such a rule, so as to retain the narrow scope of the TLAC exception to those securities that are required to be in place because of Federal Reserve Board requirements (taking into account the buffer described in this Part IV.C.5.b). The final regulations clarify the definition of TLAC securities amount to confirm that the TLAC scaling ratio applies without regard to whether TLAC interest is also eligible for another exclusion from base erosion payment status, and thus that the TLAC scaling ratio applies pro-rata to all internal TLAC.
Another comment recommended that the final regulations modify the definition of the “TLAC long term debt minimum amount” to reflect international standards, rather than Federal Reserve Board requirements because the comment asserted that the Federal Reserve Board may, in the future, eliminate the minimum requirement in the Federal Reserve Board regulations. Comments also recommended expanding the TLAC exception to apply to other intercompany debt that is issued to comply with other bank regulatory capital requirements. The Treasury Department and the IRS have determined that it is appropriate to limit the amount of the TLAC exception by reference to Federal Reserve Board requirements, notwithstanding comments suggesting that in the future the Federal Reserve Board may eliminate its minimum required amount. If there are meaningful changes in the total loss absorbing capacity systems in the future, the Treasury Department and the IRS would be able to reassess the section 59A regulations.
Finally, a comment recommended that the final regulations should not exclude interest on TLAC borrowing from the denominator of the base erosion percentage calculation, which is discussed in Part III of this Summary of Comments and Explanation of Revisions. The proposed regulations exclude from the denominator of the base erosion percentage amounts excluded under certain of the specific exceptions to base erosion payment status in § 1.59A-3(b) for SCM, QDP, and TLAC. This is in contrast to those amounts that are not base erosion payments because they are not within the main definition of a base erosion payment, for example, a payment to an unrelated third party, which remain in the denominator. The comment suggested that interest expense that is excluded from the definition of a base erosion payment under the TLAC exception should be viewed as like a payment to an unrelated third party, that is, the interest expense should remain in the denominator of the base erosion percentage. The comment premised this position on the view that internal TLAC should be viewed as issued to the holders of external TLAC (that is, to unrelated third party investors) under a theory that the issuer of internal TLAC is an intermediary or conduit for the issuer of the external TLAC securities. Therefore, there would be no underlying base erosion payment by the U.S. borrower on the internal TLAC, and thus the internal TLAC interest expense would remain in the denominator of the base erosion percentage calculation like interest paid to unrelated third parties. The proposed regulations and the final regulations provide a regulatory exception for internal TLAC on the basis of the special status of TLAC issued by GSIBs as part of the global system to address bank solvency. That is, the rationale for the TLAC exception in the proposed regulations and final regulations is not that the internal TLAC is a conduit for the external TLAC. For this reason, the final regulations (consistent with the proposed regulations) exclude from the denominator the TLAC interest in a manner consistent with the treatment of deductions covered by the SCM and QDP exceptions.
The proposed regulations provide that if tax is imposed by section 871 or 881, and the tax is deducted and withheld under section 1441 or 1442 without reduction by an applicable income tax treaty on a base erosion payment, the base erosion payment is treated as having a base erosion tax benefit of zero for purposes of calculating a taxpayer's modified taxable income and base erosion percentage. If an income tax treaty reduces the amount of withholding imposed on the base erosion payment, the amount of the base erosion payment that is treated as a base erosion tax benefit is reduced in proportion to the reduction in withholding. In the regulation section pertaining to base erosion tax benefits, the final regulations include a technical correction to the fraction used to determine the amount of a base erosion payment that is treated as a base erosion tax benefit when the rate of withholding imposed on that payment is reduced by an income tax treaty. § 1.59A-3(c)(3)(i). To avoid duplication, the final regulation section pertaining to the base erosion percentage replaces a similar operating rule with a cross reference to the rule for determining base erosion tax benefits. See § 1.59A-2(e)(3)(iii).
Under section 884(f) and § 1.884-4, a portion of interest expense allocated to income of a foreign corporation that is, or is treated as, effectively connected with the conduct of a trade or business in the United States (“excess interest”) is treated as interest paid by a wholly-owned domestic corporation to the foreign corporation. The foreign corporation is subject to tax under section 881 on the excess interest and is required to report the excess interest on its income tax return, subject to the exemption provided in section 881 for bank deposit interest and reduction or elimination under applicable tax treaties. However, no withholding is required under section 1441 and 1442.
A comment suggested that because excess interest is subject to tax under section 881(a) as if it were interest paid to a foreign corporation by a wholly-owned domestic corporation, the exclusion from base erosion tax benefits that applies to payments subject to full withholding should also apply to excess interest. The comment suggested that the exclusion from treatment as a base erosion tax benefit might apply to excess interest under the proposed regulations, but requested clarification. While excess interest would not be excluded from treatment as a base erosion tax benefit under the proposed regulations because it is not subject to withholding, the Treasury Department and the IRS have determined that it is appropriate to expand the general exclusion from base erosion tax benefits to include excess interest. Accordingly, the final regulations reduce any base
The final regulations also provide a coordination rule to clarify the interaction between the withholding tax exception and the rules determining the portion of interest expense attributable to ECI that is treated as paid to a foreign related party. As discussed in part IV.B.4. of this Summary of Comments Explanation of Revisions, interest expense attributable to ECI that is in excess of direct allocations and interest expense on U.S.-booked liabilities is treated as paid to a foreign related party in proportion to the foreign corporation's average worldwide ratio of interest expense paid to a foreign related party over total interest expense. This coordination rule provides that any interest, including branch interest under § 1.884-4(b)(1), on which tax is imposed under 871 or 881 and tax has been deducted and withheld under section 1441 or 1442 but which is not attributable to direct allocations or interest expense on U.S.-booked liabilities is treated as not paid to a foreign related party for purposes of determining the foreign corporation's average worldwide ratio.
Section 59A(c)(3) provides a stacking rule in cases in which section 163(j) applies to a taxpayer, under which the reduction in the amount of deductible interest is treated as allocable first to interest paid or accrued to persons who are not related parties with respect to the taxpayer and then to related parties. The statute does not provide a rule for determining which portion of the interest treated as paid to related parties (and thus potentially treated as a base erosion payment) is treated as paid to a foreign related party as opposed to a domestic related party. Proposed § 1.59A-3(c)(4) provides rules coordinating section 163(j) with the determination of the amount of base erosion tax benefits. This rule provides, consistent with section 59A(c)(3), that where section 163(j) applies to limit the amount of a taxpayer's business interest expense that is deductible in the taxable year, a taxpayer is required to treat all disallowed business interest first as interest paid or accrued to persons who are not related parties, and then as interest paid or accrued to related parties for purposes of section 59A. More specifically, with respect to interest paid to related parties, the proposed regulations provide that the amount of allowed business interest expense is treated first as the business interest expense paid to related parties, proportionately between foreign and domestic related parties. Conversely, the amount of a disallowed business interest expense carryforward is treated first as business interest expense paid to unrelated parties, and then as business interest expense paid to related parties, proportionately between foreign and domestic related-party business interest expense.
Proposed § 1.59A-3(c)(4)(i)(C) provides that business interest expense paid or accrued to a foreign related party to which the ECI exception in proposed § 1.59A-3(b)(3)(iii) applies is classified as domestic related business interest expense. One comment observed that the proposed regulations do not expressly provide similar rules for business interest expense paid to foreign related parties that is excluded from the definition of a base erosion payment under the TLAC exception or excluded from the definition of a base erosion tax benefit under the exception for payments subject to withholding tax. The final regulations confirm that those categories of interest expense retain their classification as payments to foreign related parties, but also that the foreign related business interest expense category is treated as consisting of interest that is eligible for these exceptions and interest that is not eligible for these exceptions, on a pro-rata basis.
See the 2019 proposed regulations for a proposal to provide an election (and certain procedural safeguards) by which a taxpayer may permanently forego a deduction for all U.S. federal tax purposes, with the result that the foregone deduction will not be treated as a base erosion tax benefit.
Proposed § 1.59A-4 contains rules relating to the determination of modified taxable income.
Section 59A(c)(1) defines modified taxable income as “the taxable income of the taxpayer computed under this chapter for the taxable year, determined without regard to—(A) any base erosion tax benefit with respect to any base erosion payment, or (B) the base erosion percentage of any net operating loss deduction allowed under section 172 for the taxable year.” Proposed § 1.59A-4(b)(2) clarifies that modified taxable income is computed by adding back the base erosion tax benefits and base erosion percentage of any net operating loss deductions (the “add-back method”). In addition, to prevent net operating loss benefits from being duplicated, proposed § 1.59A-4(b)(1) provides that taxable income may not be reduced below zero as a result of a net operating loss deduction.
Comments generally recommended one of three approaches to calculate modified taxable income: (1) The add-back method, (2) the “recomputation method,” and (3) the “limited recomputation method.”
Some comments recommended that the final regulations retain the add-back method because it would be simpler and easier to administer this method than a recomputation method. See Part V.A.2 of this Summary of Comments and Explanation of Revisions for a description of the recomputation method. Comments highlighted that the add-back method does not require attributes to be separately computed and tracked for regular income tax purposes and the BEAT. In addition, a comment asserted that this method more closely follows the statute, observing that the statutory language in section 59A(c) is substantially different from the recomputation-like language that was in section 59(a)(1)(B) relating to the foreign tax credit determination for alternative minimum tax purposes, which is now repealed for corporations.
Some comments recommended that the final regulations determine modified taxable income by using the recomputation method that is described in the preamble to the proposed regulations whereby the taxpayer's taxable income is recomputed without the excluded items, or a variation of that method.
Additionally, some comments requested a recomputation method with a separate tracking of attributes such as net operating loss carryovers, while others requested a recomputation method without a separate tracking of attributes. Some comments acknowledged that the recomputation method could give taxpayers a double benefit from non-base eroding deductions unless it required separate tracking of attributes for purposes of the BEAT. For example, one comment noted that the recomputation method would generally allow net operating loss carryovers to be used more rapidly for purposes of modified taxable income than for regular tax purposes because the taxable income limitation under section 172 on net operating loss deductions would be lower for regular tax purposes. As a result, the comment noted that if net operating loss carryovers are not separately tracked for purposes of the BEAT, a taxpayer may receive a double benefit from the non-base eroding deductions because those attributes reduce modified taxable income in the loss year, but if the attributes do not reduce the taxpayer's regular tax liability, the attributes would remain available to reduce modified taxable income in a future year. In contrast, another comment asserted that attributes should not be separately tracked because section 59A requires a snapshot of relative tax attributes that are applied independently to calculate taxable income and modified taxable income.
Some comments recommended that the final regulations permit a taxpayer to elect to recompute its taxable income with respect to pre-2018 net operating loss carryovers (the “limited recomputation method”). Under this approach, comments generally suggested the taxpayer would use the add-back method except with respect to pre-2018 net operating loss carryovers, which would be separately used and tracked for purposes of the BEAT. One comment suggested that this approach should apply to net operating losses generally, not only pre-2018 net operating loss carryovers. Comments asserted that the proposed regulations have the effect of denying some taxpayers the economic benefit of their pre-2018 net operating loss carryovers because they do not allow pre-2018 net operating loss carryovers to offset full tax liability of taxpayers. Some comments acknowledged that using net operating loss carryovers under any of the three methods discussed in this Part V.A of the Summary of Comments and Explanation of Revisions are timing differences (rather than permanent differences that would deny economic benefit) because pre-2018 net operating loss carryovers are allowed against modified taxable income as and when those net operating loss carryovers are deducted for regular tax purposes. Comments generally asserted that limiting the utilization of net operating loss carryovers is arguably retroactive in nature because it limits the tax benefit of pre-2018 net operating loss carryovers and is unduly harsh because it may cause a taxpayer to pay tax on an amount greater than its economic income. Some comments also asserted that the limited recomputation approach is more consistent with pre-Act section 172 and the policies supporting section 59A. The comments noted that the section 172 legislative history suggests that net operating loss deductions were allowed primarily to alleviate economic losses incurred by taxpayers and asserted that absent clear statutory language and expressed legislative intent to limit the use of net operating losses, taxpayers should be able to use the net operating loss carryovers without limitation in calculating their modified taxable income. However, the comment acknowledged that an attribute tracking system is required to prevent the same net operating loss carryovers from being deducted multiple times for the BEAT.
The final regulations retain the add-back method. The add-back method takes into account all the statutory language in section 59A(c)(1), which determines modified taxable income without regard to both the base erosion tax benefits and the base erosion percentage of net operating loss deductions. This approach is also consistent with the Joint Committee on Taxation's Explanation of the Act, which states that “an applicable taxpayer's modified taxable income is its taxable income for the taxable year,
Assume further that in 2021, DC has gross income of $70x, and no current year deductions. For regular tax purposes, DC is permitted a net operating loss deduction of $56x (section 172(a) limits the regular tax deduction for net operating losses that originated after the Act to 80 percent of taxable income before the net operating loss deduction), and thus DC has regular taxable income of $14x ($70x − $56x = $14x). Under the add-back method, DC's modified taxable income for 2021 would be computed as $36.4x, computed as regular taxable income of $14x, plus $0 base erosion tax benefits in 2021, plus the section 59A(c)(1)(B) base erosion percentage of the net operating loss allowed under section 172, $22.4x ($56x × 40 percent = $22.4x).
Under the recomputation method, DC would presumably need to recompute its 2021 taxable income
Further, as some comments noted, the add-back method is more consistent with the statutory framework of section 59A because the add-back method does not require additional rules regarding the treatment of separate tax attributes. The Treasury Department and the IRS have determined, and numerous comments acknowledged, that if the recomputation method were used, separate tracking of attributes would be required to avoid duplication of benefits. Unlike the alternative minimum tax that was repealed for corporations, the BEAT does not contain rules to address how a recomputation method would be implemented, including in the case of a section 381 transaction, a section 382 ownership change, or a deconsolidation. Thus, the recomputation methods would require the Treasury Department and the IRS to construct such rules by regulation. Moreover, as also identified by comments, the add-back method is simpler and easier to comply with and administer for both taxpayers and the IRS than the recomputation method or other methods (including a method by which a taxpayer could elect to apply the add-back or recomputation method) because the recomputation-based methods would require the taxpayer to calculate an entire parallel tax return and schedules to take into account iterative effects, whereas the add-back approach only requires addition, rather than iterative effects. As a result of these factors, the Treasury Department and the IRS have determined that it is not appropriate to permit the recomputation method.
These reasons for rejecting the recomputation method also apply to the limited recomputation method. Because the recomputation approach generally is not consistent with the statutory construct, it would be inappropriate to create a limited version of that approach to permit a taxpayer to use its pre-2018 net operating loss carryovers or all net operating loss carryovers. Section 59A does not provide special rules or preferences for pre-2018 net operating loss carryovers. In addition, the comments' assertions for pre-2018 net operating loss carryovers generally apply to subsequent net operating loss carryovers of certain taxpayers, and those carryovers would raise all the issues discussed.
The claim that taxpayers are losing the benefit of their net operating loss carryovers as a result of the add-back method in the proposed regulations is erroneous. Net operating loss carryovers continue to offset regular taxable income. Section 59A does not change that result, as the net operating loss deduction is allowed against modified taxable income as and when deducted for regular tax purposes. Section 172 does not provide that if a taxpayer has a net operating loss carryover then the taxpayer does not have to pay any taxes under any provision. Because the base erosion percentage of any net operating loss deduction is taken into account in determining modified taxable income, section 59A(c)(1)(B) specifically contemplates that a taxpayer may not obtain the full benefit of net operating loss carryovers even in a year in which the taxpayer uses a net operating loss deduction to fully offset taxable income for purposes of its regular tax liability.
Moreover, the statutory language in section 59A does not explicitly limit that provision to net operating loss deductions related to carryovers that originated in tax years beginning after December 31, 2017; rather, that limitation resulted from the vintage year approach adopted in proposed § 1.59A-4(b)(2)(ii). Absent that provision, or if proposed § 1.59A-4(b)(2)(ii) had adopted a current year base erosion percentage approach, the add-back provision in section 59A(c)(1)(B) could have also applied to net operating loss deductions related to carryovers that originated in pre-2018 tax years. See Part V.B of this Summary of Comments and Explanation of Revisions for a discussion of the comments related to proposed § 1.59A-4(b)(1) and limiting the net operating loss deduction for purposes of computing modified taxable income.
Under the add-back method, section 59A(c) provides that the computation of modified taxable income starts with the taxpayer's regular taxable income for the year. Section 172(a) generally provides that for regular tax purposes a deduction is allowed for the tax year in an amount equal to the net operating loss carryover to the year. For net operating loss carryovers originating after the Act, the net operating loss deduction is generally limited for regular tax purposes to 80 percent of taxable income computed without regard to the net operating loss deduction. Section 172(a). For net operating loss carryovers originating before the Act, the net operating loss carryover deduction generally is not limited for regular tax purposes. Section 13302(e)(1) of the Act. Proposed § 1.59A-4(b)(1) provides that taxable income may not be reduced below zero as a result of net operating loss deductions. The preamble to the proposed regulations explains that the rule is necessary because section 172(a) could be read to provide that the same net operating loss carryover could reduce modified taxable income in multiple years. REG-104259-18, 83 FR 65965 (December 21, 2018).
The preamble to the proposed regulations provides an example where a taxpayer has a net operating loss carryover of $100x that arose in a taxable year beginning before January 1, 2018. REG-104259-18, 83 FR 65965 (December 21, 2018). In a subsequent year, the taxpayer has taxable income of $5x before taking into account the $100x net operating loss carryover. Absent the rule in proposed § 1.59A-4(b)(1), the taxpayer might claim the entire $100x net operating loss carryover as a $100x deduction in that year to create a $95x taxable loss for determining modified taxable income, even though $95x of the net operating loss carryover would remain as a carryover to future years. Proposed § 1.59A-4(b)(1) ensures that a net operating loss is taken into account only once in determining a taxpayer's modified taxable income.
Some comments recognized the need for proposed § 1.59A-4(b)(1) consistent with the preamble to the proposed regulations. A comment acknowledged that if the net operating loss carryover deductions are not limited to the amount of taxable income, those net operating losses could reduce taxable income—and therefore the taxpayer's BEAT liability—multiple times. Another comment noted that, without proposed § 1.59A-4(b)(1), allowing net operating loss carryovers to be taken into account for modified taxable income to the same extent as general taxable income would give rise to certain complex questions concerning net operating loss carryovers for general tax purposes.
Other comments asserted that there is no authority in section 59A for limiting the net operating loss deduction to the amount of taxable income, that the rule in proposed § 1.59A-4(b)(1) is contrary to the statute, and that the final regulations should permit taxable income to be negative as a result of net operating loss carryovers. Comments noted that modified taxable income is determined based on taxable income, which generally is gross income minus deductions allowed under chapter 1, including the net operating loss deduction. Another comment noted that with respect to the amount of net operating loss deduction in a taxable year, when Congress wants to place a floor on a number, it does so expressly; for example, section 59A(b)(1)(B) provides that regular tax liability is “reduced (but not below zero).” In contrast, there is no similar language in section 59A or section 172(a) prior to the Act for net operating loss deductions.
Comments also asserted that the limitation on the use of net operating loss carryovers as deductions in a taxable year causes taxpayers to be liable for tax pursuant to the BEAT on their base erosion tax benefits even though they are not liable for regular income tax because of their net operating loss deductions that reduced regular taxable income to zero. Comments also asserted that the proposed regulations effectively reduce the extent to which the net operating loss carryforwards may be used.
Other comments requested that the final regulations provide a transition to the proposed rule preventing taxable income to be negative as a result of a net operating loss deduction. One comment requested that final regulations provide for a deferral of the effective date of proposed § 1.59A-4(b)(1) of one or two years. Another comment requested that final regulations provide that taxpayers may reduce their BEAT liability by (a) an amount equal to the pre-2018 net operating loss carryover that offset taxable income, multiplied by (b) the difference between the regular income tax rate and the BEAT rate because section 59A should not retroactively reduce the value of the pre-2018 net operating loss carryovers. These comments also highlighted a situation where a taxpayer's regular taxable income is reduced entirely by available pre-2018 net operating loss carryovers, but the taxpayer also has base erosion tax benefits that increase modified taxable income, causing a BEAT liability. The comments asserted that imposing BEAT on this modified taxable income amounts to a retroactive reduction in the value of the taxpayer's pre-2018 net operating loss carryovers, and recommended that the final regulations adopt this methodology by which pre-2018 attributes are provided a 21 percent tax rate benefit, which is similar to the limited recomputation method discussed in Part V.A of this Summary of Comments and Explanation of Revisions.
These comments are not adopted in the final regulations. First, the comments focused on a technical reading of section 172(a) as it applies to net operating loss carryovers that originated before the Act. That version of section 172(a) did not expressly limit the amount of net operating loss deduction for regular tax purposes to 100 percent of taxable income computed without regard to the net operating loss deduction. As it existed before the Act, there was no reason to limit the section 172(a) deduction in this manner because before the Act there was no consequence to claiming a net operating loss deduction greater than 100 percent of current year taxable income. For example, before the Act, a taxpayer's net operating loss carryover was only reduced by the amount of net operating loss deduction that was actually used to reduce taxable income to zero.
In addition to the technical reading of section 172(a) as it applies to net operating loss carryovers that originated before the Act, the Treasury Department and the IRS continue to believe, consistent with some of the comments received, that limiting net operating loss deductions to the amount of taxable income for purposes of computing modified taxable income is necessary and appropriate to prevent net operating loss carryovers from being used multiple times to reduce modified taxable income. If the final regulations did not limit the amount of net operating loss carryover deductions for purposes of calculating modified taxable income, a taxpayer with a large pre-2018 net operating loss carryover would be able to reduce modified taxable income in multiple years with the same net operating loss carryover, without reducing the net operating loss carryover for regular income tax purposes.
The fact that taxpayers with sufficiently large pre-2018 net operating loss carryovers may be able to avoid paying regular income tax in a taxable year does not mean that those taxpayers should be permitted to offset the entire amount of their BEAT liability in that taxable year, or in other words, not be liable for tax under the BEAT. As discussed in Part V.A. of this Summary of Comments and Explanation of Revisions, the limitation on net operating loss deductions for determining modified taxable income impacts only the BEMTA. This limitation does not prevent the use of pre-2018 net operating loss carryover to reduce regular taxable income to zero. Further, to the extent a taxpayer's pre-2018 net operating loss carryovers exceed the taxpayer's taxable income, the taxpayer continues to use those remaining net operating loss carryovers in later years to offset some or all regular taxable income; and the taxpayer continues to reduce modified taxable income by the same amount in those later years.
A comment asserted that the add-back method creates an economic disparity between similarly situated taxpayers because taxpayers without pre-2018 net operating loss carryovers can make more base erosion payments than taxpayers with pre-2018 net operating loss carryovers before being subject to BEAT liability. However, taxpayers with pre-2018 net operating loss carryovers are not similarly situated to taxpayers
One comment questioned why current year losses can result in negative taxable income for BEAT purposes, while net operating losses that are carried to a different year cannot result in negative taxable income in that different year. Proposed § 1.59A-4(b)(1) permits taxpayers that have current year losses to use that negative income amount as a starting point for computing modified taxable income because the Treasury Department and the IRS determined that if taxpayers were not permitted to use that negative amount as a starting point for calculating modified taxable income, the base erosion tax benefits for that year could be double counted. That is, the base erosion tax benefits for that year could be included in modified taxable income for the current year and in the year the net operating loss carryover is used because of the add-back of the base erosion percentage of the net operating loss deduction in the year used. Because of this concern, the proposed regulations expressly permit current year losses to be taken into account as the starting point for computing modified taxable income. Proposed §§ 1.59A-4(b)(1) and (c).
Section 59A(i) provides a broad grant of regulatory authority, permitting the Secretary to prescribe regulations as may be necessary or appropriate to carry out the provisions of the section. For the reasons discussed, the Treasury Department and the IRS have determined that limiting the net operating loss deduction to taxable income in computing modified taxable income is within the grant of authority, and the final regulations do not adopt the comments requesting a different rule. The final regulations also do not adopt a rule providing a fixed 21 percent tax rate benefit for all pre-2018 net operating loss carryovers. The fact that a taxpayer may have positive modified taxable income (resulting in a positive BEAT tax liability) even if the taxpayer has a lesser amount of regular taxable income because pre-2018 net operating loss carryovers reduce taxable income is a part of the statutory framework of the BEAT; that is, imposing tax on a modified taxable income base. See also, the response to the limited recomputation method discussed in Part V.A of this Summary of Comments and Explanation of Revisions.
Proposed § 1.59A-4(b)(1) generally defines modified taxable income as a taxpayer's taxable income computed under chapter 1, determined without regard to base erosion tax benefits and the base erosion percentage of any net operating loss deduction under section 172 for the taxable year. Under the proposed regulations, the base erosion percentage for the year that the net operating loss carryover arose (the “vintage year” base erosion percentage) is used to compute modified taxable income. Proposed § 1.59A-4(b)(2)(ii). Although the computation of modified taxable income is made on a taxpayer-by-taxpayer basis, the proposed regulations clarify that in computing the add-back for net operating loss deductions, the relevant base erosion percentage is the base erosion percentage for the aggregate group, which is used to determine whether the taxpayer is an applicable taxpayer.
A comment noted that an aggregate base erosion percentage could potentially take into account deductions of another aggregate group member that are not otherwise included in a taxpayer's return. The comment questioned whether a more precise determination of a taxpayer's vintage year base erosion percentage is appropriate.
The Treasury Department and the IRS have determined that the base erosion percentage that is applied to net operating loss deductions when computing modified taxable income should be computed on the basis of the taxpayer and its aggregate group in the same manner as the base erosion percentage that is computed for determining whether the taxpayer is an applicable taxpayer under section 59A(e). Section 59A(e)(3) requires aggregation for purposes of computing the base erosion percentage that is used to determine whether a taxpayer is an applicable taxpayer and to determine the portion of net operating loss deductions that are included in computing modified taxable income pursuant to section 59A(c)(1)(B). Because Congress chose to determine the base erosion percentage on an aggregate basis, it follows that one aggregate group member's deductions can affect the base erosion percentage that will apply with respect to another member of the group. For these reasons, the final regulations do not revise the rules for determining the base erosion percentage that is applied to net operating loss deductions when computing modified taxable income.
Section 59A(c)(1)(B) provides that modified taxable income includes the base erosion percentage of any net operating loss deduction allowed under section 172 for the taxable year. Proposed § 1.59A-4(b)(2)(ii) provides that the base erosion percentage of the year in which the loss arose, or the “vintage year,” is used to compute modified taxable income rather than the base erosion percentage in the year in which the taxpayer takes the net operating loss deduction.
One comment requested guidance on how the vintage year approach is applied when in the vintage year the taxpayer has both deductions that are base erosion tax benefits and deductions that are not base erosion tax benefits. The comment stated that it is not clear how to compute or order the base erosion percentage because the proposed regulations do not provide rules for determining which type of deductions were used in that vintage year to offset gross income, and which deductions were carried forward as net operating loss carryforwards. The comment provided an example in which the taxpayer in year 1 has gross income of $800x and deductions of $1000x that consist of $250x of base erosion tax benefits and $750x of non-base erosion tax benefits, resulting in a $200x net operating loss. The comment requested clarification for determining how the deductions are ordered for determining the base erosion percentage of the year 1 $200x net operating loss carryover when that carryover is deducted in a later year.
The final regulations do not revise the vintage year rule because section 59A(c)(1)(B) and the proposed regulations already provide that the base erosion percentage used with respect to the net operating loss deduction is the base erosion percentage of the taxpayer in the relevant taxable year (in this example, $250x/$1000x = 25 percent). That is, no specific ordering rule is required because the base erosion percentage calculation for the vintage year takes into account a proportionate amount of each type of deduction (or $250x divided by $1000x in the example).
Another comment suggested that in applying the vintage year approach to net operating loss deductions, a simplifying convention should be provided to address target corporations that have net operating loss carryovers and become members of a taxpayer's
Proposed § 1.59A-5 contains rules regarding the calculation of BEMTA and provides the base erosion and anti-abuse tax rate that applies to the taxpayer's taxable year. The proposed regulations provide that an applicable taxpayer computes its BEMTA for the taxable year to determine its liability under section 59A(a). Proposed § 1.59A-5(b). Generally, the taxpayer's BEMTA equals the excess of (1) the applicable tax rate for the taxable year (“BEAT rate”) multiplied by the taxpayer's modified taxable income for the taxable year over (2) the taxpayer's adjusted regular tax liability for that year. Proposed § 1.59A-5(b). In determining the taxpayer's adjusted regular tax liability for the taxable year, credits (including the foreign tax credit) are generally subtracted from the regular tax liability amount. Proposed § 1.59A-5(b)(2). Consistent with section 59A(b)(1)(B), the proposed regulations provide that for taxable years beginning before January 1, 2026, the credits allowed against regular tax liability (which reduce the amount of regular tax liability for purposes of calculating BEMTA) are not reduced by the research credit determined under section 41(a) or by a portion of applicable section 38 credits.
To prevent an inappropriate understatement of a taxpayer's adjusted regular tax liability, the proposed regulations provide that credits for overpayment of taxes and for taxes withheld at source are not subtracted from the taxpayer's regular tax liability because these credits relate to U.S. federal income tax paid for the current or previous year. Proposed § 1.59A-5(b)(3)(i)(C) and (ii).
The proposed regulations provide that the computations of modified taxable income and BEMTA are done on a taxpayer-by-taxpayer basis. That is, the aggregate group concept is used solely for determining whether a taxpayer is an applicable taxpayer, and does not apply to the computations of modified taxable income and the BEMTA. The preamble to the proposed regulations explains that if taxpayers calculated BEMTA differently depending on their differing views of the base on which the BEAT should be calculated (that is, aggregate group, consolidated group, individual company), this could lead to inequitable results across otherwise similar taxpayers. REG-104259-18, 83 FR 65974 (December 21, 2018).
The proposed regulations also explain that it is expected to be less costly for taxpayers to calculate BEMTA on a taxpayer-by-taxpayer basis because the statutory framework of section 59A applies in addition to the regular tax liability of a taxpayer. Calculating BEAT liability at an aggregate level, for example, would require any BEAT liability to be reallocated among the separate taxpayers.
Comments requested that electing taxpayers be permitted to apply the aggregation rules of section 59A(e)(3) to determine their modified taxable income and BEMTA. Electing taxpayers would effectively compute modified taxable income and BEMTA at the level of the aggregate group rather than at the level of the separate taxpayer.
The comments explained that aggregation would permit a group with multiple consolidated returns to be given full credit for the group's contributions to the U.S. tax base. Comments further explained that, in certain instances, business, legal, or regulatory reasons prevent groups with multiple taxpayers from forming an affiliated group of corporations within the meaning of section 1504 that can file a single consolidated return. However, the comments asserted that these groups still represent a single economic unit where they have a common parent and overall management, share services, and are generally treated as a single employer.
Comments also suggested that an election to apply the aggregation rules for BEMTA would prevent inequitable results in the application of the BEAT. For example, some comments suggested that it would be inequitable for a single consolidated group within an aggregate group that had a large amount of NOLs, minimal regular tax liability, and little to no base erosion payments to be subject to the BEAT as a result of a separate consolidated group's high base erosion percentage.
The comments suggested that an aggregate approach would result in an insignificant amount of additional complexity and little additional burden to taxpayers and the government. Comments also made suggestions regarding particular requirements of the election, such as requirements that each taxpayer joining the election have the same taxable year-end, agree to provide the IRS with all information needed to compute the aggregate BEAT liability, agree to be allocated a pro-rata share of the aggregate BEAT liability, and give consent for the statute of limitations to remain open until the audits of all group members with respect to the information used to determine that aggregate BEAT liability have closed.
The final regulations do not adopt the recommendations. The Treasury Department and the IRS recognize that, in determining whether a taxpayer is an applicable taxpayer, and for determining certain computational matters relating to modified taxable income and the BEMTA, section 59A applies by reference to the taxpayer and the members of its aggregate group. Section 59A does not explicitly extend that aggregate group treatment to the computation of a taxpayer's BEMTA or the resulting tax liability. The rules relating to the aggregate group concept are complex, and they produce meaningful differences from the single-entity concepts in the consolidated return regulations. See Part III of this Summary of Comments and Explanation of Revisions. Section 1502 and the regulations thereunder contain detailed rules for implementing the single taxpayer elements of the consolidated return regulations. No similar rules are expressly contemplated in section 59A with respect to BEMTA. Adding similar rules to these final regulations would add significant complexity and would require the IRS to audit a parallel BEMTA computation system. Consistent with section 1502 and the regulations thereunder, aggregate groups of taxpayers that file a consolidated return must compute BEMTA on a single-entity basis under section 59A and the final regulations.
A comment noted that taxpayers may have credits generated in taxable years beginning before January 1, 2018, that carry forward to be used in taxable years beginning after December 31, 2017. In the case of net operating losses that arose in taxable years beginning before January 1, 2018, and that are deducted as carryovers in taxable years beginning after December 31, 2017, the comment also noted that proposed § 1.59A-4(b)(2)(ii) provides that those deductions are excluded from modified taxable income.
The comment requested that the final regulations exclude section 38 credits and foreign tax credits generated in pre-2018 taxable years from the definition of credits allowed under chapter 1 of the Code. As a result of this request, these credits would not be subtracted from the regular tax liability amount in determining BEMTA. Alternatively, the comment requested that the partial exclusion of section 38 credits from the calculation of BEMTA in proposed § 1.59A-5(b)(3)(i)(B) be extended to foreign tax credits.
The final regulations do not adopt this comment. With respect to net operating losses that arose in taxable years beginning before January 1, 2018, the exclusion of these deductions from the calculation of modified taxable income results from two statutory elements: (i) Section 59A(c)(1) provides that the starting point for modified taxable income is “taxable income of the taxpayer computed under [chapter 1 of the Code] for the taxable year . . .”; that is, modified taxable income starts with taxable income, as reduced for any net operating loss deduction under section 172; and (ii) section 59A(c)(1)(B) provides that modified taxable income includes, or adds back to taxable income, the base erosion percentage of any NOL deduction under section 172 for the taxable year. This statutory framework for determining modified taxable income establishes that section 59A permits the net operating loss deduction to reduce some or all of the current year's pre-NOL taxable income, but that a portion of the tax benefit from that NOL deduction is added back to taxable income. Further, § 1.59A-4(b)(2)(ii) applies the base erosion percentage of the year in which the loss arose for this purpose, which effectively means that net operating losses incurred in taxable years ending on or before December 31, 2017, are entirely excluded from the calculation from modified taxable income when those deductions are used to reduce or eliminate regular taxable income. In contrast to this explicit statutory framework that addresses the lifecycle of the net operating loss carryforward, section 59A does not provide a similar rule for credits. Instead, section 59A(b)(1)(B) provides that all credits allowed under chapter 1 of the Code against regular taxable income for the taxable year are excluded from the calculation of BEMTA, except for specifically enumerated credits that are partially or fully allowed to reduce BEMTA. Because section 59A(b)(1) refers to all credits allowed to reduce taxable income during the taxable year and makes no distinction as between those credits that originated in the current taxable year or a prior taxable year, the Treasury Department and the IRS have determined that the proposed regulations are consistent with the statute, and the final regulations retain the same rules with respect to section 38 credits and foreign tax credits.
Generally, a taxpayer's BEMTA equals the excess of (1) the applicable tax rate for the year multiplied by the taxpayer's modified taxable income for the taxable year over (2) the taxpayer's adjusted regular tax liability for that year. In determining the taxpayer's adjusted regular tax liability for the taxable year, credits are generally subtracted from the regular tax liability amount. To prevent an inappropriate understatement of a taxpayer's adjusted regular tax liability, the proposed regulations provide that credits for overpayment of taxes and for taxes withheld at source are not subtracted from the taxpayer's regular tax liability because these credits relate to U.S. federal income tax paid for the current or previous year.
Historically, an alternative minimum tax (“AMT”) was imposed on a corporation to the extent the corporation's tentative minimum tax exceeded its regular tax. If a corporation was subject to AMT in any year, the amount of AMT was allowed as an AMT credit in any subsequent taxable year to the extent the corporation's regular tax liability exceeded its tentative minimum tax in the subsequent year. Bluebook, pp. 92, 94.
The Act repealed the corporate AMT, and allows the corporate AMT credit to offset the entire regular tax liability of the corporation for a taxable year. In addition, the AMT credit is allowable and generally refundable for a taxable year beginning after 2017 and before 2022 in an amount equal to 50 percent (100 percent in the case of taxable years beginning in 2021) of the excess (if any) of the minimum tax credit for the taxable year over the amount of the credit allowed for the year against regular tax liability. Bluebook p. 97.
Comments requested that AMT credits be excluded from the calculation of credits that reduce adjusted regular tax liability because they represent income taxes imposed in a previous tax year and allowed as credits in a subsequent tax year. The Treasury Department and the IRS agree with these comments. Accordingly, § 1.59A-5(b)(3) provides that AMT credits, like overpayment of taxes and for taxes withheld at source, do not reduce adjusted regular tax liability for purposes of section 59A.
Generally, under proposed § 1.59A-2(e)(1), a taxpayer, or the aggregate group of which the taxpayer is a member, satisfies the base erosion percentage test to determine applicable taxpayer status if its base erosion percentage is at least three percent. However, section 59A(e)(1)(C) and proposed § 1.59A-2(e)(2)(i) provide that a lower threshold of two percent applies if the taxpayer is a member of an affiliated group (as defined in section 1504(a)(1)) that includes a domestic bank or registered securities dealer. Proposed § 1.59A-2(e)(2)(ii) applies this two-percent threshold to the aggregate group of which a taxpayer is a member that includes a bank or registered securities dealer that is a member of an affiliated group. Proposed § 1.59A-2(e)(2)(iii) provides a de minimis exception to this lower two-percent base erosion percentage threshold in the case of an aggregate group or consolidated group that has de minimis bank or registered securities dealer activities as measured by gross receipts. Specifically, proposed § 1.59A-2(e)(2)(iii) provides that an aggregate group that includes a bank or a registered securities dealer that is a member of an affiliated group is not treated as including a bank or registered securities dealer for a taxable year if the total gross receipts of the aggregate group attributable to the bank or the registered securities dealer represent less than two percent of the total gross receipts of the aggregate group (or consolidated group if there is no aggregate group). Even if a taxpayer qualifies for the de minimis exception to the lower base erosion percentage test threshold, proposed § 1.59A-5(c)(2) provides that the BEAT rate is increased by an additional one percent for any
A comment requested that the final regulations provide for a higher de minimis threshold of five percent and clarify that in characterizing the income of a corporation with a bank or securities dealer division for purposes of this threshold, only the gross receipts arising from the conduct of the banking or securities business would be taken into account. The Treasury Department and the IRS have determined that this modification to the de minimis threshold is not warranted because this de minimis exception in the proposed regulations was developed based on a qualitative assessment of a very small degree of activities to justify a regulatory-based exception to the statutory provision that applies to a bank or registered securities dealer. Accordingly, the final regulations retain the two-percent de minimis threshold.
Comments supported the proposed regulations' de minimis exception to the lower base erosion percentage threshold and suggested that a similar exception be created regarding the increased BEAT rate for a taxpayer that is a member of an affiliated group with de minimis gross receipts attributable to banking or securities dealer activities. In instances where the base erosion percentage exceeds three percent, the comments questioned the appropriateness of applying the BEAT rate add-on of one percent to the non-financial members of the affiliated group when the gross receipts of the financial members are insignificant relative to the non-financial members.
The final regulations adopt this comment by revising § 1.59A-5(c)(2) to provide that the additional one percent add-on to the BEAT rate will not apply to a taxpayer that is part of an affiliated group with de minimis banking and securities dealer activities.
A comment recommended that an additional exception to the increased BEAT rate should be provided where the bank or securities dealer members of an affiliated group make no more than a de minimis amount of base erosion payments, measured by reference to aggregate affiliated group base erosion payments. The final regulations do not adopt this recommendation because the base erosion percentage test already operates as a statutory rule that limits the BEAT to taxpayers (without regard to any particular type of business) that have a relatively low degree of base erosion payments.
A comment requested that the final regulations include a transitory ownership exception to apply where a bank or securities dealer is a member of an affiliated group for only a short period (such as 90 days) during the taxable year. The stated purpose of this request was to allow time for a taxpayer that acquires a group that includes a bank or registered securities dealer to dispose of the bank or securities dealer member of a target affiliated group without causing the entire acquiring affiliated group to become subject to the higher BEAT rate applicable to taxpayers with bank or registered securities dealer members. The Treasury Department and the IRS decline to expand the regulatory de minimis exception to include an exception based on short-term ownership, but note that a taxpayer in this situation may be eligible for the de minimis regulatory exception if the bank and securities dealer operations are relatively small. If the operations are not sufficiently small, the statutory rules that apply to banks and registered securities dealers would no longer apply in taxable years after the disposition of the bank or securities dealer.
A comment observed that the rule in the proposed regulations extending the lower base erosion percentage threshold to the entire aggregate group that includes a bank or registered securities dealer is not supported by the language of section 59A. The comment proposed that the proper application of section 59A requires that the lower base erosion percentage should be limited to only the affiliated group that includes a bank or registered securities dealer, and not the remainder of the taxpayer's aggregate group. The final regulations do not adopt this comment. The Treasury Department and the IRS note that section 59A(e)(3) specifically requires aggregation for purposes of computing the base erosion percentage. Further, the implication of the comment is that in measuring whether a particular taxpayer has a base erosion percentage that is greater than the prescribed level in section 59A(e)(3)(C), the threshold level would be blended. That is, under the approach recommended by the comment, a taxpayer with a bank or securities dealer in its aggregate group would compute a relative weighting of the bank/dealers (two percent threshold) vs. non-bank/dealers (three percent threshold) in order to compute a blended threshold that is used for the base erosion percentage test. There is no indication in the statutory language supporting this approach. Accordingly, no changes are made to the final regulations in this regard.
Section 59A(b)(1)(A) provides that the base erosion minimum tax amount of an applicable taxpayer for any taxable year is the excess of an amount equal to 10 percent (5 percent in the case of taxable years beginning in calendar year 2018) of the modified taxable income of the taxpayer for the taxable year. Proposed § 1.59A-5(c) provides the base erosion and anti-abuse tax rates that apply for purposes of calculating the BEMTA. The base erosion and anti-abuse tax rate is five percent for taxable years beginning in calendar year 2018 and 10 percent for taxable years beginning after December 31, 2018, and before January 1, 2026. Proposed § 1.59A-5(c)(1)(i) and (ii). Proposed § 1.59A-5(c)(3) provides that section 15 does not apply to any taxable year that includes January 1, 2018, and further provides that for a taxpayer using a taxable year other than the calendar year, section 15 applies to any taxable year beginning after January 1, 2018. In the case of taxpayers that use a taxable year other than the calendar year and that includes January 1, 2019, this proposed regulation provides that section 15 applies to the change in the section 59A tax rate from 5 percent to 10 percent, based on an effective date of January 1, 2019.
Several comments asserted that final regulations should provide that section 15 applies only to the change in tax rate set forth in section 59A(b)(2) and should not apply to the change in tax rate included in section 59A(b)(1)(A) for taxable years beginning in calendar year 2018. The final regulations adopt this comment. In adopting this comment that section 15 not apply to the change in tax rate included in section 59A(b)(1)(A) for taxable years beginning in calendar year 2018, the final regulations provide no inference as to the application of section 15 to other provisions of the Code that do not set forth an explicit effective date.
Proposed § 1.59A-6 provides guidance regarding QDPs.
Proposed § 1.59A-6(b) defines a QDP as a payment made by a taxpayer to a foreign related party pursuant to a derivative with respect to which the taxpayer (i) recognizes gain or loss as if the derivative were sold for its fair market value on the last business day of
A comment requested that the scope of the QDP definition be expanded. The comment requested that the final regulations extend the scope of the QDP exception so that multinational corporations that use a centralized hedging center structure can benefit from this exception from the definition of a base erosion payment with respect to their outbound related-party hedging payments. The comment stated that taxpayers in the oil and gas sector often do not adopt a mark-to-market method of tax accounting for a variety of business and tax-related reasons. The comment recommended that the final regulations adopt a distinct QDP exception that would be applicable to oil and gas hedging centers (as well as any similarly situated hedging centers). The comment requested that this QDP exception exclude related-party hedging payments from the scope of base erosion payments, without regard to whether the taxpayer satisfies the requirement in section 59A(h)(2)(A)(i) that the taxpayer accounts for the underlying commodity derivative on a mark-to-market basis. As an alternative, the comment suggested that the final regulations could interpret the mark-to-market requirement of section 59A(h)(2)(A)(i) broadly to cover taxpayers that undertake mark-to-market accounting for derivatives for either financial accounting or tax purposes.
For a derivative payment to qualify for the QDP exception, section 59A(h)(2)(A) requires that the taxpayer recognize gain or loss with respect to the derivative as if the derivative were sold for its fair market value on the last business day of the taxable year, and “such
Section 59A(h)(1) provides that a QDP is not treated as a base erosion payment. To qualify for the QDP exception, the payment must be made with respect to a derivative. A derivative is generally defined in section 59A(h)(4) as any contract the value of which, or any payment or other transfer with respect to which, is directly or indirectly determined by reference to one or more listed items, including any share of stock in a corporation or any evidence of indebtedness. A derivative does not include any of the listed items. Section 59A(h)(3) excludes from the QDP exception any payment that would be treated as a base erosion payment if it were not made pursuant to a derivative (for example, interest on a debt instrument). Section 59A(h)(3) also excludes any payment properly allocable to a nonderivative component of a contract that contains derivative and nonderivative components.
The preamble to the proposed regulations notes that a sale-repurchase transaction satisfying certain conditions is treated as a secured loan for U.S. federal tax purposes, and therefore, is not a derivative. REG-104259-18, 83 FR 65962 (December 21, 2018). The preamble to the proposed regulations explains that “[b]ecause sale-repurchase transactions and securities lending transactions are economically similar to each other, the Treasury Department and the IRS have determined that these transactions should be treated similarly for purposes of section 59A(h)(4), and therefore payments on those transactions are not treated as QDPs.” REG-104259-18, 83 FR 65963 (December 21, 2018). As a result, proposed § 1.59A-6(d)(2)(iii) provides that a derivative does not include any securities lending transaction, sale-repurchase transaction, or substantially similar transaction.
Comments generally agreed that a sale-repurchase transaction that is treated as a secured loan for U.S. federal income tax purposes is not a derivative; therefore, comments acknowledged that a sale-repurchase transaction that is treated as a secured loan for U.S. federal tax purposes is not eligible for the QDP exception under section 59A, regardless of the specific exclusion language in proposed § 1.59A-6(d)(2)(iii). Certain comments explained that the nominal seller of the securities in a sale-repurchase transaction is treated as transferring the securities as collateral of a loan. Comments interpret current federal income tax law to provide that the nominal seller remains the tax owner of the securities when a sale-repurchase transaction is treated as a secured loan for federal income tax purposes. Therefore, when the nominal buyer of the securities receives payments with respect to the collateral securities (for example, in the case of an equity security, the dividend payments), and passes those payments on to the nominal seller (or otherwise credits the seller for the amount of the payments), the comments asserted that the nominal seller is treated as having directly received those payments from the issuer of the securities.
In the context of section 59A, if the nominal seller in a sale-repurchase transaction that is treated as a loan is a domestic corporation and the nominal buyer is a foreign related party, any interest paid with respect to the secured loan from the domestic corporation to the foreign related party would be a base erosion payment, not a QDP. In a sale-repurchase transaction that is treated as a loan for which the nominal seller is instead a foreign related party and the nominal buyer is a domestic corporation, the payments with respect to the security held by the nominal buyer as collateral for that transaction are treated as received by the nominal buyer for the benefit of the nominal seller. Because there is no regarded “substitute payment” from the nominal buyer to the nominal seller, there cannot be a base erosion payment.
Comments asserted that securities lending transactions and sale-repurchase transactions are treated differently with respect to underlying payments or substitute payments as a result of proposed § 1.59A-6(d)(2)(iii) even though the transactions are economically similar. Comments observed that in a typical fully-collateralized securities lending transaction, the securities lender transfers the securities to the securities borrower in exchange for an obligation by the borrower to make certain payments to the securities lender and return identical securities. Unlike a sale-repurchase transaction, comments remarked that this transaction results in a transfer of beneficial ownership of the securities to the securities borrower for U.S. federal income tax purposes. Comments noted that these securities lending transactions may arise in the ordinary course of business, for example, to facilitate a short sale of the
Comments suggested that the final regulations should treat a collateralized securities lending transaction as consisting of two legs: (1) A loan of securities, or a “securities leg”, and (2) a loan of cash, or a “cash leg.” Comments stated that the cash leg is simply a cash borrowing by the security lender. Many comments conceded that the cash leg of a securities lending transaction should not be eligible for the QDP exception because the cash leg is properly treated as a loan and any payments should be treated as interest. Certain of these comments observed that the treatment of the cash leg of a securities lending transaction as debt giving rise to interest payments is consistent with the broadly symmetrical treatment of securities lending transactions and sale-repurchase transactions that are treated as secured loans for U.S. federal income tax purposes.
Comments, however, asserted that the securities leg of a securities lending transaction should be treated as a derivative that qualifies for the QDP exception. The comments argued that a securities leg meets the statutory requirement of a derivative because it represents a contract, which includes any short position, the value of which, or any payment or other transfer with respect to which, is (directly or indirectly) determined by reference to any share of stock in a corporation. By treating a substitute payment in a securities lending transaction as eligible for the QDP exception, those payments would receive similar treatment for purposes of section 59A as in the case of a sale-repurchase transaction that is treated as a secured loan. That is, in the sale-repurchase transaction, the remittances on the collateral by the nominal buyer to the nominal seller are treated as a payment from the issuer of the security to the nominal seller for U.S. federal income tax purposes.
Some comments acknowledged that in certain circumstances, there is the potential to use a securities lending transaction as a financing. One comment described a scenario involving an uncollateralized securities borrowing by a domestic corporation of relatively risk-free debt, such as short-term Treasury bills, from a foreign related party. As a second step, the domestic corporation immediately sells the Treasury bills for cash; after a short period, the taxpayer buys even shorter-term Treasury bills and redelivers them to the lender. Comments acknowledged that in this situation, or in similar situations, the transaction may be viewed as economically equivalent to borrowing money, with the taxpayer exposed to the relatively small risk of changes in the value of the security (here, U.S. government-backed Treasury bills).
Rather than excluding all securities lending transactions from QDP status, comments generally recommended that the final regulations adopt rules to address this particular risk. Some comments recommended adopting a specific operating rule to address this concern, including (i) providing that only contracts entered into in the ordinary course of the taxpayer's trade or business can qualify for the QDP exception, (ii) providing that only fully collateralized transactions can qualify for the QDP exception, or (iii) applying different rules for securities lending transactions involving relatively low-risk securities (such as Treasury bills) than for other securities that are subject to more market risk. Regarding fully collateralized securities lending transactions, some comments asserted that under certain bank regulatory regimes, other amounts outside of the actual collateral in the transaction may effectively serve as collateral due to the securities borrower's compliance with any specific regulatory regime governing securities borrowing. Some comments recommended that the final regulations adopt an anti-abuse rule rather than an operating rule to address this concern. One comment suggested an anti-abuse rule that excludes from the QDP exception transactions with specific debt-like features that make the transaction substantially similar to a financing, while another comment noted that it would be unduly burdensome to test contracts based on certain characteristics, particularly for taxpayers that engage in a high volume of these transactions in the ordinary course. This comment instead suggested that all securities lending transactions entered into for valid non-tax business purposes should be eligible for the QDP exception.
In response to these comments, the final regulations make certain revisions to § 1.59A-6(d)(2)(iii). First, § 1.59A-6(d)(2)(iii) has been revised to more directly provide that a derivative contract as defined in section 59A(h)(4) does not include a sale-repurchase transaction or substantially similar transaction that is treated as a secured loan for U.S. federal income tax purposes. Second, § 1.59A-6(d)(2)(iii) is also revised to exclude from the definition of a derivative for purposes of section 59A(h) the cash leg of a securities lending transaction, along with cash payments pursuant to a sale-repurchase transaction, or other similar transaction. The final regulations no longer expressly exclude securities lending transactions from the definition of a derivative contract in § 1.59A-6(d)(2)(iii). As a result, payments (such as a borrow fee) made with respect to the securities leg of a securities lending transaction may qualify as a QDP.
To address the concern about securities lending transactions that have a significant financing component, the final regulations adopt the recommendation from comments to provide an anti-abuse rule.
Section 59A(h)(2)(B) provides that no payment is a QDP for a taxable year “unless the taxpayer includes in the information required to be reported under section 6038B(b)(2)
Section 1.6038A-1(c) generally defines a reporting corporation as either a domestic corporation that is 25-percent foreign-owned, or a foreign corporation that is 25-percent foreign-owned and engaged in trade or business within the United States. A comment recommended that the final regulations clarify that a failure to comply with the Form 8991 reporting requirements by a taxpayer that is not a reporting corporation (within the meaning of § 1.6038A-1(c)) does not affect the QDP status of any payments made by the taxpayer. The comment also recommended that the final regulations clarify the consequences of failing to comply with the Form 8991 QDP reporting requirements.
Section 59A(h)(2)(B) requires that all taxpayers, whether or not the taxpayer is a reporting corporation within the meaning of section 6038A, report QDPs in order for the exception to apply to any particular payment. The Treasury Department and the IRS interpret the language in section 59A(h)(2)(B) referencing section 6038B(b)(2) (“the information required to be reported under section 6038B(b)(2) [sic]”) as addressing the scope of information required to be reported rather than limiting the scope of taxpayers that must report in order to qualify derivatives as QDPs under section 59A(h). The final regulations, therefore, clarify that § 1.59A-6(b)(2)(i) applies to all taxpayers (whether or not a taxpayer is a reporting corporation as defined in § 1.6038A-1(c)) and that all taxpayers must report the information required by § 1.6038A-2(b)(7)(ix) for a payment to be eligible for QDP status.
Comments also requested additional guidance regarding the consequences when a taxpayer fails to comply with the QDP reporting requirements with respect to a particular payment. The proposed regulations provide that a failure by a taxpayer to report a particular payment as a QDP disqualifies only that payment and does not affect the taxpayer's properly reported payments. The final regulations retain that rule. In addition, § 1.59A-6(b)(2)(i) provides that a taxpayer satisfies the reporting requirement by including a QDP in the aggregate amount of all QDPs (rather than the aggregate amount as determined by type of derivative contract as provided in proposed § 1.6038A-2(b)(7)(ix)(A)) on Form 8991 or a successor form.
Another comment requested a reasonable cause exception to the QDP reporting requirements because treating a payment as a base erosion payment solely when a taxpayer failed to report the payments as a QDP would unfairly penalize a taxpayer for making an error. The Treasury Department and the IRS have determined that a reasonable cause exception is inappropriate because section 59A(h)(2)(B) provides that a taxpayer must identify all base erosion payments. A taxpayer must determine that a payment is eligible for the QDP exception and, therefore, properly excluded from the base erosion percentage calculation. Similarly, a taxpayer must determine that a payment is properly characterized as a QDP to properly determine modified taxable income for purposes of section 59A. In addition, a reasonable cause exception would make it more difficult for the IRS to administer section 59A. However, as discussed in Part VII.C.3 of this Summary of Comments and Explanation of Revisions, the final regulations provide a good faith standard that applies during the QDP transition period before the reporting set forth in § 1.6038A-2(b)(7)(ix) is required. In addition, in response to comments, the transition period has been extended to 18 months.
A comment recommended that the final regulations clarify that taxpayers may use the net amount with respect to each derivative transaction to arrive at the aggregate QDP amount that must be reported on Form 8991. The comment noted that this approach would be consistent with the BEAT Netting Rule for mark-to-market transactions. See Part III.D of Summary of Comments and Explanation of Revisions. Generally, the Treasury Department and the IRS have adopted this comment.
Another comment requested excluding from QDP reporting requirements any payments with respect to securities lending transactions and sale-repurchase transactions that are not regarded under generally accepted accounting principles (GAAP). The final regulations do not adopt this recommendation. Reporting QDPs is a statutory requirement to provide the IRS with data about transactions that have been excluded under the QDP exception, and the financial accounting for these transactions is not relevant to QDP status. Furthermore, the Treasury Department and the IRS have determined that the deferred applicability date and transition period, described in Part VII.C.3 of Summary of Comments and Explanation of Revisions, will provide taxpayers with adequate time to develop systems to track the information that may not have been previously maintained in accounting systems.
Comments asserted that taxpayers needed additional time before the final regulations regarding QDP reporting are applicable. Comments noted that before the enactment of section 59A, taxpayers generally were not required to separately track or account for certain transactions with foreign related parties. The Treasury Department and the IRS recognize that section 59A will require taxpayers to develop new systems to properly report QDPs; therefore, the final regulations extend the transition period for meeting the complete QDP reporting requirements until taxable years beginning Monday, June 7, 2021.
Another comment requested additional guidance regarding the QDP reporting requirements that apply before the applicability date of the final regulations for these rules (the “QDP transition period”). Specifically,
Proposed § 1.59A-7 provides rules regarding how partnerships and their partners are treated for purposes of the BEAT. The proposed regulations generally apply an aggregate approach in addressing the treatment of payments made by a partnership or received by a partnership for purposes of section 59A.
The proposed regulations treat a contribution to a partnership as a transaction between the partners that may result in a base erosion payment, including when a partnership with a domestic corporate partner receives a contribution of depreciable property from a foreign related party. Several comments requested a change to the approach taken in the proposed regulations. One comment asserted that the issuance of a partnership interest in exchange for a contribution to a partnership was not intended to be a base erosion payment covered by section 59A(d)(2) and that subjecting inbound nonrecognition transactions to the BEAT seems contrary to the purpose of the Act, which the comment stated was to encourage taxpayers to relocate business functions and assets to the United States and expand business activities in the United States. The comment noted that if Congress intended to subject nonrecognition transactions to the BEAT, it would have done so more explicitly.
Other comments generally asserted that nonrecognition transactions should not be subject to the BEAT. Some of these comments specifically addressed section 721 transactions and recommended that the same exception for section 351 transactions that is discussed in Part IV.B.3 of this Summary of Comments and Explanation of Revisions apply to section 721(a) transactions.
In contrast, a comment noted that applying an aggregate approach to partnerships for purposes of the BEAT was consistent with the purposes of the statute. The comment asserted that treating a contribution of property in exchange for a partnership interest as a potential base erosion payment is consistent with the concept of treating a partnership as an aggregate of its partners and with the purposes of section 59A. The comment explained that to the extent there is a base eroding transaction when property (such as depreciable property) is contributed to a partnership under section 721, it is the acquisition of a proportionate share of new property by the existing partners from a contributing partner (assuming that partner is a foreign related party). The comment also explained that the existing partners would have paid for the new property with a proportionate share of the existing assets of the partnership. In addition, the comment noted that a contributing partner (such as a domestic corporation) could be acquiring a proportionate share of the partnership's existing assets (where one or more partners of the partnership are foreign related parties).
The final regulations do not adopt the comments requesting an exception for nonrecognition transactions involving partnerships. The general premise of the aggregate approach to transactions involving partners and partnerships in both the proposed regulations and the final regulations is to treat partners as engaging in transactions directly with each other, not as engaging in transactions with the partnership as a separate entity (solely for purposes of section 59A). See § 1.59A-7(b) and (c); proposed § 1.59A-7(b)(1)-(3); REG-104259-18, 83 FR 65965 (December 21, 2018). The Treasury Department and the IRS acknowledge that the final regulations include an exception for specified corporate nonrecognition transactions that is discussed in Part IV.B.3 of the Summary of Comments and Explanation of Revisions, which presents some similarity with the types of transactions contemplated by this comment. For example, if a domestic corporation and a foreign related party each contribute depreciable property to a new domestic corporation in exchange for stock of the new domestic corporation in a transaction that qualifies under section 351(a), the new domestic corporation generally will not be treated as making a base erosion payment in exchange for the depreciable property pursuant to the new exception in the final regulations for specified corporate nonrecognition transactions that is discussed in Part IV.B.3 of the Summary of Comments and Explanation of Revisions. In contrast, if the same domestic corporation and a foreign related party each contribute depreciable property to a new partnership in exchange for interests in the partnership in a transaction that qualifies under section 721(a), the transaction is treated as a partner-to-partner exchange that may result in a base erosion payment solely for purposes of section 59A, with no specific exception adopted in the final regulations.
The final regulations do not extend the exception for specified corporate nonrecognition transactions to partnership transactions because that treatment would be generally inconsistent with the approach of treating partners in a partnership as engaging in transactions with each other. The preamble to the proposed regulations states that the Treasury Department and the IRS determined that a rule that applies the aggregate principle consistently is necessary to align the treatment of economically similar transactions. REG-104259-18, 83 FR 65956, 65967 (Dec. 21, 2018).
The adoption of a section 721(a) exception to the BEAT could permit related parties to use a partnership to avoid a transaction that would be a base erosion payment if that transaction occurred directly among the partners. The Treasury Department and the IRS acknowledge that in some respects, a similar argument could be made against adopting the exception for specified corporate nonrecognition transactions that applies to the section 351(a) example that is described in this Part VIII.A.1; however, the general tax rules that apply to corporations under subchapter C are fundamentally different from the general tax rules that apply to partnerships under subchapter K. In particular, when property is distributed by a partnership back to the partner, nonrecognition by the partnership and the partner is the general rule under subchapter K; however, when property is distributed by a corporation back to its shareholder,
Proposed § 1.59A-3(b)(2)(i) confirms that an amount “paid or accrued,” as those terms are used for purposes of determining whether there is a base erosion payment, includes an amount paid or accrued using any form of consideration.
A comment asserted that subchapter K of the Code contains well-developed provisions to distinguish between a sale or exchange, as opposed to a contribution, and that there should only be a “payment or accrual” for purposes of section 59A(d) to the extent a partner is treated as receiving proceeds from the partnership pursuant to a sale (for example, under the disguised sale rules of section 707). Similarly, a comment recommended that a distribution by a partnership described in section 731 generally not be treated as an amount paid or accrued for purposes of section 59A, except to the extent that the transaction would be treated as a deemed sale of property by the partnership.
In addition, one comment recommended that if the final regulations continue to treat certain partnership contributions and distributions as “payments” that could be base erosion payments, the applicability date of the provisions relating to this treatment should be modified to take into account that taxpayers have engaged in contributions to (or distributions by) partnerships between December 31, 2017, and December 21, 2018, without guidance that these transactions could be treated as base erosion payments. The comment also recommended a special rule to exclude pro-rata contributions (contributions made by each partner of the partnership in proportion to its interest in the partnership) from the definition of “an amount paid or accrued.”
The final regulations continue to treat contributions to and distributions from partnerships as “payments” that could be base erosion payments under the aggregate approach. Section 59A does not contain an explicit restriction on the type of consideration that constitutes a payment. Proposed § 1.59A-3(b)(2)(i) confirms that “an amount paid or accrued includes an amount paid or accrued using any form of consideration, including cash, property, stock, or the assumption of a liability.” The final regulations include the same language. The Treasury Department and the IRS have determined that it is not appropriate to change the operating rule describing payment consideration or delay its application. However, in response to comments, the final regulations add partnership interests to the non-exclusive list of examples of consideration in § 1.59A-3(b)(2)(ii) to reaffirm this result.
The final regulations do not exclude pro-rata contributions from the definition of “an amount paid or accrued” and therefore, they are not excluded from the definition of a base erosion payment. If pro-rata contributions are made by each partner, each transaction must be separately considered, consistent with the general rule in section 59A that assesses transactions on a gross, rather than net, basis. A pro-rata contribution exclusion would be inconsistent with the aggregate approach taken in these final regulations. For example, if there was an exception, a domestic corporation could contribute cash to a new partnership and its foreign parent could contribute depreciable property, each in proportion to their interest in the partnership, and under the exception, the transaction would not be subject to section 59A even though, under the aggregate approach, the domestic corporation effectively acquired its proportionate share of the contributed depreciable property from a foreign related party in exchange for cash.
Consistent with the approach taken for contributions to a partnership, the Treasury Department and the IRS determined that no special rule should be provided for distributions by a partnership. The approach suggested by a comment—only treating distributions subject to the disguised sales rules as potential base erosion payments—would be inconsistent with the aggregate approach to partnerships for the reasons discussed in the context of partnership contributions.
A comment recommended that contributions of depreciable (or amortizable) property by a foreign related party to a partnership (in which an applicable taxpayer is a partner) or distributions of depreciable or amortizable property by a partnership (in which a foreign related party is a partner) to an applicable taxpayer be excluded from the definition of a base erosion payment to the extent that the foreign related party would receive (or would be expected to receive) allocations of income from that partnership interest that would be taxable to the foreign related party as effectively connected income. The final regulations do not include rules relating to these comments. In the 2019 proposed regulations, however, the Treasury Department and the IRS request comments regarding how to address a contribution by a foreign person to a partnership engaged in a U.S. trade or business, transfers of partnership interests by a foreign person, and transfers of property by the partnership with a foreign person as a partner to a related U.S. person. See Part VI.B of the Explanation of Provisions of the preamble to the 2019 proposed regulations in which the Treasury Department and the IRS request comments regarding transactions involving partners and partnerships that have effectively connected income.
Proposed § 1.59A-3(b)(2)(iii) provides that the amount of any base erosion payment is determined on a gross basis unless the transaction is subject to a special mark-to-market rule or the Code or regulations otherwise provide. A comment requested that a special netting rule be provided for partnerships when the base erosion tax benefits allocated by a partnership are reduced by deductions foregone as a result of the partner contributing property to the partnership.
The Treasury Department and the IRS have determined that this suggestion is inconsistent with the gross basis regime generally. See Part IV.A.3 of this Summary of Comments and Explanation of Revisions (Netting). The result addressed in the comment is the same result that would arise if the transactions had occurred outside of a partnership. For example, a taxpayer that acquired one depreciable asset from a foreign related party and sold another asset would be in a similar position: the taxpayer would treat the depreciation with respect to the acquired asset as a base erosion tax benefit and there would
Proposed § 1.59A-7(b)(5)(i) provides that (subject to the small partner exception), for purposes of section 59A, each partner is treated as owning its share of the partnership items determined under section 704, including the assets of the partnership, using a reasonable method with respect to the assets. A comment proposed either removing the phrase “including the assets of the partnership” from this rule or including examples that clarify the purposes of section 59A for which the aggregate approach to the ownership of partnership assets is relevant.
In response to this comment, the final regulations remove this language from § 1.59A-7(b)(5)(i). Instead, when it is necessary for a person to determine what assets were transferred from or to a partner in a partnership, the relevant provision refers to the partner's proportionate share of the assets, as determined based on all of the facts and circumstances.
Proposed § 1.59A-7(b) generally provides that section 59A is applied at the partner level and that amounts paid or accrued by (or to) a partnership are treated as paid or accrued by (or to) the partners based on their distributive shares.
A number of comments requested clarification with respect to the aggregate approach taken in the proposed regulations. For example, a comment indicated that the proposed regulations do not address how to determine each partner's share of a payment received by a partnership if the payment results in no income or gain or results in a deduction or loss (for example, where a partnership sells depreciable or amortizable property to an applicable taxpayer and the amount realized is equal to or less than the partnership's adjusted basis in the property). The comment recommended that the final regulations provide rules for determining the extent to which a partner is treated as receiving a payment received by a partnership where the payment results in no income or a deduction or loss. The comment suggested that taxpayers be permitted to use a reasonable method to determine each partner's share of a payment received by the partnership if the payment results in no income and that, in circumstances where a payment results in a deduction or loss, the partner's share of the payment be determined by the partner's share of the deduction or loss. Additionally, the comment suggested that the final regulations permit taxpayers to use a reasonable method to determine each partner's share of the payment received by the partnership where the income or gain is recognized over multiple taxable years (such as in an installment sale).
Comments also requested that the final regulations clarify that depreciation deductions allocated to a taxpayer by a partnership that are attributable to property contributed to the partnership by a foreign related party are not treated as base erosion tax benefits if the property was contributed before the effective date of the BEAT.
One comment requested clarification regarding a scenario described in the preamble in which a foreign related party and a taxpayer form a partnership, and the foreign related party contributes depreciable property to the partnership. The preamble concludes that deductions for depreciation of the property contributed generally are base erosion tax benefits because the partnership is treated as acquiring the property in exchange for an interest in the partnership under section 721(a). REG-104259-18, 83 FR 65956, 65967 (Dec. 21, 2018). The comment requested that the final regulations clarify whether, in the scenario described in the preamble, each partner is treated as making its share of the payment (in the form of an interest in the partnership) to the foreign related party contributing the depreciable property under proposed § 1.59A-7(b)(2) in determining if there is a base erosion payment. The language in the preamble to the proposed regulations that the comment discussed was in error. Consistent with the aggregate approach, the language should have stated that the deductions for depreciation of the property contributed generally are base erosion tax benefits because the
In response to the comments, the final regulations provide a more detailed explanation of how the aggregate approach set forth in the proposed regulations operates, including the treatment of partnership contributions and transfers of partnership interests (including issuances). In addition, § 1.59A-7(g) includes examples illustrating the application of the rules.
The final regulations clarify that if property described in § 1.59A-3(b)(1)(ii) or (iv) (depreciable or amortizable property or property that results in reductions to determine gross income) is transferred to a partnership, each partner is treated as receiving its proportionate share of the property for purposes of determining if it has a base erosion payment. Similarly, if the partnership transfers property described in § 1.59A-3(b)(1)(ii) or (iv), each partner is treated as transferring its proportionate share of the property for purposes of determining if the recipient has a base erosion payment.
In keeping with this construct, if a taxpayer was a partner in a partnership and a foreign related party contributed depreciable property to the partnership before January 1, 2018, there would be no base erosion payment. However, also consistent with this construct, if a taxpayer acquires an interest (including an increased interest) in any partnership asset (including pursuant to a transfer of a partnership interest either by the partnership or by another person) on or after January 1, 2018, from a partnership that holds depreciable property and has a foreign related party as a partner whose interest in the asset is reduced, with or without a section 754 election by the partnership, that transaction will be a base erosion payment because the property will be treated as acquired on or after January 1, 2018.
The final regulations also clarify that the amount of deduction resulting from a payment is not impacted by the gain or loss arising from the consideration used to make the payment. Therefore, if the partnership makes a payment, that payment from the partnership may result in a deduction even if the partnership incurs a gain on the transfer under general tax principles because the partnership used built-in gain property as consideration. Similarly, if the partnership receives a payment as consideration for the sale of built-in loss property, that payment to the partnership will result in income.
If a series of payments or accruals with respect to a transaction occurs over time, whether there is a base erosion payment is determined each time there is a payment or accrual. If, instead, there is a single payment that results in base erosion tax benefits being allocated by a partnership over multiple years, the portion of the payment that is a base erosion payment must be determined at the time of the payment, but the amount of the base erosion tax benefits will be determined based on the allocations by the partnership that occur each year. For example, if a partnership, whose partners are a domestic corporation and an unrelated person, acquires depreciable property from a foreign related party of the domestic corporation, then the entire amount is a base erosion payment with respect to the domestic corporation and any allocations by the partnership of depreciation to the domestic corporation are base erosion tax benefits.
The final regulations clarify that if a distribution of property from a partnership to a partner causes an increase in the tax basis of property that either continues to be held by the partnership or is distributed from the partnership to a partner, such as under section 732(b) or 734(b), the increase in tax basis for the benefit of a taxpayer that is attributable to a foreign related party is treated as if it was newly purchased property by the taxpayer from the foreign related party that is placed in service when the distribution occurs for purposes of determining if a taxpayer has a base erosion payment.
The final regulations also include certain additional operating rules to clarify how § 1.59A-7 applies. For example, § 1.59A-7(c)(5)(ii) clarifies the order in which the base erosion payment rules apply, and § 1.59A-7(c)(5)(iv) reaffirms that if both parties to a transaction use non-cash consideration, each transfer of property must be separately analyzed to determine if there is a base erosion payment.
The final regulations also clarify that if a transaction is not specifically described in § 1.59A-7, whether it gives rise to a base erosion payment or base erosion tax benefit will be determined in accordance with the principles of § 1.59A-7 and the purposes of section 59A.
Given the absence in the statute of a provision describing the specific treatment of partnerships and partners, the Act's legislative history, and the overall significance of the proper functioning of the BEAT regime, the Treasury Department and the IRS have determined that, in addition to section 59A, certain authorities in subchapter K provide support for the treatment of partners and partnerships under these final regulations. The 1954 legislative history to subchapter K makes clear that this determination of aggregate versus entity should be based on the policies of the provision at issue, in this case, section 59A. See H.R. Rep. No. 83-2543, at 59 (1954). Under the rules of subchapter K, an aggregate approach applies if it is appropriate to carry out the purpose of a provision of the Code, unless an entity approach is specifically prescribed and clearly contemplated by the relevant statute.
For purposes of determining whether a payment or accrual by a partnership is a base erosion payment, proposed § 1.59A-7(b)(2) provides that (subject to the small partner exception) any amount paid or accrued by a partnership is treated as paid or accrued by each partner based on the partner's distributive share of items of deduction (or other amounts that could be base erosion tax benefits) with respect to that amount (as determined under section 704). A comment noted that proposed § 1.59A-7(b)(2) does not indicate how a partner's base erosion tax benefits would be determined if a partner's distributive share of the partnership item that produces the base erosion tax benefits changed from one taxable year to another taxable year. The comment concluded that the amount of a partner's distributive share of deductions with respect to property acquired by the partner's base erosion payment that is treated as a base erosion tax benefit may not correspond to the amount of the partner's initial base erosion payment with respect to that property. The comment recommended that the final regulations clarify whether any amount of the partner's distributive share of deductions with respect to property acquired by a base erosion payment (in any amount) that is treated as made by the partner would be a base erosion tax benefit, subject to the small partner exception.
Another comment requested that the final regulations provide that when depreciable property is contributed to a partnership that adopts the remedial method under § 1.704-3(d) with respect to that property, the remedial items of depreciation (which may be allocated to a partner that is an applicable taxpayer) should not be treated as base erosion tax benefits. The comment further asserted that treating remedial items as base erosion tax benefits would penalize applicable taxpayers that are U.S. transferors in section 721(c) partnerships for which the gain deferral method is applied.
As recommended by a comment, § 1.59A-7(d)(1) clarifies that the base erosion tax benefits are not dependent on the amount of the base erosion payment, and provides that a partner's base erosion tax benefits are the partner's distributive share of any deductions described in § 1.59A-3(c)(1)(i) or (ii) or reductions to determine gross income described in § 1.59A-3(c)(1)(iii) or (iv) attributable to the base erosion payment.
The final regulations also clarify that a taxpayer's base erosion tax benefits resulting from a base erosion payment include the partner's distributive share of any deduction or reduction to determine gross income attributable to the base erosion payment, including as a result of section 704(c), section 734(b), section 743(b) or certain other sections.
The proposed regulations provide that partners with certain small ownership interests are excluded from the aggregate approach for purposes of determining base erosion tax benefits from the partnership. This small partner exception generally applies to partnership interests that: (i) Represent less than ten percent of the capital and profits of the partnership; (ii) represent less than ten percent of each item of income, gain, loss, deduction, and credit; and (iii) have a fair market value of less than $25 million.
Comments recommended expanding the thresholds for the small partner exception for partnership interests and items to 25 percent, and eliminating the fair market value limitation. The comments suggested that the compliance burden associated with the thresholds in the proposed regulations would be substantial and that minority partners may have little or no ability to obtain the necessary information from the partnership.
The final regulations do not adopt these recommendations. In determining the appropriate threshold for a small ownership interest in the proposed regulations, the Treasury Department and the IRS considered the treatment of small ownership interests in partnerships in analogous situations in other Treasury regulations. Further, the fair market value threshold addresses a concern that while a partner may have a relatively small interest in a partnership, the partnership itself could have significant value such that partnership items should not be excluded from the BEAT base when an analogous payment made outside of the partnership context is not similarly excluded from the BEAT base. The $25 million fair market value threshold was developed after qualitative consideration of these factors.
Comments also recommended that the small partner exception apply to payments made to a partnership. The final regulations do not adopt this recommendation. The proposed regulations included the small partner interest exception for payments by a partnership in part because the Treasury Department and the IRS were cognizant that small partners in a partnership may not always have sufficient information about the amounts of payments made by the partnership and the identity of the payee. The Treasury Department and the IRS were also cognizant that this type of information is not currently reportable by the partnership to its partners on a Form K-1; that is, without information provided by the partnership to the taxpayer partner, that partner may not be able to determine whether it is treated as having made a base erosion payment through the partnership pursuant to proposed § 1.59A-7. The Treasury Department and the IRS considered these factors, and reached a qualitative conclusion that at or below the threshold level set forth in the proposed regulations, the administrability considerations outweighed the competing consideration of ensuring that base erosion payments through a partnership are properly taken into account by taxpayer partners in the partnership.
In a situation where a taxpayer makes a payment to a partnership (that is, a payment that may be a base erosion payment under proposed § 1.59A-7 because a partner in the partnership is a foreign related party with respect to the payor), the administrability concerns that factored into the small partner exception for payments by a partnership are less pronounced. That is, the taxpayer (payor) will generally have information to determine whether it has made a payment to a partnership in which any foreign related party is a partner without needing to obtain significant information from the partnership. Based on these factors, the Treasury Department and the IRS reached a qualitative conclusion that the administrability aspects of accounting for payments by a taxpayer to a partnership are not outweighed by the competing consideration of ensuring that base erosion payments to a partnership are properly taken into account by taxpayer payors.
Proposed § 1.59A-9 contains anti-abuse rules that recharacterize certain transactions in accordance with their substance for purposes of carrying out the provisions of section 59A. The proposed anti-abuse rules address the following types of transactions: (a) Transactions involving intermediaries acting as a conduit if there is a principal purpose of avoiding a base erosion payment (or reducing the amount of a base erosion payment); (b) transactions with a principal purpose of increasing the deductions taken into account in the denominator of the base erosion percentage; and (c) transactions among related parties entered into with a principal purpose of avoiding the application of rules applicable to banks and registered securities dealers (for example, causing a bank or registered securities dealer to disaffiliate from an affiliated group so as to avoid the requirement th at it be a member of such a group).
Comments generally requested more guidance on when a transaction has “a principal purpose” of avoiding a provision of section 59A. Comments expressed a concern that any transaction that would result in a lower BEAT liability could be viewed as having “a principal purpose” of avoiding a provision of the section 59A regulations. Comments also expressed a concern that the anti-abuse rules could be interpreted as applying to transactions undertaken in the ordinary course of a taxpayer's business. One comment requested that the Treasury Department and the IRS consider whether existing anti-abuse rules and judicial doctrines, including section 7701(o), are sufficient to address abuse of section 59A.
Consistent with the grant of authority in section 59A(i), the Treasury Department and the IRS believe that anti-abuse rules specific to section 59A are needed. The final regulations address the requests for clarity regarding the “principal purpose” standard in the final regulations by adding new examples that illustrate the differences between transactions that the Treasury Department and the IRS find to be abusive or non-abusive.
A comment requested that the anti-abuse rule for transactions involving intermediaries acting as a conduit be modified so that it would not apply to transactions where taxpayers restructure their operations in a way that reduces their base erosion payments because they have moved operations to the United States. The comment asserted that proposed § 1.59A-9(b)(1) should not apply where taxpayers restructure their operations for business reasons even if, under the resulting structure, payments are made to a foreign related party through an intermediary. As an example, the comment suggested that taxpayers might restructure their business so that a domestic related party performs functions previously performed by a foreign related party. However, if the foreign related party continues to perform some functions that benefit the taxpayer, and payments for those functions are made through the
Another comment requested clarification on when the anti-abuse rule in proposed § 1.59A-9(b)(1) could apply to a “corresponding payment” to an intermediary that would have been a base erosion payment if made to a foreign related party. The final regulations do not modify this rule because the rule is already clear that it applies to a corresponding payment that is part of a transaction, plan, or arrangement that has a principal purpose of avoiding a base erosion payment, and the final regulations include examples of transactions with such a purpose. Another similar comment requested clarification on when the anti-abuse rule in proposed § 1.59A-9(b)(1) could apply to an “indirect” corresponding payment. The final regulations do not modify this rule because it is already clear that transactions involving conduits and intermediaries can include transactions involving multiple intermediaries, for example, multiple intermediary lenders in a fact pattern similar to that in proposed § 1.59A-9(c)(4) (Example 4), and thus expanding that example to involve another intermediary would be redundant.
Other comments asked for a clarification that the anti-abuse rule for transactions designed to inflate the denominator of the base erosion percentage applies only to non-economic deductions such as those described in the example in proposed § 1.59A-9(c)(5) (Example 5). One comment recommended that the rule be limited to deductions and losses incurred for “the” principal purpose of increasing the denominator. The comment expressed a concern that the rule could be interpreted as applying to deductions and losses on transactions undertaken in the ordinary course of a taxpayer's business. The final regulations do not change the standard for determining whether transactions that increase the denominator of the base erosion percentage are abusive. Narrowing the rule to apply only to transactions where the single principal purpose is to increase the denominator of the base erosion percentage would make it difficult to administer in all but the most egregious cases. Further, it is a common formulation for anti-abuse rules to apply when “a principal purpose” or “one of the principal purposes” of a transaction is to avoid a particular provision.
One comment requested that the anti-abuse rule with respect to the disaffiliation of banks and registered securities dealers be removed. The comment expressed a concern that proposed § 1.59A-9(b)(3) could effectively prevent taxpayers from disaffiliating a bank or registered securities dealer, notwithstanding the fact that disaffiliation could have other non-tax effects. The comment suggested that if a disaffiliation made sense from a business perspective and is permissible under applicable banking and securities rules, the Treasury Department and the IRS should not treat disaffiliation as abusive. The Treasury Department and the IRS have determined that disaffiliation of a bank or registered securities dealer could be abusive in certain circumstances, such as the interposition of entities other than “includible corporations” (as defined in section 1504(b)) with a principal purpose of avoiding the rules applicable to banks and registered securities dealers. Moreover, in developing guidance under various Code provisions, the Treasury Department and IRS often consider that disaffiliation could potentially avoid the purposes of a provision. See, for example, § 1.904(i)-1, which similarly limits the use of deconsolidation to avoid foreign tax credit limitations.
Finally, a comment recommended excluding from the anti-abuse rule transactions entered into, or pursuant to a binding commitment that was in effect, before the date of public announcement of certain provisions in section 59A. The final regulations do not adopt this recommendation. The anti-abuse rule in § 1.59A-9 is based on the specific grant of authority in section 59A(i), and the Treasury Department and the IRS decline to adopt a grandfathering rule when no such rule was adopted by statute.
Section 59A(d)(3) provides that the term “base erosion payment” includes any premium or other consideration paid or accrued by a taxpayer to a foreign related party for any reinsurance payments that are taken into account under sections 803(a)(1)(B) or 832(b)(4)(A). The preamble to the proposed regulations requests comments regarding several issues relating to insurance companies. Specifically, the preamble to the proposed regulations requests comments regarding certain reinsurance agreements and other commercial agreements with reciprocal payments that are settled on a net basis. REG-104259-18, 83 FR 65968 (December 21, 2018).
Comments were also requested with respect to whether claims payments for losses incurred and other deductible payments made by a domestic reinsurance company to a foreign related insurance company are base erosion payments within the scope of section 59A(d)(1). REG-104259-18, 83 FR 65968 (December 21, 2018). The proposed regulations, however, did not provide any exceptions specific to the insurance industry.
Comments received generally addressed whether (1) claims payments for losses incurred (claims payments) under reinsurance contracts should be treated as base erosion payments, and (2) certain payments made pursuant to reinsurance contracts should be netted. For a discussion of comments relating to life/non-life consolidated returns, see Part XI of this Summary of Comments and Explanation of Revisions.
The proposed regulations do not provide specific rules for payments by
Generally, comments requested that the final regulations provide an exception to the term “base erosion payment” for claims payments made by a domestic reinsurance company to a related foreign insurance company. Some comments recommended that the exception should apply only to claims payments with respect to reinsurance that ultimately relates to the risk of unrelated third parties. Comments also stated that there was no apparent policy reason for treating life and non-life insurance claims payments differently for purposes of section 59A, although one comment noted that this distinction between life and non-life insurance claims payments results from the different approaches taken in drafting section 801(b) and section 832(b)(3), and that the Code sometimes provides disparate results.
Comments explained that an exception for claims payments by a domestic reinsurance company to a related foreign insurance company would provide symmetrical treatment for life insurance companies and non-life insurance companies. In addition, comments noted that reinsurance transactions with respect to which outbound claims payments are made do not base erode because they result from insurance business that is moved into the United States; therefore, it is appropriate to provide an exception similar to the TLAC exception and the exception for foreign currency losses. As noted, several comments requested an exception for reinsurance claims payments only to the extent that the claims payments are with respect to policies ultimately insuring third-party risks. Comments stated that because the reinsurance claims payments are payable only when an unrelated third party makes a claim under an insurance policy that the domestic insurance company has reinsured (and the nature of those claims payments are non-routine and often large and unpredictable), the timing and amount of the claims payment are not controlled by the related parties. Finally, comments noted that foreign regulatory requirements generally require that a local entity provide insurance to its residents; as a result of these regulatory requirements, domestic companies that want to provide insurance in many jurisdictions must do so by reinsuring a subsidiary established in the local jurisdiction.
Comments also addressed how an exception for claims payments should impact the base erosion percentage calculation. Generally, comments recommended that claims payments be excluded from the numerator, but included in the denominator. If claims payments were eliminated from the denominator, comments noted that a significant amount of business expenses would be removed from the base erosion percentage calculation. Several comments acknowledged that the final regulations may adopt an exception that applies to both the numerator and the denominator; in that case, comments recommended that claims payments should be eliminated from the denominator of the base erosion percentage only to the extent that the payments are made to a foreign related party. Comments also indicated that the ambiguity regarding whether a claims payment is a deduction or a reduction in gross income for non-life insurance companies could result in taxpayers taking inconsistent positions and may lead to controversy regarding the calculation of the denominator for the base erosion percentage.
Finally, several comments noted that certain self-help remedies with respect to claims payments are not available for insurance companies. First, because insurance companies are per se corporations under § 301.7701-2(b)(4), an election under § 301.7701-3 to treat a related foreign insurance company as a disregarded entity for U.S. tax purposes is unavailable. In addition, comments stated that regulators in some jurisdictions would prohibit a local insurance company from making an election to be treated as a U.S. taxpayer pursuant to section 953(d) if the election would result in U.S. withholding tax with respect to payments to policyholders.
Section 1.59A-3(b)(3)(ix) adopts the recommendation from these comments and provides a specific exception for deductible amounts for losses incurred (as defined in section 832(b)(5)) and claims and benefits under section 805(a) (“claims payments”) paid pursuant to reinsurance contracts that would otherwise be within the definition of section 59A(d)(1), to the extent that the amounts paid or accrued to the related foreign insurance company are properly allocable to amounts required to be paid by such company (or indirectly through another regulated foreign insurance company), pursuant to an insurance, annuity, or reinsurance contract, to a person other than a related party. The final regulations also clarify that all claims payments are included in the denominator of the base erosion percentage, except to the extent excepted from the definition of a base erosion payment under § 1.59A-3(b)(3)(ix). This treatment in the denominator is consistent with the treatment in the final regulations of derivatives and QDPs (discussed in Part VII of this Summary of Comments and Explanation of Revisions), section 988 foreign exchange losses (discussed in Part IV.C.4 of this Summary of Comments and Explanation of Revisions), and deductions for services eligible for the SCM exception (discussed in Part IV.C.1 of this Summary of Comments and Explanation of Revisions).
As discussed in Part IV.A.2 of this Summary of Comments and Explanation of Revisions, the amount of any base erosion payment is generally determined on a gross basis, regardless of any contractual or legal right to make or receive payments on a net basis. The proposed regulations do not provide an exception to this general rule with respect to reinsurance agreements.
Several comments recommended that the final regulations permit netting with respect to reinsurance contracts to better reflect the economics of the transactions. One comment suggested that the final regulations permit netting with respect to a single economic transaction where the parties exchange net value in the form of a single payment, which would include many reinsurance transactions. Other comments identified specific types of reinsurance transactions for which netting should or should not be permitted. For quota share reinsurance arrangements, comments noted that the proposed regulations provide that the gross amount of reinsurance premium is a base erosion payment without considering any inbound payments such
As background, reinsurance is the transfer from an insurer (referred to as the “ceding” company) to a reinsurer of all or part of the risk assumed under a policy or a group of policies. A traditional reinsurance agreement typically requires the ceding company to pay a reinsurance premium to the reinsurance company and the reinsurance company to pay a ceding commission to the ceding company. The reinsurance premium compensates the reinsurer for acquiring the reinsured obligations. The ceding commission compensates the ceding company for its expenses incurred in acquiring and managing the reinsured policies, and may include a profit margin. When the risks are transferred, the ceding company may reduce its reserves for the reinsured obligations, and the reinsurance company establishes its own reserves for the reinsured obligations. In terms of payment flows, it is common for the ceding commission owed under the reinsurance agreement to be netted against the reinsurance premium owed, such that the ceding company remits the reinsurance premium net of the ceding commission amount. However, both flows are typically separately identified in the contract and in any case represent reciprocal economic obligations. When losses are paid under the reinsured policies, depending on the terms of the reinsurance agreement, the reinsurer will have corresponding obligations to make payments to the ceding company (for example, the agreement may require the reinsurer to reimburse a percentage of total losses, or losses above a certain dollar threshold).
Under modco and similar funds-withheld reinsurance agreements, the ceding company retains the assets with respect to the policies reinsured and generally does not transmit an initial premium payment to the reinsurer under the agreement. The reinsuring company in a modco agreement is entitled to premiums and a share of investment earnings on certain assets, and the ceding company is entitled to expense allowances (similar to ceding commissions) and reimbursement for losses paid under the reinsured policies, but the parties make net settlement payments based on each party's overall entitlement under the agreement on a periodic basis. Comments noted that in this respect, the arrangement is similar to making settlement payments under a derivative contract. In both the modco and traditional reinsurance context, comments asserted that imposing tax on one leg of a reinsurance transaction (the premium payment) is not equitable and does not reflect the economics of the transaction.
A comment recommended that the final regulations exclude ceding commissions paid by a domestic insurance company to a foreign affiliate in exchange for the domestic insurance company's reinsurance of foreign risk from the definition of a base erosion payment. The comment suggested that this exception would be similar to the exception for section 988 foreign currency losses and for TLAC securities because an insurance group should not have a base erosion payment when insurance regulators dictate the structure of reinsurance agreements. The comments noted that reinsurance involves substantial payments in both directions, including premiums, ceding commissions, and claims. The comment explained that a ceding commission compensates the reinsured for its policy acquisition costs plus a small profit component and noted that a substantial amount of the commissions are reimbursements for third party expenses for many lines of business. For most reinsurance contracts, a comment noted that ceding commissions and premiums are separately stated in the reinsurance contract, but not separately paid. Instead, premiums are paid to the reinsurer net of the ceding commission.
Several comments expressed strong support for the determination in the proposed regulations that netting is not permitted with respect to reinsurance arrangements. Comments indicated that the result from the proposed regulations is appropriate under current law and necessary to achieve the legislative goals for the BEAT. Before the enactment of the BEAT, comments explained that foreign insurance groups had a significant competitive advantage over U.S.-based insurance companies because foreign groups were allowed to shift their U.S. earnings into low-tax jurisdictions using affiliated reinsurance payments. Comments asserted that section 59A identified reinsurance as a base erosion payment to close the loophole. Comments also noted that using gross amounts is consistent with the statutory annual statement that is the basis for determining taxable income under subchapter L. Comments explained that the use of gross reinsurance premium, rather than net, is consistent with the excise tax imposed under section 4371, which computes the excise tax as a percentage of gross reinsurance payments, even for a funds-withheld or modco contract (where only net amounts are transferred between the contracting insurance companies). Finally, comments noted that when Congress determines that netting is appropriate with respect to insurance, it specifically permits netting.
Some comments asserted that the statutory language of section 59A(d)(3), which provides that base erosion payments include consideration paid or accrued “for any reinsurance payments which are taken into account under sections 803(a)(1)(B) or 832(b)(4)(A),” requires treating only the net amounts paid by a domestic company under a modco-type reinsurance contract as base erosion payments. For example, in the life insurance context, section 803(a)(1) defines “premiums” as:
(A) The gross amount of premiums and other consideration on insurance and annuity contracts, less
(B) return premiums, and premiums and other consideration arising out of indemnity reinsurance.
Further, section 59A(c)(2)(A)(iii)(I) closely tracks section 803(a)(1) in its definition of base erosion tax benefit in the life insurance context as the amount by which “gross premiums and other consideration on insurance and annuity contracts” are reduced by “premiums and other consideration arising out of indemnity reinsurance.” These comments suggested that the phrase “consideration arising out of indemnity reinsurance” suggests a broader view of the transaction than just reinsurance premiums and is best interpreted as referring to the net cash settlement payments under a modco-type reinsurance contract, rather than the gross amount identified in the contract as reinsurance premium.
Other comments disagreed with this characterization and noted that section 59A(d)(3) is describing consideration paid or accrued for reinsurance—that is, payments moving in one direction from the taxpayer to foreign related party—without describing offsetting or reciprocal payments. The comments noted that the phrase “arising out of indemnity reinsurance” was merely lifted from preexisting section 803(a)(1)(B), rather than being selected deliberately by Congress to account for both inflows and outflows under a reinsurance contract. They noted further that section 803(a)(1)(B) and its non-life counterpart, section 832(b)(4), use
Some comments asserted that foreign insurers may decide to reduce their capacity, discontinue lines of business, or increase pricing as a result of section 59A. Those comments acknowledged that domestic reinsurers may pick up the increased capacity, but warned that the shift to domestic reinsurers would concentrate the insured risk in the United States rather than spreading it globally, resulting in less risk diversification (a key element of insurance risk management). Other comments disagreed with this contention, noting that global reinsurance capacity has remained strong and that premium increases have been negligible since the enactment of section 59A.
In contrast, a comment asserted in the context of reinsurance that it was clear that the law applies on a gross basis, both based on the plain language of the statute and the intent of Congress, and that relevant policy considerations weigh heavily in favor of applying the BEAT on a gross basis. The comment explained that because the reinsurance transactions at issue are between related parties, they are not necessarily at arm's length. Further, according to the comment, the legislative purpose of section 59A was to level the playing field between U.S. and foreign-owned companies, which can only be advanced if section 59A is applied on a gross basis.
The final regulations do not adopt the recommendations that payments made under a reinsurance contract be netted for purposes of determining the amount of a base erosion payment, unless netting would otherwise be permitted for U.S. federal income tax purposes. Section 59A's requirements are best interpreted in the context of the existing body of tax law and regulations. As discussed in Part IV.A.3 of this Summary of Comments and Explanation of Revisions, amounts of income and deduction are generally determined on a gross basis under the Code, and unless a rule permits netting (so that there is no deduction or the deduction is a reduced amount, as opposed to a deduction offset by an item of income), no netting is permitted.
Although comments asserted that section 59A(d)(3) (defining a base erosion payment as including certain reinsurance payments) requires the netting of ceding commissions and other payments from the related foreign reinsurance company against reinsurance premiums, the Treasury Department and IRS are not persuaded by arguments that the language of section 59A(d)(3) mandates that result. Whether payments under particular types of reinsurance contracts (for example, modco) may be netted for purposes of section 59A is determined based on the existing rules in the Code and regulations regarding netting. The subchapter L provisions cited in section 59A(d)(3) (section 803(a)(1)(B) for life insurance companies and section 832(b)(4)(A) for non-life insurance companies) do not provide for netting of ceding commissions, claims payments or other expenses against premiums.
With respect to the comment that modco and other reinsurance contracts that are periodically settled on a net basis are substantially similar to derivative contracts, the Treasury Department and IRS note that Congress specified in section 59A(h)(4)(C) that the term “derivative” does not include insurance contracts. This indicates that Congress did not intend for agreements with derivative-like characteristics that are also insurance contracts to be treated as derivatives for purposes of section 59A.
With respect to comments that ceding commissions should be broken down into components and not treated as base erosion payments to the extent that they reimburse amounts paid to third parties, this scenario is not materially different from those described in comments received from taxpayers in other industries and discussed in Part IV.A.1 of this Summary of Comments and Explanation of Revisions. These other comments described various scenarios in which a domestic corporation makes a deductible payment to a foreign related party, and that foreign related party in turn makes deductible payments to unrelated third parties. Therefore, the final regulations do not adopt a narrower regulatory exception for payments to foreign related insurance companies that arise in connection with a regulatory requirement.
Proposed § 1.1502-59A provides rules regarding the application of section 59A and the regulations thereunder to consolidated groups. Under these rules, all members of a consolidated group are treated as a single taxpayer for purposes of determining whether the group is an applicable taxpayer and the amount of tax due under section 59A. For example, items resulting from intercompany transactions (as defined in § 1.1502-13(b)(1)(i)) are disregarded for purposes of making the required computations.
Some comments requested clarification on what it means for intercompany transactions to be “disregarded” in making the required computations under section 59A. Generally, intercompany transactions should not change the consolidated taxable income or consolidated tax liability of a consolidated group. For example, where one member (S) sells depreciable property to another member (B) at a gain, S's gain on the sale is deferred. Every year, as B depreciates the property, S recognizes a portion of its deferred gain. As a result, the depreciation expense deducted by B that exceeds the depreciation expense the group would have deducted if S and B were divisions of a single entity (“additional depreciation”) is offset by the amount of gain S recognizes each year, and the intercompany sale does not change the consolidated taxable income.
However, the base erosion percentage is generally computed based solely on deductions; income items are not relevant. Therefore, under the foregoing example, B's depreciation deduction would include the additional depreciation amount, but S's offsetting gain inclusion would be excluded from the base erosion percentage computation.
To make clear that intercompany transactions may not impact the BEAT consequences of a consolidated group, these final regulations clarify in § 1.1502-59A(b)(1) that items resulting from intercompany transactions are not taken into account in computing the group's base erosion percentage and BEMTA. Consequently, in the foregoing example, B's additional depreciation is not taken into account in computing the group's base erosion percentage.
In addition, some comments raised concerns that the proposed section 59A regulations and proposed § 1.1502-59A may be incompatible with the rules and framework of § 1.1502-47 for life-nonlife consolidated groups. The
Proposed section 1.1502-59A(c)(3) provides rules to determine whether a consolidated group's business interest deduction permitted under section 163(j) is a base erosion tax benefit. Due to the fungibility of money, these rules generally treat the consolidated group as a single entity and aggregate all members' current-year business interest expense paid to nonmembers. The current-year business interest expense deducted by members is then classified as an amount paid or accrued to a domestic related party, foreign related party, or unrelated party based on specified allocation ratios, which are based on the entire group's business interest expense paid. If members cannot fully deduct their current-year business interest expense, then the members' section 163(j) carryforwards are allocated a status as a domestic related carryforward, foreign related carryforward, or unrelated carryforward based on specified allocation ratios. Such status is taken into account for BEAT purposes in future years when the member deducts its section 163(j) disallowed business interest expense carryforward, whether the member remains in the group or deconsolidates.
A comment requested a special rule under § 1.1502-59A(c)(3) for certain situations in which a member (T) deconsolidates from a consolidated group (the original group) that was not an applicable taxpayer under section 59A and joins an unrelated consolidated group. Assume that, during the time T was a member of the original group, T incurred business interest expense that could not be fully deducted and has a section 163(j) disallowed business interest expense carryforward. T then deconsolidates from the original group and joins the new group, which is an applicable taxpayer under section 59A. The comment recommended allowing T to use the special allocation ratios under § 1.1502-59A(c)(3) of the new group for the taxable year of the acquisition (rather than the allocation ratios of the original group). The comment posited that the original group would not have determined or maintained information pertaining to the allocation ratios because the original group was not an applicable taxpayer.
The final regulations do not adopt this special rule. Whether a business interest expense deducted by members of a consolidated group is a base erosion tax benefit is determined on a single-entity basis, without regard to which member actually incurred the payment to the domestic related, foreign related, or unrelated party. Therefore, in the foregoing example, whether T's deduction of its section 163(j) disallowed business interest expense carryforward is a base erosion tax benefit must be determined by reference to the original group, not the new group.
Furthermore, to determine whether a consolidated group is an applicable taxpayer, the group generally must determine its base erosion percentage for the year. In order to do so, the group must apply the classification rule under § 1.1502-59A(c)(3) to its aggregate current-year business interest expense that was deducted. Therefore, the original group should have the information relevant to the classification rule under § 1.1502-59A(c)(3), regardless of whether it was an applicable taxpayer. Consequently, the final regulations do not adopt the rule recommended by the comment.
However, the final regulations provide two rules for situations in which a member deconsolidates from the original consolidated group with a section 163(j) carryforward. The first rule is an exception that applies if the original group was not an applicable taxpayer because it did not meet the gross receipts test in the year the business interest expense at issue was incurred. Under these circumstances, application of the classification rule under § 1.1502-59A(c)(3) would have been unnecessary within the original consolidated group with regard to the year in which the interest was paid or accrued. This special rule permits the deconsolidating member (and any acquiring consolidated group) to apply the classification rule on a separate-entity basis to determine the status of the deconsolidating member's section 163(j) disallowed business interest expense carryforward as a payment or accrual to a domestic related, foreign related, or unrelated party. The second rule applies if the deconsolidating member (or its acquiring consolidated group) fails to substantiate the status of its section 163(j) disallowed business interest expense carryforward from the original group. In that case, the section 163(j) disallowed business interest expense carryforward is treated as a payment or accrual to a foreign related party.
Pursuant to section 7805(b)(1)(B), these final regulations (other than the reporting requirements for QDPs in § 1.6038A-2(b)(7), § 1.1502-2, and § 1.1502-59A) apply to taxable years ending on or after December 17, 2018. However, taxpayers may apply these final regulations in their entirety for taxable years ending before December 17, 2018. Taxpayers may also apply provisions matching §§ 1.59A-1 through 1.59A-9 from the Internal Revenue Bulletin (IRB) 2019-02 (
Section 1.6038A-2(b)(7)(ix) applies to taxable years beginning Monday, June 7, 2021. No penalty under sections 6038A(d) or 6038C(c) will apply to a failure solely under § 1.6038A-2(a)(3), (b)(6), or (b)(7) that is corrected by March 6, 2020.
Pursuant to sections 1503(a) and 7805(b)(1)(A), § 1.1502-2 and § 1.1502-59A apply to taxable years for which the original consolidated Federal income tax return is due (without extensions) after December 6, 2019. However, taxpayers may apply § 1.1502-2 and § 1.1502-59A in their entirety for taxable years for which such a return is due (without extensions) before December 6, 2019.
IRS revenue procedures, revenue rulings, notices, and other guidance cited in this preamble are published in the Internal Revenue Bulletin and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at
Executive Orders 13563 and 12866 direct agencies to assess 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
These final regulations have been designated as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget (OMB) regarding review of tax regulations. The Office of Information and Regulatory Affairs has designated these regulations as economically significant under section 1(c) of the MOA. Accordingly, the OMB has reviewed these regulations.
The Tax Cuts and Jobs Act of 2017 (the “Act”) added new section 59A, which applies to large corporations that have the ability to reduce U.S. tax liabilities by making deductible payments to foreign related parties. The Base Erosion and Anti-Abuse Tax (“BEAT”) is generally levied on certain large corporations that have deductions paid or accrued to foreign related parties that are greater than three percent of their total deductions (two percent in the case of certain banks or registered securities dealers), a determination referred to as the base erosion percentage test. Large corporations are those with gross receipts of $500 million or more, as calculated under the rules of section 59A, a determination referred to as the gross receipts test. By taxing these corporations' base erosion tax benefits, the BEAT “aims to level the playing field between U.S. and foreign-owned multinational corporations in an administrable way.” Senate Committee on Finance, Explanation of the Bill, S. Prt. 115-20, at 391 (November 22, 2017). The BEAT operates as a minimum tax, so a taxpayer is only subject to additional tax under the BEAT if the BEAT tax rate multiplied by the taxpayer's modified taxable income exceeds the taxpayer's regular tax liability adjusted for certain credits.
Section 59A is largely self-executing, which means that it is binding on taxpayers and the IRS without any regulatory action. Although it is self-executing, the Treasury Department and the IRS recognize that section 59A provides interpretive latitude for taxpayers and the IRS which could create uncertainty and prompt a variety of taxpayer responses without further guidance. The final regulations are needed to address questions regarding the application of section 59A and to reduce compliance burden and economic inefficiency that would be caused by uncertainty about how to calculate tax liability.
These final regulations provide guidance under section 59A regarding the determination of the tax with respect to base erosion payments for certain taxpayers with substantial gross receipts. They provide guidance for applicable taxpayers to determine the amount of BEAT liability and how to compute the components of the tax calculation.
Regulations under section 59A (§§ 1.59A-1 through 1.59A-10) provide details for taxpayers regarding whether a taxpayer is an applicable taxpayer and the computation of certain components of the base erosion minimum tax amount, including the amount of base erosion payments, the amount of base erosion payments that are treated as base erosion tax benefits, and modified taxable income. The regulations also provide specific guidance for banks, registered securities dealers, and insurance companies, and provide guidance in applying section 59A to amounts paid by and to partnerships. These regulations also establish anti-abuse rules to prevent taxpayers from taking measures to inappropriately circumvent section 59A.
Regulations under sections 383, 1502 and 6038A (§§ 1.383-1, 1.1502-2, 1.1502-59A, 1.6038A-1, 1.6038A-2, and 1.6038-4) provide rules for the application of section 59A with respect to limitations on certain capital losses and excess credits, consolidated groups and their members, and reporting requirements, which include submitting, in certain cases, new Form 8991, Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts.
The Treasury Department and the IRS have assessed the benefits and costs of these final regulations compared to a no-action baseline that reflects anticipated Federal income tax-related behavior in the absence of these final regulations.
These final regulations provide certainty and clarity to taxpayers regarding the meaning of terms and calculations they are required to apply under the BEAT provisions of the Act. In the absence of the enhanced specificity provided by these regulations, similarly situated taxpayers might interpret the statutory rules of section 59A differently, potentially resulting in inefficient patterns of economic activity. For example, two otherwise similar taxpayers might structure an income-generating activity differently based solely on different assumptions about whether that activity will involve payments that are subject to the BEAT. If this tax-driven difference in business structures confers a competitive advantage on the less profitable enterprise, U.S. economic performance may suffer. This final regulatory guidance thus provides value by helping to ensure that economic agents face similar tax incentives, a tenet of economic efficiency.
The Treasury Department and the IRS project that under these final regulations, 3,500-4,500 taxpayers may be applicable taxpayers under the BEAT because those taxpayers (1) are U.S. shareholders of a foreign corporation, 25 percent foreign-owned corporations, or foreign corporations engaged in a trade or business within the United States and (2) have gross receipts of $500 million or more without taking into account the gross receipts of members of its aggregate group. As many as 100,000-110,000 additional taxpayers may be applicable taxpayers as a result of being members of an aggregate group.
The Treasury Department and the IRS recognize that in response to these final regulations, these businesses may alter the way they transact with related versus unrelated parties. They may make changes to financial arrangements, supply chain arrangements, or the locations of business activity, each in ways that increase or reduce the volume of payments made to a foreign affiliate that qualify as base erosion payments, relative to the decisions they would make under alternative regulatory approaches, including the no-action baseline. These differences in business activities may have economic effects beyond their effects on taxpayers' tax liability.
The Treasury Department and the IRS have not attempted to quantify the economic effects of any changes in business activity stemming from these final regulations. The Treasury Department and the IRS do not have readily available data or models that predict with reasonable precision the decisions that businesses would make under the final regulations versus
Within these limitations, part I.D.3 of these Special Analyses (and the Summary of Comments and Explanation of Revisions) explains the rationale behind the final regulations and provides a qualitative assessment of the economic effects of the final regulations relative to the alternative regulatory approaches that were considered.
The Treasury Department and the IRS welcome comments on these conclusions and on the economic effects of the provisions described in the following sections.
Section 59A(h) includes an exception to base erosion payment status for certain payments by a corporation to a foreign related party pursuant to certain derivative contracts (qualified derivative payments, or QDPs). The statute further provides that the QDP exception does not apply to a payment pursuant to a derivative contract that would be treated as a base erosion payment if the payment was not made pursuant to a derivative contract. The final regulations specify how the QDP exception applies to securities lending transactions, a particular form of financial transaction. In this regard, the final regulations generally provide parity in the treatment of securities lending transactions and sale-repurchase transactions, a similar, alternative form of financial transaction. This part I.D.3.a discusses the treatment of securities lending transactions and sale-repurchase transactions under the final regulations. For a further description of securities lending transactions and sale-repurchase transactions, see Part VII.B of the Summary of Comments and Explanation of Revisions.
In general, a sale-repurchase transaction is an agreement under which a person transfers a security in exchange for cash and simultaneously agrees to receive substantially identical securities from the transferee in the future in exchange for cash. Certain sale-repurchase transactions are treated as secured debt for federal tax purposes; that is, the nominal seller of the securities in the sale-repurchase transaction is treated as transferring securities as collateral for a loan from the nominal buyer to the nominal seller. The fee paid by the nominal seller to the nominal buyer pursuant to this type of sale-repurchase contract is one example of a payment that does not qualify for the QDP exception.
In this type of sale-repurchase transaction, the nominal seller remains the beneficial owner of the securities for federal income tax purposes and is treated as a cash borrower from the nominal buyer. Because the nominal seller remains the beneficial owner of the securities for federal income tax purposes, when the nominal buyer receives any payments with respect to the securities and passes those payments through to the nominal seller (known as substitute payments), such as interest or dividends, the nominal seller is treated as receiving that payment directly from the issuer of the security for federal income tax purposes. Thus, the substitute payment is not considered a payment between the nominal seller and the nominal buyer for federal tax purposes. Consequently, even if the nominal buyer is a U.S. person and the nominal seller is a foreign related party, the substitute payments on the sale-repurchase agreement that is treated as a loan for federal tax purposes generally are not base erosion payments for the BEAT.
Certain securities lending transactions are economically similar to sale-repurchase transactions but are treated differently for federal income tax purposes. In some securities lending transactions, a securities lender also transfers securities to a securities borrower in exchange for an obligation that the securities borrower make certain payments to the securities lender and also return identical (though not necessarily the same) securities to the securities lender. In connection with the transfer of securities in this type of transaction, the securities borrower may also provide cash or other form of collateral to the securities lender, often with the same or greater value as the lent security. Economically, the securities lender in these transactions can be viewed as both a lender of securities to the counterparty, and a borrower of cash from the counterparty. In these respects, the securities lending transaction is economically similar to a sale-repurchase transaction.
However, in these securities lending transactions, the securities lender is no longer treated as the beneficial owner of the securities for federal income tax purposes. As a result, when the securities borrower makes substitute payments (with respect to the securities) in the securities lending transaction, those substitute payments may be base erosion payments (without regard for the QDP exception) if the securities lender is a foreign related party because the substitute payments are treated as payments from the securities borrower to the securities lender for federal income tax purposes.
The proposed regulations state that sale-repurchase transactions are not eligible for the QDP exception. The proposed regulations further provide that securities lending transactions are not eligible for the QDP exception because the securities lending transactions are economically similar to sale-repurchase transactions. However, as discussed in this part I.D.3.a, substitute payments on a sale-repurchase transaction are not a base erosion payment because the nominal seller of the securities is treated as remaining the beneficial owner of the securities for federal income tax purposes. Comments observed that the proposed regulations thus failed to take into account the disparate tax treatment of substitute payments for sale-repurchase transactions and securities lending transactions for purposes of the BEAT.
To take into account the disparate treatment of the substitute payments in securities lending transactions, the final regulations remove the per se exclusion of securities lending transactions from the QDP exception. Instead, the final regulations more narrowly exclude the borrowing of cash pursuant to a securities lending transaction (“cash leg”) from the QDP exception. This change provides symmetry with the treatment of a sale-repurchase transaction that is treated as a secured loan for federal income tax purposes. Under the final regulations, both a sale-repurchase transaction and the cash leg of a securities lending transaction are excluded from the QDP exception to the extent that they are treated as financings, and thus may be base erosion payments.
The final regulations no longer exclude payments attributable to the borrowing of securities pursuant to a securities lending transaction from qualifying for the QDP exception; as a result, substitute payments on the security may qualify for the QDP exception. This change in the final regulations provides general symmetry in the treatment of substitute payments made pursuant to sale-repurchase
The final regulations also provide an anti-abuse rule to address a potentially abusive transaction characterized by an uncollateralized borrowing of securities that can be liquidated for cash in a multiple-step transaction that is economically similar to an uncollateralized cash loan.
Specifically, the Treasury Department and the IRS adopted an anti-abuse rule that takes into account two factors: (a) Whether the securities lending transaction or substantially similar transaction provides the taxpayer with the economic equivalent of a substantially unsecured cash borrowing and (b) whether the transaction is part of an arrangement that has been entered into with a principal purpose of avoiding the treatment of any payment with respect to the transaction as a base erosion payment.
The Treasury Department and the IRS considered an alternative anti-abuse rule that would have applied solely on the basis of the securities loan being undercollateralized. The Treasury Department and the IRS did not adopt this alternative in the final regulations because the Treasury Department and the IRS are cognizant that an objective mechanical rule based solely on the level of collateralization may be difficult for both taxpayers and the IRS to apply, in particular due to the high volume of transactions issued under varying conditions. Accordingly, the final regulations further provide that for the anti-abuse rule to apply, the transactions must also be part of an arrangement that has been entered into with a principal purpose of avoiding the treatment of any payment with respect to the transaction as a base erosion payment. See §§ 1.59A-6(d)(2)(iii)(C); 1.59A-6(e)(2) (Example 2).
The Treasury Department and the IRS recognize that in response to these final regulations, businesses may increase the volume of certain securities lending transactions relative to the volume that would occur under alternative anti-abuse rules. The Treasury Department and the IRS project, however, that taxpayer response to these rules, and the relative economic effects of adoption of the final rule, will be minor given the wide range of financial transactions that applicable taxpayers currently engage in, the various roles that securities lending transactions play, and the relatively small difference in regulatory treatment between the final regulations and alternative anti-abuse rules.
The Treasury Department and the IRS have not attempted to provide a quantitative prediction of the change in the volume of securities lending transactions nor to quantify the economic effects of this potential shift that may result from the final regulations, relative to alternative regulatory approaches. The Treasury Department and the IRS do not have readily available data or models that predict with reasonable precision the types of intercompany arrangements that businesses would adopt under the final regulations versus alternative regulatory approaches. Nor do they have readily available data or models that would measure with reasonable precision the difference in returns or risk that would occur as a result of this shift in the volume of securities lending transactions relative to the alternative regulatory approach. Such estimates would be necessary to quantify the economic effects of these final regulations over the treatment of securities lending transactions versus alternative regulatory approaches.
To provide an estimate of taxpayers affected by the change to the QDP rule, the Treasury Department and the IRS used current tax filings for taxable year 2017 and examined the set of filers who marked-to-market securities and were (1) U.S. shareholders of a foreign corporation as indicated by the filing of Form 5471 or (2) otherwise potentially applicable taxpayers as indicated by the filing of Form 5472. This marked-to-market proxy is reasonable because the QDP exception applies only if a taxpayer recognizes gain or loss as if the derivative were sold for fair market value on the last day of the taxable year and treats that gain or loss as ordinary. Based on these tax data, the number of taxpayers estimated to be affected by these provisions of the final regulations is 900, based on counts of the forms shown in the accompanying table.
Under section 59A, a taxpayer is subject to the BEAT only if the taxpayer meets the statutory tests to be an applicable taxpayer, including the base erosion percentage test. The base erosion percentage test is satisfied with respect to a taxpayer if the taxpayer (or, if the taxpayer is a member of an aggregate group, that aggregate group) has a base erosion percentage of three percent or more. A lower threshold of two percent generally applies if the taxpayer, or a member of the taxpayer's aggregate group, is a member of an affiliated group that includes a domestic bank or registered securities dealer. The final regulations specify how losses from certain currency exchange transactions should be included in the base erosion percentage test.
Proposed § 1.59A-3(b)(3)(iv) provides that exchange losses from section 988 transactions described in § 1.988-1(a)(1) are excluded from the definition of base erosion payments. Section 988 transactions are generally transactions in which the amount that the taxpayer is entitled to receive (or required to pay) is denominated in terms of a nonfunctional currency or is determined by reference to one or more nonfunctional currencies. In the
Proposed § 1.59A-2(e)(3)(ii)(D) also provides that exchange losses from section 988 transactions (including with respect to transactions with persons other than foreign related parties) are not included in the denominator when calculating the base erosion percentage for purposes of the base erosion percentage test. In response to comments, the final regulations restore the section 988 losses to the denominator when calculating the base erosion percentage, except to the extent of the amount of section 988 losses from transactions with foreign related parties that is also excluded from the numerator of the base erosion percentage.
As an alternative, the Treasury Department and the IRS considered removing all section 988 losses from the denominator of the base erosion percentage test. However, the Treasury Department and the IRS determined that it was appropriate to exclude from the denominator only the amounts that are excluded from the numerator because that is how other statutory exceptions from the BEAT are addressed in the base erosion percentage calculations. Specifically, for the QDP exception (discussed in Part I.D.3.a of this Special Analysis) and the services cost method exception (discussed in Part IV.C.1 of the Summary of Comments and Explanation of Revisions) the amounts in the denominator of the base erosion percentage are also accounted for in this manner. That is, the denominator does include the amount of QDP deductions or services cost method deductions that are also excluded from the numerator of the base erosion percentage because of those exceptions.
The Treasury Department and the IRS project that under these final regulations, fewer taxpayers would be expected to satisfy the base erosion percentage test and therefore fewer would be liable for the BEAT, relative to the alternative regulatory approach as specified in the proposed regulations. These final regulations include in the denominator of the base erosion percentage section 988 losses arising from foreign currency transactions with unrelated parties. Inclusion of such losses in the denominator, all else equal, reduces the base erosion percentage, and may increase the likelihood that businesses engage in incremental section 988 transactions with unrelated parties to reduce the base erosion percentage, relative to the proposed regulations. However, regulations under § 1.59A-9(b)(2) (anti-abuse rule addressing transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation) are expected to limit this behavior.
The Treasury Department and the IRS have not attempted to provide a quantitative prediction of the change in the volume of section 988 transactions nor to quantify the economic effects of this change resulting from the final regulations, relative to the alternative regulatory approach. The Treasury Department and the IRS do not have readily available data or models that predict with reasonable precision the volume of section 988 transactions that businesses might engage in under the final regulations versus the alternative regulatory approach because of the complex role that currency exchange plays for these businesses. The Treasury Department and the IRS further do not have readily available data or models that would measure with reasonable precision the difference in economic returns or volatility that these businesses would experience as a result of this shift in section 988 transactions relative to the alternative regulatory approach, again because of the complex role that currency exchange plays for these businesses. Such estimates would be necessary to quantify the economic effects of these final regulations over the treatment of section 988 transactions versus the alternative regulatory approach.
The Treasury Department and the IRS have not estimated the number of these taxpayers because the Form 1120 series does not separately break out gains or losses from section 988 transactions. The sole form that breaks out section 988 gain and loss is Form 5471, which is filed by U.S. shareholders of a CFC. Information from Form 5471 is unlikely to be informative because a CFC is unlikely to be an applicable taxpayer.
A taxpayer is liable for the BEAT only if the taxpayer is an applicable taxpayer. In general, an applicable taxpayer is a corporation, other than a RIC, REIT, or an S corporation, that satisfies the gross receipts test and the base erosion percentage test. For purposes of these tests, members of a group of corporations related by certain specified percentages of stock ownership are aggregated. Section 59A(e)(3) refers to aggregation on the basis of persons treated as a single taxpayer under section 52(a) (controlled group of corporations), which includes both domestic and foreign persons. In the proposed regulations, the Treasury Department and the IRS determined that to implement the provisions of section 59A, it was necessary to treat foreign corporations as outside of the controlled group for purposes of applying the aggregation rules, except to the extent that the foreign corporation is subject to net income tax under section 882(a) (tax on income of foreign corporations connected with U.S. business). The final regulations also adopt this position.
Upon aggregation of domestic and foreign controlled groups of corporations, intra-aggregate group transactions are eliminated for purposes of the gross receipts test and base erosion percentage test. If aggregation were defined to include both domestic and all related foreign persons (
In the proposed regulations, the Treasury Department and the IRS considered an alternative of not providing guidance on the aggregation rule in the statute. Absent the proposed regulations, there would be uncertainty among taxpayers as to whether the tax equal to the BEMTA would apply to them. Without guidance, different taxpayers would likely take different positions regarding the determination of their status as an applicable taxpayer, which would result in inefficient decision-making and inconsistent application of the statute as taxpayers engage in corporate restructurings, or adjust investment and spending policies based on tax planning strategies to manage BEAT liability. No substantive comments objected to the general approach set forth in the proposed regulations.
Section 59A(d)(5) provides an exception from the definition of a base erosion payment for an amount paid or accrued by a taxpayer for services if the services are eligible for the services cost method under section 482 (without regard to certain requirements under the section 482 regulations) and the amount constitutes the total services cost with no markup component. The statute is ambiguous as to whether the SCM exception (1) does not apply to a payment or accrual that includes a markup component, or (2) does apply to such a payment or accrual that includes a markup component, but only to the extent of the total services costs. The proposed regulations follow the latter approach. See REG-104259-18, 83 FR 65961 (December 21, 2018). The final regulations retain the same approach. See part IV.C.1 of the Summary of Comments and Explanation of Revisions.
Alternatives would have been to disallow the SCM exception for the entire amount of any payment that includes a markup component, or to not provide any guidance at all regarding the SCM exception. The Treasury Department and the IRS rejected the former approach. The section 482 regulations mandate intercompany pricing under an “arm's length standard.” Under specific circumstances, the section 482 regulations provide that intercompany payments for services can be set by a taxpayer at the cost of providing the service with no profit markup. However, the section 482 regulations prohibit use of this cost-only SCM approach for services “that contribute significantly to fundamental risks of business success or failure” (the “business judgment rule”). See § 1.482-9(b)(5). At arm's length, such services generally would be priced to include a profit element to satisfy the market's demand for, and supply of, services among recipients and providers. Section 59A(d)(5)(A) explicitly allows an exception from the BEAT for services that would be eligible for the SCM, “determined without regard to [the business judgment rule].” By allowing an exception from the BEAT for intercompany service payments that do not include a profit markup (
The Treasury Department and the IRS also rejected the option of not providing any guidance at all regarding the SCM exception because if taxpayers relied on statutory language alone, taxpayers would adopt different approaches due to ambiguity in the statute, leaving it open to differing statutory interpretations and an inconsistent application of the statute. Comments supported the SCM exception and recommended that final regulations adopt the approach from the proposed regulations.
The final regulations provide an exception from the definition of base erosion payment for payments to the U.S. branch of a foreign related person to the extent that the payments are treated as effectively connected income.
Under section 59A, whether a deductible payment is a base erosion payment is determined based on whether the recipient is a foreign person (as defined in section 6038A(c)(3)) and a related party. See section 59A(f). A foreign person means any person who is not a United States person. However, the Treasury Department and the IRS determined in the proposed regulations that establishing whether a payment is a base erosion payment based solely on the status of the recipient as a foreign person is inconsistent with the statute's intent of eliminating base erosion. As a result, deductible payments to a foreign person that are treated as effectively connected income are subject to tax under section 871(b) and 882(a) in substantially the same manner as payments to a U.S. citizen or resident, or a domestic corporation, and, thus, such payments do not result in base erosion. Thus, such payments are treated as income to the recipient and subject to U.S. tax, substantially similar to any payment between related U.S. corporations. Further, treatment of effectively connected income payments to a foreign related party would produce different tax results for two similarly situated U.S. taxpayers. That is, if the taxpayer were to make a payment to a related U.S. corporation, the payment generally would not be subject to the BEAT, but if a taxpayer were to make a payment to a foreign person with respect to its effectively connected income, it would give rise to BEAT liability, despite the fact that in both cases the recipients include the payment in U.S. taxable income. The final regulations retain the same approach as the proposed regulations. See § 1.59A-3(b)(3)(iii). This approach provides consistency with the approach in the regulations to determining the applicable taxpayer for aggregate groups, which is discussed in part I.D.4.a of this Special Analysis, because this provision excludes from the definition of a base erosion payment those payments to members of the aggregate group that are also excluded from the base erosion percentage because the payments are also within the aggregate group.
The Treasury Department and the IRS considered an alternative of not providing this exception to the definition of a base erosion payment, but determined that it would be inconsistent to exclude a payment to the U.S. branch of a foreign related person from the base erosion percentage (a condition to the application of the BEAT) but not also exclude the same payment from the amount of base erosion payments (a factor in determining the amount of BEAT tax liability).
Modified taxable income is a taxpayer's taxable income for the year calculated without regard to any base erosion tax benefit or the base erosion percentage of any allowable net operating loss deductions under section 172 (net operating loss deduction). As discussed in Part V.A. of the Summary of Comments and Explanation of Revisions, the proposed regulations
As discussed in Part VIII of the Summary of Comments and Explanation of Revisions section, these final regulations apply the “aggregate” approach to base erosion payments involving partnerships, which is to say that the regulations generally treat the partnership as an aggregation of its partners, with the partners viewed as entering into transactions. This aggregate approach is in contrast to the alternative “entity” approach that treats the partnership as an entity that engages in transactions. Because partnerships are passthrough entities that are not themselves subject to U.S. income tax and because the income of the partnership is taxable to the partners in the partnership, these final regulations apply the aggregate approach and provide that payments by a corporation to a partnership, and payments by a partnership to a corporation, are treated in the first instance as payments to the partners in the partnership and in second instance as payments by the partners in the partnership. Under the alternative entity approach that assesses the partnership as a separate entity, a payment by an applicable taxpayer (corporation) to a related foreign partnership could be a base erosion payment even if all of the partners in the partnership are domestic persons.
Under the aggregate approach adopted in these final regulations, the applicable taxpayer (corporation) that makes a payment to a related foreign partnership with a partner or partners that are related foreign parties will determine whether it has made a base erosion payment by treating the amount as having been paid to each partner of the partnership. Conversely, also in the absence of this aggregate approach, a payment by an applicable taxpayer (corporation) to a related domestic partnership would not be a base erosion payment even if some or all of the partners in the partnership are foreign related parties. As with a payment to a related foreign partnership, under the aggregate approach adopted in these final regulations, the applicable taxpayer (corporation) that makes a payment to a related domestic partnership with a partner or partners that are related foreign parties will determine whether it has made a base erosion payment by treating the amount as having being paid to each partner of the partnership. This approach is thus neutral in both preventing potential abuse and preventing potential over-breadth.
The final regulations retain the same general approach that was provided in the proposed regulations. See Part VIII of the Summary of Comments and Explanation of Revisions. The Treasury Department and the IRS considered an alternative of not providing guidance on transactions involving partnerships; however, as discussed in this part I.D.4.e, these final regulations eliminate the distortion that would otherwise be present if determination of whether a payment is a base erosion payment is made by reference to the partnership, rather than by reference to the partners. For example, in the absence of these final regulations, taxpayers might be incentivized to route payments through a domestic partnership that is formed by foreign persons as an intermediary to avoid the BEAT. Conversely, in the absence of the final regulations, taxpayers would be incentivized to restructure to avoid making any payments to a foreign partnership that has partners that are solely domestic because such payment could be inappropriately classified as a base erosion payment.
Section 59A(i) provides the Secretary authority to issue regulations and other guidance including for the purposes of preventing the avoidance of the purposes of section 59A. Pursuant to this specific grant of regulatory authority, § 1.59A-9 provides rules recharacterizing certain specified transactions as necessary to prevent the avoidance of section 59A, and provides examples. The Treasury Department and the IRS have determined that any compliance burdens or other economic costs created by the anti-abuse provisions are necessary to further the purposes of section 59A.
These final regulations also provide reporting requirements necessary to properly administer and enforce section 59A. In particular, the Treasury Department and the IRS have identified certain types of information from taxpayers who are applicable taxpayers for purposes of section 59A that will be required to be reported on Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code), and a new Form 8991, Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts. The regulations increase record keeping requirements for taxpayers relative to the baseline because additional information is to be reported on Form 5472 and Form 8991. The requirements added by the proposed regulations, however, derive directly from statutory changes that require information from applicable taxpayers and are necessary for the effective administration of section 59A.
The collections of information in the final regulations with respect to section 59A are in §§ 1.59A-3(b)(3)(i)(C), 1.59A-3(b)(4)(i)(D), and 1.6038A-2. In response to comments addressing the notice of proposed rulemaking preceding the final regulations, the Treasury Department and the IRS have revised the collection of information with respect to section 6038A. The revised collection of information with respect to sections 59A and 6038A is in § 1.6038A-2(b)(7)(ix).
The collection of information in § 1.59A-6(b)(2)(i) and § 1.6038A-2(b)(7)(ix) requires an applicable taxpayer that makes qualified derivative payments to report information regarding its qualified derivative payments on Form 8991 in order for the QDP exception from base erosion payment status to apply to any particular payment. In response to comments, § 1.59A-6(b)(2)(i) provides that a taxpayer satisfies the reporting requirement by reporting the aggregate amount of all QDPs (rather than the aggregate amount as determined by type of derivative contract as provided in proposed § 1.6038A-2(b)(7)(ix)(A)) on Form 8991 or its successor form. To comply with these reporting requirements, taxpayers will need to develop systems to collect and report the relevant information. To separately determine the aggregate amount of QDPs by each specific type of derivative contract would add to the complexity of those systems. That additional complexity and compliance burden outweighs the utility to the IRS of receiving that information for each specific type of derivative contract. Section 1.59A-6(b)(2)(iv) also provides that during the transition period before § 1.59A-6(b)(2)(i) is applicable, taxpayers will not be deemed to have failed to satisfy the reporting requirement if the taxpayer reports the aggregate amount of qualified derivative payments in good faith. For purposes of the PRA, the reporting burden associated with § 1.59A-3(b)(4)(i)(D), § 1.59A-6(b)(2)(i) and § 1.6038A-2(b)(7)(ix) will be reflected in the PRA submission associated with the Form 8991 series (see chart at the end of this Part II of the Special Analysis section for the status of the PRA submission for this form).
The information collection requirements pursuant to § 1.59A-3(b)(3)(i)(C) are discussed further below. The collections of information pursuant to section 59A, except with respect to information collected under § 1.59A-3(b)(3)(i)(C), will be conducted by way of the following:
• Form 8991, Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts;
• Schedule G to the Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations;
• Part VIII of the updated Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business;
• Revised Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities.
For purposes of the Paperwork Reduction Act, the reporting burden associated with the collections of information with respect to section 59A, other than with respect to § 1.59A-3(b)(3)(i)(C), will be reflected in the IRS Forms 14029 Paperwork Reduction Act Submission, associated with Forms 5471 (OMB control numbers 1545-0123, and 1545-0074), 5472 (OMB control number 1545-0123), 8858 (OMB control numbers 1545-0123, 1545-0074, and 1545-1910), and 8991 (OMB control number 1545-0123).
The current status of the Paperwork Reduction Act submissions related to BEAT is provided in the following table. The BEAT provisions are included in aggregated burden estimates for the OMB control numbers listed below which, in the case of 1545-0123, represents a total estimated burden time, including all other related forms and schedules for corporations, of 3.157 billion hours and total estimated monetized costs of $58.148 billion ($2017) and, in the case of 1545-0074, a total estimated burden time, including all other related forms and schedules for individuals, of 1.784 billion hours and total estimated monetized costs of $31.764 billion ($2017). The burden estimates provided in the OMB control numbers below are aggregate amounts that relate to the entire package of forms associated with the OMB control number, and will in the future include but not isolate the estimated burden of only the BEAT requirements. These numbers are therefore unrelated to the future calculations needed to assess the burden imposed by the final regulations. The Treasury Department and IRS urge readers to recognize that these numbers are duplicates and to guard against overcounting the burden that international tax provisions imposed prior to the Act. No burden estimates specific to the final regulations are currently available. The Treasury Department has not estimated the burden, including that of any new information collections, related to the requirements under the final regulations. Those estimates would capture both changes made by the Act and those that arise out of discretionary authority exercised in the final regulations. The Treasury Department and the IRS request comment on all aspects of information collection burdens related to the final regulations. In addition, when available, drafts of IRS forms are posted for comment at
The numbers of respondents in the Related New or Revised Tax Forms table were estimated by Treasury's Office of Tax Analysis based on data from IRS Compliance Planning and Analytics using tax return data for tax years 2015 and 2016. Data for Form 8991 represent preliminary estimates of the total number of taxpayers which may be required to file the new Form 8991. Only certain large corporate taxpayers with gross receipts of at least $500 million are expected to file this form. Data for each of the Forms 5471, 5472, and 8858 represent preliminary estimates of the total number of taxpayers that are expected to file these information returns regardless of whether that taxpayer must also file Form 8991.
The Treasury Department and the IRS project that 3,500-4,500 taxpayers may be applicable taxpayers under the BEAT. This estimate is based on the number of filers that (1) filed the Form 1120 series of tax returns (except for the Form 1120-S), (2) filed a Form 5471 or Form 5472, and (3) reported gross receipts of at least $500 million. Because an applicable taxpayer is defined under section 59A(e)(1)(A) as a corporation other than a regulated investment company, a real estate investment trust, or an S corporation, the Treasury Department and the IRS have determined that taxpayers who filed the Form 1120 series of tax returns will be most likely to be affected by these proposed regulations. Additionally, the Treasury Department and the IRS estimated the number of filers likely to make payments to a foreign related party based on filers of the Form 1120 series of tax returns who also filed a Form 5471 or Form 5472 to determine the number of respondents. Finally, because an applicable taxpayer is defined under section 59A(e)(1)(B) as a taxpayer with average annual gross receipts of at least $500 million for the 3-taxable-year period ending with the preceding taxable year, the Treasury Department and the IRS estimated the scope of respondents based on the amount of gross receipts reported by taxpayers filing the Form 1120 series of tax returns.
These projections are based solely on data with respect to the taxpayer, without taking into account any
The information collection requirements pursuant to § 1.59A-3(b)(3)(i)(C) will be satisfied by the taxpayer maintaining permanent books and records that are adequate to verify the amount charged for the services and the total services costs incurred by the renderer, including a description of the services in question, identification of the renderer and the recipient of the services, calculation of the amount of profit mark-up (if any) paid for the services, and sufficient documentation to allow verification of the methods used to allocate and apportion the costs to the services.
The collection of information in § 1.59A-3(b)(3)(i)(C) is mandatory for taxpayers seeking to exclude certain amounts paid or accrued to a foreign related party for services from treatment as base erosion payments for purposes of section 59A (the “SCM exception to the BEAT”). Taxpayers seeking to rely on the SCM exception to the BEAT are aggregate groups of corporations with average annual gross receipts of at least $500 million and that make payments to foreign related parties. The information required to be maintained will be used by the IRS for tax compliance purposes.
Based on these estimates, the annual three-year reporting burden for those electing the SCM exemption is $0.16 mn/yr ($2017) ($238 × 2,000/3, converted to millions).
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is based on the fact that these regulations will primarily affect aggregate groups of corporations with average annual gross receipts of at least $500 million and that make payments to foreign related parties. Generally only large businesses both have substantial gross receipts and make payments to foreign related parties.
Pursuant to section 7805(f), the proposed regulations preceding these final regulations (REG-104259-18) were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold is approximately $154 million. This rule does not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This final rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.
The Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget has determined that this is a major rule for purposes of the Congressional Review Act (5 U.S.C. 801
Pursuant to section 808(2) of the CRA, the Treasury Department and the IRS find, for good cause, that a 60-day delay in the effective date is unnecessary and contrary to the public interest. The Treasury Department and the IRS have determined that the rules in this Treasury decision (other than the reporting requirements for QDPs in § 1.6038A-2(b)(7), § 1.1502-2(a)(9), and § 1.1502-59A) shall take effect for taxable years ending on or after December 17, 2018. Section 14401(e) of the Act provides that section 59A applies to base erosion payments paid or accrued in taxable years beginning after December 31, 2017. This means that the statute is currently effective, and taxpayers may be required to make payments under section 59A on a U.S. federal income tax return for 2018 tax years. These final regulations provide crucial guidance for taxpayers on how to apply the rules of section 59A, correctly calculate their liability under section 59A, and accurately file their U.S. federal income tax returns. Because the statute already requires taxpayers to comply with section 59A, a 60-day delay in the effective date is unnecessary and contrary to the public interest.
The principal authors of these final regulations are Azeka J. Abramoff, Sheila Ramaswamy, and Karen Walny of the Office of Associate Chief Counsel (International) and Julie Wang and John
Income taxes, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 1 is amended as follows:
26 U.S.C. 7805 * * *
§ 1.59A-0 also issued under 26 U.S.C. 59A(i).
§ 1.59A-1 also issued under 26 U.S.C. 59A(i).
§ 1.59A-2 also issued under 26 U.S.C. 59A(i).
§ 1.59A-3 also issued under 26 U.S.C. 59A(i).
§ 1.59A-4 also issued under 26 U.S.C. 59A(i).
§ 1.59A-5 also issued under 26 U.S.C. 59A(i).
§ 1.59A-6 also issued under 26 U.S.C. 59A(i).
§ 1.59A-7 also issued under 26 U.S.C. 59A(i).
§ 1.59A-8 also issued under 26 U.S.C. 59A(i).
§ 1.59A-9 also issued under 26 U.S.C. 59A(i).
§ 1.59A-10 also issued under 26 U.S.C. 59A(i).
§ 1.1502-59A also issued under 26 U.S.C. 1502.
§ 1.1502-100 also issued under 26 U.S.C. 1502.
§ 1.6038A-2 also issued under 26 U.S.C. 6001, 6038A, and 6038C.
This section contains a listing of the headings for §§ 1.59A-1, 1.59A-2, 1.59A-3, 1.59A-4, 1.59A-5, 1.59A-6, 1.59A-7, 1.59A-8, 1.59A-9, 1.59A-10.
(a) Purpose.
(b) Definitions.
(1) Aggregate group.
(2) Applicable section 38 credits.
(3) Applicable taxpayer.
(4) Bank.
(5) Base erosion and anti-abuse tax rate.
(6) Business interest expense.
(7) Deduction.
(8) Disallowed business interest expense carryforward.
(9) Domestic related business interest expense.
(10) Foreign person.
(11) Foreign related business interest expense.
(12) Foreign related party.
(13) Gross receipts.
(14) Member of an aggregate group.
(15) Registered securities dealer.
(16) Regular tax liability.
(17) Related party.
(i) In general.
(ii) 25-percent owner.
(iii) Application of section 318.
(18) TLAC long-term debt required amount.
(19) TLAC securities amount.
(20) TLAC security.
(21) Unrelated business interest expense.
(a) Scope.
(b) Applicable taxpayer.
(c) Aggregation rules.
(1) In general.
(2) Aggregate group determined with respect to each taxpayer.
(i) In general.
(ii) Reserved.
(3) Taxable year of members of an aggregate group.
(4) Reserved.
(5) Reserved.
(6) Reserved.
(7) Partnerships.
(8) Transition rule for aggregate group members with different taxable years.
(d) Gross receipts test.
(1) Amount of gross receipts.
(2) Taxpayer not in existence for entire three-year period.
(3) Gross receipts of foreign corporations.
(4) Gross receipts of an insurance company.
(5) Reductions in gross receipts.
(6) Gross receipts of consolidated groups.
(e) Base erosion percentage test.
(1) In general.
(2) Base erosion percentage test for banks and registered securities dealers.
(i) In general.
(ii) Aggregate groups.
(iii) De minimis exception for banking and registered securities dealer activities.
(3) Computation of base erosion percentage.
(i) In general.
(ii) Certain items not taken into account in denominator.
(iii) Effect of treaties on base erosion percentage determination.
(iv) Amounts paid or accrued between members of a consolidated group.
(v) Deductions and base erosion tax benefits from partnerships.
(vi) Mark-to-market positions.
(vii) Reinsurance losses incurred and claims payments.
(viii) Certain payments that qualify for the effectively connected income exception and another base erosion payment exception.
(f) Examples.
(1) Mark-to-market.
(i) Facts.
(ii) Analysis.
(2) [Reserved]
(a) Scope.
(b) Base erosion payments.
(1) In general.
(2) Operating rules.
(i) In general.
(ii) Amounts paid or accrued in cash and other consideration.
(iii) Transactions providing for net payments.
(iv) Amounts paid or accrued with respect to mark-to-market position.
(v) Coordination among categories of base erosion payments.
(vi) Certain domestic passthrough entities.
(A) In general.
(B) Amount of base erosion payment.
(C) Specified domestic passthrough.
(D) Specified foreign related party.
(vii) Transfers of property to related taxpayers.
(viii) Reductions to determine gross income.
(ix) Losses recognized on the sale or transfer of property.
(3) Exceptions to base erosion payment.
(i) Certain services cost method amounts.
(A) In general.
(B) Eligibility for the services cost method exception.
(C) Adequate books and records.
(D) Total services cost.
(ii) Qualified derivative payments.
(iii) Effectively connected income.
(A) In general.
(B) Application to certain treaty residents.
(iv) Exchange loss on a section 988 transaction.
(v) Amounts paid or accrued with respect to TLAC securities and foreign TLAC securities.
(A) In general.
(B) Limitation on exclusion for TLAC securities.
(C) Scaling ratio.
(D) Average domestic TLAC securities amount.
(E) Average TLAC long-term debt required amount.
(F) Limitation on exclusion for foreign TLAC securities.
(
(
(
(
(vi) Amounts paid or accrued in taxable years beginning before January 1, 2018.
(vii) Business interest carried forward from taxable years beginning before January 1, 2018.
(viii) Specified nonrecognition transactions.
(A) In general.
(B) Other property transferred to a foreign related party in a specified nonrecognition transaction.
(C) Other property received from a foreign related party in certain specified nonrecognition transactions.
(D) Definition of other property
(E) Allocation of other property.
(ix) Reinsurance losses incurred and claims payments.
(A) In general.
(B) Regulated foreign insurance company.
(4) Rules for determining the amount of certain base erosion payments.
(i) Interest expense allocable to a foreign corporation's effectively connected income.
(A) Methods described in § 1.882-5.
(B) U.S.-booked liabilities determination.
(C) U.S.-booked liabilities in excess of U.S.-connected liabilities.
(D) Election to use financial statements.
(E) Coordination with certain tax treaties.
(
(
(
(F) Coordination with exception for foreign TLAC securities.
(ii) Other deductions allowed with respect to effectively connected income.
(iii) Depreciable property.
(iv) Coordination with ECI exception.
(v) Coordination with certain tax treaties.
(A) Allocable expenses.
(B) Internal dealings under certain income tax treaties.
(vi) Business interest expense arising in taxable years beginning after December 31, 2017.
(c) Base erosion tax benefit.
(1) In general.
(2) Exception to base erosion tax benefit.
(i) In general.
(ii) Branch-level interest tax.
(3) Effect of treaty on base erosion tax benefit.
(4) Application of section 163(j) to base erosion payments.
(i) Classification of payments or accruals of business interest expense based on the payee.
(A) Classification of payments or accruals of business interest expense of a corporation.
(B) Classification of payments or accruals of business interest expense by a partnership.
(C) Classification of payments or accruals of business interest expense paid or accrued to a foreign related party that is subject to an exception.
(
(
(ii) Ordering rules for business interest expense that is limited under section 163(j)(1) to determine which classifications of business interest expense are deducted and which classifications of business interest expense are carried forward.
(A) In general.
(B) Ordering rules for treating business interest expense deduction and disallowed business interest expense carryforwards as foreign related business interest expense, domestic related business interest expense, and unrelated business interest expense.
(
(
(
(d) Examples.
(1) Example 1: Determining a base erosion payment.
(i) Facts.
(ii) Analysis.
(2) Example 2: Interest allocable under § 1.882-5.
(i) Facts.
(ii) Analysis.
(3) Example 3: Interaction with section 163(j).
(i) Facts.
(ii) Analysis.
(A) Classification of business interest.
(B) Ordering rules for disallowed business interest expense carryforward.
(4) Example 4: Interaction with section 163(j); carryforward.
(i) Facts.
(ii) Analysis.
(A) Classification of business interest.
(B) Ordering rules for disallowed business interest expense carryforward.
(5) Example 5: Interaction with section 163(j); carryforward.
(i) Facts.
(ii) Analysis.
(6) Example 6: Interaction with section 163(j); partnership.
(i) Facts.
(ii) Partnership level analysis.
(iii) Partner level allocations analysis.
(iv) Partner level allocations for determining base erosion tax benefits.
(v) Computation of modified taxable income.
(7) Example 7: Transfers of property to related taxpayers.
(i) Facts.
(ii) Analysis.
(A) Year 1.
(B) Year 2.
(a) Scope.
(b) Computation of modified taxable income.
(1) In general.
(2) Modifications to taxable income.
(i) Base erosion tax benefits.
(ii) Certain net operating loss deductions.
(3) Rule for holders of a residual interest in a REMIC.
(c) Examples.
(1) Example 1: Current year loss.
(i) Facts.
(ii) Analysis.
(2) Example 2: Net operating loss deduction.
(i) Facts.
(ii) Analysis.
(a) Scope.
(b) Base erosion minimum tax amount.
(1) In general.
(2) Calculation of base erosion minimum tax amount.
(3) Credits that do not reduce regular tax liability.
(i) Taxable years beginning on or before December 31, 2025.
(ii) Taxable years beginning after December 31, 2025.
(c) Base erosion and anti-abuse tax rate.
(1) In general.
(i) Calendar year 2018.
(ii) Calendar years 2019 through 2025.
(iii) Calendar years after 2025.
(2) Increased rate for banks and registered securities dealers.
(i) In general.
(ii) De minimis exception to increased rate for banks and registered securities dealers.
(3) Application of section 15 to tax rates in section 59A.
(i) New tax.
(ii) Change in tax rate pursuant to section 59A(b)(1)(A).
(iii) Change in rate pursuant to section 59A(b)(2).
(a) Scope.
(b) Qualified derivative payment.
(1) In general.
(2) Reporting requirements.
(i) In general.
(ii) Failure to satisfy the reporting requirement.
(iii) Reporting of aggregate amount of qualified derivative payments.
(iv) Transition period for qualified derivative payment reporting.
(3) Amount of any qualified derivative payment.
(i) In general.
(ii) Net qualified derivative payment that includes a payment that is a base erosion payment.
(c) Exceptions for payments otherwise treated as base erosion payments.
(d) Derivative defined.
(1) In general.
(2) Exceptions.
(i) Direct interest.
(ii) Insurance contracts.
(iii) Securities lending and sale-repurchase transactions.
(A) Multi-step transactions treated as financing.
(B) Special rule for payments associated with the cash collateral provided in a securities lending transaction or substantially similar transaction.
(C) Anti-abuse exception for certain transactions that are the economic equivalent of substantially unsecured cash borrowing.
(3) American depository receipts.
(e) Examples.
(1) Example 1: Notional principal contract as QDP.
(i) Facts.
(ii) Analysis.
(2) Example 2: Securities lending anti-abuse rule.
(i) Facts.
(ii) Analysis.
(a) Scope.
(b) Application of section 59A to partnerships.
(c) Base erosion payment.
(1) Payments made by or to a partnership.
(2) Transfers of certain property.
(3) Transfers of a partnership interest.
(i) In general.
(ii) Transfers of a partnership interest by a partner.
(iii) Certain issuances of a partnership interest by a partnership.
(iv) Partnership interest transfers defined.
(4) Increased basis from a distribution.
(5) Operating rules applicable to base erosion payments.
(i) Single payment characterized as separate transactions.
(ii) Ordering rule with respect to transfers of a partnership interest.
(iii) Consideration for base erosion payment or property resulting in base erosion tax benefits.
(iv) Non-cash consideration.
(d) Base erosion tax benefit for partners.
(1) In general.
(2) Exception for base erosion tax benefits of certain small partners.
(i) In general.
(ii) Attribution.
(e) Other rules for applying section 59A to partnerships.
(1) Partner's distributive share.
(2) Gross receipts.
(i) In general.
(ii) Foreign corporation.
(3) Registered securities dealers.
(4) Application of sections 163(j) and 59A(c)(3) to partners.
(5) Tiered partnerships.
(f) Foreign related party.
(g) Examples.
(1) Facts.
(2) Examples.
(i) Example 1: Contributions to a partnership on partnership formation.
(A) Facts.
(B) Analysis.
(ii) Example 2: Section 704(c) and remedial allocations.
(A) Facts.
(B) Analysis.
(iii) Example 3: Sale of a partnership interest without a section 754 election.
(A) Facts.
(B) Analysis.
(iv) Example 4: Sale of a partnership interest with section 754 election.
(A) Facts.
(B) Analysis.
(v) Example 5: Purchase of depreciable property from a partnership.
(A) Facts.
(B) Analysis.
(vi) Example 6: Sale of a partnership interest to a second partnership.
(A) Facts.
(B) Analysis.
(vii) Example 7: Distribution of cash by a partnership to a foreign related party.
(A) Facts.
(B) Analysis.
(viii) Example 8: Distribution of property by a partnership to a taxpayer.
(A) Facts.
(B) Analysis.
(ix) Example 9: Distribution of property by a partnership in liquidation of a foreign related party's interest.
(A) Facts.
(B) Analysis.
(a) Scope.
(b) Anti-abuse rules.
(1) Transactions involving unrelated persons, conduits, or intermediaries.
(2) Transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(3) Transactions to avoid the application of rules applicable to banks and registered securities dealers.
(4) Nonrecognition transactions.
(c) Examples.
(1) Facts.
(2) Example 1: Substitution of payments that are not base erosion payments for payments that otherwise would be base erosion payments through a conduit or intermediary.
(i) Facts.
(ii) Analysis.
(3) Example 2: Alternative transaction to base erosion payment.
(i) Facts.
(ii) Analysis.
(4) Example 3: Alternative financing source.
(i) Facts.
(ii) Analysis.
(5) Example 4: Alternative financing source that is a conduit.
(i) Facts.
(ii) Analysis.
(6) Example 5: Intermediary acquisition.
(i) Facts.
(ii) Analysis.
(7) Example 6: Offsetting transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(i) Facts.
(ii) Analysis.
(8) Example 7: Ordinary course transactions that increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(i) Facts.
(ii) Analysis.
(9) Example 8: Transactions to avoid the application of rules applicable to banks and registered securities dealers.
(i) Facts.
(ii) Analysis.
(10) Example 9: Transactions that do not avoid the application of rules applicable to banks and registered securities dealers.
(i) Facts.
(ii) Analysis.
(11) Example 10: Acquisition of depreciable property in a nonrecognition transaction.
(i) Facts.
(ii) Analysis.
(12) Example 11: Transactions between related parties with a principal purpose of increasing the adjusted basis of property.
(i) Facts.
(ii) Analysis.
(a)
(b)
(1) Aggregate group. The term
(i) Identifying a controlled group of corporations as defined in section 1563(a), except that the phrase “more than 50 percent” is substituted for “at least 80 percent” each place it appears in section 1563(a)(1) and the determination is made without regard to sections 1563(a)(4) and (e)(3)(C), and
(ii) Once the controlled group of corporations is determined, excluding foreign corporations except with regard to income that is, or is treated as, effectively connected with the conduct of a trade or business in the United States under an applicable provision of the Internal Revenue Code or
(2) Applicable section 38 credits. The term
(i) The low-income housing credit determined under section 42(a),
(ii) The renewable electricity production credit determined under section 45(a), and
(iii) The investment credit determined under section 46, but only to the extent properly allocable to the energy credit determined under section 48.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(A) Any 25-percent owner of the taxpayer;
(B) Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or any 25-percent owner of the taxpayer; or
(C) A controlled taxpayer within the meaning of § 1.482-1(i)(5) together with, or with respect to, the taxpayer.
(ii)
(A) The total voting power of all classes of stock of the corporation entitled to vote; or
(B) The total value of all classes of stock of the corporation.
(iii)
(A) “10 percent” is substituted for “50 percent” in section 318(a)(2)(C); and
(B) Section 318(a)(3)(A) through (C) are not applied so as to consider a United States person as owning stock that is owned by a person who is not a United States person.
(18)
(19)
(20)
(21)
(a)
(b)
(1) Is a corporation, but not a regulated investment company, a real estate investment trust, or an S corporation;
(2) Satisfies the gross receipts test of paragraph (d) of this section; and
(3) Satisfies the base erosion percentage test of paragraph (e) of this section.
(c)
(2)
(ii) [Reserved]
(3)
(4) through (6) [Reserved]
(7)
(8)
(d)
(2)
(3)
(4)
(5)
(6)
(e)
(2)
(ii)
(iii)
(3)
(A) The aggregate amount of the taxpayer's (or in the case of a taxpayer that is a member of an aggregate group, the aggregate group's) base erosion tax benefits (as defined in § 1.59A-3(c)(1)) for the taxable year, by
(B) The sum of—
(
(
(
(ii)
(A) Any deduction allowed under section 172, 245A, or 250 for the taxable year;
(B) Any deduction for amounts paid or accrued for services to which the exception described in § 1.59A-3(b)(3)(i) applies;
(C) Any deduction for qualified derivative payments that are not treated as base erosion payments by reason of § 1.59A-3(b)(3)(ii);
(D) Any exchange loss within the meaning of § 1.988-2 from a section 988 transaction as described in § 1.988-1(a)(1) that is not treated as a base erosion payment by reason of § 1.59A-3(b)(3)(iv);
(E) Any deduction for amounts paid or accrued to foreign related parties with respect to TLAC securities and foreign TLAC securities that are not treated as base erosion payments by reason of § 1.59A-3(b)(3)(v);
(F) Any reinsurance losses incurred and claims payments described in § 1.59A-3(b)(3)(ix); and
(G) Any deduction not allowed in determining taxable income for the taxable year.
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(f)
(1)
(B) For position A in year 1, DC makes a payment of $150x on June 30, and receives a payment of $50x on December 31. There are no other payments in year 1. On December 31, position A has a value to DC of $110x (that is, position A is in-the-money by $110x).
(C) For position B in year 1, DC receives a payment of $120x on June 30, and makes a payment of $30x on December 31. There are no other payments in year 1. On December 31, position B has a value to DC of ($130x) (that is, position B is out-of-the-money by $130x).
(ii)
(B) With respect to position B, based on the total amount of payments made and received in year 1, DC has net income of $90x. In addition, DC has a mark-to-market loss of $130x. As described in paragraph (e)(3)(vi) of this section, the mark-to-market loss of $130x is combined with the net income of $90x resulting from the payments. Therefore, with respect to position B, DC has a loss of $40x, and thus has a $40x deduction in year 1 for purposes of section 59A.
(2) [Reserved]
(a)
(b)
(i) Any amount paid or accrued by the taxpayer to a foreign related party of the taxpayer and with respect to which a deduction is allowable under chapter 1
(ii) Any amount paid or accrued by the taxpayer to a foreign related party of the taxpayer in connection with the acquisition of property by the taxpayer from the foreign related party if the character of the property is subject to the allowance for depreciation (or amortization in lieu of depreciation);
(iii) Any premium or other consideration paid or accrued by the taxpayer to a foreign related party of the taxpayer for any reinsurance payments that are taken into account under section 803(a)(1)(B) or 832(b)(4)(A); or
(iv) Any amount paid or accrued by the taxpayer that results in a reduction of the gross receipts of the taxpayer if the amount paid or accrued is with respect to—
(A) A surrogate foreign corporation, as defined in section 59A(d)(4)(C)(i), that is a related party of the taxpayer (but only if the corporation first became a surrogate foreign corporation after November 9, 2017); or
(B) A foreign person that is a member of the same expanded affiliated group, as defined in section 59A(d)(4)(C)(ii), as the surrogate foreign corporation.
(2)
(ii)
(iii)
(iv)
(v)
(vi)
(B)
(C)
(
(
(
(D)
(vii)
(viii)
(ix)
(3)
(i)
(B)
(
(
(C)
(D)
(ii)
(iii)
(B)
(iv)
(v)
(B)
(C)
(D)
(E)
(F)
(
(
(
(
(
(vi)
(vii)
(viii)
(B)
(C)
(D)
(E)
(ix)
(B)
(
(
(4)
(i)
(
(
(
(B)
(C)
(D)
(E)
(
(
(F)
(ii)
(iii)
(iv)
(v)
(B)
(vi)
(c)
(i) In the case of a base erosion payment described in paragraph (b)(1)(i) of this section, any deduction that is allowed under chapter 1 of subtitle A of the Internal Revenue Code for the taxable year with respect to that base erosion payment;
(ii) In the case of a base erosion payment described in paragraph (b)(1)(ii) of this section, any deduction allowed under chapter 1 of subtitle A of the Internal Revenue Code for the taxable year for depreciation (or amortization in lieu of depreciation) with respect to the property acquired with that payment;
(iii) In the case of a base erosion payment described in paragraph (b)(1)(iii) of this section, any reduction under section 803(a)(1)(B) in the gross amount of premiums and other consideration on insurance and annuity contracts for premiums and other consideration arising out of indemnity reinsurance, or any deduction under section 832(b)(4)(A) from the amount of gross premiums written on insurance contracts during the taxable year for premiums paid for reinsurance; or
(iv) In the case of a base erosion payment described in paragraph (b)(1)(iv) of this section, any reduction in gross receipts with respect to the payment in computing gross income of the taxpayer for the taxable year for purposes of chapter 1 of subtitle A of the Internal Revenue Code.
(2)
(ii)
(3)
(i) The rate of tax imposed under the treaty; over
(ii) The rate of tax imposed without regard to the treaty.
(4)
(A)
(B)
(C)
(
(ii)
(B)
(
(
(d)
(1)
(ii)
(2)
(ii)
(3)
(ii)
(B)
(4)
(ii)
(B)
(5)
(ii)
(6)
(ii)
(iii)
(iv)
(v)
(7)
(ii)
(B)
(a)
(b)
(2)
(i)
(ii)
(3)
(c)
(1)
(ii)
(2)
(ii)
(a)
(b)
(2)
(i) An amount equal to the base erosion and anti-abuse tax rate multiplied by the modified taxable income of the taxpayer for the taxable year, over
(ii) An amount equal to the regular tax liability as defined in § 1.59A-1(b)(16) of the taxpayer for the taxable year, reduced (but not below zero) by the excess (if any) of—
(A) The credits allowed under chapter 1 of subtitle A of the Code against regular tax liability over
(B) The sum of the credits described in paragraph (b)(3) of this section.
(3)
(i)
(A) The credit allowed under section 38 for the taxable year that is properly allocable to the research credit determined under section 41(a);
(B) The portion of the applicable section 38 credits not in excess of 80 percent of the lesser of the amount of those applicable section 38 credits or the base erosion minimum tax amount (determined without regard to this paragraph (b)(3)(i)(B)); and
(C) Any credits allowed under sections 33, 37, and 53.
(ii)
(c)
(i)
(ii)
(iii)
(2)
(ii)
(3)
(ii)
(iii)
(a)
(b)
(i) Recognizes gain or loss as if the derivative were sold for its fair market value on the last business day of the taxable year (and any additional times as required by the Internal Revenue Code or the taxpayer's method of accounting);
(ii) Treats any gain or loss so recognized as ordinary; and
(iii) Treats the character of all items of income, deduction, gain, or loss with respect to a payment pursuant to the derivative as ordinary.
(2)
(ii)
(iii)
(iv)
(3)
(ii)
(c)
(1) The payment would be treated as a base erosion payment if it were not made pursuant to a derivative, including any interest, royalty, or service payment; or
(2) In the case of a contract that has derivative and nonderivative components, the payment is properly allocable to the nonderivative component.
(d)
(i) Any share of stock in a corporation;
(ii) Any evidence of indebtedness;
(iii) Any commodity that is actively traded;
(iv) Any currency; or
(v) Any rate, price, amount, index, formula, or algorithm.
(2)
(i)
(ii)
(iii)
(B)
(C)
(3)
(e)
(1)
(ii)
(2)
(B) On June 30 of year 1, FC lends 100x U.S. Treasury bills with a remaining maturity of 11 months (Securities B) to DC (Securities Lending Transaction 2) for a period of six months. Pursuant to the terms of Securities Lending Transaction 2, DC is obligated to make substitute payments to FC corresponding to the interest payments on Securities B. Immediately thereafter, DC sells Securities B for cash and uses the cash to purchase U.S. Treasury bills with a remaining maturity equal to the Securities A bills that DC then transfers to FC in repayment of Securities Lending Transaction 1.
(ii)
(a)
(b)
(c)
(1)
(2)
(3)
(ii)
(iii)
(iv)
(4)
(5)
(ii)
(iii)
(iv)
(d)
(2)
(A) The partner's interest in the partnership represents less than ten percent of the capital and profits of the partnership at all times during the taxable year;
(B) The partner is allocated less than ten percent of each partnership item of income, gain, loss, deduction, and credit for the taxable year; and
(C) The partner's interest in the partnership has a fair market value of less than $25 million on the last day of the partner's taxable year, determined using a reasonable method.
(ii)
(e)
(2)
(ii)
(3)
(4)
(5)
(f)
(g)
(1)
(i) DC is a domestic corporation that is an applicable taxpayer for purposes section 59A.
(ii) FC is a foreign corporation that is a foreign related party with respect to DC.
(iii) UC is a domestic corporation that is not related to DC and FC.
(iv) Neither FC nor any partnership in the examples is (or is treated as) engaged in a U.S. trade or business or has a permanent establishment in the United States.
(v) All payments apply to a taxable year beginning after December 31, 2017.
(vi) Unless otherwise stated, all allocations are pro-rata and satisfy the requirements of section 704(b) and all the partners have equal interests in the partnership.
(vii) Unless otherwise stated, depreciable property acquired and placed in service by the partnership has a remaining recovery period of five years and is depreciated under the alternative depreciation system of section 168(g) using the straight line method. Solely for purposes of simplifying the calculations in these examples, assume the applicable convention rules in section 168(d) do not apply.
(viii) No exception under § 1.59A-3(b) or (c) applies to any amount paid or accrued.
(2)
(B)
(ii)
(B)
(iii)
(B)
(iv)
(B)
(v)
(B)
(vi)
(B)
(vii)
(B)
(viii)
(B)
(ix)
(B)
(a)
(b)
(2)
(3)
(4)
(c)
(1)
(i) DC is a domestic corporation that is an applicable taxpayer for purposes section 59A.
(ii) FP is a foreign corporation that owns all the stock of DC.
(iii) None of the foreign corporations have income that is, or is treated as, effectively connected with the conduct of a trade or business in the United States under an applicable provision of the Internal Revenue Code or regulations thereunder.
(iv) All payments occur in a taxable year beginning after December 31, 2017.
(2)
(ii)
(3)
(ii)
(4)
(ii)
(5)
(ii)
(6)
(ii)
(7)
(ii)
(8)
(ii)
(9)
(ii)
(10)
(ii)
(11)
(ii)
(12)
(ii)
Sections 1.59A-1 through 1.59A-9 apply to taxable years ending on or after December 17, 2018. However, taxpayers may apply these final regulations in their entirety for taxable years beginning after December 31, 2017, and ending before December 17, 2018. In lieu of applying these final regulations, taxpayers may apply the provisions matching §§ 1.59A-1 through 1.59A-9 from the Internal Revenue Bulletin (IRB) 2019-02 (
(d) * * *
(3) * * *
(i) * * * The application of section 59A is not a limitation contained in subtitle A for purposes of this paragraph (d)(3)(i). Therefore, the treatment of pre-change losses and pre-change credits in the computation of the base erosion minimum tax amount will not affect whether such losses or credits result in absorption of the section 382 limitation and the section 383 credit limitation.
(a)
(1) The tax imposed by section 11(a) in the amount described in section 11(b) on the consolidated taxable income for the year (reduced by the taxable income of a member described in paragraphs (a)(5) through (8) of this section);
(2) The tax imposed by section 541 on the consolidated undistributed personal holding company income;
(3) If paragraph (a)(2) of this section does not apply, the aggregate of the taxes imposed by section 541 on the separate undistributed personal holding company income of the members which are personal holding companies;
(4) If neither paragraph (a)(2) nor (3) of this section apply, the tax imposed by section 531 on the consolidated accumulated taxable income (see § 1.1502-43);
(5) The tax imposed by section 594(a) in lieu of the taxes imposed by section 11 on the taxable income of a life insurance department of the common parent of a group which is a mutual savings bank;
(6) The tax imposed by section 801 on consolidated life insurance company taxable income;
(7) The tax imposed by section 831(a) on consolidated insurance company taxable income of the members which are subject to such tax;
(8) Any increase in tax described in section 1351(d)(1) (relating to recoveries of foreign expropriation losses); and
(9) The tax imposed by section 59A on base erosion payments of taxpayers with substantial gross receipts.
(b)
(c)
(d)
(d) * * *
(3)
(b) * * *
(2) * * *
(i) * * *
(A) The consolidated liability for tax determined without § 1.1502-2(a)(2) through (4), and without the foreign tax credit provided by section 27, over
(f) * * *
(7) * * *
(iii) Any taxes described in § 1.1502-2 (other than by paragraphs (a)(1) and (6) of that section).
(a)
(b)
(2)
(3)
(c)
(2)
(3)
(ii)
(iii)
(iv)
(4)
(ii)
(B)
(iii)
(iv)
(5)
(ii)
(B)
(iii)
(iv)
(v)
(6)
(ii)
(iii)
(7)
(d)
(e) [Reserved]
(f)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(g)
(1)
(B)
(ii)
(B)
(2)
(ii)
(B)
(C)
(
(
(D)
(3)
(B)
(
(
(
(
(
(
(
(
(ii)
(B)
(
(
(
(
(h)
(b) The tax liability for a consolidated return year of an exempt group is the tax imposed by section 511(a) on the consolidated unrelated taxable income for the year (determined under paragraph (c) of this section), and by allowing the credits provided in § 1.1502-2(b).
The additions and revision read as follows:
(n) * * *
(2)
(ii)
(3) * * * For taxable years ending on or before December 31, 2017, see § 1.6038A-4 as contained in 26 CFR part 1 revised as of April 1, 2018.
The revisions and additions read as follows:
(a)
(2)
(i) Will not generate in any taxable year gross income from sources within the United States or income effectively connected, or treated as effectively connected, with the conduct of a trade or business within the United States, and
(ii) Will not generate in any taxable year any expense, loss, or other deduction that is allocable or apportionable to such income.
(3)
(b) * * *
(1) * * *
(ii) The name, address, and U.S. taxpayer identification number, if applicable, of all its direct and indirect foreign shareholders (for an indirect 25-percent foreign shareholder, explain the attribution of ownership); whether any 25-percent foreign shareholder is a surrogate foreign corporation under section 7874(a)(2)(B) or a member of an expanded affiliated group as defined in section 7874(c)(1); each country in which each 25-percent foreign shareholder files an income tax return as a resident under the tax laws of that country; the places where each 25-percent shareholder conducts its business; and the country or countries of organization, citizenship, and incorporation of each 25-percent foreign shareholder.
(2) * * *
(iv) The relationship of the reporting corporation to the related party (including, to the extent the form may prescribe, any intermediate relationships).
(3) * * * The total amount of such transactions, as well as the separate amounts for each type of transaction described below, and, to the extent the form may prescribe, any further
(6)
(i) The identity and status of the related parties;
(ii) The reporting corporation's relationship to the related parties;
(iii) The reporting corporation's reportable transactions with the related parties; and
(iv) Other items required to be reported on Form 5472.
(7)
(i) Determination of whether a taxpayer is an applicable taxpayer;
(ii) Computation of base erosion minimum tax amount, including computation of regular tax liability as adjusted for purposes of computing base erosion minimum tax amount;
(iii) Computation of modified taxable income;
(iv) Base erosion tax benefits;
(v) Base erosion percentage calculation;
(vi) Base erosion payments;
(vii) Amounts with respect to services as described in § 1.59A-3(b)(3)(i), including a breakdown of the amount of the total services cost and any mark-up component;
(viii) Arrangements or transactions described in § 1.59A-9;
(ix) Any qualified derivative payment, including:
(A) The aggregate amount of qualified derivative payments for the taxable year; and
(B) A representation that all payments satisfy the requirements of § 1.59A-6(b)(2); and
(x) Any other information necessary to carry out section 59A.
(c)
(d) * * * A Form 5472 and Form 8991 required under this section must be filed with the reporting corporation's income tax return for the taxable year by the due date (including extensions) of that return. * * *
(g) * * * Paragraph (b)(7)(ix) of this section applies to taxable years beginning June 7, 2021. Before these final regulations are applicable, a taxpayer will be treated as satisfying the reporting requirement described in § 1.59A-6(b)(2) only to the extent that it reports the aggregate amount of qualified derivative payments on Form 8991.
Internal Revenue Service (IRS), Treasury.
Notice of proposed rulemaking.
This document contains proposed regulations that provide guidance regarding the base erosion and anti-abuse tax imposed on certain large corporate taxpayers with respect to certain payments made to foreign related parties. The proposed regulations would affect corporations with substantial gross receipts that make payments to foreign related parties.
Written or electronic comments and requests for a public hearing must be received by February 4, 2020.
Submit electronic submissions via the Federal eRulemaking Portal at
Concerning the proposed regulations, Sheila Ramaswamy, Azeka J. Abramoff, or Karen Walny at (202) 317-6938; concerning submissions of comments and requests for a public hearing, Regina Johnson at (202) 317-6901 (not toll-free numbers).
This document contains proposed amendments to 26 CFR part 1 under sections 59A and 6031 of the Internal Revenue Code (the “Code”). The Tax Cuts and Jobs Act, Public Law 115-97 (2017) (the “Act”), which was enacted on December 22, 2017, added section 59A to the Code. Section 59A imposes on each applicable taxpayer a tax equal to the base erosion minimum tax amount for the taxable year (the “base erosion and anti-abuse tax” or “BEAT”).
The Act also added reporting obligations regarding this tax for 25-percent foreign-owned corporations subject to section 6038A and foreign corporations subject to section 6038C and addressed other issues for which information reporting under those sections is important to tax administration.
On December 21, 2018, the Treasury Department and the IRS published proposed regulations (REG-104259-18) under section 59A, and proposed amendments to 26 CFR part 1 under sections 383, 1502, 6038A, and 6655 in the
These proposed regulations provide guidance under sections 59A and 6031 regarding certain aspects of the BEAT. Part II of this Explanation of Provisions describes proposed modifications to the rules set forth in the final regulations relating to how a taxpayer determines its aggregate group for purposes of determining gross receipts and the base erosion percentage. Part III of this Explanation of Provisions describes proposed regulations providing an election to waive deductions. Part IV of this Explanation of Provisions describes proposed regulations addressing the application of the BEAT to partnerships.
For certain purposes, including the determination of gross receipts described in section 59A(e)(2) and the base erosion percentage described in section 59A(c)(4), section 59A(e)(3) and § 1.59A-1(b)(1) generally aggregate a group of corporations (“aggregate group”) on the basis of persons treated as a single employer under section 52(a), which treats members of the same controlled group of corporations (as defined in section 1563(a) with certain modifications) as one person. To determine gross receipts, section 59A(e)(2) requires the application of rules similar to, but not necessarily the same as, section 448(c)(3)(B), (C), and (D). The 2018 proposed regulations provided rules for determining the aggregate group for applying the gross receipts test as well as the base erosion percentage test. Generally, the 2018 proposed regulations provided that each taxpayer determines its gross receipts and base erosion percentage by reference to its own taxable year, taking into account the results of other members of its aggregate group during that taxable year.
Comments to the 2018 proposed regulations recommended that the determination of gross receipts and the base erosion percentage of a taxpayer's aggregate group be made on the basis of the taxpayer's taxable year and the taxable year of each member of its aggregate group that ends with or within the applicable taxpayer's taxable year (the “with-or-within method”). In response to the comments to the 2018 proposed regulations, the final regulations generally adopt the with-or-within method. § 1.59A-2(c)(3). The final regulations do not include specific rules regarding how the with-or-within method applies in certain situations. These proposed regulations provide guidance regarding certain applications of the aggregate group rules and request comments regarding these rules in light of the with-or-within method.
The 2018 proposed regulations provided guidance regarding the determination of gross receipts for purposes of section 59A. In the case of a taxpayer that has a short taxable year, the 2018 proposed regulations annualized the gross receipts of the taxpayer by multiplying the gross receipts for the short taxable year by 365 and dividing the result by the number of days in the short taxable year.
One comment to the 2018 proposed regulations expressed concern that determining the gross receipts of a taxpayer by annualizing a short taxable year could yield inappropriate results when combined with the rule providing that any reference to a taxpayer includes a reference to its predecessor. For example, the comment asserted that if the taxpayer has a full taxable year but a predecessor had a short taxable year, it is not clear whether the taxable year of the predecessor should be annualized first and then combined with the year of the taxpayer or whether the taxable
In the case of a taxpayer that has a short taxable year, solely for purposes of section 59A, these proposed regulations continue to annualize the gross receipts of the taxpayer by multiplying the gross receipts for the short taxable year by 365 and dividing the result by the number of days in the short taxable year. Proposed § 1.59A-2(c)(5). However, the Treasury Department and the IRS recognize that the with-or-within method in § 1.59A-2(c)(3) must be adjusted to prevent the understatement or overstatement of the gross receipts, base erosion tax benefits, and deductions of an aggregate group in the case of a taxpayer with a short taxable year. For example, the with-or-within method would completely exclude the taxable year of certain members of an aggregate group if the taxable year of those members did not end with or within the taxpayer's short taxable year.
The Treasury Department and the IRS request comments on whether more specific guidance is needed, and if so, the best approach for determining the gross receipts and base erosion percentage of an aggregate group for purposes of section 59A when the applicable taxpayer or another member of an aggregate group has a short taxable year. The approach should neither over-count nor under-count the gross receipts, base erosion tax benefits, and deductions of the aggregate group. The approach should also appropriately account for short taxable years that result from a change in a taxpayer's taxable year end (in which case the preceding and following taxable years would be full taxable years) and short taxable years that result from changes in ownership, such as a joining or leaving a consolidated group (in which case the preceding or succeeding taxable year may also be a short taxable year).
A member may join or leave the aggregate group of a taxpayer because of a change in ownership of the member such as a sale of the member to a third party. A comment to the 2018 proposed regulations requested clarity on whether the determination of gross receipts and the base erosion percentage of an aggregate group takes into account the gross receipts, base erosion tax benefits, and deductions of a member of the aggregate group for the period before the member joins the group or the period after the member leaves the group. In response to this comment, the proposed regulations provide guidance that clarifies the treatment of members that join or leave the aggregate group of a taxpayer.
To determine the gross receipts and the base erosion percentage of a taxpayer with respect to its aggregate group for purposes of section 59A, these proposed regulations take into account only items of members that occur during the period that they were members of the taxpayer's aggregate group. Proposed § 1.59A-2(c)(4). Items of members that occur before a member joins an aggregate group of a taxpayer or after a member leaves an aggregate group of a taxpayer are not taken into account by the taxpayer. Solely for purposes of determining which items occurred while a corporation was a member of an aggregate group under section 59A, a corporation is treated as having a deemed taxable year end when the corporation joins or leaves an aggregate group of a taxpayer. The taxpayer may determine items attributable to this deemed short taxable year by either deeming a close of the corporation's books or, in the case of items other than extraordinary items (as defined in § 1.1502-76(b)(2)(ii)(C)), making a pro-rata allocation.
A comment to the 2018 proposed regulations expressed concern that gross receipts arising from intercompany transactions (as defined in § 1.1502-13(b)(1)) might be treated as gross receipts of the selling member (S) when S deconsolidates from a consolidated group (original consolidated group) and separately joins a different aggregate group (new aggregate group). For purposes of section 59A, the comment to the 2018 proposed regulations recommended that the gross receipts resulting from intercompany transactions in which S engaged while a member of the original consolidated group should not be counted even after S becomes a member of the new aggregate group, despite S no longer being a member of the original consolidated group.
The Treasury Department and the IRS are studying whether it is appropriate to continue to eliminate gross receipts resulting from intercompany transactions when members deconsolidate and join a different aggregate group. Furthermore, the Treasury Department and the IRS are aware of more general questions regarding the proper treatment of gross receipts when members join or deconsolidate from a consolidated group. These issues are currently under study, and the proposed regulations reserve on such issues. The Treasury Department and the IRS request comments on the appropriate treatment of a deconsolidating member's gross receipts history as it relates to the original consolidated group and the acquiring consolidated group in the context of the BEAT aggregate group.
For purposes of determining gross receipts, the 2018 proposed regulations provided that a reference to a taxpayer includes a reference to any predecessor of the taxpayer. 2018 proposed § 1.59A-2(c)(6)(i). The Treasury Department and the IRS, however, recognize that the aggregate groups of a taxpayer and its predecessor may overlap. As a result, an interpretation of the predecessor rule that simply adds the gross receipts of the predecessor to the gross receipts of the taxpayer's aggregate group could result in double counting of the gross receipts of corporations that are members of both aggregate groups. These proposed regulations clarify that, for purposes of section 59A, the gross receipts of those corporations included in both aggregate groups are not double counted. Proposed § 1.59A-2(c)(6)(ii). The Treasury Department and the IRS request comments on appropriate methods of taking into account predecessors for purposes of determining gross receipts of an applicable taxpayer's aggregate group. An appropriate method should avoid double-counting and address whether to take into account the taxable year of a predecessor in determining whether to annualize a short taxable year of a taxpayer.
The final regulations provide that, in general, the base erosion percentage for a taxable year is computed by dividing (1) the aggregate amount of base erosion tax benefits (the “numerator”) by (2) the sum of the aggregate amount of deductions allowed plus certain other base erosion tax benefits (the “denominator”).
Comments to the 2018 proposed regulations requested that the final regulations clarify that allowable deductions that a taxpayer declines to claim on its tax return are not “allowed” deductions, and therefore, the foregone deductions are not base erosion tax benefits. These proposed regulations provide that a taxpayer may forego a deduction and that those foregone deductions will not be treated as a base erosion tax benefit if the taxpayer waives the deduction for all U.S. federal income tax purposes and follows specified procedures. Proposed § 1.59A-3(c)(6). If the taxpayer waives a deduction for purposes of section 59A, these proposed regulations provide that the taxpayer cannot claim the deduction for any purpose of the Code or regulations except as otherwise provided under the proposed regulations.
The Treasury Department and the IRS are concerned that in adopting this approach, absent certain procedural rules, taxpayers that waive a deduction pursuant to the proposed regulations to reduce their amount of base erosion tax benefits could benefit by using some or all of the foregone deductions in a subsequent year, while still benefiting from the reduction of base erosion tax benefits made in the prior year. Accordingly, proposed § 1.59A-3(c)(6) provides rules to address this concern. The proposed regulations also include certain reporting rules concerning deductions that are waived pursuant to the proposed regulations, and provide guidance on the time and manner for electing to waive deductions. Proposed § 1.59A-3(c)(6)(i) and (iii).
Specifically, the proposed regulations provide that as a baseline, all deductions that could be properly claimed by a taxpayer for the taxable year, determined after giving effect to the taxpayer's permissible method of accounting and to any election, (such as the election under section 173 to capitalize circulation expenditures or the election under section 168(g)(7) to use the alternative depreciation system of depreciation), are treated as allowed deductions solely for purposes of section 59A(c)(2)(A)(i), unless a taxpayer elects to waive certain deductions.
A taxpayer may make the election to waive deductions on its original filed Federal income tax return, by an amended return, or during the course of an examination of the taxpayer's income tax return for the relevant tax year pursuant to procedures prescribed by the Commissioner. Proposed § 1.59A-3(c)(6)(iii). Unless the Commissioner prescribes specific procedures with respect to waiving deductions during the course of an examination, the same procedures that generally apply to affirmative tax return changes during an examination will apply. The Treasury Department and the IRS request comments related to the process for submitting an election under the proposed regulations during the course of an examination. The information related to this waiver must be reported on the appropriate forms, which are expected to include Form 8991,
In addition, the proposed regulations provide that the waiver of deductions is treated as occurring before the allocation and apportionment of deductions under §§ 1.861-8 through -14T and 1.861-17 (such as for purposes of section 904). Proposed § 1.59A-3(c)(6)(ii)(A)(
The waiver of a deduction is also disregarded for purposes of applying the exclusive apportionment rule in § 1.861-17(b), in determining the geographic source where the research and experimental activities that account for more than fifty percent of the amount of the deduction for research and experimentation was performed. Proposed § 1.59A-3(c)(6)(ii)(B)(
The waiver of a deduction is also disregarded for purposes of determining the price of a controlled transaction under section 482. Proposed § 1.59A-3(c)(6)(ii)(B)(
Furthermore, the waiver of a deduction is disregarded for purposes of determining: (1) The amount of a taxpayer's earnings and profits, (2) any item as necessary to prevent a taxpayer from receiving the benefit of a waived deduction, and (3) any other item that is expressly identified in published guidance. Proposed § 1.59A-3(c)(6)(ii)(B)(
To ensure a taxpayer is not able to reduce the amount of its base erosion tax benefits via a waiver of deductions in a prior year and then recover the waived deductions in a subsequent year by making an accounting method change, the proposed regulations provide that, by making the election to waive deductions, the taxpayer agrees that if a change in method of accounting is made with respect to an item that had been waived, the previously waived portion of the item is not taken into account in determining the amount of adjustment under section 481(a). Proposed § 1.59A-3(c)(6)(ii)(D). For an illustration of this proposed rule, see proposed § 1.59A-3(d), Example 9. More generally, the Treasury Department and the IRS are studying the treatment of changes in method of accounting and the related section 481 adjustments for purposes of the BEAT. To the extent that a negative adjustment under section 481(a) relates to an increase in an item that would be a base erosion tax benefit, it is expected that the section 481(a) adjustment would also be taken into account as a base erosion tax benefit. In addition, the Treasury Department and the IRS are considering other consequences of adjustments under section 481(a), including (a) how positive adjustments under section 481(a) are taken into account for BEAT purposes and (b) whether a waiver similar to the waiver provided in proposed § 1.59A-3(c)(6) should be permitted with respect to negative section 481(a) adjustments.
The Treasury Department and the IRS request comments regarding the election to waive deductions, including the reporting requirements and additional rules necessary to prevent a taxpayer from claiming a waived deduction in a subsequent year. The Treasury Department and the IRS also request comments on the effect of adjustments under section 481(a) on the BEAT, including in the context of waived items.
In general, the final regulations treat deductions allocated by the partnership to an applicable taxpayer resulting from a base erosion payment as a base erosion tax benefit. However, the Treasury Department and the IRS are cognizant that a partner in a partnership can obtain a similar economic result if the partnership allocates income items away from the partner instead of allocating a deduction to the partner through curative allocations. To the extent the partnership places a taxpayer in such an economically equivalent position by allocating less income to that partner in lieu of allocating a deduction to the partner through curative allocations, the proposed regulations provide that the partner is similarly treated as having a base erosion tax benefit to the extent of that substitute allocation. Proposed § 1.59A-7(b)(5)(v).
Comments to the 2018 proposed regulations recommended that contributions of depreciable (or amortizable) property by a foreign related party to a partnership (in which an applicable taxpayer is a partner) or distributions of depreciable or amortizable property by a partnership (in which a foreign related party is a partner) to an applicable taxpayer be excluded from the definition of a base erosion payment to the extent that the foreign related party would receive (or would be expected to receive) allocations of income from that partnership interest that would be taxable to the foreign related party as ECI.
The Treasury Department and the IRS are considering additional guidance to address the treatment of a contribution by a foreign person to a partnership engaged in a U.S. trade or business, as well as transfers of partnership interests by a foreign person and transfers of property by the partnership with a foreign person as a partner to a related U.S. person. The Treasury Department and the IRS request comments addressing how these issues should be addressed, including rules to ensure that the foreign partner is treating the items allocated with respect to the property and any gain from the property as ECI.
Section 1.59A-9(b) of the final regulations provides that certain transactions that have a principal purpose of avoiding section 59A will be disregarded or deemed to result in a base erosion payment. These proposed regulations provide an additional anti-abuse rule relating to derivatives on partnership interests.
The proposed regulations also provide an additional anti-abuse rule to prevent a partnership from allocating items of income with a principal purpose of eliminating or reducing the base erosion payments to a taxpayer not acting in a partner capacity on amounts paid to or accrued by a partnership that do not change the economic arrangement of the partners. For example, assume that a domestic corporation and a third party both pay equal amounts to a partnership with a foreign related party partner and an unrelated partner (each having equal interests in the partnership) for services. If the partnership allocates the income it receives from the domestic corporation to the unrelated partner while allocating an equivalent amount of income from the third party to the foreign related party partner with a principal purpose of eliminating the domestic corporation's base erosion payment, the domestic corporation must determine its base erosion payment as if the allocations had not been made and the partners shared the income proportionately. As a result, half of the domestic corporation's payment would be a base erosion payment.
Pursuant to section 6031 and § 1.6031(a)-1(a), a domestic partnership must file a return of partnership income for each taxable year on the form prescribed for the partnership return. Pursuant to § 1.6031(a)-1(b), with limited exceptions, a foreign partnership that has gross income that is, or is treated as, effectively connected with the conduct of a trade or business within the United States or gross income (including gains) derived from sources within the United States must file a partnership return for its taxable year in accordance with the rules for domestic partnerships (such a foreign partnership, a “reporting foreign partnership”). The partnership return must contain the information required by the prescribed form and the accompanying instructions. The IRS plans to update Form 1065, Schedule K, and Schedule K-1 to incorporate certain information that will be necessary for its partners to complete their Form 8991 or a successor form. The IRS expects that these revisions to the Form 1065, Schedule K, and Schedule K-1 will track the information required by the Form 8991.
As a result of these planned revisions, a domestic partnership and a reporting foreign partnership will be required to report the information required by Form 8991.
The rules in the section 59A proposed regulations generally apply to taxable years beginning on or after the date that final regulations are filed with the
In addition, taxpayers may rely on the rules in the section 59A proposed regulations in their entirety for taxable years beginning after December 31, 2017, and before the final regulations are applicable.
The rules in the section 6031(a) proposed regulations generally apply to taxable years ending on or after the date that final regulations are filed with the
Executive Orders 13563 and 12866 direct agencies to assess 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. The Executive Order 13771 designation for any final rule resulting from the proposed regulation will be informed by comments received. The preliminary Executive Order 13771 designation for this proposed regulation is regulatory.
These proposed regulations have been designated as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) (MOA) between the Treasury Department and the Office of Management and Budget (OMB) regarding review of tax regulations. The Office of Information and Regulatory Affairs (OIRA) has designated these proposed regulations as significant under section 1(b) of the MOA. Accordingly, these proposed regulations have been reviewed by OIRA.
The Tax Cuts and Jobs Act of 2017 (the “Act”) added new section 59A, which imposes a Base Erosion and Anti-Abuse Tax (“BEAT”) on certain deductions paid or accrued to foreign related parties. By taxing such payments, the BEAT “aims to level the playing field between U.S. and foreign-owned multinational corporations in an administrable way.” Senate Committee on Finance, Explanation of the Bill, S. Prt. 115-20, at 391 (November 22, 2017).
In plain language, the tax is levied only on corporations with substantial gross receipts (a determination referred to as the gross receipts test) and for which the relevant deductions are three
A taxpayer that satisfies both the gross receipts test and the base erosion percentage test is referred to as an applicable taxpayer. A taxpayer is not an applicable taxpayer, and thus does not have any BEAT liability, if its base erosion percentage is less than the base erosion threshold.
Additional features of the BEAT also enter its calculation. The BEAT operates as a minimum tax, so an applicable taxpayer is only subject to additional tax under the BEAT if the tax at the BEAT rate multiplied by the taxpayer's modified taxable income exceeds the taxpayer's regular tax liability, reduced by certain credits. Because of this latter provision, the BEAT formula has the effect of imposing the BEAT on the amount of those tax credits. In general, tax credits are subject to the BEAT except the research credit under section 41, and a portion of low income housing credits, renewable electricity production credits under section 45, and certain investment tax credits under section 46. Notably, this means that the foreign tax credit is currently subject to the BEAT. In taxable years beginning after December 31, 2025, all tax credits are subject to the BEAT.
Section 59A does not explicitly state whether an amount that is permitted as a deduction under the Code or regulations but that is not claimed as a deduction on a taxpayer's tax return is potentially a base erosion tax benefit for purposes of the BEAT and the base erosion percentage test. Comments recommended that the Treasury Department and the IRS clarify the treatment of amounts that are allowable as a deduction but not claimed as a deduction on a taxpayer's tax return. These proposed regulations are needed to respond to these comments and to clarify the treatment of these amounts under section 59A. The proposed regulations are also needed to clarify certain aspects of the rules set forth in the final regulations relating to how a taxpayer determines its aggregate group for purposes of determining gross receipts and the base erosion percentage, and how the BEAT applies to partnerships.
The proposed regulations provide taxpayers an election to waive deductions that would otherwise be taken into account in determining whether the taxpayer is an applicable taxpayer subject to the BEAT. This change is analyzed in part D of these Special Analyses.
These proposed regulations also include modifications to the rules set forth in the final regulations relating to how a taxpayer determines its aggregate group for purposes of determining gross receipts and the base erosion percentage, and how the BEAT applies to partnerships. These latter modifications to the existing final rule are not expected to result in any substantial changes in taxpayer behavior.
The Treasury Department and the IRS have assessed the benefits and costs of the proposed regulations compared to a no-action baseline that reflects anticipated Federal income tax-related behavior in the absence of these proposed regulations.
Section 59A does not explicitly state whether an amount that is permitted as a deduction under the Code or regulations but that is not claimed as a deduction on the taxpayer's tax return is potentially a base erosion tax benefit for the purposes of the base erosion percentage test. A taxpayer may find waiving certain deductions advantageous if the waived deductions lower the taxpayer's base erosion percentage below the base erosion threshold, thus making section 59A inapplicable to the taxpayer. Comments recommended that the Treasury Department and the IRS clarify the treatment of allowable amounts that are not claimed as a deduction on the taxpayer's tax return for purposes of section 59A.
To address concerns about the treatment of these amounts permitted as deductions under law, the Treasury Department and the IRS considered two alternatives for the proposed guidance: (1) Providing that all deductions that could be properly claimed by a taxpayer for the taxable year are taken into account for purposes of the base erosion percentage test (and for other purposes of the BEAT) even if a deduction is not claimed on the taxpayer's tax return (the “alternative regulatory approach”); or (2) providing that an allowable deduction that a taxpayer does not claim on its tax return is not taken into account in the base erosion percentage test or for other purposes of the BEAT, provided that certain procedural steps are followed. The proposed regulations adopt the latter approach.
Under the alternative regulatory approach, base erosion payments allowable as deductions but not claimed by a taxpayer would nonetheless be taken into account in the base erosion percentage. Thus, a taxpayer could not avoid satisfying the base erosion percentage test by not claiming certain deductions. Under the proposed regulations, base erosion payments allowable as deductions but waived by a taxpayer are not taken into account in the base erosion percentage test, assuming certain procedural steps are followed. The waived deductions are waived for all U.S. federal income tax purposes and thus, for example, the deductions are also not allowed for regular income tax purposes. If the taxpayer is not an applicable taxpayer because it waives deductions so as not to satisfy the base erosion percentage test, the taxpayer may continue to claim deductions for base erosion payments that are not waived, provided these deductions would otherwise be allowed.
Consider a U.S.-parented multinational enterprise that satisfies the gross receipts test and that is not a bank or registered securities dealer. The U.S. corporation has gross income from domestic sources of $1000x and also has a net global intangible low-taxed income (“GILTI”) inclusion of $500x.
Under the alternative regulatory approach, the taxpayer is an applicable taxpayer because its base erosion percentage is 3.33 percent ($30x/$900x), which is greater than the three percent base erosion threshold. Because the taxpayer is subject to the BEAT, it must further compute its modified taxable income, which is $630x—its regular U.S. taxable income ($600x) plus its base erosion tax benefits ($30x). The taxpayer determines its base erosion minimum tax amount as the excess of the BEAT rate (10 percent) multiplied by its modified taxable income $63x ($630x × 10%) over its regular U.S. tax liability of $21x, which is equal to $42x ($63x − $21x). In this example the total U.S. tax bill is $63x ($21x of regular tax and $42x of BEAT).
Under the proposed regulations, this taxpayer would have the option to waive all or part of its deductions that are base erosion payments so that its base erosion percentage would fall below the base erosion threshold. Specifically, the taxpayer could waive $3.10x of its deductions that are base erosion payments, yielding a base erosion percentage of less than the three percent base erosion threshold (base erosion tax benefits = $26.90x ($30x − $3.10x); base erosion percentage = $26.90x/($870x + $26.90x) = 2.99%). After taking into account this waiver, the taxpayer's regular taxable income would increase to $603.10x ($1000x + $500x − $870x − $26.90x), and its regular tax liability would increase to $21.65x ($603.10x × 21% = $126.65, less foreign tax credits of $105x = $21.65x).
This example shows the difference in tax liability caused by allowing deductions to be waived and thus, the difference between the proposed regulations and the alternative regulatory approach. The next part D.2.c of these Special Analyses discusses the behavioral incentives and economic effects that can result from this tax treatment.
The proposed regulations effectively allow a taxpayer to make payments that would be base erosion payments without becoming an applicable taxpayer. This provision reduces the effective tax on base erosion payments for at least some taxpayers, relative to the alternative regulatory approach. Because of this reduction, the proposed regulations may lead to a higher amount of base erosion payments than under the alternative regulatory approach.
Any additional base erosion payments under the proposed regulations would come from taxpayers who, under the alternative regulatory approach, would not be applicable taxpayers but would be close to being applicable taxpayers; that is, they would have base erosion percentages that were close to but below the base erosion threshold.
Taxpayers that would be applicable taxpayers under the alternative regulatory approach will not increase their base erosion payments under the proposed regulations. To see this point, consider an applicable taxpayer under the alternative regulatory approach with base erosion payments of $Y. If this taxpayer were to increase its base erosion payments by $10 and reduce its non-base erosion payments by $10 (that is, it has substituted base erosion payments for non-base erosion payments), its tax bill would generally increase by $1. The fact that this taxpayer chose base erosion payments of $Y rather than $Y+10 suggests that this substitution would be worth less than $1 to the taxpayer. The substitution is not worth the increased tax. Next consider this taxpayer under the proposed regulations. If it elects to waive sufficient deductions such that it is not an applicable taxpayer, then the marginal increase in its tax bill from the hypothetized substitution is $2.10. Thus, if this increase in base erosion payments (and substitution away from non-base erosion payments) is not worthwhile to the taxpayer under the alternative regulatory approach, it will not be worthwhile under the proposed regulations.
This example suggests that to the extent that there is any increase in base erosion payments under the proposed regulations, it will not come from taxpayers that would be applicable taxpayers under the alternative regulatory approach and will instead come from those taxpayers that would not be applicable taxpayers under the alternative regulatory approach. These taxpayers would be able, under the proposed regulations, to take on activities that increase their base erosion payments but, by waiving all or part of the deduction for these activities, avoid crossing the base erosion threshold. This is the set of taxpayers that will be the source of any economic effects arising from the proposed regulations.
As a result of the ability to waive deductions in the proposed regulations, taxpayers may change business behavior in two possible ways. First, businesses may expand economic activities in the United States even if those activities result in payments to foreign related parties (
Second, businesses already operating in the United States may not be discouraged from structuring transactions as base erosion payments under the proposed regulations. Under the alternative regulatory approach, a business might conduct its transactions through unrelated parties rather than with a foreign related party so that its base erosion percentage would remain below the base erosion threshold. Under the proposed regulations, this business could use a foreign related party rather than an unrelated party for these transactions, without paying the BEAT, again provided it waived sufficient deductions to stay below the base erosion threshold.
In each of these cases, a business adopting these strategies would be presumed to accrue a non-tax, economic benefit from using a foreign related party rather than an unrelated party to conduct this aspect of its business. Under the proposed regulations, there is no U.S. tax-related benefit tax associated with transacting with a foreign related party and thus any decisions made by a business to make a base erosion payment would occur because of the economic advantage it provides to the business, rather than that payment being avoided, diverted or otherwise distorted because it would result in the taxpayer becoming an applicable taxpayer subject to the BEAT. This economic advantage might arise, for example, because the business has a closer relationship with the foreign related party and its transactions with the foreign related party provide enhanced managerial control. This economic benefit accruing to this business would generally be beneficial to the U.S. economy; this is
Note that under the proposed regulations, a taxpayer would in general face a marginal tax rate that is 21 percentage points higher on its base erosion payments than on comparable deductions that are not base erosion payments. Economic analysis would conclude that the business will undertake a base erosion payment rather than a non-base erosion payment only if it provides a non-tax benefit at least this large. Businesses will choose a different mix of base erosion and non-base erosion payments under the alternative regulatory approach, but an analogous inference about the marginal value of a base erosion payment here (and thus of the difference between the proposed regulations and the alternative regulatory approach) is more complex because the marginal tax incurred by base erosion payments near the base erosion threshold depends on (i) how close the taxpayer would be to the threshold; (ii) the quantity of its base erosion payments that are below the base erosion threshold and subject to tax if the base erosion threshold is exceeded; and (iii) other factors affecting the potential BEAT liability. Because of these factors, the difference in the non-tax value to businesses of a marginal base erosion payment between the proposed regulations and alternative regulatory approach is complex and not readily inferred.
This said, as a general matter, for taxpayers who chose to waive deductions under the proposed regulations in order not to be applicable taxpayers, the Treasury Department and the IRS expect that relative to the alternative regulatory approach, the proposed regulations would tend to:
• Reduce tax costs of additional economic activity in the United States by those taxpayers in the situation where additional economic activity in the United States would tend to increase base erosion payments;
• Reduce tax-related incentives for otherwise economically inefficient business, contractual or accounting changes designed to avoid the taxpayer being an applicable taxpayer;
• Continue to fulfill the general intent and purpose of the statute by not providing tax incentives for certain large corporations to make deductible payments to foreign related parties in excess of 3 percent of the taxpayer's deductions; and
• Reduce the number of taxpayers that are applicable taxpayers and the overall amount of BEAT collected. This revenue effect is likely to be offset to some degree by the fact that some taxpayers are likely to elect to waive allowable deductions.
The Treasury Department and the IRS have not attempted to provide a quantitative estimate of the economic consequences of the proposed regulations relative to the alternative regulatory approach. Any increase in base erosion payments under the proposed regulations depends on the number of taxpayers that would be close to the base erosion threshold under the alternative regulatory approach, the quantity of base erosion payments they would have under the alternative regulatory approach, and, most importantly, the economic value provided by those base erosion payments relative to alternative economic decisions. These items are difficult to estimate with any reasonable precision in part because they involve economic activities, including potential new economic activity in the United States, that cannot be readily inferred from existing data or models available to the Treasury Department and the IRS.
In the absence of such quantitative estimates, the Treasury Department and the IRS have undertaken a qualitative analysis of the economic effects of the proposed regulations relative to the alternative regulatory approach.
The Treasury Department and the IRS solicit comments on these findings and more generally on the economic effects of these proposed regulations. The Treasury Department and the IRS particularly solicit data, other evidence, or models that could be used to enhance the rigor of the process by which the final regulations might be developed.
These proposed regulations affect all corporate taxpayers that satisfy the gross receipts test, base erosion percentage test, and have base erosion payments. The Treasury Department and the IRS project that 3,500-4,500 taxpayers may be applicable taxpayers under the BEAT. This estimate is based on the number of filers that (1) filed the Form 1120 series of tax returns (except for the Form 1120-S), (2) filed a Form 5471 or Form 5472, and (3) reported gross receipts of at least $500 million. Because an applicable taxpayer is defined under section 59A(e)(1)(A) as a corporation other than a regulated investment company, a real estate investment trust, or an S corporation, the Treasury Department and the IRS have determined that taxpayers who filed the Form 1120 series of tax returns will be most likely to be affected by these proposed regulations. Additionally, the Treasury Department and the IRS estimated the number of filers likely to make payments to a foreign related party based on filers of the Form 1120 series of tax returns who also filed a Form 5471 or Form 5472 to determine the number of respondents. Finally, because an applicable taxpayer is defined under section 59A(e)(1)(B) as a taxpayer with average annual gross receipts of at least $500 million for the 3-taxable-year period ending with the preceding taxable year, the Treasury Department and the IRS estimated the scope of Affected Taxpayers based on the amount of gross receipts reported by taxpayers filing the Form 1120 series of tax returns.
These projections are based solely on data with respect to the taxpayer, without taking into account any members of the taxpayer's aggregate group. As many as 100,000-110,000 additional taxpayers may be applicable taxpayers as a result of being members of an aggregate group.
The collections of information in these proposed regulations with respect to section 59A are in proposed §§ 1.59A-3(c)(5), and 1.6031(a)-1(b)(7). The collection of information in proposed §§ 1.59A-3(c)(5) is an election to waive deductions allowed under the Code. The election to waive deductions is made by a taxpayer on its original or amended income tax return. A taxpayer makes the election on an annual basis by completing Form 8991 or as provided in applicable instructions. The IRS is contemplating making additional changes to the Form 8991 to take these proposed regulations into account.
The collection of information in proposed § 1.6031(a)-1(b)(7) requires a partner in a foreign partnership that: (1)
For purposes of the Paperwork Reduction Act, the reporting burden associated with the collections of information with respect to section 59A, will be reflected in the Paperwork Reduction Act Submission, associated with Form 8991 (OMB control number 1545-0123).
The current status of the Paperwork Reduction Act submissions related to BEAT is provided in the following table. The BEAT provisions are included in aggregated burden estimates for the OMB control numbers listed below which, in the case of 1545-0123, represents a total estimated burden time, including all other related forms and schedules for corporations, of 3.157 billion hours and total estimated monetized costs of $58.148 billion ($2017). The burden estimates provided in the OMB control numbers below are aggregate amounts that relate to the entire package of forms associated with the OMB control number, and will in the future include but not isolate the estimated burden of only the BEAT requirements. These numbers are therefore unrelated to the future calculations needed to assess the burden imposed by the proposed regulations. The Treasury Department and IRS urge readers to recognize that these numbers are duplicates and to guard against overcounting the burden that international tax provisions imposed prior to the Act. No burden estimates specific to the proposed regulations are currently available. The Treasury Department has not estimated the burden, including that of any new information collections, related to the requirements under the proposed regulations. Those estimates would capture both changes made by the Act and those that arise out of discretionary authority exercised in the proposed regulations. The Treasury Department and the IRS request comments on all aspects of information collection burdens related to the proposed regulations. In addition, when available, drafts of IRS forms are posted for comment at
The number of respondents in the Related New or Revised Tax Forms table was estimated by Treasury's Office of Tax Analysis based on data from IRS Compliance Planning and Analytics using tax return data for tax years 2015 and 2016. Data for Form 8991 represent preliminary estimates of the total number of taxpayers which may be required to file the new Form 8991. Only certain large corporate taxpayers with gross receipts of at least $500 million are expected to file this form.
It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is based on the fact that these regulations will primarily affect aggregate groups of corporations with average annual gross receipts of at least $500 million and that make payments to foreign related parties. Generally only large businesses both have substantial gross receipts and make payments to foreign related parties.
Notwithstanding this certification, the Treasury Department and the IRS invite comments from the public about the impact of this proposed rule on small entities.
Pursuant to section 7805(f), these regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold is approximately $154 million. This rule does not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.
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 Treasury Department and the IRS request comments on all aspects of the proposed rules. See also parts II and III of the Explanation of Provisions (requesting specific comments related to the aggregate group rules in light of the with-or-without method and the election to waive allowable deductions, respectively) and parts II.C., II.D., and IV.B. of the Explanation of Provisions (requesting specific comments related to the appropriate treatment of a deconsolidating member's gross receipts history, appropriate methods of taking into account predecessors and successors for purposes of determining gross receipts of an applicable taxpayer's aggregate group, and the treatment of transactions involving partnerships engaged in a U.S. trade or business, respectively).
All comments will be available at
The principal authors of the proposed regulations are Azeka J. Abramoff, Sheila Ramaswamy and Karen Walny of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.
Income taxes, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
26 U.S.C. 7805 * * *
(c) * * *
(2) * * *
(ii)
(4)
(5)
(6)
(ii)
(f) * * *
(2)
(ii)
(B) For purposes of section 59A, to determine the gross receipts and base erosion percentage of the aggregate group of Corporation 2 for calendar Year 1, each of Parent Corporation, Corporation 1, and Corporation 3 are treated as having a taxable year end at immediately before noon on June 30, Year 1. Because Corporation 2 does not have a short taxable year, paragraph (c)(5) of this section does not apply. The aggregate group of Corporation 2 takes into account the gross receipts, base erosion tax benefits, and deductions of Parent Corporation and Corporation 1 attributable to the period from January 1 to immediately before noon on June 30 of Year 1, and the gross receipts, base erosion tax benefits, and deductions of Corporation 3 attributable to the period from noon on June 30 to December 31 of Year 1.
(c) * * *
(5)
(6)
(A) A detailed description of the item or property to which the deduction relates, including sufficient information to identify that item or property on the taxpayer's books and records;
(B) The date on which, or period in which, the waived deduction was paid or accrued;
(C) The provision of the Internal Revenue Code (and regulations, as applicable) that allows the deduction for the item or property to which the election relates;
(D) The amount of the deduction that is claimed for the taxable year with respect to the item or property;
(E) The amount of the deduction being waived for the taxable year with respect to the item or property;
(F) A description of where the deduction is reflected (or would have been reflected) on the Federal income tax return (schedule and line number); and
(G) The name, EIN (if applicable), and country of organization of the foreign related party that is or will be the recipient of the payment that generates the deduction.
(ii)
(
(
(B)
(
(
(
(
(
(
(
(C)
(D)
(iii)
(d) * * *
(8)
(ii)
(9)
(ii)
(B)
(c) * * *
(5) * * *
(v)
(g) * * *
(2) * * *
(x)
(B)
(b) * * *
(5)
(6)
(a)
(b)
(b) * * *
(7)
(f) * * *
(3) Paragraph (b)(7) of this section applies to taxable years ending on or after the date that final regulations are filed with the
Fish and Wildlife Service, Interior.
Proposed rule.
We, the U.S. Fish and Wildlife Service (Service), propose to list
In addition, we propose to list
We will accept comments received or postmarked on or before February 4, 2020. Comments submitted electronically using the Federal eRulemaking Portal (see
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
The coordinates or plot points or both from which the map is generated are included in the administrative record for this critical habitat designation and are available at
Jeff Humphrey, Field Supervisor, U.S. Fish and Wildlife Service, Arizona Ecological Services Field Office, 9828 North 31st Avenue, #C3, Phoenix, AZ 85051-2517; telephone 602-242-0210. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service at 800-877-8339.
For beardless chinchweed, we have determined that the key factors supporting the proposed endangered finding are: Loss of habitat due to invasion by nonnative species (Factor A); altered fire regime exacerbated by nonnative invasion (Factors A and E); altered precipitation, drought, and temperature (Factors A and E); road and trail maintenance, mining, livestock, wildlife, and post-wildfire runoff (Factors A and E); grazing from wildlife and livestock (Factor C); and small population size exacerbating all other stressors (Factor E). The existing regulatory mechanisms are not adequate to address these factors such that the species does not meet the definition of
For Bartram's stonecrop, we have determined the key factors supporting the proposed threatened finding are: Reduction in water availability (Factors A and E); erosion, sedimentation, and burial (Factors A and E); trampling (Factor E); altered fire regime (Factors A and E); loss of shade (Factors A and E); altered flooding regime (Factors A and E); drought (Factors A and E); predation of individuals and shade trees (Factors A, C, and E); illegal collection (Factor B); and small population size (Factor E). The existing regulatory mechanisms are not adequate to address these factors such that the species does not meet the definition of an endangered or threatened species (Factor D).
Under the Act, any species that is determined to be an endangered or a threatened species shall, to the maximum extent prudent and determinable, have habitat designated that is considered to be critical habitat. Section 4(b)(2) of the Act states that the Secretary shall designate and make revisions to critical habitat on the basis of the best available scientific data after taking into consideration the economic impact, the impact on national security, and any other relevant impact of specifying any particular area as critical habitat. The Secretary may exclude an area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific data available, that the failure to designate such area as critical habitat will result in the extinction of the species. Under section 4(d) of the Act, the Secretary of the Interior has the discretion to issue such regulations as he deems necessary and advisable to provide for the conservation of threatened species.
We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from other concerned governmental agencies, Native American tribes, the scientific community, industry, or any other interested parties concerning this proposed rule. We particularly seek comments concerning:
(1) Beardless chinchweed and Bartram's stonecrop biology, range, and population trends, including:
(a) Biological or ecological requirements of these species, including habitat requirements for germination, growth, and reproduction;
(b) Genetics and taxonomy;
(c) Historical and current range, including distribution in Mexico;
(d) Historical and current population levels, and current and projected trends; and
(e) Past and ongoing conservation measures for these species, their habitats, or both.
(2) Factors that may affect the continued existence of these species, which may include habitat modification or destruction, overutilization, disease, predation, the inadequacy of existing regulatory mechanisms, or other natural or manmade factors.
(3) Biological, commercial trade, or other relevant data concerning any stressors (or lack thereof) to these species and existing regulations that may be addressing those stressors.
(4) Additional information concerning the historical and current status, range, distribution, and population size of these species, including the locations of any additional populations of these species.
(5) Information related to climate change within the range these species and how it may affect these species' habitats.
(6) Information on regulations that are necessary and advisable to provide for the conservation of these species and that the Service can consider in developing a 4(d) rule for the species. In particular, information concerning the extent to which we should include any of the section 9 prohibitions in the 4(d) rule or whether any other forms of take should be excepted from the prohibitions in the 4(d) rule.
(7) The reasons why areas should or should not be designated as critical habitat as provided by section 4 of the Act (16 U.S.C. 1531
(a) The species is threatened by taking or other human activity and identification of critical habitat can be expected to increase the degree of such threat to the species;
(b) The present or threatened destruction, modification, or curtailment of a species' habitat or range is not a threat to the species, or threats to the species' habitat stem solely from causes that cannot be addressed through management actions resulting from consultations under section 7(a)(2) of the Act;
(c) Areas within the jurisdiction of the United States provide no more than negligible conservation value, if any, for a species occurring primarily outside the jurisdiction of the United States;
(d) No areas meet the definition of critical habitat.
(8) The following specific information on:
(a) The amount and distribution of habitat;
(b) What areas, that are currently occupied and that contain the physical and biological features essential to the conservation of these species, should be
(c) Special management considerations or protection that may be needed for the essential features in potential critical habitat areas, including managing for the potential effects of climate change; and
(d) What areas not occupied at the time of listing are essential for the conservation of the species. We particularly seek comments regarding:
(i) Whether occupied areas are inadequate for the conservation of the species; and,
(ii) Specific information that supports the determination that unoccupied areas will, with reasonable certainty, contribute to the conservation of the species and, contain at least one physical or biological feature essential to the conservation of the species.
(9) Land use designations and current or planned activities in the subject areas and their possible impacts on proposed critical habitat.
(10) Any probable economic, national security, or other relevant impacts of designating any area that may be included in the final designation, and the benefits of including or excluding areas that may be impacted.
(11) Information on the extent to which the description of probable economic impacts in the draft economic analysis is a reasonable estimate of the likely economic impacts.
(12) Whether any specific areas we are proposing for critical habitat designation should be considered for exclusion under section 4(b)(2) of the Act, and whether the benefits of potentially excluding any specific area outweigh the benefits of including that area under section 4(b)(2) of the Act.
(13) The likelihood of adverse social reactions to the designation of critical habitat, as discussed in the associated documents of the draft economic analysis, and how the consequences of such reactions, if likely to occur, would relate to the conservation and regulatory benefits of the proposed critical habitat designation.
(14) Whether we could improve or modify our approach to designating critical habitat in any way to provide for greater public participation and understanding, or to better accommodate public concerns and comments.
(15) Additional guidance and methods that the Service could provide or use, respectively, to streamline the implementation of the proposed 4(d) rule for Bartram's stonecrop.
Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.
Please note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered or a threatened species must be made “solely on the basis of the best scientific and commercial data available.”
You may submit your comments and materials concerning this proposed rule by one of the methods listed in
If you submit information via
Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on
Section 4(b)(5) of the Act provides for a public hearing on this proposal, if requested. Requests must be received within 45 days after the date of publication of this proposed rule in the
Beardless chinchweed was a candidate for listing from 1980 to 1996. It was first a Category 1 candidate species, as identified in our December 15, 1980, notice of review (45 FR 82480). Category 1 is a term no longer in use, having been replaced by the term “candidate species.” A candidate species is a species for which the Service has on file sufficient information on biological vulnerability and threat(s) to support issuance of a proposed rule to list, but issuance of the proposed rule is precluded by higher priority actions to amend the Lists of Endangered and Threatened Wildlife and Plants. In 1983, beardless chinchweed was reclassified as a Category 2 species (48 FR 53640; November 28, 1983). A Category 2 species referred to a species for which the Service had some indication that listing as endangered or threatened might be warranted, but there were insufficient data available to justify a proposal to list. The species remained so designated in subsequent annual candidate notices of review (50 FR 39526, September 27, 1985; 55 FR 6184, February 21, 1990; 58 FR 51144; September 30, 1993). In 1996, the Service eliminated Category 2 species; consequently, this species dropped off the candidate list. The Service received a petition in July 2010 to list beardless chinchweed and designate critical habitat under the Act (Center for Biological Diversity 2010, entire). The Service published a 90-day finding on August 8, 2012 (77 FR 47352), concluding that the petition presented substantial scientific or commercial information indicating that listing of the species may be warranted.
Bartram's stonecrop was a candidate for listing from 1980 to 1996. It was first a Category 1 candidate species, as identified in our December 15, 1980, notice of review (45 FR 82480), and then in 1983, it was reclassified as a Category 2 species (48 FR 53640; November 28, 1983). The species remained so designated in subsequent annual candidate notices of review (50 FR 39526, September 27, 1985; 55 FR 6184, February 21, 1990; 58 FR 51144; September 30, 1993). In 1996, the Service eliminated Category 2 species; consequently, this species dropped off the candidate list. The Service received a petition in July 2010 to list Bartram's stonecrop and designate critical habitat under the Act (Center for Biological Diversity 2010, entire). The Service published a 90-day finding on August 8, 2012 (77 FR 47352), concluding that the petition presented substantial scientific or commercial information indicating that listing of the species may be warranted.
To provide the necessary and most up-to-date information and background on which to base our determination, we completed a species status assessment (SSA) report for beardless chinchweed (Service 2018a, entire), and an SSA report for Bartram's stonecrop (Service 2018b, entire), which are available online at
Beardless chinchweed is plant of the Asteraceae, or sunflower, family. Beardless chinchweed was first collected by Charles Wright in the early 1850s in Sonora, Mexico (now part of Santa Cruz County, Arizona), and was described by Asa Gray in 1853 (Phillips
Beardless chinchweed is an erect, many-branched, perennial herb growing 3 to 12 decimeters (1 to 4 feet (ft)) from a slender, woody, taprooted caudex (stem base) (Keil 1978, p. 143; Phillips
Young beardless chinchweed plants have been noted in April (Dahlby 2017, pers. comm.), and are still present in November (Westland 2010, p. 10). Flowering occurs from August to October, when the plants are more than 0.5 meters (m) (1.6 ft) in height (Kearney and Peebles 1951, p. 935; Phillips
The species has been reported to reproduce both by seed and rhizomes (Westland 2010, p. 10), although there is no evidence that the species is rhizomatous (Keil 2017, pers. comm.). It is not known whether plants are able to pollinate themselves or require the pollen of another plant. However, it is likely that the plant requires pollinators. The pollinators of beardless chinchweed are not known, but other
Beardless chinchweed is typically found in oak woodlands at higher elevations, and desert grasslands and oak savannas at lower elevations (McLaughlin
Beardless chinchweed requires a lack of competition from other plants. The different shaped and sized canopy and root systems of associated plant species within healthy grasslands, savannas, and woodlands create heterogeneity of form, height, and open patches needed by beardless chinchweed. Open patches are created and maintained through a variety of abiotic and biotic mechanisms (Porensky
The historical range of beardless chinchweed was larger than the current range, with a greater number of populations than persist today in southeastern Arizona and northern Sonora and Chihuahua Mexico. The historical distribution included 21 separate beardless chinchweed populations within the Atascosa-Pajarito, Huachuca, Patagonia, and Santa Rita Mountains and Canelo Hills of Cochise, Pima, and Santa Cruz Counties, Arizona, as well as in northern Chihuahua and Sonora Mexico (see Table 1, below). We define a population of beardless chinchweed as one or more subpopulations that occur within 1 kilometer (km) (0.62 miles (mi)) of other beardless chinchweed individuals allowing for gene flow and movement through cross-pollination. Because many bees and butterflies can travel a distance of 1 km (0.62 mi), we believe plants within this distance to be a single population. Subpopulations within a population are separated by between 300 and 999 m (984.3 and 3,278 ft). Of the 21 populations, 15 were in Arizona and 6 were in Mexico. The number of individuals seen historically in Mexico is not available, and no beardless chinchweed have been reported from Mexico since 1940. Nine populations and one subpopulation in Arizona have become extirpated since 1962.
Currently, there are 12 populations in Arizona and Mexico. In Arizona, there are currently 387 individual beardless chinchweed spread across less than 2 hectares (ha) (5 acres (ac)) within six extant populations spread across the following four mountain ranges: The Atascosa-Pajarito, Huachuca, Santa Rita mountain ranges, and the Canelo Hills (see Table 1, above). Five of the six populations in Arizona contain fewer than 50 individuals. Most of the mountain ranges in the United States have been surveyed for beardless chinchweed, and it is unlikely that any large populations remain unaccounted for therein. In addition, there are six populations in northern Mexico for which we have no current information. Inquiries between February 17 and December 12, 2017, with 11 researchers familiar with the flora of Chihuahua and Sonora revealed no information on the status of the species in Mexico. We believe these populations are extant, but with few individuals and with poor habitat condition (similar to the smallest extant populations in the United States), because much of the grasslands in beardless chinchweed' historical range in Mexico have been invaded by nonnative species (Romo
For beardless chinchweed to maintain viability, its populations or some representative portion thereof must be resilient. Resiliency describes the ability of populations to withstand stochastic events (arising from random factors). We can measure resiliency based on metrics of population health (for example, germination versus death rates and population size). Highly resilient populations are better able to withstand disturbances such as random fluctuations in germination rates (demographic stochasticity), variations in rainfall (environmental stochasticity), or the effects of anthropogenic activities. A beardless chinchweed population with high resiliency is one in which abundance is high, the number of subpopulations is high and spatially dispersed, seed production is high,
In addition to the above demographic needs, populations also need habitat elements for resiliency. Based on where the species has typically been found, a resilient population needs eroding granite or limestone soils or rock outcrops with native-dominated habitat, on sunny to partly shaded southern exposures. Beardless chinchweed plants are also often associated with active disturbances from frequent, low severity wildfire; grazing and browsing of native animals; and natural erosion of nonstable substrates, thus reducing competition for beardless chinchweed. In addition, resilient populations need soil moisture for seed germination, growth, and reproduction in the form of dormant season (October through March) precipitation. The minimum amount of precipitation needed for individual survival is unknown. We believe that deviation from the timing and amount of precipitation would impact the resiliency of a population, because soil moisture would be impacted. This would lead to decreased seed germination, reduced growth, reduced flowering, and decreased seed production. Further, the presence of pollinators is needed for effective fertilization, out-crossing, and seed production in beardless chinchweed. Habitat resiliency categories for beardless chinchweed are described in Table 2, below, and in section 3.2 of the SSA report (Service 2018a).
Maintaining representation in the form of genetic or ecological diversity is important to maintain the capacity of beardless chinchweed to adapt to future environmental changes. Representation describes the ability of a species to adapt to changing environmental conditions. Representation can be measured by the breadth of genetic or ecological diversity within and among populations. The more representation, or diversity a species has, the more it is capable of adapting to changes (natural or human-caused) in its environment. In the absence of species-specific genetic and ecological diversity information, we evaluate representation based on the extent and variability of habitat characteristics across the geographical range.
Genetic analysis of beardless chinchweed has not been conducted within or among populations or mountain ranges. However, populations on different mountain ranges are widely separated, making cross-pollination highly unlikely, and most of the populations contain small numbers of individuals. Therefore, there is the potential for genetic diversity among mountain ranges. However, these populations are isolated and contain small numbers of individuals. Small, isolated populations are susceptible to the loss of genetic diversity, genetic drift, and inbreeding. This could mean that between-population genetic diversity may be greater than within-population diversity (Smith and Wayne 1996, p. 333; Lindenmayer and Peakall 2000, p. 200). It is possible that there has been a loss of genetic diversity in the species due to the fact that multiple populations are already extirpated. Currently, there are six extant populations across four widely separated mountain ranges in the United States, and six populations in northern Mexico that are presumed extant.
Beardless chinchweed has been reported from both decomposing granite and limestone substrates. This variability of substrate preference may be important in maintaining environmental and genetic diversity. Similarly, the species is found over a relatively wide range of elevations of 1,158 to 1,737 m (3,799 to 5,699 ft) and vegetation communities (oak woodlands at higher elevations, and grasslands and oak savannas at lower elevations), which could be important in terms of representation. The precise genetic and ecological diversity needed is unknown, but given the loss of populations, the low number of individuals in the majority of the populations, and the distance among populations, it is likely that some diversity has been lost. Consequently, at a minimum, we likely need to retain populations throughout the range of the species to maintain the overall potential genetic and life-history attributes that can buffer the species' response to environmental changes over time.
Beardless chinchweed needs to have multiple resilient populations distributed throughout its range to provide for redundancy. Redundancy describes the ability of a species to withstand catastrophic events, measured by the number of populations, and their resiliency, distribution, and connectivity. The more populations, and the wider the distribution of those populations, the more redundancy the species will exhibit. Redundancy reduces the risk that a large portion of the species' range will be negatively affected by a catastrophic natural or anthropogenic event at a given point in time. Species that are well-distributed across their historical range are considered less susceptible to extinction and more likely to be viable than species confined to a small portion of their range (Carroll
Bartram's stonecrop is a plant of the Crassulaceae or stonecrop family (Phillips
Bartram's stonecrop is a small, succulent (fleshy), acaulescent (without a stem) perennial plant (Phillips
The inflorescence stalks of Bartram's stonecrop grow for 30 to 40 days, around July and August, before coming to their full height, with the flowers then opening primarily between September and November (Kearney and Peebles 1951, p. 361; Phillips
Bartram's stonecrop requires pollination for reproduction. The major pollinators of Bartram's stonecrop are
There is little information available regarding the seedbank of Bartram's stonecrop. In general, a seed that is very tiny has evolved a requirement of sunlight for germination, as they cannot successfully emerge from deep burial (Venable and Brown 1987, p. 360). Similarly, it is thought that Bartram's stonecrop seeds reside at the soil surface beneath the litter (Shohet 1999, p. 48). It is possible that because the seed is so small, with little endosperm, mycorrhizae (the symbiotic association of a fungus with the roots of plants) may be required for seedling establishment and growth, but this has not been studied (Felger 2017, pers. comm.). Researchers at the Desert Botanical Gardens have attempted to grow Bartram's stonecrop from seed. They had no difficulty with seed germination; however, they have experienced high seedling mortality, perhaps related to a requirement for mycorrhizae for seedling establishment.
The species typically occurs on rocky outcrops with erodible soils in deep, narrow canyons in heavy cover of litter and shade within Madrean woodlands at elevations ranging from 1,067 to 2,042 m (3,500 to 6,700 ft). Madrean woodlands are a forested community dominated by evergreen oaks, but also containing junipers and pine trees, and characterized by mild winters and warm wet summers (Brown 1982, p. 59). Madrean evergreen woodland is typically bounded by semi-desert grasslands and savanna at warmer, drier sites in the lower elevations, and by evergreen and broadleaf forests on more mesic and cooler sites at higher elevation, at north aspect, or near riparian areas. Bartram's stonecrop root into crevices on rock ledges and cliffs on slopes of various aspects (Shohet 1999, p. 22; Ferguson 2014, p. 41; NPS 2016, p. 7). In addition, Bartram's stonecrop are almost always located near water sources (springs, seeps, or intermittent streams), but above the floodline (Phillips
Madrean evergreen woodlands of the sky island mountain ranges have evolved with frequent, low-severity fire and have warm wet summers and mild winters. The maximum interval between the relatively widespread fires typically ranged from about 10 to 30 years in the pine-dominant forests (Swetnam
Bartram's stonecrop is known to have historically occurred in 33 separate populations within 13 isolated sky island mountain ranges, 10 in southern Arizona and 3 in northern Mexico. While the overall range of the species is likely unchanged, the number and size of populations has been reduced. Four populations have become extirpated in the United States in recent years, and a fifth population has contracted in size. In three instances, extirpation was associated with the drying of habitat, which rendered it no longer suitable for the species to persist; we do not know the cause of extirpation in the fourth instance. In addition, there have been many changes in the southeastern Arizona landscape since the 1890s due to intensive cattle grazing, water development, and fire suppression (
We define a population as occurring within the same water course (
As of 2017, when the SSA analysis was completed, there were 29 extant populations across 12 mountain ranges in the United States and Mexico: 26 extant populations from 9 mountain ranges in southern Arizona and 3 presumed extant populations from 3 mountain ranges in northern Mexico (see Table 3, below). Within these 29 populations, there are approximately 3,756 individuals within about 2 ha (5 ac).
In 2018, four additional populations were located in the United States in the Rincon Mountains, one additional population was located in Mexico, and a known population in Mexico, which we did not have recent data for, was confirmed. The new populations in the United States included the Upper Rincon Creek population with 38 individuals (including “many” seedlings), Turkey Creek population with 4 individuals (seedlings not differentiated, but photos look like adult rosettes and flowering), Deer Creek population with 10 individuals (adult rosettes and flowering), and Chiminea Tributary population with 13 plants (seedlings not differentiated). In Sonora, Mexico, a new population (Mesa Tres Rios population) with 80 living and 28 dead plants was found in Mesa Tres Rios. In the Río Piedras Verdes near Colonia Pacheo area of Chihuahua, seven individuals were located, confirming the presence of an extant population “near Colonia Pacheco”; it is unknown if this is the exact historical location. Seedlings were not differentiated in either of the Mexico surveys. In total, only 145 new individuals were found, including seedlings, with 65 from the United States and 80 from Mexico. All but one population (Mesa Tres Rios) are small populations with fewer than 150 individuals. The number of extant populations as of 2018 is 34 across 13 mountain ranges in the United States and Mexico.
The number of populations within each sky island mountain ranges from one population (
Bartram's stonecrop typically occurs in small populations with limited numbers of individuals. Most populations contain fewer than 100 plants (Ferguson 2014, entire; Ferguson 2016a, entire), but occasionally hundreds of plants can be found within a single population. The number of individuals in a given population can vary greatly from year to year and from season to season, depending on weather and stressors present (Ferguson 2017b, pp. 8, 15).
For Bartram's stonecrop to maintain viability, its populations or some representative portion thereof must be resilient. Resiliency describes the ability of populations to withstand stochastic events (arising from random factors). We can measure resiliency based on metrics of population health (for example, germination versus death rates and population size). Highly resilient populations are better able to withstand disturbances such as random fluctuations in germination rates (demographic stochasticity), variations in rainfall (environmental stochasticity), or the effects of anthropogenic activities. Resilient Bartram's stonecrop populations must be large enough that stochastic events do not eliminate the entire population. A highly resilient population of Bartram's stonecrop consists of multiple subpopulations, with a large number of individuals in each subpopulation. Highly resilient Bartram's stonecrop populations must also produce and disperse seeds, establish seedlings that survive, and maintain mature reproductive individuals in the population; recruitment should exceed or be equal to mortality. This allows for shared pollinators and seed dispersal between subpopulations and groups within the population, which can allow the population to recover from disturbance events and maintain or increase genetic diversity. Population resiliency categories for Bartram's stonecrop are described in section 3.2 of the SSA report (Service 2018b, entire).
In addition to the above demographic needs, populations also need habitat elements for resiliency. Based on where the species has typically been found, a resilient population needs riparian characteristics (
Maintaining representation in the form of genetic or ecological diversity is important to maintain the capacity of Bartram's stonecrop to adapt to future environmental changes. Representation describes the ability of a species to adapt to changing environmental conditions. Representation can be measured by the breadth of genetic or ecological diversity within and among populations. The more representation, or diversity, a species has, the more it is capable of adapting to changes (natural or human-caused) in its environment. In the absence of species-specific genetic and ecological diversity information, we evaluate representation based on the extent and variability of habitat characteristics across the geographical range.
Genetic analysis of Bartram's stonecrop has not been conducted within or among populations or mountain ranges. However, populations on different mountain ranges are widely separated (ranging from roughly 14 to 42 km (8.7 to 26 mi) apart), making cross-pollination highly unlikely, and most of the populations contain small numbers of individuals. Therefore, there is the potential for genetic diversity among mountain ranges. Because multiple populations have been extirpated, it is possible that there has been a loss of genetic diversity. There may be genetic diversity between populations within and among the sky island mountain ranges due to response to elevational and other environmental differences between locations. As such, maintaining representation in the form of genetic diversity across multiple populations and sky island mountain ranges may be important to the capacity of Bartram's stonecrop to adapt to future environmental change.
The species is found over a relatively wide range of elevations of 1,067 to 2,042 m (3,500 to 6,700 ft) and vegetation communities (oak woodlands at higher elevations, and grasslands and oak savannas at lower elevations), which could be important in terms of representation. Such variability in elevation could aid in survival of future environmental changes, such as warming temperatures or decreased precipitation from climate change. At a minimum, we likely need to retain populations throughout the geographic and elevational ranges of the species to maintain the overall potential genetic and environmental diversity that can maximize the species' response to environmental changes over time.
Bartram's stonecrop needs to have multiple resilient populations distributed throughout its range to provide for redundancy such that a catastrophic event will not result in the loss of all populations. Redundancy describes the ability of a species to withstand catastrophic events, measured by the number of populations, and their resiliency, distribution, and connectivity. The more populations, and the wider the distribution of those populations, the more redundancy the species will exhibit. Redundancy reduces the risk that a large portion of the species' range will be negatively affected by a catastrophic natural or anthropogenic event at a given point in time. Species that are well-distributed across their historical range are considered less susceptible to extinction and more likely to be viable than species confined to a small portion of their range (Carroll
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species is an “endangered species” or a “threatened species.” The Act defines an endangered species as a species that is “in danger of extinction throughout all or a significant portion of its range,” and a threatened species as a species that is “likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” The Act requires that we determine whether any species is an “endangered species” or a “threatened species” because of any of the following factors:
(A) The present or threatened destruction, modification, or curtailment of its habitat or range;
(B) Overutilization for commercial, recreational, scientific, or educational purposes;
(C) Disease or predation;
(D) The inadequacy of existing regulatory mechanisms; or
(E) Other natural or manmade factors affecting its continued existence.
These factors represent broad categories of natural or human-caused actions or conditions that could have an effect on a species' continued existence. In evaluating these actions and conditions, we look for those that may have a negative effect on individuals of the species, as well as other actions or conditions that may ameliorate any negative effects or may have positive effects.
We use the term “threat” to refer in general to actions or conditions that are known to or are reasonably likely to negatively affect individuals of a species. The term “threat” includes actions or conditions that have a direct impact on individuals (direct impacts), as well as those that affect individuals through alteration of their habitat or required resources (stressors). The term “threat” may encompass—either together or separately—the source of the action or condition or the action or condition itself.
However, the mere identification of any threat(s) does not necessarily mean that the species meets the statutory definition of an “endangered species” or a “threatened species.” In determining whether a species meets either definition, we must evaluate all identified threats by considering the expected response by the species, and the effects of the threats—in light of those actions and conditions that will ameliorate the threats—on an individual, population, and species level. We evaluate each threat and its expected effects on the species, then analyze the cumulative effect of all of the threats on the species as a whole. We also consider the cumulative effect of the threats in light of those actions and conditions that will have positive effects on the species—such as any existing regulatory mechanisms or conservation efforts. The Secretary determines whether the species meets the definition of an “endangered species” or a “threatened species” only after conducting this cumulative analysis and describing the expected effect on the species now and in the foreseeable future.
The Act does not define the term “foreseeable future,” which appears in the statutory definition of “threatened species.” Our implementing regulations at 50 CFR 424.11(d) set forth a framework for evaluating the foreseeable future on a case-by-case basis. The term foreseeable future extends only so far into the future as the Services can reasonably determine that both the future threats and the species' responses to those threats are likely. In other words, the foreseeable future is the period of time in which we can make reliable predictions. “Reliable” does not mean “certain”; it means sufficient to provide a reasonable degree of confidence in the prediction. Thus, a prediction is reliable if it is reasonable to depend on it when making decisions.
It is not always possible or necessary to define foreseeable future as a particular number of years. Analysis of the foreseeable future uses the best scientific and commercial data available and should consider the timeframes applicable to the relevant threats and to the species' likely responses to those threats in view of its life-history characteristics. Data that are typically relevant to assessing the species' biological response include species-specific factors such as lifespan, reproductive rates or productivity, certain behaviors, and other demographic factors.
We completed a comprehensive assessment of the biological status of beardless chinchweed and Bartram's stonecrop, and prepared an SSA report for each species (Service 2018a and 2018b, entire), which provides a thorough account of the species' overall viability. We define viability here as the ability of the species to persist over the long term and, conversely, to avoid extinction. In the following discussion, we summarize the conclusions of the SSA reports, which can be accessed at Docket FWS-R2-ES-2018-0104 on
Several stressors influence whether beardless chinchweed populations will grow to maximize habitat occupancy, which increases the resiliency of a population to stochastic events. We evaluated the past, current, and future stressors (
• Loss of habitat due to invasion by nonnative species;
• Altered fire regime exacerbated by invasion by nonnative species;
• Altered precipitation, drought, and temperature;
• Erosion, sedimentation, and burial from road and trail maintenance, mining, livestock, wildlife, and post-wildfire runoff;
• Grazing from wildlife and livestock; and
• Small population size exacerbating all other stressors.
The stressors that pose the largest risk to future viability of the species are: (1) Loss of habitat caused by the invasion of nonnative grasses that compete for space, water, light, and nutrients and that alter wildfire regimes; and (2) small population size (fewer than 50 individuals), which potentially causes other stressors to seriously damage or extirpate populations. The size of fewer than 50 individuals as a small population was determined by assessing the range of known population sizes. Much of the historical range of beardless chinchweed in both the United States and Mexico has been altered by an invasion of nonnative grasses and herbaceous plants. Although there are many nonnative plant species growing in historical beardless chinchweed habitats in both the United States and Mexico, two species in particular are most problematic to beardless chinchweed at this time: Lehman's lovegrass (
Lehman's lovegrass, a nonnative grass from South Africa, has numerous
Rose natal, a native of Africa and Madagascar, is invasive in many locations, including southern Arizona and northern New Mexico (Stevens and Fehmi 2009, p. 379; Romo
In addition, several other African grasses (
The desert grasslands, oak savannas, and oak woodlands of southern Arizona historically had large-scale, low-severity fire roughly every 10 to 20 years and following periods of adequate moisture (McPherson and Weltzin 2000, p. 5; Brooks and Pyke 2002, p. 6; McDonald and McPherson 2011a, p. 385; Fryer and Leunsmann 2012, entire). Fires now are more frequent and intense due to the unnaturally dense and evenly spaced canopies of nonnative-dominated communities (as compared to more open and heterogeneous native-dominated grasslands), coupled with more frequent fire starts from recreationist and cross-border violators (Anable
In many locations in southern Arizona in recent decades, repeat fires have occurred within short periods of time, aided by the dominance of nonnative grasses in the landscape. For example, in the Pajarito and Atascosa Mountains area, multiple fires burned the landscape between 2008 and 2016 (Figure 4.4 in Service 2018a). This landscape is now dominated by both nonnative Lehman's lovegrass and rose natal (Service 2014c, entire; Heitholt 2017, entire), and many historically documented locations that supported beardless chinchweed have not been found again (Service 2014c, entire; Fernandez 2017, pers. comm.; Haskins and Murray 2017, p. 4). High-severity wildfires burn hotter than fires that beardless chinchweed evolved with; consequently, we believe the plant is not capable of surviving high-severity fires.
Altered precipitation timing and form (snow versus rain), as well as reduced winter and spring precipitation and prolonged drought, are currently occurring and projected to increase or be altered from normal in the Southwest (Garfin
Under a continuation of A2-high emissions scenario, reduced winter and spring precipitation is consistently projected for the southern part of the Southwest by 2100, as part of the general global precipitation reduction in subtropical areas (Garfin
Climatic events such as snowpack, earlier snowmelt, and increased drought are regional and will impact all populations of beardless chinchweed. Precipitation timing and amount impacts the germination, growth, and flowering of beardless chinchweed, resulting in the loss of individuals and recruitment, and overall reducing the population size.
In the Southwest, temperatures increased 2.7 degrees Celcius (°C) (1.6 degrees Fahrenheit (°F)) plus or minus 0.9 °C (0.5 °F), between 1901 and 2010, and more heat waves occurred over the Southwest during 2001-2010 compared to average occurrences in the 20th century. In the future, under RCP 4.5, the annual maximum temperature is projected to increase by 5 °C (2.7 °F) for 2025-2049 and 7.3 °C (4 °F) for 2050-2074, and 5 °C (2.7 °F) for 2025-2049 and 10.4 °C (5.7 °F) for 2050-2074 under RCP 8.5, all relative to 1981-2010 (USGS 2019, entire). When temperatures rise, as has been occurring in recent decades and as is projected to continue into the future, evapotranspiration rates also increase and soil moisture decreases. Along with projected warming and increased evapotranspiration, it is highly likely that droughts will become more severe (Garfin 2013, pp. 137-138). A decrease of up to 4 percent soil moisture is projected under RCP 4.5 scenario for 2016-2035, relative to 1986-2005. The decrease in soil moisture would likely be greater under the RCP 8.5 scenario. Further, the evaporation deficient increases under RCP 4.5 and increases more in RCP 8.5 in 2025 to 2049, relative to 1981 to 2010. Based on the high emissions scenario, the current 100-year drought will become commonplace in the second half of this century and future droughts will be much more severe than those previously recorded (Garfin 2013, p. 138). This projection of intensified drought conditions on the Colorado River is not due to changes in precipitation, but rather due directly to warming and its effect on reducing soil moisture (Garfin 2013, p. 138). Physiological effects of CO
Although rare species in the southwestern United States evolved with drought, recent changes in temperature, and rainfall patterns present stressful conditions of increased magnitude greater than what the species faced historically and raise the question of whether the species, can persist. Some species may shift their distributions in response to warming of the climate (McLaughlin
General road maintenance and widening could disturb populations along road cuts and create erosion (Phillips
The McCleary Canyon—Gunsight Pass population is in the path of a proposed alignment of a secondary access road for the proposed Rosemont Mine (Westland 2010, p. iv), and the McCleary Canyon—Wasp Canyon population is within the processing facility portion of the proposed Rosemont Mine (Westland 2017, entire). Collectively, these plants represent approximately 33 percent of the total beardless chinchweed populations known across the U.S. range and 16 percent of all known individuals. The proposed road alignment would eliminate these populations.
Dust from mining operations or recreational travel can impact beardless chinchweed populations along dirt roadways. Dust may negatively affect plant growth and vigor as a result of changes in physiological and biochemical processes (
There are two different perspectives on the influence of grazing on beardless chinchweed:
(1) Wildfire historically maintained native open habitat where beardless chinchweed occurred, but with fire suppression, overgrazing may have alternatively provided native open habitats for this species to expand its range in the early 1900s, even without frequent fire (Schmalzel 2015, p. 2), due to open space being created and maintained by cattle; and
(2) Grazing pressure may have contributed to the species' rareness (Keil 1982, entire) due to reduced reproduction and alteration in habitat.
Regardless, grazing that occurs in small populations (fewer than 50 individuals) of beardless chinchweed would have a negative population-level impact through the reduction of flowers and seeds, and possibly individuals. Beardless chinchweed does not flower until it reaches a height of more than 0.5 m (1.6 ft) tall, suggesting that grazing in summer or fall when the plant is growing and flowering could reduce seed production and recruitment.
Small population size has the potential to affect beardless chinchweed' population resiliency, as all stressors are exacerbated in populations with only a small number of individuals (fewer than 50). Known population sizes of beardless chinchweed were used to quantify the size of a small population. Small populations are less able to recover from losses caused by random environmental changes (Shaffer and Stein 2000, pp. 308-310), such as fluctuations in reproduction (demographic stochasticity), variations in rainfall (environmental stochasticity), or changes in the frequency or severity of disturbances, such as wildfires. Five of the six extant beardless chinchweed populations in the United States contain fewer than 50 individuals. Based on populations in the United States, which are mostly small and occur in habitat dominated by nonnatives, we believe that the six populations in Mexico are of similar size but may be in worse condition, because of limited native habitat management, similar climate change impacts, equally frequent wildfires, and likely more impacts from grazing. Loss due to mining, erosion, road and trail maintenance, trampling, grazing, or other stressors mentioned above are exacerbated in small populations, and have the potential to seriously damage or completely remove these small populations. Synergistic interactions among wildfire, nonnative grasses, decreased precipitation, and increased temperatures cumulatively and cyclically impact beardless chinchweed, and all stressors are exacerbated in small populations.
Since 1962, we are aware of nine populations and one subpopulation of beardless chinchweed in the United States that have become extirpated. Currently, six extant beardless chinchweed populations are spread across four mountain ranges in southern Arizona: The Atascosa-Pajarito, Huachuca, Santa Rita, and the Canelo Hills. These six populations consist of 387 individuals spread across less than 2 ha (5 ac). Additionally, six populations have been reported from northern Mexico, but this information is from 1940 or earlier.
To help determine current condition, we assessed each population in terms of its resiliency. Our analysis of the past, current, and future stressors on the resources that beardless chinchweed needs for long-term viability revealed that there are a number of stressors impacting this species. All beardless chinchweed populations likely contain nonnative grasses. Further, altered fire regime has the potential to affect all populations. This altered fire regime enhances the spread of nonnatives, and all populations of beardless chinchweed contain nonnatives. Consequently, fire will aid in the spread of nonnatives, and is currently a risk to all populations of beardless chinchweed and will be further exacerbated by nonnative grasses in the near future (approximately 10 years). Altered precipitation, increased temperatures, increased evapotranspiration, decreased soil moisture, and decreased winter and spring precipitation are current and ongoing regional actions that are impacting all populations of beardless chinchweed. These environmental conditions exacerbate an altered fire regime, which in turn further drives the spread of nonnatives. In addition, nonnative grasses have competitive advantage over native grasses during periods of drought.
Road maintenance is likely resulting in the direct killing of individuals in three populations (Ruby Road, Scotia Canyon, and Coronado National Memorial). In addition, all individuals in these three populations are currently being impacted by dust from the road. These three populations are already of low resiliency. Two additional populations (McCleary Canyon—Gunsight Pass and McCleary Canyon—Wasp Canyon) will be impacted by Rosemont mining operations and dust in the near future (approximately 10 years; Westland 2010, p. iv). One of these populations is already of low resiliency, and the other is of moderate resiliency. Eleven of the 12 populations (92 percent) are small population (fewer than 50 individuals). Synergistic interactions among wildfire, nonnative grasses, decreased precipitation, and increased temperatures cumulatively and cyclically impact beardless chinchweed, and all stressors are exacerbated in small populations. Of the six extant populations, two are moderately resilient and four are in low resiliency (Table 5, below). Population resiliency categories are described in Table 2, above, and in the SSA report (Service 2018a).
No genetic studies have been conducted within or between the 21 historical populations of beardless chinchweed in southern Arizona and Mexico. Mountain ranges that have only one or two populations, or have only have one subpopulation per population, or low numbers of individuals per population with several miles between mountain ranges, may not be as genetically diverse because pollination or transport of seeds between populations may be very limited or nonexistent. Five of the six extant U.S. populations do not have multiple subpopulations. The Coronado National Memorial population has two subpopulations. The six extant U.S. populations are separated geographically into the Atascosa-Pajarito, Huachuca, and Santa Rita Mountains, and the Canelo Hills, which are separated by 16 to 61 km (9.9 to 37.9 mi). There is likely genetic diversity among mountain ranges, but reduced genetic diversity within populations. Further, overall genetic diversity is likely reduced given that some populations are extirpated.
The 15 historical beardless chinchweed populations in the United States range in elevation from 1,158 m (3,799 ft) to 1,737 m (5,699 ft). Of these, eight (about 53 percent) fall below 457 m (1,500 ft) elevation. Of these eight, six have become extirpated in recent decades. This essentially indicates a loss at this lower elevational range and possibly loss of some local adaptation to warmer or dryer environments and genetic differentiation among populations.
In the Ruby Road, Scotia Canyon, and Coronado National Memorial populations, plants have been reported over many decades, indicating that these populations may have the genetic and environmental diversity needed to adapt to changing conditions. Note, however, that both the Ruby Road and Scotia Canyon populations have been reduced in size in the past 30 years, and we have no previous count data at Coronado National Memorial for comparison.
The beardless chinchweed populations in the United States and Mexico are naturally fragmented between mountain ranges. Currently, six extant beardless chinchweed U.S. populations are spread across Atascosa-Pajarito, Huachuca, and Santa Rita Mountains and the Canelo Hills. The Atascosa-Pajarito Mountains and the Canelo Hills have only one extant population each, while the Santa Rita and Huachuca Mountains have two extant populations each. These mountain ranges are separated from each other by 16 to 61 km (9.9 to 37.9 mi), so natural gene exchange or re-establishment following extirpation is very unlikely. In addition, six historical populations of beardless chinchweed are distributed across two general areas in northern Chihuahua and Sonora, Mexico. Their status is unknown, but we believe they are small populations with poor habitat based on populations in the United States, which are small and dominated by nonnative species. Although this may imply some level of redundancy across the range of beardless chinchweed, note that five of the six extant populations in the United States contain fewer than 50 individual plants. Further, nine populations and one subpopulation have been extirpated in recent decades, largely from the lower elevations of the species' range, and several populations have been reduced in size in recent decades.
We also assessed the future condition of beardless chinchweed under several plausible scenarios in our SSA report (Service 2018a, entire). We present a summary of the relevant information here; the detailed future condition analysis is available in the SSA report.
We developed four scenarios incorporating the stressors that are ongoing or will occur in the future to consider the range of possible future conditions. For each scenario, we describe the level of impact from the identified stressors that would occur in each population. All of the scenarios involve some degree of uncertainty; however, they present a range of realistic and plausible future conditions (Table 6). All scenarios consider impacts from nonnative invasion, altered wildfire regime, and drought because there is no likely future scenario where these stressors would not affect the species. In addition, effects on individual plants (small population size) from multiple stressors are assessed, including cross-border
Below is a summary of the four scenarios. For more detail, see Chapter 6 of the SSA (Service 2018a, entire).
The “continuation” scenario evaluates the condition of beardless chinchweed if there is no increase in risk of stressors to the populations relative to what exists today. The other scenarios evaluate the response of the species to changes in those risks. The “conservation” scenario takes into account realistically possible additional protective measures, which may or may not happen. The “moderate effects” scenario is an increase in the risk of stressors to populations. The “major effects” scenario is a further increase in risk of stressors to populations.
We examined the resiliency, representation, and redundancy of beardless chinchweed under each of these plausible scenarios (see table 6.7 in the SSA report). The overall resiliency categories are the same as those used for current condition. We expect the six extant beardless chinchweed populations to experience changes to aspects of their habitat in different ways under the different scenarios. We projected the expected future resiliency, representation, and redundancy of beardless chinchweed based on the risk of stressors that would occur under each scenario (see Table 7). Under the “continuation” scenario, we would expect the viability of beardless chinchweed to be characterized by a loss of resiliency, representation, and redundancy at the level that is currently occurring. Under the “conservation” scenario, we would expect the viability of beardless chinchweed to be characterized by higher levels of resiliency, representation, and redundancy than it exhibits under the current condition. Under the “moderate effects” scenario, we would expect the viability of beardless chinchweed to be characterized by lower levels of resiliency, representation, and redundancy than it has in the “continuation” scenario. Under the “major effects” scenario, we would expect all populations of beardless chinchweed to be extirpated at the 40-year time step.
Several factors influence whether Bartram's stonecrop populations will grow to increase habitat occupancy, which increases the resiliency of a population to stochastic events. We evaluated the past, current, and future stressors that are affecting what Bartram's stonecrop needs for viability. These stressors are described in detail in the chapter 4 of the SSA report (Service 2018b, entire). Stressors that have the potential to affect Bartram's stonecrop population resiliency include:
• Loss of water in nearby drainages from mining and drought;
• Erosion, sedimentation, and burial from mining, livestock, wildlife, recreation trails and roads, cross-border violators, and post-wildfire runoff;
• Trampling from humans, wildlife, and livestock, and predation;
• Altered fire regime resulting from fires ignited by recreationists, cross-border violators, and lightning;
• Illegal collection;
• Altered precipitation, drought, flooding, and freezing regime from current and future climate change, resulting in loss of seedling, immature, and adult plants, and in loss of reproduction; and
• Small population size exacerbating all other stressors.
The stressors that pose the largest risk to future viability of the species, which are related to habitat changes, include:
(1) Groundwater extraction and prolonged drought that may reduce nearby water levels and humidity within Bartram's stonecrop habitat; and
(2) Altered fire regimes leading to erosion of Bartram's stonecrop habitat, sedimentation that could cover individuals, and loss of overstory shade trees. These stressors play a large role in the future viability of Bartram's stonecrop, especially for smaller populations. These stressors may reduce nearby water levels, shade, and humidity within Bartram's stonecrop habitat and may directly impact individuals.
Dewatering of streams from mining operations may lead to overstory canopy losses and resulting loss of shade, as well as reduction in spring and stream flow and humidity in nearby Bartram's stonecrop populations. The Rosemont Mine Final Environmental Impact Statement states that no Bartram's stonecrop were found in the project area or the footprint of the connected actions; however, individuals growing in the analysis area could experience indirect impacts from groundwater drawdown (USFS 2013a, p. 676). According to the Rosemont Mine Final Environmental Impact Statement (USFS 2013a, p. 339), the proposed mine pit would create a permanent drawdown of the water table, and groundwater would flow toward the pit and be lost to evaporation. The water would be perpetually replenished in part by groundwater from the regional aquifer, and the pit would act as a hydraulic sink. Given that Bartram's stonecrop is consistently found in locations with nearby springs or other water sources, the loss of groundwater at the nearby unmapped spring in Box Canyon/Sycamore Canyon confluence, between Ruelas Spring and the Singing Valley Road residences, could significantly impact these Bartram's stonecrop plants. In the range of Bartram's stonecrop, there are many mining claims, trenching and exploration drilling activities, and a few active and proposed mines. Many currently undeveloped areas of locatable mineral deposits may be explored and/or mined in the future. We do not know the extent of future mine activity within the range of Bartram's stonecrop; however, a number of proposed mines are identified for development within Bartram's stonecrop habitat. The range of current and projected mining activities varies from 1 to 10 per sky island mountain range containing Bartram's stonecrop (USFS 2012, entire). The loss of water in any Bartram's stonecrop population could lead to extirpation of that population.
Bartram's stonecrop typically occurs on steep slopes with erodible soils and areas susceptible to rock fall, making the plant particularly vulnerable to physical damage to its environment (Phillips
Direct removal of Bartram's stonecrop individuals and substrate due to erosion, or burial of individuals, may occur due to the placement of mineral extraction sites and debris piles. These impacts could severely impact small Bartram's stonecrop populations. Erosion from test pits (an excavation made to examine the subsurface conditions of a potential mine site) has been documented to remove portions of habitat occupied by Bartram's stonecrop in Flux Canyon (Phillips
The trampling of individual Bartram's stonecrop plants may occur from a variety of activities, including livestock and wildlife movement; the placement and maintenance of infrastructure, trails, and roads; and recreationists or cross-border violators traveling along established trails or cross country (Phillips
Since the mid-1980s, wildfire frequency in western forests has nearly quadrupled compared to the average of the period 1970 to 1986 (Westerling
We are aware of 11 wildfires (Alamo, Brown, Elkhorn, Hog, Horseshoe II, La Sierra, Lizard, Mule Ridge, Murphy, Soldier Basin, and Spring) that have occurred in known Bartram's stonecrop sites in the past decade that killed some Bartram's stonecrop individuals and removed shade in some instances. When looking at the number of acres burned per sky island mountain range in comparison to the number of adult individuals known from that range, the two largest populations occur in sky island mountain ranges that have had the fewest acres burned in the past 10 years. It is not known if this is coincidence or is of significance, as we do not have pre-fire population counts in any population to address this question. Wildfires have burned in all nine sky island mountain ranges of southern Arizona that support Bartram's stonecrop during this time period. Fires did not burn through Bartram's stonecrop populations in all cases, but fire could occur in any population within this 10-year timeframe. Wildfire could potentially cause extirpation of small Bartram's stonecrop populations throughout the range of the species and have negative impacts on larger populations. In addition, because it is thought that Bartram's stonecrop seeds reside at the soil surface and the seeds are very tiny (Shohet 1999, p.48), it is likely that the seeds would not survive a wildfire.
The nonnative plants in the uplands and within Bartram's stonecrop populations include nonnative grass species such as Lehman's lovegrass and rose natal, both of which have numerous advantages over native grasses. Lehman's lovegrass resprouts from roots and tiller nodes not killed by hot fire, is not hampered by the reduction in mycorrhizae associated with fire and erosion, responds to winter precipitation when natives grasses are dormant, produces copious seed earlier than native grasses, maintains larger seedbanks than native grasses, and has higher seedling survival and establishment than native grasses during periods of drought (Anable 1990, p. 49; Anable
Bartram's stonecrop is an attractive small plant that can be easily collected by gardeners and succulent enthusiasts. Tagged individuals were uprooted and taken from two sites in the Santa Rita Mountains, one near a campsite (Shohet 1999, p. 60). In a 2016 on-line Google search for Bartram's stonecrop for sale, an advertisement from a collector in Texas offered to pay cash for Bartram's stonecrop seedlings or rooted cuttings. One website notes that the similar southern Arizona occurring species,
Precipitation within the sky island mountain ranges is bimodal, with winter snow and rain, and summer monsoon rain (CLIMAS 2014, entire). Fall and winter (October through March) precipitation is needed for Bartram's stonecrop germination, and both summer (July and August) and fall precipitation (October and November) is needed for Bartram's stonecrop flower production. Flowering is triggered by fall rains and does not occur during periods of water stress (Shohet 1999, pp. 22, 25, 36, 39). Altered precipitation timing and form (
Altered precipitation timing and form (snow versus rain), as well as reduced winter and spring precipitation and prolonged drought, are currently occurring and projected to increase or be altered from normal in the Southwest (Garfin
Under a continuation A2-high emissions scenario, reduced winter and
Precipitation timing and amount impacts the germination, growth, and flowering of Bartram's stonecrop, resulting in the loss of individuals and recruitment, and overall reducing the population size.
In the Southwest, temperatures increased 2.7°C (1.6 °F) plus or minus 0.9 °C (0.5 °F), between 1901 and 2010, and more heat waves occurred over the Southwest during 2001-2010 compared to average occurrences in the 20th century. In the future, under RCP 4.5, the annual maximum temperature is projected to increase by 5°C (2.7°F) for 2025-2049 and 7.3 °C (4°F) for 2050-2074, and 5 °C (2.7°F) for 2025-2049 and 10.4 °C (5.7°F) for 2050-2074 under RCP 8.5, all relative to 1981-2010 (USGS 2019, entire). When temperatures rise, as has been occurring in recent decades and as is projected to continue into the future, evapotranspiration rates also increase and soil moisture decreases. Along with projected warming and increased evapotranspiration, it is highly likely that droughts will become more severe (Garfin 2013, pp. 137-138). A decrease of up to 4 percent soil moisture is projected under RCP 4.5 for 2016-2035, relative to 1986-2005. The decrease in soil moisture would likely be greater under RCP 8.5. Further, the evaporation deficient increases under RCP 4.5 and increases more in RCP 8.5 in 2025 to 2049, relative to 1981 to 2010. Based on the high emissions scenario, the current 100-year drought will become commonplace in the second half of this century and future droughts will be much more severe than those previously recorded (Garfin 2013, p. 138). This projection of intensified drought conditions on the Colorado River is not due to changes in precipitation, but rather due directly to warming and its effect on reducing soil moisture (Garfin 2013, p. 138). Physiological effects of CO
Although rare species in the southwestern United States evolved with drought, recent changes in temperature and rainfall patterns present stressful conditions of increased magnitude above what the species faced historically and raise the question of whether the species in this rule can persist. Some species will shift their distributions in response to warming of the climate (McLaughlin
Stressors are exacerbated in populations with only a small number (
In summary, the stressors that pose the largest risk to future species viability are primarily related to habitat changes: Groundwater extraction from mining, long-term drought, and alteration in wildfire regime. These stressors may reduce nearby water levels, shade, and humidity within Bartram's stonecrop habitat and may directly impact individuals. Other important stressors include erosion or trampling from livestock, wildlife, or human activities; illegal collection; predation of Bartram's stonecrop or their shade trees by wildlife and insects; abnormal freezing or flooding events; or other stressors that have the potential to seriously damage or completely remove small populations. Synergistic interactions among wildfire, drought, altered precipitation, and increased temperatures cumulatively and cyclically impact Bartram's stonecrop, and all stressors are exacerbated in small populations.
Historically, we know of 33 populations spread across 13 mountain ranges. Four populations have been extirpated in the United States in recent years, and a fifth population has likely contracted in size. In addition, the southeastern Arizona landscape has experienced many changes since the 1890s, resulting from intensive cattle grazing, water development, and fire
To help determine current condition, we assessed each population in terms of its resiliency and assessed the species' representation and redundancy. Our analysis of the past, current, and future stressors on the resources that Bartram's stonecrop needs for long-term viability revealed a number of stressors to this species. All Bartram's stonecrop populations likely contain nonnative grasses. Further, altered fire regime has the potential to affect all populations. This altered fire regime enhances the spread of nonnatives. Consequently, all populations of Bartram's stonecrop will be further impacted by nonnative grasses in the near future. Altered precipitation, increased temperatures, and decreased annual precipitation are current and ongoing regional conditions that are impacting all populations of Bartram's stonecrop. These environmental conditions exacerbate an altered fire regime, which, in turn, further drives the spread of nonnatives. In addition, nonnative grasses have competitive advantage over native grasses during periods of drought. Many currently undeveloped areas of locatable mineral deposits may be explored or mined in the future. We do not know the extent of future mine activity within the range of Bartram's stonecrop; however, there are 12 mining projects currently ongoing or proposed within 8 km (5 mi) of Bartram's stonecrop populations in Arizona. The range of current and projected mining activities varies from 1 to 10 per sky island mountain range containing Bartram's stonecrop (USFS 2012, entire). One population, Sycamore Canyon (115 adult individuals), would be affected by groundwater drawdown due to the Rosemont Mine. Sycamore Canyon is currently in moderate condition. Further, this species is collected and sold. Synergistic interactions among wildfire, nonnative grasses, decreased precipitation, and increased temperatures cumulatively and cyclically impact Bartram's stonecrop, and all stressors are exacerbated in small populations. In addition, because approximately 41 percent (12 populations) of the extant Bartram's stonecrop populations contain 50 or fewer individuals, loss due to erosion, trampling, collection, predation, fire, severe frost, or other stressors have the potential to seriously damage or completely remove these small populations. Of the 29 extant populations, 1 population (3 percent) is in high condition, 21 populations (72 percent) are in moderate condition, and 7 populations (24 percent) are in low condition (Table 8, below). Population resiliency categories are described in Table 4, above, and in the SSA report (Service 2018b).
No genetic studies have been conducted within or between the 33 historical populations of Bartram's stonecrop in southern Arizona and Mexico. However, we assessed representation for Bartram's stonecrop in the form of its geographic distribution across the range. Some genetic exchange likely occurs within populations containing many subpopulations or many plants per subpopulation. Sky island populations on different mountain ranges are widely separated (ranging from roughly 14 to 42 km (8.7 to 26 mi) apart), making cross-pollination across sky islands highly unlikely. Mountain ranges that have only one or two populations, have only one subpopulation per population, or have low numbers of individuals per population with several miles between mountain ranges may not be as genetically diverse because pollination or transport of seeds between populations may be very limited. However, there may be genetic diversity between populations within and between the sky island mountain ranges in response to elevational and other environmental differences between locations. Due to the loss of four populations, it is possible that there has been a loss of genetic diversity. However, because the species occurs across 29 populations in 12 mountain ranges, it is likely some genetic diversity exists among mountain ranges.
In addition, because the plant occurs on multiple substrate types and at a range of elevations (1,067 to 2,042 m (3,500 to 6,700 ft)), there is likely some local adaptation and genetic differentiation among populations. This range in elevation provides a variety of climatic conditions for the species to inhabit. Lastly, in at least three locations (Flux Canyon, Sycamore Canyon (Pajarito-Atascosa Mountains), and Gardner Canyon populations), Bartram's stonecrop have been reported over many decades, indicating that these populations may have the genetic and environmental diversity to adapt to changing conditions.
The Bartram's stonecrop populations in the United States and Mexico are naturally fragmented between mountain ranges. Currently, 29 extant Bartram's stonecrop populations are spread across 12 different mountain ranges in southern Arizona and northern Mexico. Although these numbers may imply redundancy across its range, note that 24 of the 29 extant populations contain fewer than 150 total individual plants. Further, 14 of the 29 populations have 50 individuals or less, and 4 populations have been extirpated over recent (approximately 10) years. Five mountain ranges (Baboquivari, Chiricahua, Mule, Whetstone, and Patagonia Mountains) have only one or two populations each or have only have one subpopulation per population, and low numbers of individuals per population. These sky island mountain ranges are several miles away from the other sky island mountain ranges, so natural gene exchange or re-establishment following extirpation is unlikely. In addition, the Mule Mountains contain large number of Bartram's stonecrop individuals, but there is only one population and it is approximately 38 km (23.6 mi) away from the nearest population, making natural re-establishment of populations unlikely. In addition, this population is known to be contracting in size due to drying of habitat (The Nature Conservancy 1987, p. 2).
We now consider the species' future condition of population resiliency and the species' representation and redundancy are likely to be. The future viability of Bartram's stonecrop depends on maintaining multiple resilient populations over time. The resiliency of Bartram's stonecrop populations depends on moisture in their microenvironment maintained by shade from overstory vegetation, spring and winter precipitation, proximity to water, and vegetation litter. We expect the 29 extant Bartram's stonecrop populations to experience changes to all of these aspects of their habitat, although it may be in different ways under the different conditions. In addition, direct impacts to Bartram's stonecrop through being dislodged, buried, or collected will continue to impact the species.
Given our uncertainty regarding the scope of the stressors manifesting and the species' response, we forecasted future conditions of Bartram's stonecrop under four plausible future scenarios (see chapter 6 of the SSA report; Service 2018b). We developed these scenarios to span a range of potential stressors that are ongoing or will occur in the future that we believe will influence the future status of the species. We chose 10 years to evaluate the current condition, as well as future projections out to 40 years because this is within the range of predictions of available hydrological and climate change model forecasts and is within the time period of the Rosemont Mine effects. This time frame represents eight generations of the Bartram's stonecrop, which allows us to assess reproductive effects on the species and allows the species opportunities to rebound after poor water years. The ten-year time step also represents a reasonable timeframe to judge the species' current vulnerability to threats as they are manifested now, without projecting changes to threats that longer timeframes would provide. Thus, the future scenarios forecast the viability of Bartram's stonecrop over the next 40 years. See table 9 below for a summary of the four scenarios. For more detail, see Chapter 6 of the SSA report (Service 2018b, entire).
All scenarios consider impacts from mining, wildfire, and climate. In addition, effects on individual plants from multiple stressors are assessed, including livestock, recreation, trampling, predation, and collection. The “continuation” scenario evaluates the condition of Bartram's stonecrop if there is no increase in risks to the populations relative to what exists today, while the other scenarios evaluate the response of the species to changes in those risks. The “conservation” scenario takes into account realistically possible additional protective measures which may or may not happen. The “moderate effects” scenario is an increase in the risks to populations with changes in climate as projected in a lower (8.5) emissions scenario along with increases in other stressors. The “major effects” scenario is a further increase in risks to populations, with changes in climate projected at a higher (8.5) emissions scenario, and with additional increases in other stressors. These are described in more detail in chapter 6 of the SSA report (Service 2018b).
The most likely scenario is the “moderate effects” scenario, with impacts to the species occurring around the 40-year time step. Under the “moderate effects” scenario, water flow reduction due to drought and groundwater extraction continues to reduce the humid microhabitat for this species. Cross-border violator traffic continues, and risk of catastrophic wildfire is high due to dry conditions; invasion of nonnatives in the uplands; and increased risk of fire starts from illegal activity, recreation, and natural causes. Mining impacts individuals in the Patagonia and Santa Rita Mountains. Collection, trampling, freezing, predation, and human impacts also continue at current or increased levels. The full analyses of all scenarios are available in the SSA report (Service 2018b, chapter 6); however, we are only presenting the full results of the “moderate effects” scenario here because it gives the most realistic projection of the future condition of the species.
Under the “moderate effects” scenario, within the 40-year timeframe, we expect Bartram's stonecrop's viability to be characterized by lower levels of resiliency, representation, and redundancy than it has currently, which is already reduced as described above. Under the “moderate effects” scenario, no populations would be in high condition, 4 populations (12 percent) would remain in moderate condition, 16 populations (52 percent) would be in low condition, and 13 populations (36 percent) would be extirpated, further reducing population redundancy and connectivity (see table 6.6 in the SSA report; Service 2018b). Under the “moderate effects” scenario, because of the intensity of stressors discussed above, 22 populations would be reduced from their current condition (see Table 10, and see figure 6.3 and table 6.6 in the SSA report (Service 2018b)). We further believed that in the “moderate effects” scenario, one of the three small populations in Mexico becomes extirpated due to the amount of nonnatives contributing to fire, reduction in precipitation, increase in drought, and low resiliency of a small population.
Section 4 of the Act (16 U.S.C. 1533), and its implementing regulations at 50 CFR part 424, set forth the procedures for adding species to the Federal Lists of Endangered and Threatened Wildlife and Plants. Under section 4(a)(1) of the Act, we may list a species based on (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence.
We have carefully assessed the best scientific and commercial information available regarding the past, present, and future stressors to beardless chinchweed and Bartram's stonecrop.
The Act defines an endangered species as any species that is “in danger of extinction throughout all or a significant portion of its range” and a threatened species as any species “that is likely to become endangered throughout all or a significant portion of its range within the foreseeable future.”
Therefore, on the basis of the best available scientific and commercial information, we propose listing beardless chinchweed as endangered in accordance with sections 3(6) and 4(a)(1) of the Act and Bartram's stonecrop as threatened in accordance with sections 3(20) and 4(a)(1) of the Act.
Historically there were 21 populations. Nine populations have been extirpated, leaving 12 extant populations (six in the United States and six in Mexico). The six populations in the United States consist of 387 individuals spread across less than 2 ha (5 ac). The six populations have been reported from northern Mexico, but this information is from 1940 or earlier.
The proliferation of invasive nonnative grasses throughout most of the beardless chinchweed's range has greatly affected this species through increased competition and altered fire regimes. Many of these historical locations no longer support beardless chinchweed due to this alteration of habitat (National Park Service 2014, pp. 3-4; Service 2014b, pp. 1-2; Service 2014c, entire; Service 2014d, pp. 1-2).
All beardless chinchweed populations likely contain nonnative grasses, resulting in habitat loss (Factor A). Further, altered fire regime (Factors A and E), which is currently or in the near future impacting all populations, drives the spread of nonnatives (Factor A), exacerbating the encroachment of nonnative grasses. Consequently, all remaining populations of beardless chinchweed are impacted by nonnative grasses now or will be in the near future. Altered precipitation (Factors A and E), increased temperatures (Factors A and E), and decreased annual precipitation (Factors A and E) are current and ongoing regional conditions that are impacting all populations of beardless chinchweed. These environmental conditions exacerbate an altered fire regime, which, in turn, drives the spread of nonnatives. In addition, nonnative grasses have competitive advantage over native grasses during periods of drought. Road and trail maintenance (Factors A and E) is altering habitat and likely resulting in the direct killing of individuals in three populations (Ruby Road, Scotia Canyon, and Coronado National Memorial). In addition, all individuals in these three populations are being impacted by dust (Factor E) from the road. These three populations are already of low resiliency. Two additional populations (McCleary Canyon—Gunsight Pass and McCleary Canyon—Wasp Canyon) will be impacted by roads (Factor A) related to mining operations in the near future (Westland 2010, p. iv). All individuals of these two populations will also be impacted by dust (Factor E). One of these populations is already of low resiliency and the other is of moderate resiliency. Of the 12 populations, 11 (92 percent) are small populations (fewer than 50 individuals). Synergistic interactions among wildfire, nonnative grasses, decreased precipitation, and increased temperatures cumulatively and cyclically impact beardless chinchweed, and all stressors are exacerbated in small populations (Factor E). No conservation efforts have been implemented for this species.
We consider beardless chinchweed to have poor representation in the form of potential genetic diversity (Factor E). All but one population has fewer than 50 individuals. Small populations are susceptible to the loss of genetic diversity, genetic drift, and inbreeding. There are currently six populations spread across four mountain ranges in the United States and six populations in northern Mexico that are presumed extant. Five of the six extant U.S. populations do not have multiple subpopulations (all but the Coronado National Memorial population, which has two subpopulations). Mountain ranges that have only one or two populations, have only have one subpopulation per population, or have low numbers of individuals per population with several miles (16 to 61 km (9.9 to 37.9 mi)) between mountain ranges, may not be genetically diverse because pollination or transport of seeds between populations may be very limited. This could mean that between-population genetic diversity may be greater than within-population diversity (Smith and Wayne 1996, p. 333; Lindenmayer and Peakall 2000, p. 200). Further, nine populations are extirpated, and it is possible that there has been a loss of genetic diversity.
Beardless chinchweed populations in the United States range in elevation from 1,158 m (3,799 ft) to 1,737 m (5,699 ft) in elevation. Of the 15 historical U.S. populations, 8
Beardless chinchweed needs to have multiple resilient populations distributed throughout its range to provide for redundancy. Beardless chinchweed needs multiple resilient populations spread over their range that are distributed in such a way that a catastrophic event will not result in the loss of all populations. With the known extant populations being separated by as much as 35 km (21.8 mi) in southern Arizona and even farther in northern Mexico, there is little connection potential between known disjunct populations. Therefore, a localized stressor such as grazing during flowering would impact only those groups of plants nearby the activity. However, repeated, large-scale, moderate- and high-severity fires, nonnative plant invasion, and climatic changes occur across the region and could impact all populations now or in the near future. The distance among populations reduces connectivity among populations and mountain ranges, making it unlikely that a site that is extirpated can be naturally recolonized by another population (Factor E).
We find that beardless chinchweed is presently in danger of extinction throughout its entire range based on the severity and immediacy of stressors currently impacting the species. The overall range has been significantly reduced (nine populations extirpated), and the remaining habitat and populations are threatened by a variety of factors acting in combination to reduce the overall viability of the species. The risk of extinction is high because the remaining populations are small, isolated, and have limited potential for natural recolonization. Therefore, on the basis of the best available scientific and commercial information, we propose listing beardless chinchweed as endangered in accordance with sections 3(6) and 4(a)(1) of the Act. We find that a threatened species status is not appropriate for beardless chinchweed because of the species's current precarious condition due to its contracted range, because the stressors are severe and occurring rangewide, and because the stressors are ongoing and expected to continue into the future.
Under the Act and our implementing regulations, a species may warrant listing if it is endangered or threatened throughout all or a significant portion of its range. Because we have determined that beardless chinchweed is endangered throughout all of its range, we find it unnecessary to proceed to an evaluation of potentially significant portions of the range. Where the best available information allows the Service to determine a status for the species rangewide, that determination should be given conclusive weight because a rangewide determination of status more accurately reflects the species' degree of imperilment and better promotes the purposes of the statute. Under this reading, we should first consider whether listing is appropriate based on a rangewide analysis and proceed to conduct a “significant portion of its range” analysis if, and only if, a species does not qualify for listing as either endangered or threatened according to the “all” language. We note that the court in
Therefore, on the basis of the best available scientific and commercial information, we propose to list beardless chinchweed as an endangered species across its entire range in accordance with sections 3(6) and 4(a)(1) of the Act.
Bartram's stonecrop has experienced population declines and four populations have been lost entirely. Currently, there are 29 extant populations. All Bartram's stonecrop populations contain or are near nonnative grasses resulting in habitat loss in the future (Factor A). Further, altered fire regime (Factors A and E), which is currently and in the future impacting all populations, drives the spread of nonnatives (Factor A), exacerbating the encroachment of nonnative grasses. Consequently, all populations of Bartram's stonecrop will be impacted by nonnative grasses in the future. Altered precipitation (Factors A and E), increased temperatures (Factors A and E), and decreased annual precipitation (Factors A and E) are current and ongoing regional conditions that are impacting all populations of Bartram's stonecrop. These environmental conditions exacerbate an altered fire regime, which, in turn, drives the spread of nonnatives. In addition, nonnative grasses have competitive advantage over native grasses during periods of drought. Many currently undeveloped areas of locatable mineral deposits may be explored or mined in the future (Factors A and E). The range of current and projected mining activities varies from 1 to 10 per sky island mountain range containing Bartram's stonecrop (USFS 2012, entire). One population, Sycamore Canyon (115 adult individuals), will be affected by groundwater drawdown due to the Rosemont Mine, which will impact the shade and moist microclimate this species needs (Factor A). This species is known to be collected and sold (Factor B), and plants in close proximity to trails or roads have higher discovery potential and are, therefore, more likely to be collected. In addition, because approximately 47 percent of the extant Bartram's stonecrop populations contain 50 or fewer individuals (Factor E), loss due to erosion (Factors A and E), trampling (Factor E), collection (Factor B), predation (Factor C), and fire (Factors A and E) has the potential to seriously damage or completely remove these small populations. Synergistic interactions among wildfire, nonnative grasses, decreased precipitation, and increased temperatures cumulatively and cyclically impact Bartram's stonecrop, and all stressors are exacerbated in small populations (Factor E). No conservation efforts have been implemented for this species.
We consider Bartram's stonecrop to have poor representation in the form of potential genetic diversity. Sky island populations on different mountain ranges are widely separated (ranging from roughly 14 to 42 km (8.7 to 26 mi) apart), making genetic exchange highly unlikely. There is likely genetic diversity among mountain ranges, but reduced genetic diversity within populations. Further, overall genetic diversity is likely reduced given that four populations are extirpated. However, it is likely that the species' genetic representation will be lost given the impacts to populations through the reduction in the number of individuals per population and the loss of populations (Factor E). In addition, it is likely that ecological representation will continue to decline as those populations at lower elevations are lost due to reduced precipitation and increased temperatures (Factor E).
The Bartram's stonecrop populations in the United States and Mexico are naturally fragmented between mountain ranges. Currently, 29 extant Bartram's stonecrop populations are spread across 12 different mountain ranges in southern Arizona and northern Mexico. Although this may imply redundancy
The overall range of the species has not been significantly reduced, although four populations are extirpated due to habitat drying. Currently, 29 extant populations are spread across 12 mountain ranges, providing protection from catastrophic events in the near future (approximately 10 years). While there are multiple stressors to the remaining populations, these stressors are not immediately impacting all populations such that Bartram's stonecrop is in danger of extinction. The stressors that pose the largest risk to future species viability are primarily related to habitat changes: Groundwater extraction from mining, long-term drought, and alteration in wildfire regime. These are stressors that we have high confidence in occurring and impacting Bartram's stonecrop within the next 40 years. We chose a foreseeable future of 40 years (approximately 2060) because this is within the range of predictions of available hydrological and climate change model forecasts, is within the time period of the Rosemont Mine effects, and represents eight generations of the Bartram's stonecrop, which allows us to assess reproductive effects on the species and allows the species opportunities to rebound after poor water years. The primary sources we examined in determining foreseeable future include the IPCC (2013 and 2014 entire) and Garfin
Under the Act and our implementing regulations, a species may warrant listing if it is endangered or threatened throughout all or a significant portion of its range. Because we have determined that the Bartram's stonecrop is likely to become an endangered species within the foreseeable future throughout its range, we find it unnecessary to proceed to an evaluation of potentially significant portions of the range. Where the best available information allows the Service to determine a status for the species rangewide, that determination should be given conclusive weight because a rangewide determination of status more accurately reflects the species' degree of imperilment and better promotes the purposes of the statute. Under this reading, we should first consider whether listing is appropriate based on a rangewide analysis and proceed to conduct a “significant portion of its range” analysis if, and only if, a species does not qualify for listing as either endangered or threatened according to the “all” language. We note that the court in
Therefore, on the basis of the best available scientific and commercial information, we propose to list Bartram's stonecrop as a threatened species across its entire range in accordance with sections 3(20) and 4(a)(1) of the Act.
Conservation measures provided to species listed as endangered or threatened species under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing results in public awareness, and conservation by Federal, State, Tribal, and local agencies; private organizations; and individuals. The Act encourages cooperation with the States and other countries and calls for recovery actions to be carried out for listed species. The protection required by Federal agencies and the prohibitions against certain activities are discussed, in part, below.
The primary purpose of the Act is the conservation of endangered and threatened species and the ecosystems upon which they depend. The ultimate goal of such conservation efforts is the recovery of these listed species, so that they no longer need the protective measures of the Act. Section 4(f) of the Act calls for the Service to develop and implement recovery plans for the conservation of endangered and threatened species. The recovery planning process involves the identification of actions that are necessary to halt or reverse the species' decline by addressing the stressors to its survival and recovery. The goal of this process is to restore listed species to a point where they are secure, self-sustaining, and functioning components of their ecosystems.
Recovery planning includes the development of a recovery outline shortly after a species is listed and preparation of a draft and final recovery plan. The recovery outline guides the immediate implementation of urgent recovery actions and describes the process to be used to develop a recovery plan. Revisions of the plan may be done to address continuing or new stressors to the species, as new substantive information becomes available. The recovery plan also identifies recovery criteria for review of when a species may be ready for downlisting (reclassification from endangered to threatened) or delisting (removal from listed status), and methods for monitoring recovery progress. Recovery plans also establish a framework for agencies to coordinate their recovery efforts and provide estimates of the cost of implementing recovery tasks. Recovery teams (composed of species experts, Federal and State agencies, nongovernmental organizations, and stakeholders) are often established to develop recovery plans. When completed, the recovery outline, draft
Implementation of recovery actions generally requires the participation of a broad range of partners, including other Federal agencies, States, Tribes, nongovernmental organizations, businesses, and private landowners. Examples of recovery actions include habitat restoration (
Although beardless chinchweed and Bartram's stonecrop are only proposed for listing under the Act at this time, please let us know if you are interested in participating in recovery efforts for this species. Additionally, we invite you to submit any new information on this species whenever it becomes available and any information you may have for recovery planning purposes (see
Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as an endangered or threatened species and with respect to its critical habitat, if any is designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any action that is likely to jeopardize the continued existence of a species proposed for listing or result in destruction or adverse modification of proposed critical habitat. If a species is listed subsequently, section 7(a)(2) of the Act requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of the species or destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency must enter into consultation with the Service.
Federal agency actions within the species' habitat that may require conference or consultation or both as described in the preceding paragraph include management and any other landscape-altering activities on Federal lands administered by the U.S. Forest Service (Coronado National Forest), Bureau of Land Management, U.S. Customs and Border Protection, and National Park Service (Coronado National Memorial).
With respect to endangered plants, prohibitions at section 9 of the Act and 50 CFR 17.61 make it illegal for any person subject to the jurisdiction of the United States to import or export, transport in interstate or foreign commerce in the course of a commercial activity, sell or offer for sale in interstate or foreign commerce, or to remove and reduce to possession any such plant species from areas under Federal jurisdiction. In addition, for endangered plants, the Act prohibits malicious damage or destruction of any such species on any area under Federal jurisdiction, and the removal, cutting, digging up, or damaging or destroying of any such species on any other area in knowing violation of any State law or regulation, or in the course of any violation of a State criminal trespass law. Exceptions to these prohibitions are set forth at 50 CFR 17.62 and 17.63.
We may issue permits to carry out otherwise prohibited activities involving endangered plants under certain circumstances. Regulations governing permits are codified at 50 CFR 17.62 and 17.63. With regard to endangered plants, the Service may issue a permit authorizing any activity otherwise prohibited by 50 CFR 17.61 for scientific purposes, for enhancing the propagation or survival of endangered plants, or for economic hardship. At this time, we are unable to identify specific activities that would not be considered to result in a violation of section 9 of the Act because beardless chinchweed occurs in a variety of habitat conditions across its range.
Based on the best available information, the following activities may potentially result in a violation of section 9 of the Act; this list is not comprehensive:
(1) Unauthorized handling or collecting of the species;
(2) Ground-disturbing activities within 30 m (98 ft) of individual beardless chinchweed plants;
(3) Dislodging and trampling by livestock;
(4) Livestock grazing during April through October where the species occurs; and
(5) Herbicide applications within 30 m (98 ft) of individual beardless chinchweed plants.
Federal agency actions within the species' habitat that may require conference or consultation or both as described in the preceding paragraph include management and any other landscape-altering activities on Federal lands administered by the U.S. Forest Service (Coronado National Forest), Bureau of Land Management, U.S. Customs and Border Protection, and National Park Service (Chiricahua National Monument and Saguaro National Park).
With respect to threatened plants, the Act allows the Secretary to promulgate regulations to prohibit activities to provide for the conservation of the species. Under II. Proposed Section 4(d) Rule for Bartram's stonecrop, below, we explain what activities we are proposing to prohibit.
We may issue permits to carry out otherwise prohibited activities involving threatened plants under certain circumstances. Regulations governing permits are codified at 50 CFR 17.72. With regard to threatened plants, a permit issued under this section must be for one of the following: Scientific purposes, the enhancement of the propagation or survival of threatened species, economic hardship, botanical or horticultural exhibition, educational purposes, or other activities consistent with the purposes and policy of the Act.
It is our policy, as published in the
Based on the best available information, the following activities may potentially result in a violation of the Act; this list is not comprehensive:
(1) Unauthorized handling or collecting of the species;
(2) Ground-disturbing activities within 30 m (98 ft) of individual Bartram's stonecrop plants;
(3) Herbicide applications within 30 m (98 ft) of individual Bartram's stonecrop plants; and
(4) Dislodging and trampling by livestock.
Questions regarding whether specific activities would constitute a violation of the Act should be directed to the Arizona Ecological Services Field Office (see
Section 4(d) of the Act states that the “Secretary shall issue such regulations as he deems necessary and advisable to provide for the conservation” of species listed as threatened. In
The courts have recognized the extent of the Secretary's discretion under this standard to develop rules that are appropriate for the conservation of a species. For example, the Secretary may decide not to include a taking prohibition for threatened wildlife, or to include a limited taking prohibition. See
The Service has developed a species-specific 4(d) rule that is designed to address Bartram's stonecrop's specific stressors and conservation needs. Although the statute does not require the Service to make a “necessary and advisable” finding with respect to the adoption of specific prohibitions under section 9, we find that this regulation is necessary and advisable to provide for the conservation of Bartram's stonecrop. As discussed under Summary of Biological Status and Stressors, above, the Service has concluded that Bartram's stonecrop is at risk of extinction within the foreseeable future primarily due to groundwater extraction and prolonged drought that may reduce nearby water levels and humidity within Bartram's stonecrop's microenvironment, and altered fire regimes leading to erosion of Bartram's stonecrop that could dislodge plants, sedimentation that could cover individuals, and loss of overstory shade trees. In addition, collection, trampling, predation, flooding, and dislodging and burial from recreationists, cross-border violators, and domestic and wild animals contribute to the risk of extinction within the foreseeable future due to the majority of populations being small and isolated. The provisions of this proposed 4(d) rule would promote conservation of Bartram's stonecrop by encouraging management of the landscape in ways that meet land management needs while meeting the conservation needs of Bartram's stonecrop. The provisions of this rule are one of many tools that the Service would use to promote the conservation of Bartram's stonecrop. This proposed 4(d) rule would apply only if and when the Service makes final the listing of Bartram's stonecrop as a threatened species.
This proposed 4(d) rule would provide for the conservation of the Bartram's stonecrop by applying all of the prohibitions applicable to an endangered plant, except as otherwise authorized or permitted: Import or export; certain acts related to removing, damaging, and destroying; delivery, receipt, transport, or shipment in interstate or foreign commerce in the course of commercial activity; or sale or offering for sale in interstate or foreign commerce. Bartram's stonecrop is an attractive and small plant that can be easily collected by gardeners and succulent enthusiasts. We have confirmed collection from the wild and sale in interstate commerce. Because Bartram's stonecrop is difficult to propagate and maintain in captivity, it is more vulnerable to collection than other plants in this genus. Small populations may not be able to recover from collection, especially if the mature, reproductive plants are removed.
As discussed under Summary of Biological Status and Stressors, above, multiple factors are affecting the status of Bartram's stonecrop. A range of activities have the potential to impact Bartram's stonecrop, including:
(1) Unauthorized handling or collecting of the species;
(2) Ground-disturbing activities where the species occurs;
(3) Activities that would affect pollinators where the species occurs and in the surrounding area;
(4) Activities that would promote high-severity wildfires where the species occurs;
(5) Activities that would reduce shade, reduce proximity to water, and lower the water table such that the cooler, humid microenvironment is affected; and
(6) Herbicide applications where the species occurs.
Regulating these activities will help conserve the species' remaining populations; slow their rate of decline; and decrease synergistic, negative effects from other stressors.
We may issue permits to carry out otherwise prohibited activities, including those described above, involving threatened plants under certain circumstances. Regulations governing permits are codified at 50 CFR 17.72. With regard to threatened plants, a permit may be issued for the following purposes: For scientific purposes, to enhance propagation or survival (control of nonnatives and fuel load), for economic hardship, for botanical or horticultural exhibition, for
The Service recognizes the special and unique relationship with our State natural resource agency partners in contributing to conservation of listed species. State agencies often possess scientific data and valuable expertise on the status and distribution of endangered, threatened, and candidate species of wildlife and plants. State agencies, because of their authorities and their close working relationships with local governments and landowners, are in a unique position to assist the Services in implementing all aspects of the Act. In this regard, section 6 of the Act provides that the Services shall cooperate to the maximum extent practicable with the States in carrying out programs authorized by the Act. Therefore, under this proposed 4(d) rule, any qualified employee or agent of a State conservation agency which is a party to a cooperative agreement with the Service in accordance with section 6(c) of the Act, who is designated by his or her agency for such purposes, would be able to conduct activities designed to conserve Bartram's stonecrop that may result in otherwise prohibited activities without additional authorization.
Nothing in this proposed 4(d) rule would change in any way the recovery planning provisions of section 4(f) of the Act, the consultation requirements under section 7 of the Act, or the ability of the Service to enter into partnerships for the management and protection of Bartram's stonecrop. However, interagency cooperation may be further streamlined through planned programmatic consultations for the species between Federal agencies and the Service. We ask the public, particularly State agencies and other interested stakeholders that may be affected by the proposed 4(d) rule, to provide comments and suggestions regarding additional guidance and methods that the Service could provide or use, respectively, to streamline the implementation of this proposed 4(d) rule (see Information Requested, above).
Critical habitat is defined in section 3 of the Act as:
(1) The specific areas within the geographical area occupied by the species, at the time it is listed in accordance with the Act, on which are found those physical or biological features
(a) Essential to the conservation of the species, and
(b) Which may require special management considerations or protection; and
(2) Specific areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species.
Our regulations at 50 CFR 424.02 define the geographical area occupied by the species as an area that may generally be delineated around species' occurrences, as determined by the Secretary of the Interior (
Conservation, as defined under section 3 of the Act, means to use and the use of all methods and procedures that are necessary to bring an endangered or threatened species to the point at which the measures provided pursuant to the Act are no longer necessary. Such methods and procedures include, but are not limited to, all activities associated with scientific resources management such as research, census, law enforcement, habitat acquisition and maintenance, propagation, live trapping, and transplantation, and, in the extraordinary case where population pressures within a given ecosystem cannot be otherwise relieved, may include regulated taking.
Critical habitat receives protection under section 7 of the Act through the requirement that Federal agencies ensure, in consultation with the Service, that any action they authorize, fund, or carry out is not likely to result in the destruction or adverse modification of critical habitat. The designation of critical habitat does not affect land ownership or establish a refuge, wilderness, reserve, preserve, or other conservation area. Such designation does not allow the government or public to access private lands. Such designation does not require implementation of restoration, recovery, or enhancement measures by non-Federal landowners. Where a landowner requests Federal agency funding or authorization for an action that may affect a listed species or critical habitat, the consultation requirements of section 7(a)(2) of the Act would apply, but even in the event of a destruction or adverse modification finding, the obligation of the Federal action agency and the landowner is not to restore or recover the species, but to implement reasonable and prudent alternatives to avoid destruction or adverse modification of critical habitat.
Under the first prong of the Act's definition of critical habitat, areas within the geographical area occupied by the species at the time it was listed are included in a critical habitat designation if they contain physical or biological features (1) which are essential to the conservation of the species and (2) which may require special management considerations or protection. For these areas, critical habitat designations identify, to the extent known using the best scientific and commercial data available, those physical or biological features that are essential to the conservation of the species (such as space, food, cover, and protected habitat). In identifying those physical or biological features that occur in specific areas, we focus on the specific features that are essential to support the life-history needs of the species, including but not limited to, water characteristics, soil type, geological features, prey, vegetation, symbiotic species, or other features. A feature may be a single habitat characteristic, or a more complex combination of habitat characteristics. Features may include habitat characteristics that support ephemeral or dynamic habitat conditions. Features may also be expressed in terms relating to principles of conservation biology, such as patch size, distribution distances, and connectivity.
Under the second prong of the Act's definition of critical habitat, we can designate critical habitat in areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. When designating critical habitat, the Secretary will first evaluate areas occupied by the species. The Secretary will only consider unoccupied areas to be essential where a critical habitat designation limited to geographical areas occupied by the species would be inadequate to ensure the conservation of the species. In addition, for an unoccupied area to be considered essential, the Secretary must determine that there is a reasonable certainty both that the area will contribute to the conservation of the species and that the area contains one or more of those physical or biological
Section 4 of the Act requires that we designate critical habitat on the basis of the best scientific data available. Further, our Policy on Information Standards Under the Act (published in the
When we are determining which areas should be designated as critical habitat, our primary source of information is generally the information from the SSA report and information developed during the listing process for the species. Additional information sources may include any generalized conservation strategy, criteria, or outline that may have been developed for the species; the recovery plan for the species; articles in peer-reviewed journals; conservation plans developed by States and counties; scientific status surveys and studies; biological assessments; other unpublished materials; or experts' opinions or personal knowledge.
Habitat is dynamic, and species may move from one area to another over time. We recognize that critical habitat designated at a particular point in time may not include all of the habitat areas that we may later determine are necessary for the recovery of the species. For these reasons, a critical habitat designation does not signal that habitat outside the designated area is unimportant or may not be needed for recovery of the species. Areas that are important to the conservation of the species, both inside and outside the critical habitat designation, will continue to be subject to: (1) Conservation actions implemented under section 7(a)(1) of the Act; (2) regulatory protections afforded by the requirement in section 7(a)(2) of the Act for Federal agencies to ensure their actions are not likely to jeopardize the continued existence of any endangered or threatened species; and (3) the Act's prohibitions on taking any individual of the species, including taking caused by actions that affect habitat. Federally funded or permitted projects affecting listed species outside their designated critical habitat areas may still result in jeopardy findings in some cases. These protections and conservation tools will continue to contribute to recovery of this species. Similarly, critical habitat designations made on the basis of the best available information at the time of designation will not control the direction and substance of future recovery plans, habitat conservation plans (HCPs), or other species conservation planning efforts, if new information available at the time of these planning efforts calls for a different outcome.
Section 4(a)(3) of the Act, as amended, and implementing regulations (50 CFR 424.12), require that, to the maximum extent prudent and determinable, the Secretary shall designate critical habitat at the time the species is determined to be an endangered or threatened species. Our regulations (50 CFR 424.12(a)(1)) state that the Secretary may, but is not required to, determine that a designation would not be prudent in the following circumstances:
(i) The species is threatened by taking or other human activity and identification of critical habitat can be expected to increase the degree of such threat to the species;
(ii) The present or threatened destruction, modification, or curtailment of a species' habitat or range is not a threat to the species, or threats to the species' habitat stem solely from causes that cannot be addressed through management actions resulting from consultations under section 7(a)(2) of the Act;
(iii) Areas within the jurisdiction of the United States provide no more than negligible conservation value, if any, for a species occurring primarily outside the jurisdiction of the United States;
(iv) No areas meet the definition of critical habitat; or
(v) The Secretary otherwise determines that designation of critical habitat would not be prudent based on the best scientific data available.
We did not identify any of the factors above to apply to the beardless chinchweed. Therefore, we find designation of critical habitat is prudent for the species.
As described above, there is currently an imminent threat of take attributed to collection or vandalism identified under Factor B for this species, and identification and mapping of critical habitat is expected to increase such threat because when we designate critical habitat, we publish detailed maps and descriptions of species' occurrences in the
Having determined that designation is prudent for beardless chinchweed, under section 4(a)(3) of the Act, we must find whether critical habitat for the species is determinable. Our regulations at 50 CFR 424.12(a)(2) state that critical habitat is not determinable when one or both of the following situations exist:
(i) Data sufficient to perform required analyses are lacking, or
(ii) The biological needs of the species are not sufficiently well known to identify any area that meets the definition of “critical habitat.”
When critical habitat is not determinable, the Act allows the Service an additional year to publish a critical habitat designation (16 U.S.C. 1533(b)(6)(C)(ii)).
We reviewed the available information pertaining to the biological needs of the species and habitat characteristics where this species is located. This and other information represent the best scientific data available and led us to conclude that the designation of critical habitat is determinable for beardless chinchweed.
In accordance with section 3(5)(A)(i) of the Act and regulations at 50 CFR 424.12(b), in determining which areas within the geographical area occupied by the species at the time of listing to designate as critical habitat, we consider the physical or biological features that are essential to the conservation of the species and which may require special management considerations or protection. For example, physical features might include gravel of a particular size required for spawning, alkali soil for seed germination, protective cover for migration, or susceptibility to flooding or fire that maintains necessary early-successional habitat characteristics. Biological features might include prey species,
We derive the specific physical or biological features essential to the conservation of beardless chinchweed from studies of this species' habitat, ecology, and life history, as described below. We have determined that the following physical or biological features are essential to the conservation of beardless chinchweed:
(1) Native-dominated plant communities, consisting of:
(a) Plains, great basin, and semi-desert grasslands, oak savanna, or Madrean evergreen woodland;
(b) Communities dominated by bunchgrasses with open spacing (adjacent to and within 10 m (33 ft) of individual beardless chinchweed) and with little competition from other plants; and
(c) Communities with plants for pollinator foraging and nesting within 1 km (0.62 mi) of beardless chinchweed populations.
(2) 1,158 to 1,737 m (3,799 to 5,699 ft) elevation.
(3) Eroding limestone or granite bedrock substrate.
(4) Steep, south-facing, sunny to partially shaded hillslopes.
(5) The presence of pollinators (
Space for individual and population growth is needed for
Beardless chinchweed needs multiple populations distributed across its range that are large enough to withstand stochastic events, and connectivity to reestablish extirpated populations. Species that are widely-distributed are considered less susceptible to extinction and more likely to be viable than species confined to small ranges (Carroll
All populations need protection from wildfires of high severity and of greater frequency than was known historically and from nonnative grass encroachment. Further, all populations need protection from stressors related to one or more of the following activities: Recreation, road and trail maintenance, grazing, trampling, and mining. As discussed above, these stressors are currently, or will in the near future, impact all populations. Protection is needed from these stressors to ensure the conservation of the species.
The minimum viable population size for this species is unknown. General conservation biology indicates that at least 500 individual are needed for a minimum viable population. Currently, 11 of the 12 populations have fewer than 50 individuals. In Arizona, there are currently 387 individual beardless chinchweed spread across less than 2 ha (5 ac) within six extant populations spread across the four mountain ranges. Space, in the form of habitat described above, is needed for an increase in the number of populations and the number of individuals per population.
Specific details about the physical or biological features essential to this species are described above in the background section and in the SSA report (Service 2018a).
When designating critical habitat, we assess whether the specific areas within the geographical area occupied by the species at the time of listing contain features which are essential to the conservation of the species and which may require special management considerations or protection. The features essential to the conservation of this species may require special management considerations or protection to reduce the following stressors: Altered fire regime, nonnative grass encroachment, grazing, erosion, and burial (see Table 11 below). Special management considerations or protection are required within critical habitat areas to address these stressors. Management activities that could
As required by section 4(b)(2) of the Act, we use the best scientific data available to designate critical habitat. Sources of data for this species include multiple databases maintained by the Arizona Natural Heritage Program, existing endangered species reports, and interviews with species experts. We have also reviewed available information that pertains to the habitat requirements of this species.
In accordance with the Act and our implementing regulations at 50 CFR 424.12(b), we review available information pertaining to the habitat requirements of the species and identify specific areas within the geographical area occupied by the species at the time of listing and any specific areas outside the geographical area occupied by the species to be considered for designation as critical habitat. We are proposing to designate critical habitat in areas within the geographical area currently occupied by the species (
The current distribution of beardless chinchweed is reduced from its historical distribution to a level where it is in danger of extinction. We anticipate that recovery will require continued protection of existing populations and habitat, as well as reestablishment of populations at a subset of previously occupied habitats throughout the species' historical range in the United States. Reestablishment of additional populations will help to ensure that catastrophic events, such as wildfire, cannot simultaneously affect all known populations. We have determined that it is reasonably certain that the unoccupied areas will contribute to the conservation of the species and contain one or more of the physical or biological features that are essential to the conservation of the species.
The proposed critical habitat designation does not include all populations known to have been occupied by the species historically; instead, it includes all currently occupied areas within the historical range that have retained the necessary physical or biological features that will allow for the maintenance and expansion of these existing populations. The following populations meet the definition of areas occupied by the species at the time of listing: McCleary Canyon, Audubon Research Ranch, Scotia Canyon, Coronado National Memorial, and Ruby Road.
Pena Blanca Lake, Summit Motorway, Copper Mountain, Lampshire Well, Harshaw Creek, Flux Canyon, Washington Camp, Box Canyon, and Joe's Canyon are within the historical range of beardless chinchweed, but are not within the geographic range currently occupied by the species. We consider these sites to be extirpated. For areas not occupied by the species at the time of listing, we must demonstrate that these areas are essential to the conservation of the species in order to include them in our critical habitat designation. To determine if these areas are essential for the conservation of beardless chinchweed, we considered the life history, status, and conservation needs of the species such as: (1) The importance of the site to the overall status of the species to prevent extinction and contribute to future recovery of beardless chinchweed; (2) whether the area could be restored to support beardless chinchweed; (3) whether the site provides connectivity between occupied sites for genetic exchange; and (4) whether a population of the species could be reestablished in the area.
Of the unoccupied areas, Lampshire Well, Harshaw Creek, and Washington Camp on U.S. Forest Service lands contain a mixture of native and nonnative grasses that could be restored to native conditions, thus making them suitable for reestablishment of the species, and they are important to the overall status of the species. The reestablishment of the Washington Camp population would reintroduce the species into the Patagonia Mountains, where currently it is extirpated. The reestablishment of beardless chinchweed into the Patagonia Mountains would restore the historical range of the species in terms of occupied mountain ranges. This area would provide key representation and redundancy needed for conservation of
Of the remaining historical populations in the United States, Pena Blanca Lake, Summit Motorway, Copper Mountain, Box Canyon, Joe's Canyon, and Flux Canyon are heavily infested with nonnative grasses to an extent where restoration of native vegetation is not likely feasible. Reestablishment of the species to these historical sites is not likely to be successful and, therefore, not likely to contribute to the recovery of the species. Therefore, these remaining historical sites are not included in the proposed designation of critical habitat.
In summary, for areas within the geographic area occupied by the species at the time of listing (
For areas outside the geographic area occupied by the species at the time of listing, we delineated critical habitat unit boundaries by evaluating areas not known to have been occupied at listing (
We conclude that the areas we are proposing for critical habitat provide for the conservation of beardless chinchweed because they include habitat for all extant populations and include habitat for connectivity and dispersal opportunities within units. Such opportunities for dispersal assist in maintaining the population structure and distribution of the species. In addition, the unoccupied units each contain one or more of the physical or biological features and are likely to provide for the conservation of the species. Each of the unoccupied areas are on lands managed by the Coronado National Forest. The Forest Plan for the Coronado contains several important guidelines that would contribute to the conservation of beardless chinchweed including control of nonnative vegetation, promotion of native grasses, and protections for species listed under the Endangered Species Act (USDA Forest Service 2018). Designation of critical habitat would facilitate the application of this guidance where it would do the most good for the beardless chinchweed.
As a final step, we evaluated occupied units and refined the area by evaluating the presence or absence of appropriate physical or biological features. We selected the boundary of a unit to include 1 km (0.62 mi) of foraging and reproductive habitat for pollinators that are necessary for beardless chinchweed. We then mapped critical habitat units using ArcMap version 10 (Environmental Systems Research Institute, Inc.), a geographic information systems (GIS) program.
The areas we are proposing for designation as critical habitat provide sufficient habitat for recruitment, pollinators, seed bank, and seed dispersal. In general, the physical or biological features of critical habitat are contained within 1 km (0.62 mi) of beardless chinchweed plants within the population.
When determining proposed critical habitat boundaries, we made every effort to avoid including developed areas such as lands covered by buildings, pavement, and other structures because such lands lack the physical or biological features necessary for beardless chinchweed. The scale of the maps we prepared under the parameters for publication within the Code of Federal Regulations may not reflect the exclusion of such developed lands. Any such lands inadvertently left inside critical habitat boundaries shown on the maps of this proposed rule have been excluded by text in the proposed rule and are not proposed for designation as critical habitat. Therefore, if the critical habitat is made final as proposed, a Federal action involving these lands would not trigger section 7 consultation with respect to critical habitat and the requirement of no adverse modification unless the specific action would affect the physical or biological features in the adjacent critical habitat.
We are proposing for designation as critical habitat lands that we have determined are occupied at the time of listing (
Units are proposed for designation based on one or more of the physical or biological features being present to support beardless chinchweed life-history processes. Some units contain all of the identified physical or biological features and support multiple life-history processes. Some units contain only some of the physical or biological features necessary to support beardless chinchweed' particular use of that habitat.
The critical habitat designation is defined by the map, as modified by any accompanying regulatory text, presented at the end of this document under Proposed Regulation Promulgation. We include more detailed information on the boundaries of the critical habitat designation in the preamble of this document. We will make the coordinates or plot points or both on which the map is based available to the public on
We are proposing to designate approximately 10,604 ac (4,291 ha) in eight units as critical habitat for beardless chinchweed. The critical habitat areas we describe below constitute our current best assessment of areas that meet the definition of critical habitat for beardless chinchweed. The eight units we propose as critical habitat are listed in Table 12.
We present brief descriptions of all units, and reasons why they meet the definition of critical habitat for beardless chinchweed, below.
The McCleary Canyon unit occurs in the northeastern portion of the Santa Rita Mountains in Pima County, Arizona, and is managed by the U.S. Forest Service. This unit is 1,686 ac (682 ha) in size and is currently occupied. The unit contains two extant populations: Gunsight Pass and Wasp Canyon. Each population within the McCleary Canyon unit supports 32 individual beardless chinchweed plants. The proposed Rosemont Copper Mine occurs in this unit, and there is ongoing and historical mining activity throughout the Santa Rita Mountains. This unit also receives significant recreational pressure and livestock grazing. The Gunsight Pass population is one of the few populations within the range of beardless chinchweed where native grass species dominate the site. The Wasp Canyon population has a mixture of native and nonnative grass species. The McCleary Canyon unit provides at least one of the following essential physical and biological features needed for this species: Appropriate native plant communities (despite the presence of some nonnative species), elevation, substrates, and slope aspect. The physical and biological features in this unit may require special management considerations including reduction in nonnative grass presence, promotion of native forbs and grasses, removal of livestock between April and October, and the creation of exclosures. This unit includes habitat for species already listed under the Act, including the jaguar (
The Audubon Research Ranch unit occurs in the northern portion of the Canelo Hills in Santa Cruz County, Arizona, and is managed by the Audubon Society and some plants occur on the Coronado National Forest. This unit is 2,287 ac (926 ha) in size and is currently occupied. The O'Donnell Canyon population is currently extant but there was one additional population, Post Canyon that occurred here historically. The Audubon Research Ranch unit supports 37 individual beardless chinchweed plants and is dominated by native grass species. The Audubon Research Ranch unit provides the physical and biological features in this unit may require special management considerations, including reduction in nonnative grass presence, promotion of native forbs and grasses. This unit includes habitat for species already listed under the Act: Jaguar, ocelot, Mexican spotted owl, yellow-billed cuckoo, Chiricahua leopard frog, Gila chub (
The Scotia Canyon unit occurs on the western slopes of the Huachuca Mountains in Cochise County, Arizona, and is managed by the U.S. Forest Service. This unit is 855 ac (346 ha) in size and is currently occupied by beardless chinchweed. There is one extant population that is estimated to contain 100 individual beardless chinchweed plants. This unit has been impacted by historical mining, grazing, and wildfire. High recreational use also occurs in this unit. The Scotia Canyon unit is one of the few sites within the range of beardless chinchweed where native grass species dominate the site. The Scotia Canyon unit provides at least one of the following essential physical and biological features needed for this species: Appropriate native plant communities, elevation, substrates, and slope aspect. The physical and biological features in this unit may require special management considerations, including reduction in nonnative grass presence, promotion of native forbs and grasses, reduction in road maintenance activity, removal of livestock between April and October, and the creation of exclosures. This unit includes habitat for species already listed under the Act: Jaguar, ocelot, Mexican spotted owl, yellow-billed cuckoo, Chiricahua leopard frog, northern Mexican gartersnake, and Huachuca water-umbel. In addition, this unit includes designated critical habitat for jaguar and Huachuca water-umbel, and proposed critical habitat for northern Mexican gartersnake.
The Coronado National Memorial unit occurs in the southern portion of the Huachuca Mountains in Cochise County, Arizona, and is managed by the National Park Service. This unit is 2,109 ac (853 ha) in size and is occupied. The unit contains two extant subpopulations: The visitor's center and the State of Texas mine. The area around the visitor's center supports approximately 180 individual beardless chinchweed plants. Another 61 plants have been documented in the vicinity of the State of Texas mine. Additionally, the historical subpopulation, Joe's Canyon Trail, occurs within this unit and is not currently occupied. This unit supports a high level of recreational use,
The Lampshire Well unit occurs in the Canelo Hills in Santa Cruz County, Arizona, and is managed by the U.S. Forest Service. This unit is 939 ac (380 ha) in size and is currently unoccupied. Historically, beardless chinchweed populations occurred on this unit. This unit is characterized by communities of mixed native and nonnative grasses, and is subject to border activities (foot traffic and increased fire ignition) and wildfire. This unit includes habitat for species already listed under the Act: Jaguar, ocelot, Mexican spotted owl, yellow-billed cuckoo, Chiricahua leopard frog, northern Mexican gartersnake, Huachuca water-umbel, and Canelo Hills ladies'-tresses (
Although it is considered unoccupied, this unit contains all of the physical or biological features essential for the conservation of the species. This unit consists of a mix of native and nonnative grasses, with scattered
The Harshaw Creek unit occurs in the Canelo Hills in Santa Cruz County, Arizona, and is managed by the U.S. Forest Service. This unit is 1,013 ac (410 ha) in size and is currently unoccupied. Historically, beardless chinchweed populations occurred on this unit. This unit is characterized by communities of mixed native and nonnative grasses, and is subject to border activities and wildfire. This unit includes habitat for species already listed under the Act: Jaguar, ocelot, Mexican spotted owl, yellow-billed cuckoo, Chiricahua leopard frog, northern Mexican gartersnake, Huachuca water-umbel, and Canelo Hills ladies'-tresses. In addition, this unit includes designated critical habitat for jaguar and proposed critical habitat for northern Mexican gartersnake.
Although it is considered unoccupied, portions of this unit contain all of the physical or biological features essential for the conservation of the species. This unit consists of a mix of native and nonnative grasses, with scattered
The Washington Camp unit occurs in the northeastern portion of the Patagonia Mountains in Santa Cruz County, Arizona, and is managed by the U.S. Forest Service. This unit is 939 ac (380 ha) in size and is currently unoccupied. This unit is the location of a number of proposed mining activities and is also subject to border activities, recreation, and wildfire. This unit is characterized by a mixture of native and nonnative grass species. This unit includes habitat for species already listed under the Act: Jaguar, ocelot, Mexican spotted owl, yellow-billed cuckoo, Chiricahua leopard frog, and northern Mexican gartersnake. In addition, this unit includes designated critical habitat for jaguar and Mexican spotted owl, and proposed critical habitat for northern Mexican gartersnake.
Although it is considered unoccupied, portions of this unit contain all of the physical or biological features essential for the conservation of the species. This unit consists of a mix of native and nonnative grasses, with scattered
The Ruby Road unit occurs in the Atascosa-Pajarito Mountains in Santa Cruz County, Arizona, and is managed by the U.S. Forest Service. This unit is 776 ac (314 ha) in size and is currently occupied. There is one extant population, Ruby Road, within this unit that supports approximately 10 individual beardless chinchweed plants. Despite the fact that nonnative grasses dominate this unit, beardless chinchweed is able to overcome this competition by occurring in areas along a roadside that is regularly maintained, which removes much of the nonnative grass cover. This unit is subject to past mining activities, border activities, recreation, grazing, and wildfire. The Ruby Road unit currently provides at least one of the following essential physical and biological features needed for this species: Appropriate native plant communities (although there is a nonnative presence), elevation, substrates, and slope aspect. The physical and biological features in this unit may require special management considerations, including reduction in nonnative grass presence, promotion of native forbs and grasses, reduction in road maintenance activity, removal of livestock between April and October, and creation of exclosures. This unit includes habitat for species already listed under the Act: Jaguar, ocelot, Mexican spotted owl, yellow-billed cuckoo, Chiricahua leopard frog, and northern Mexican gartersnake. In addition, this unit includes designated critical habitat for critical habitat for jaguar, Mexican spotted owl, and Chiricahua leopard frog.
Section 7(a)(2) of the Act requires Federal agencies, including the Service, to ensure that any action they fund, authorize, or carry out is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of designated critical habitat of such species. In addition, section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any agency action which is likely to jeopardize the continued existence of any species proposed to be listed under the Act or result in the destruction or adverse modification of proposed critical habitat.
We published a final regulation with a revised definition of destruction or adverse modification on August 27, 2019 (84 FR 44976). Destruction or adverse modification means a direct or indirect alteration that appreciably diminishes the value of critical habitat as a whole for the conservation of a listed species.
If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency (action agency) must enter into consultation with us. Examples of actions that are subject to the section 7 consultation process are actions on State, tribal, local, or private lands that require a Federal permit (such as a permit from the U.S. Army Corps of Engineers under section 404 of the Clean Water Act (33 U.S.C. 1251
Compliance with the requirements of section 7(a)(2) is documented through our issuance of:
(1) A concurrence letter for Federal actions that may affect, but are not likely to adversely affect, listed species or critical habitat; or
(2) A biological opinion for Federal actions that may affect, and are likely to adversely affect, listed species or critical habitat.
When we issue a biological opinion concluding that a project is likely to jeopardize the continued existence of a listed species and/or destroy or adversely modify critical habitat, we provide reasonable and prudent alternatives to the project, if any are identifiable, that would avoid the likelihood of jeopardy and/or destruction or adverse modification of critical habitat. We define “reasonable and prudent alternatives” (at 50 CFR 402.02) as alternative actions identified during consultation that:
(1) Can be implemented in a manner consistent with the intended purpose of the action,
(2) Can be implemented consistent with the scope of the Federal agency's legal authority and jurisdiction,
(3) Are economically and technologically feasible, and
(4) Would, in the Service Director's opinion, avoid the likelihood of jeopardizing the continued existence of the listed species and/or avoid the likelihood of destroying or adversely modifying critical habitat.
Reasonable and prudent alternatives can vary from slight project modifications to extensive redesign or relocation of the project. Costs associated with implementing a reasonable and prudent alternative are similarly variable.
Regulations at 50 CFR 402.16 require Federal agencies to reinitiate formal consultation on previously reviewed actions. These requirements apply when the Federal agency has retained discretionary involvement or control over the action (or the agency's discretionary involvement or control is authorized by law) and, subsequent to the previous consultation, we have listed a new species or designated critical habitat that may be affected by the Federal action, or the action has been modified in a manner that affects the species or critical habitat in a way not considered in the previous consultation. In such situations, Federal agencies sometimes may need to request reinitiation of consultation with us, but the regulations also specify some exceptions to the requirement to reinitiate consultation on specific land management plans after subsequently listing a new species or designating new critical habitat. See the regulations for a description of those exceptions.
The key factor related to the destruction or adverse modification determination is whether implementation of the proposed Federal action directly or indirectly alters the designated critical habitat in a way that appreciably diminishes the value of the critical habitat as a whole for the conservation of the listed species. As discussed above, the role of critical habitat is to support physical or biological features essential to the conservation of a listed species and provide for the conservation of the species.
Section 4(b)(8) of the Act requires us to briefly evaluate and describe, in any
Activities that the Services may, during a consultation under section 7(a)(2) of the Act, find are likely to destroy or adversely modify critical habitat include, but are not limited to:
(1) Actions that would remove native bunchgrass communities. Such activities could include, but are not limited to, livestock grazing; fire management; trails construction and maintenance; infrastructure and road construction and maintenance; recreation management; minerals extraction and restoration; visitor use and management; and construction and maintenance of border roads, fences, barriers, and towers. These activities could eliminate or reduce open habitat necessary for growth, seed production, seedbank, and pollinators of beardless chinchweed.
(2) Actions that would result in the introduction, spread, or augmentation of nonnative grass species. Such activities could include, but are not limited to, livestock grazing; fire management; trails construction and maintenance; infrastructure and road construction and maintenance; recreation management; minerals extraction and restoration; visitor use and management; and construction and maintenance of border roads, fences, barriers, and towers. These activities could increase the amount of nonnative grasses or introduce nonnative grasses, which eliminate or reduce open habitat necessary for growth, seed production, seedbank, and pollinators of beardless chinchweed.
(3) Actions that would promote high-severity wildfires. Such activities could include, but are not limited to, recreation and encouraging the encroachment of nonnative grasses. These activities could eliminate or reduce open habitat necessary for growth, seed production, seedbank, and pollinators of beardless chinchweed.
Section 4(a)(3)(B)(i) of the Act (16 U.S.C. 1533(a)(3)(B)(i)) provides that: “The Secretary shall not designate as critical habitat any lands or other geographical areas owned or controlled by the Department of Defense, or designated for its use, that are subject to an integrated natural resources management plan [INRMP] prepared under section 101 of the Sikes Act (16 U.S.C. 670a), if the Secretary determines in writing that such plan provides a benefit to the species for which critical habitat is proposed for designation.” There are no Department of Defense lands within the proposed critical habitat designation.
Section 4(b)(2) of the Act states that the Secretary shall designate and make revisions to critical habitat on the basis of the best available scientific data after taking into consideration the economic impact, national security impact, and any other relevant impact of specifying any particular area as critical habitat. The Secretary may exclude an area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific data available, that the failure to designate such area as critical habitat will result in the extinction of the species. In making that determination, the statute on its face, as well as the legislative history, are clear that the Secretary has broad discretion regarding which factor(s) to use and how much weight to give to any factor. At this time, we are not proposing any exclusions from critical habitat.
Section 4(b)(2) of the Act and its implementing regulations require that we consider the economic impact that may result from a designation of critical habitat. To assess the probable economic impacts of a designation, we must first evaluate specific land uses or activities and projects that may occur in the area of the critical habitat. We then must evaluate the impacts that a specific critical habitat designation may have on restricting or modifying specific land uses or activities for the benefit of the species and its habitat within the areas proposed. We then identify which conservation efforts may be the result of the species being listed under the Act versus those attributed solely to the designation of critical habitat for this particular species. The probable economic impact of a proposed critical habitat designation is analyzed by comparing scenarios both “with critical habitat” and “without critical habitat.” The “without critical habitat” scenario represents the baseline for the analysis, which includes the existing regulatory and socio-economic burden imposed on landowners, managers, or other resource users potentially affected by the designation of critical habitat (
For this particular designation, we developed an incremental effects memorandum (IEM) considering the probable incremental economic impacts that may result from this proposed designation of critical habitat. The information contained in our IEM was then used to develop a screening analysis of the probable effects of the designation of critical habitat for beardless chinchweed (IEc 2018, entire). We began by conducting a screening analysis of the proposed designation of critical habitat in order to focus our analysis on the key factors that are likely to result in incremental economic impacts. The purpose of the screening analysis is to filter out the geographic areas in which the critical habitat designation is unlikely to result in probable incremental economic impacts. In particular, the screening analysis considers baseline costs (
Executive Orders (E.O.) 12866 and 13563 direct Federal agencies to assess the costs and benefits of available regulatory alternatives in quantitative (to the extent feasible) and qualitative terms. Consistent with the E.O. regulatory analysis requirements, our effects analysis under the Act may take into consideration impacts to both directly and indirectly affected entities, where practicable and reasonable. If sufficient data are available, we assess to the extent practicable the probable impacts to both directly and indirectly affected entities.
As part of our screening analysis, we considered the types of economic activities that are likely to occur within the areas likely affected by the critical habitat designation. In our evaluation of the probable incremental economic impacts that may result from the proposed designation of critical habitat for beardless chinchweed, first we identified, in the IEM dated August 28, 2018 (Service 2018, entire), probable incremental economic impacts associated with the following categories of activities: (1) Federal lands management (National Park Service, U.S. Forest Service, Bureau of Land Management); (2) grazing (U.S. Forest Service and Bureau of Land Management); (3) wild and prescribed fire (National Park Service, U.S. Forest Service, Bureau of Land Management); (4) groundwater pumping (U.S. Forest Service); (5) mining (U.S. Forest Service); (6) fuels management (National Park Service, U.S. Forest Service, Bureau of Land Management); (7) transportation (road construction and maintenance; National Park Service, U.S. Forest Service); and (8) trampling and dust creation from recreation and border protection activities (U.S. Customs and Border Protection, U.S. Forest Service, National Park Service). We considered each industry or category individually. Additionally, we considered whether their activities have any Federal involvement. Critical habitat designation generally will not affect activities that do not have any Federal involvement; under the Act, the designation of critical habitat only affects activities conducted, funded, permitted, or authorized by Federal agencies. In areas where beardless chinchweed is present, Federal agencies already are required to consult with the Service under section 7 of the Act on activities they fund, permit, or implement that may affect the species. If we finalize this proposed critical habitat designation, consultations to avoid the destruction or adverse modification of critical habitat would be incorporated into the existing consultation process.
In our IEM, we clarified the distinction between the effects that would result from the species being listed and those attributable to the critical habitat designation (
The proposed critical habitat designation for beardless chinchweed totals approximately 7,713 ac (3,121 ha, or 73 percent of the total proposed critical habitat designation) of currently occupied habitat and 2,891 ac (1,170 ha, or 27 percent of the total proposed critical habitat designation) of unoccupied habitat (see Table 12, above). Every unit of proposed critical habitat for beardless chinchweed overlaps with the ranges of a number of currently listed species and designated critical habitats. Therefore, the actual number of section 7 consultations is not expected to increase; however, the analysis within these consultations would expand to consider effects to critical habitat for the bearded chinchweed. Consequently, there would likely be a small increase in the time needed to complete the consultation to include the assessment of beardless chinchweed critical habitat units (IEc 2018, entire). Section 7 consultations involving third parties (State, Tribal, or private lands) are limited.
Based on the locations of the proposed critical habitat units and the types of projects we typically evaluate for the Coronado National Forest and the Coronado National Memorial, we estimate that there would likely be 4 to 6 consultations annually that would include beardless chinchweed. The entities that would incur incremental costs are Federal agencies, because 97 percent of critical habitat is on Federal land.
In the 7,713 ac (3,121 ha) of occupied proposed critical habitat (Units 1, 2, 3, 4, and 8), any actions that may affect the species or its habitat would also affect proposed designated critical habitat. Consequently, it is unlikely that any additional conservation efforts would be recommended to address the adverse modification standard over and above those recommended as necessary to avoid jeopardizing the continued existence of beardless chinchweed. Therefore, only administrative costs are expected in these occupied units. While this additional analysis will require time and resources by the Federal action agency, the Service, and third parties, it is believed that, in most circumstances, these costs would predominantly be administrative in nature and would not be significant (IEc 2018, entire). In these unoccupied areas, any conservation efforts or associated probable impacts would be considered incremental effects attributed to the critical habitat designation. In units occupied by the chinchweed, we assume the additional administrative cost to address chinchweed critical habitat in the consultation is minor, costing approximately $5,100 per consultation (2017 dollars). For the proposed critical habitat units that are currently occupied by beardless chinchweed (Units 1, 2, 3, 4, and 8), we have not identified any ongoing or future projects or actions that would warrant additional recommendations or modifications to avoid adversely modifying critical habitat above those that we would recommend for avoiding jeopardy. Therefore, project modifications resulting from section 7 consultations in occupied units are unlikely to be affected by the designation of critical habitat.
In unoccupied units, (units 5, 6, and 7) we assume the incremental administrative effort will be greater on
In unoccupied units, incremental project modifications are possible. No known projects are currently scheduled to occur within the areas proposed for designation; however, U.S. Forest Service staff suggests there is always a possibility of future projects related to grazing, transportation, mining, and recreation activities in this region. We discuss potential costs resulting from these activities below.
There are grazing allotments that overlap with unoccupied critical habitat. However, only one allotment overlaps with unoccupied critical habitat by more than 5 percent of the allotment's land area and two allotments with less than 5 percent of unoccupied critical habitat. In unoccupied units, the Service suggests alterations in amount or timing of grazing activities are not required because the species is not present. However, U.S. Forest Service may undertake range improvements to reduce the loss of native plant communities (
During the improvement project, electric fencing (included in the U.S. Forest Service cost estimate) would be installed temporarily to exclude cattle. During this period, there could be a loss of forage, depending on the extent of overlap with existing grazing allotments, resulting in a temporary reduction in the number of animal unit months (AUMs; a measure of the amount of forage consumed by one cow and calf during one month) associated with the relevant allotment. The value of grazing permits associated with allotments on Federal land can be used to estimate the potential loss to ranchers during exclusion period. We estimated a range of potential costs related to grazing, based on two scenarios. In the low-end scenario, we assumed that AUM reductions would only occur in allotments where proposed critical habitat accounts for greater than 5 percent of the total allotment area. Otherwise, ranchers are likely to be able to implement changes in practices that avoid the need to reduce the amount of cattle grazed on the allotment, and thus they avoid costs associated with lost AUMs. In the high-end scenario, we assume that ranchers are unable to change practices, and the loss in AUMs is proportional to the amount of overlap between proposed critical habitat and the relevant allotment.
To identify the allotments overlapping proposed unoccupied units and the number of AUMs permitted in each allotment, data was obtained from U.S. Forest Service. That data was then used to calculate potential AUM reduction for each allotment unit overlapping with unoccupied critical habitat. Only one allotment (San Rafael) overlaps with unoccupied critical habitat by more than 5 percent of the allotment's land area. In this allotment, a temporary reduction of 402 AUMs is possible. For the remaining allotments, we assume no impact on permitted AUMs in the low-end scenario. In the high-end scenario, a temporary reduction of 747 AUMs is possible if all of the unoccupied units are fenced to exclude cattle during range improvement efforts.
The cost of reducing AUMs from occupied critical habitat during range improvement activities is unlikely to exceed $41,000 in the low-end scenario or $76,000 in the high-end scenario (2017 dollars). Impacts associated with reduced AUMs could be greatest in Unit 7 ($27,000), followed by Unit 6 ($25,000) and Unit 5 ($24,000). These estimates represent perpetuity values, thus the single year loss would be a fraction of this amount.
Other activities that could overlap with unoccupied critical habitat include mining, and road and trail construction. To avoid adverse effects to critical habitat, U.S. Forest Service might recommend moving these projects, if feasible, to avoid the proposed units. This could result in the need to construct additional linear miles of road. If projects can easily be moved to other areas, U.S. Forest Service estimates total, on-time costs to the agency, as well as the project proponents, in the range of $0 to $500,000. Where avoidance of critical habitat is prohibitively expensive, U.S. Forest Service states that it would instead recommend monitoring and subsequent treatment for the introduction or spread of invasive plants due to project activities. The costs to U.S. Forest Service and project proponents of these activities might range from $1,000 to $500,000. For projects that result in a significant amount of vegetation that would not regrow in a timely manner (
The Service estimates a total of four to six consultations are likely to occur in a given year in areas proposed for designation. As a conservative estimate (
As we stated earlier, we are soliciting data and comments from the public on the draft economic analysis, as well as all aspects of the proposed rule. We may revise the proposed rule or supporting documents to incorporate or address information we receive during the public comment period. In particular, we may exclude an area from critical habitat if we determine that the benefits of excluding the area outweigh the benefits of including the area, provided the exclusion will not result in the extinction of this species.
Under section 4(b)(2) of the Act, we consider the economic impacts of specifying any particular area as critical habitat. In order to consider economic impacts, we prepared an analysis of the probable economic impacts of the proposed critical habitat designation and related factors. The following land use sectors potentially occur in one or more of the proposed critical habitat units for beardless chinchweed: Border protection, conservation/restoration, fire management, forest management, grazing, mining, recreation, and transportation (road and trail construction and maintenance). The majority of proposed critical habitat units are on federally owned or managed lands.
During the development of a final designation, we will consider any additional economic impact information we receive through the public comment period, and as such areas may be excluded from the final critical habitat designation under section 4(b)(2) of the Act and our implementing regulations at 50 CFR 424.19.
Under section 4(b)(2) of the Act, we consider whether there are lands where a national security impact might exist. In preparing this proposal, we have determined that the lands within the proposed designation of critical habitat for beardless chinchweed are not owned or managed by the Department of Defense or Department of Homeland Security. In addition, we did not find any potential national security impacts resulting from this proposed designation; therefore, we anticipate no impact on national security. However, during the development of a final designation, we will consider any additional information on any potential national security impacts we receive through the public comment period, and as such areas may be excluded from the final critical habitat designation under section 4(b)(2) of the Act and our implementing regulations at 50 CFR 424.19.
Under section 4(b)(2) of the Act, we consider any other relevant impacts, in addition to economic impacts and impacts on national security. We consider a number of factors, including whether there are permitted conservation plans covering the species in the area such as HCPs, safe harbor agreements, or candidate conservation agreements with assurances, or whether there are non-permitted conservation agreements and partnerships that would be encouraged by designation of, or exclusion from, critical habitat. In addition, we look at the existence of tribal conservation plans and partnerships and consider the government-to-government relationship of the United States with tribal entities. We also consider any social impacts that might occur because of the designation. In preparing this proposal, we have determined that there are currently no HCPs or other management plans for beardless chinchweed, and the proposed designation does not include any tribal lands or trust resources. We anticipate no impact on tribal lands, partnerships, or HCPs from this proposed critical habitat designation. During the development of a final designation, we will consider any additional information on any impacts to tribal resources, partnerships, or conservation plans that we receive through the public comment period, and as such areas may be excluded from the final critical habitat designation under section 4(b)(2) of the Act and our implementing regulations at 50 CFR 424.19.
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(1) Be logically organized;
(2) Use the active voice to address readers directly;
(3) Use clear language rather than jargon;
(4) Be divided into short sections and sentences; and
(5) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in
We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act (NEPA; 42 U.S.C. 4321
It is our position that, outside the jurisdiction of the U.S. Court of Appeals for the Tenth Circuit, we do not need to prepare environmental analyses pursuant to NEPA in connection with designating critical habitat under the Act. We published a notice outlining our reasons for this determination in the
In accordance with the President's memorandum of April 29, 1994 (Government-to-Government Relations with Native American Tribal Governments; 59 FR 22951), Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments), and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. In accordance with Secretarial Order 3206 of June 5, 1997 (American Indian Tribal Rights, Federal-Tribal Trust Responsibilities, and the Endangered Species Act), we readily acknowledge our responsibilities to work directly with tribes in developing programs for healthy ecosystems, to acknowledge that tribal lands are not subject to the same controls as Federal public lands, to remain sensitive to Indian culture, and to make information available to tribes.
We are not aware of any tribally owned lands that are currently occupied by beardless chinchweed or Bartram's stonecrop or that are unoccupied lands that are essential to the conservation of beardless chinchweed. Therefore, we are not proposing to designate critical habitat for beardless chinchweed on tribal lands. While there are no tribally owned lands within the proposed designation of critical habitat, certain lands proposed for designation may include areas that are culturally
We do not believe this proposed rule is an E.O. 13771 (“Reducing Regulation and Controlling Regulatory Costs”) (82 FR 9339, February 3, 2017) regulatory action because we believe this rule is not significant under E.O. 12866; however, the Office of Information and Regulatory Affairs has waived their review regarding their E.O. 12866 significance determination of this proposed rule.
Executive Order 12866 provides that the Office of Information and Regulatory Affairs (OIRA) will review all significant rules. The Office of Information and Regulatory Affairs has waived their review regarding their significance determination of this proposed rule.
Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.
Under the Regulatory Flexibility Act (RFA; 5 U.S.C. 601
According to the Small Business Administration, small entities include small organizations such as independent nonprofit organizations; small governmental jurisdictions, including school boards and city and town governments that serve fewer than 50,000 residents; and small businesses (13 CFR 121.201). Small businesses include manufacturing and mining concerns with fewer than 500 employees, wholesale trade entities with fewer than 100 employees, retail and service businesses with less than $5 million in annual sales, general and heavy construction businesses with less than $27.5 million in annual business, special trade contractors doing less than $11.5 million in annual business, and agricultural businesses with annual sales less than $750,000. To determine if potential economic impacts to these small entities are significant, we considered the types of activities that might trigger regulatory impacts under this designation as well as types of project modifications that may result. In general, the term “significant economic impact” is meant to apply to a typical small business firm's business operations.
The Service's current understanding of the requirements under the RFA, as amended, and following recent court decisions, is that Federal agencies are only required to evaluate the potential incremental impacts of rulemaking on those entities directly regulated by the rulemaking itself, and, therefore, are not required to evaluate the potential impacts to indirectly regulated entities. The regulatory mechanism through which critical habitat protections are realized is section 7 of the Act, which requires Federal agencies, in consultation with the Service, to ensure that any action authorized, funded, or carried out by the agency is not likely to destroy or adversely modify critical habitat. Therefore, under section 7, only Federal action agencies are directly subject to the specific regulatory requirement (avoiding destruction and adverse modification) that would be imposed by critical habitat designation. Consequently, it is our position that only Federal action agencies would be directly regulated by this designation. There is no requirement under the RFA to evaluate the potential impacts to entities not directly regulated. Moreover, Federal agencies are not small entities. Therefore, because no small entities would be directly regulated by this rulemaking, the Service certifies that, if adopted, the proposed critical habitat designation will not have a significant economic impact on a substantial number of small entities.
In summary, we have considered whether the proposed designation would result in a significant economic impact on a substantial number of small entities. For the above reasons and based on currently available information, we certify that, if adopted, the proposed critical habitat designation will not have a significant economic impact on a substantial number of small business entities. Therefore, an initial regulatory flexibility analysis is not required.
Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use) requires agencies to prepare statements of energy effects when undertaking certain actions. In our draft economic analysis, we did not find that the designation of this proposed critical habitat would significantly affect energy supplies, distribution, or use due to the absence of any energy supply or distribution lines in the proposed critical habitat designation. Therefore, this action is not a significant energy action, and no Statement of Energy Effects is required.
In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501
(1) This rule would not produce a Federal mandate. In general, a Federal mandate is a provision in legislation,
The designation of critical habitat does not impose a legally binding duty on non-Federal Government entities or private parties. Under the Act, the only regulatory effect is that Federal agencies must ensure that their actions do not destroy or adversely modify critical habitat under section 7. While non-Federal entities that receive Federal funding, assistance, or permits, or that otherwise require approval or authorization from a Federal agency for an action, may be indirectly impacted by the designation of critical habitat, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency. Furthermore, to the extent that non-Federal entities are indirectly impacted because they receive Federal assistance or participate in a voluntary Federal aid program, the Unfunded Mandates Reform Act would not apply, nor would critical habitat shift the costs of the large entitlement programs listed above onto State governments.
(2) We do not believe that this rule would significantly or uniquely affect small governments because the lands proposed for critical habitat designation are primarily Federal lands, with a small amount of private land; small governments would be affected only to the extent that any programs having Federal funds, permits, or other authorized activities must ensure that their actions would not adversely affect the designated critical habitat. The designation of critical habitat imposes no obligations on State or local governments. Therefore, a Small Government Agency Plan is not required.
In accordance with E.O. 12630 (Government Actions and Interference with Constitutionally Protected Private Property Rights), we have analyzed the potential takings implications of designating critical habitat for beardless chinchweed in a takings implications assessment. The Act does not authorize the Service to regulate private actions on private lands or confiscate private property as a result of critical habitat designation. Designation of critical habitat does not affect land ownership, or establish any closures of, or restrictions on use of or access to, the designated areas. Furthermore, the designation of critical habitat does not affect landowner actions that do not require Federal funding or permits, nor does it preclude development of habitat conservation programs or issuance of incidental take permits to permit actions that do require Federal funding or permits to go forward. However, Federal agencies are prohibited from carrying out, funding, or authorizing actions that would destroy or adversely modify designated critical habitat. A takings implications assessment has been completed and concludes that this proposed designation of critical habitat for beardless chinchweed would not pose significant takings implications for lands within or affected by the designation.
In accordance with E.O. 13132 (Federalism), this proposed rule does not have significant federalism effects. A federalism summary impact statement is not required. In keeping with Department of the Interior and Department of Commerce policy, we requested information from, and coordinated development of this proposed critical habitat designation with, appropriate State resource agencies in Arizona. From a federalism perspective, the designation of critical habitat directly affects only the responsibilities of Federal agencies. The Act imposes no other duties with respect to critical habitat, either for States and local governments, or for anyone else. As a result, the rule does not have substantial direct effects either on the States, or on the relationship between the national government and the States, or on the distribution of powers and responsibilities among the various levels of government. The designation may have some benefit to these governments because the areas that contain the features essential to the conservation of the species are more clearly defined, and the physical or biological features of the habitat necessary to the conservation of the species are specifically identified. This information does not alter where and what federally sponsored activities may occur. However, it may assist these local governments in long-range planning (because these local governments no longer have to wait for case-by-case section 7 consultations to occur).
Where State and local governments require approval or authorization from a Federal agency for actions that may affect critical habitat, consultation under section 7(a)(2) of the Act would be required. While non-Federal entities that receive Federal funding, assistance, or permits, or that otherwise require approval or authorization from a Federal agency for an action, may be indirectly impacted by the designation of critical habitat, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency.
In accordance with Executive Order 12988 (Civil Justice Reform), the Office of the Solicitor has determined that the rule does not unduly burden the judicial system and that it meets the requirements of sections 3(a) and 3(b)(2) of the Order. We have proposed designating critical habitat in accordance with the provisions of the Act. To assist the public in understanding the habitat needs of the species, this proposed rule identifies the elements of physical or biological features essential to the conservation of the species. The proposed areas of critical habitat are presented on a map, and the proposed rule provides several options for the interested public to obtain more detailed location information, if desired.
This rule does not contain any new collections of information that require approval by Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
A complete list of references cited in this rulemaking is available on the internet at
The primary authors of this proposed rule are the staff members of the Arizona Ecological Services Field Office.
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361-1407; 1531-1544; and 4201-4245, unless otherwise noted.
(h) * * *
(a)
(1)
(i)
(ii)
(iii)
(iv)
(B) An advertisement for the sale of any
(v) It is unlawful to attempt to commit, solicit another to commit, or cause to be committed, any of the acts described in paragraph (a)(1) of this section.
(2)
(i) A person may apply for a permit in accordance with 50 CFR 17.72 that authorizes an activity otherwise prohibited by this paragraph for
(ii)(A) Any employee or agent of the Service, any other Federal land management agency, or a State conservation agency, who is designated by that agency for such purposes, may, when acting in the course of official duties, remove and reduce to possession
(
(
(
(B) Any removal and reduction to possession pursuant to this paragraph must be reported in writing to the U.S. Fish and Wildlife Service, Division of Law Enforcement, P.O. Box 28006, Washington, DC 20005, within 5 days. The specimen may only be retained, disposed of, or salvaged in accordance with written directions from the Service.
(iii) Any qualified employee or agent of the Service or of a State conservation agency which is a party to a cooperative agreement with the Service in accordance with section 6(c) of the Act, who is designated by that agency for such purposes, may, when acting in the course of official duties, remove, cut, dig up, damage, or destroy
(b) [Reserved].
(a)
(1) Critical habitat units are depicted for Cochise, Pima, and Santa Cruz Counties, Arizona, on the map below.
(2) Within these areas, the physical or biological features essential to the conservation of
(i) Native-dominated plant communities, consisting of:
(A) Plains, great basin, and semi-desert grasslands, oak savanna, or Madrean evergreen woodland;
(B) Communities dominated by bunchgrasses with open spacing (adjacent to and within 10 meters (33 feet) of individual
(C) Communities with plants for pollinator foraging and nesting within 1 kilometer (0.62 miles) of
(ii) 1,158 to 1,737 meters (3,799 to 5,699 feet) elevation.
(iii) Eroding limestone or granite bedrock substrate.
(iv) Steep, south-facing, sunny to partially shaded hillslopes.
(v) The presence of pollinators (
(3) Critical habitat does not include manmade structures (such as buildings, aqueducts, runways, roads, and other paved areas) and the land on which they are located existing within the legal boundaries on the effective date of this rule.
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13) Map of Units 1 through 8 follows:
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of proposed rulemaking and request for comment.
The U.S. Department of Energy (“DOE”) is proposing to revise its test procedure for external power supplies (“EPS” or “EPSs”). DOE is proposing to add a definition for “commercial and industrial power supply” in its regulations to differentiate between EPSs and other non-consumer power supplies that are not subject to the test procedure. DOE also proposes to add a definition to address an adaptive EPS that conforms to the Universal Serial Bus Power Delivery (“USB-PD EPS”) specifications and revise its procedure to address their testing in a manner more representative of their actual use. Further, the proposed revisions would provide more specific instructions for testing single-voltage EPSs that have multiple output busses. Lastly, DOE proposes to reorganize the test procedure to centralize definitions, consolidate generally applicable requirements, and better delineate requirements for single-voltage, multiple-voltage, and adaptive EPSs. DOE is seeking comment from interested parties on the proposal.
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
(1)
(2)
(3)
(4)
No telefacsimilies (faxes) will be accepted. For detailed instructions on submitting written comments and additional information on the rulemaking process, see section V of this document.
The docket web page can be found at
Mr. Jeremy Dommu, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-2J, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-9870. Email
Mr. Michael Kido, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-8145. Email:
For further information on how to submit a comment or review other public comments and the docket contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:
An EPS is a “covered product” for which DOE is authorized to establish and amend energy conservation standards and test procedures. (42 U.S.C. 6295(u)(1)(A)) DOE's energy conservation standards and test procedures for EPSs are currently prescribed at Title 10 of the Code of Federal Regulations (“CFR”) sections 430.32(w) and 430.23(bb), respectively. The following sections discuss DOE's authority to establish test procedures for EPSs and relevant background information regarding DOE's consideration of test procedures for this product.
The Energy Policy and Conservation Act, as amended (“EPCA”),
EPCA's energy conservation program consists essentially of four parts: (1) Testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6291), energy conservation standards (42 U.S.C. 6295), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).
The Federal testing requirements consist of test procedures that manufacturers of covered products must use as the basis for: (1) Certifying to DOE that their products comply with the applicable energy conservation standards adopted pursuant to EPCA (42 U.S.C. 6295(s)), and (2) making representations about the efficiency of those consumer products (42 U.S.C. 6293(c)). Similarly, DOE must use these test procedures to determine whether the products comply with relevant standards promulgated under EPCA. (42 U.S.C. 6295(s))
Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297) DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions of EPCA. (42 U.S.C. 6297(d))
Under 42 U.S.C. 6293, EPCA sets forth the criteria and procedures DOE must follow when prescribing or amending test procedures for covered products. EPCA requires that any test procedures prescribed or amended under this section be reasonably designed to produce test results which measure energy efficiency, energy use or estimated annual operating cost of a covered product during a representative average use cycle or period of use and not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3))
In addition, EPCA requires that DOE amend its test procedures for all covered products to integrate measures of standby mode and off-mode energy consumption. (42 U.S.C. 6295(gg)(2)(A)) Standby mode and off-mode energy consumption must be incorporated into the overall energy efficiency, energy consumption, or other energy descriptor for each covered product unless the current test procedures already account for and incorporate standby mode and off-mode energy consumption or such integration is technically infeasible. (42 U.S.C. 6295(gg)(2)(A)(i)) If an integrated test procedure is technically infeasible, DOE must prescribe separate standby mode and off-mode energy use test procedures for the covered product, if technically feasible. (42 U.S.C. 6295(gg)(2)(A)(ii)) Any such amendment must consider the most current versions of International Electrotechnical Commission (“IEC”) Standard 62301
The Energy Policy Act of 2005 (“EPACT 2005”), Public Law 109-58 (August 8, 2005), amended EPCA by adding provisions related to EPSs. Among these provisions were a definition of EPS and a requirement that DOE prescribe “definitions and test procedures for the power use of battery chargers and external power supplies.” (42 U.S.C. 6295(u)(1)(A)) DOE complied with this requirement by publishing a test procedure final rule to address the testing of EPSs to measure their energy efficiency and power consumption. 71 FR 71340 (December 8, 2006) (codified at 10 CFR part 430, subpart B, Appendix Z, “Uniform Test Method for Measuring the Energy Consumption of External Power Supplies”).
The Energy Independence and Security Act of 2007 (“EISA 2007”), Public Law 110-140 (December 19, 2007) later amended EPCA by modifying the EPS-related definitions found in 42 U.S.C. 6291. While section 135(a)(3) of EPACT 2005 defined an EPS as “an external power supply circuit that is used to convert household electric current into DC current or lower-voltage AC current to operate a consumer product,” section 301 of EISA 2007 further amended this definition by creating a subset of EPSs called Class A EPSs. EISA 2007 defined this subset of products as those EPSs that, in addition to meeting several other requirements common to all EPSs, are “able to convert [line voltage AC] to only 1 AC or DC output voltage at a time” and have “nameplate output power that is less than or equal to 250 watts.” (42 U.S.C. 6291(36)(C)(i)) As part of these amendments, EISA 2007 prescribed minimum standards for these products (hereafter referred to as “Level IV” standards based on the marking provisions detailed under 10 CFR 430.32(w)(4)) and directed DOE to publish a final rule to determine whether to amend these standards.
EISA 2007 also amended EPCA by defining the terms “active mode,” “standby mode,” and “off-mode.” Each of these modes corresponds to the operational status of a given product—
Following the amendments to EPCA under EISA 2007, Congress further amended EPCA to exclude EPSs used for certain security and life safety alarms and surveillance systems manufactured prior to July 1, 2017, from no-load standards. Public Law 111-360 (January 4, 2011). EPCA's EPS provisions were again amended by the Power and Security Systems (“PASS”) Act, which extended the rulemaking deadline and effective date established under the EISA 2007 amendments from July 1, 2015, and July 1, 2017, to July 1, 2021, and July 1, 2023, respectively. Public Law 115-78 (November 2, 2017); 131 Stat. 1256, 1256; 42 U.S.C. 6295(u)(3)(D)(ii)). The PASS Act also extended the exclusion of certain security and life safety alarms and surveillance systems from no-load standards until the effective date of the final rule issued under 42 U.S.C. 6295(u)(3)(D)(ii) and allows the Secretary to treat some or all external power supplies designed to be connected to a security or life safety alarm or surveillance system as a separate product class or to further extend the exclusion. (42 U.S.C. 6295(u)(3)(E)(ii) and (iv)).
Most recently, on January 12, 2018, the EPS Improvement Act of 2017, Public Law 115-115, amended EPCA to exclude the following devices from the EPS definition: Power supply circuits, drivers, or devices that are designed exclusively to be connected to and power (1) light-emitting diodes providing illumination, (2) organic light-emitting diodes providing illumination, or (3) ceiling fans using direct current motors.
If DOE determines that a test procedure amendment is warranted, it must publish proposed test procedures and offer the public an opportunity to present oral and written comments on them. (42 U.S.C. 6293(b)(2)) EPCA also requires that, at least once every 7 years, DOE evaluate test procedures for each type of covered product, including EPSs, to determine whether amended test procedures would more accurately or fully comply with the requirements for the test procedures to not be unduly burdensome to conduct and be reasonably designed to produce test results that reflect energy efficiency, energy use, and estimated operating costs during a representative average use cycle or period of use. (42 U.S.C. 6293(b)(1)(A)) If the Secretary determines, on his own behalf or in response to a petition by any interested person, that a test procedure should be prescribed or amended, the Secretary shall promptly publish in the
DOE's existing test procedures for EPSs appear at 10 CFR part 430, subpart B, Appendix Z, “Uniform Test Method for Measuring the Energy Consumption of External Power Supplies” (“Appendix Z”). These procedures were first established on December 8, 2006. 71 FR 71340. On March 27, 2009, pursuant to the provisions in EISA 2007, DOE published a final rule that added the terms and definitions related to EPSs to Appendix Z. 74 FR 13318. On June 1, 2011, DOE further amended Appendix Z by adding a test method for multiple-voltage EPSs. 76 FR 31750. The amendments also revised the definition of “active power” and clarified how to test an EPS that (1) has a current-limiting function, (2) can communicate with its load, or (3) combines a current-limiting function with the ability to communicate with a load. A current-limited EPS is one that can significantly lower its output voltage once an internal output current limit has been exceeded. An EPS that communicates with its load refers to an EPS's ability to identify or otherwise exchange information with its load (
On February 10, 2014, DOE published a final rule (“February 2014 final rule”) prescribing new standards for some non-Class A EPSs and amended standards for some Class A EPSs. 79 FR 7846. The February 2014 final rule also established new definitions for direct operation EPSs and indirect operation EPSs in 10 CFR 430.2, which distinguish between these devices based on whether the EPS is used to power a battery charger.
Following the publication of the February 2014 final rule, DOE received follow-up questions and requests for clarification regarding how to test certain EPSs. To address these issues, DOE published a test procedure final rule on August 25, 2015 (“August 2015 final rule”), which added further detail to Appendix Z. 80 FR 51424. These
On June 8, 2017 and June 22, 2017, the Information Technology Industry Council (“ITI”), on behalf of four petitioners—Apple, Inc. (“Apple”), Microsoft Corporation (“Microsoft”), Poin2 Lab (“Poin2”), and Hefei Bitland Information Technology Co., Ltd. (“Bitland”), filed petitions for waivers from the current DOE test procedure for EPSs under 10 CFR 430.27 for several basic models of adaptive EPSs (“USB-PD EPSs”—short for “Universal Serial Bus—Power and Data”) that meet the voltage and current provisions of the IEC's “Universal serial bus interfaces for data and power—Part 1-2: Common components—USB Power Delivery” (“IEC 62680-1-2”) specification—which specifies the relevant performance and compatibility-related specifications for USBs but does not, like some other IEC documents, prescribe any specific testing requirements. An adaptive EPS is one with an output bus
In this notice of proposed rulemaking (“NOPR”) DOE proposes to update Appendix Z as follows:
(1) Adopt a definition of “commercial and industrial power supply,” that would apply specific characteristics to help distinguish these power supplies from EPSs, as defined in EPCA, which are consumer products under the statute.
(2) Amend the definition of “external power supply” to expressly exclude any “commercial and industrial power supply.” Power supplies that meet the definition of “commercial and industrial power supply” would, therefore, not be subject to the EPS test procedure.
(3) Create a definition for USB-PD EPSs and amend their testing requirements, consistent with recently issued waivers.
(4) Provide additional direction for testing single-voltage EPSs with multiple output busses.
(5) Provide instructions to allow any functionality that is unrelated to the external power supply circuit to be disconnected during testing as long as the disconnection does not impact the functionality of the external power supply itself.
(6) Reorganize the test procedure to remove redundant definitions, modify the definition of “average active-mode efficiency”, centralize definitions, consolidate generally applicable requirements, and better delineate requirements for single-voltage, multiple-voltage, and adaptive EPSs.
DOE has tentatively determined that the proposed amendments would not alter the measured efficiency of EPSs, and that the proposal, if adopted, would not be unduly burdensome to conduct. DOE's proposed actions are summarized in Table II.1 of this NOPR and addressed in detail in section III of this document. A redline markup of the current test procedure with the proposed changes is available in the rulemaking docket.
EPCA defines an “external power supply” as an external power supply circuit that is used to convert household electric current into DC current or lower-voltage AC current to operate a consumer product. (42 U.S.C. 6291(36)(A)(i))
EPCA also defines a “consumer product” in relevant part as “any article . . . of a type which in operation consumes or is designed to consume energy . . . and which, to any significant extent, is distributed in commerce for personal use or consumption by individuals; without regard to whether such article of such type is in fact distributed in commerce for personal use or consumption by an individual . . . .” 42 U.S.C. 6291(1).
DOE issued guidance on December 20, 2017, that laid out the specific types of situations in which the agency would view a given power supply as falling outside of the scope of the definition of EPS in EPCA. The guidance document is available in the rulemaking docket
(1) A power supply requiring 3-phase input power, which is incapable of operating on household current;
(2) A DC-DC only power supply, which is incapable of operating on household current;
(3) A power supply with a fixed, non-removable connection to an end-use device that is not a consumer product under EPCA;
(4) A power supply whose output connector is uniquely shaped to fit only an end-use device that is not a consumer product;
(5) A power supply that cannot be readily connected to an end-use device that is a consumer product without significant modification or customization of the power supply itself or the end-use device;
(6) A power supply packaged with an end-use device that is not a consumer product, as evidenced by either:
(a) Such device being certified as, or declared to be in conformance with, a specific standard
(b) Such device being excluded or exempted from inclusion within, or conformance with, a law, regulation, or broadly-accepted industry standard where such exclusion or exemption applies only to non-consumer products;
(7) A power supply distributed in commerce for use with an end-use device where:
(a) The end-use device is not a consumer product, as evidenced by either the circumstances in (6)(a) or (6)(b) of this section; and
(b) The end-use device for which the power supply is distributed in commerce is reasonably disclosed to the public, such as by identification of the end-use device on the packaging for the power supply, documentation physically present with the power supply, or on the manufacturer's or private labeler's public website; or
(8) A power supply that is not marketed for residential or consumer use, and that is clearly marked (or, alternatively, the packaging of the individual power supply, the shipping container of multiple such power supplies, or associated documentation physically present with the power supply when distributed in commerce is clearly marked) “FOR USE WITH COMMERCIAL OR INDUSTRIAL EQUIPMENT ONLY” or “NOT FOR RESIDENTIAL OR CONSUMER USE,”
Consistent with the specific screening criteria laid out in the December 2017 guidance, the incorporation of these criteria into DOE's regulations would not be the sole method for determining whether a power supply would be excluded from the definition of “external power supply.” Rather, these criteria merely identify specific and likely examples of circumstances in which DOE would not consider a power supply as meeting the definition of “external power supply” under EPCA. DOE does not intend for these criteria to preclude a person from asserting that a specific power supply falls outside of EPCA's reach in spite of its inability to meet one or more of these eight criteria.
In order to provide manufacturers and other stakeholders additional certainty as to which power supplies would be considered to fall outside of the EPS definition, DOE proposes to use these criteria to create a new definition for a “commercial and industrial power supply” at 10 CFR part 430, and expressly exclude such products from the EPS definition. Specifically, DOE proposes to define “commercial and industrial power supply” as:
A power supply that is used to convert electric current into DC or lower-voltage AC current, is not distributed in commerce for use with a consumer product, and includes any of the following characteristics:
(1) A power supply that requires 3-phase input power and that is incapable of operating on household current;
(2) A DC-DC only power supply that is incapable of operating on household current;
(3) A power supply with a fixed, non-removable connection to an end-use device that is not a consumer product as defined under the Energy Policy and Conservation Act of 1975 (as amended);
(4) A power supply whose output connector is uniquely shaped to fit only an end-use device that is not a consumer product;
(5) A power supply that cannot be readily connected to an end-use device that is a consumer product without significant modification or customization of the power supply itself or the end-use device;
(6) A power supply packaged with an end-use device that is not a consumer product, as evidenced by either:
(a) Such device being certified as, or declared to be in conformance with, a specific standard applicable only to non-consumer products. For example, a power supply model intended for use with an end-use device that is certified to the following standards would not meet the EPCA definition of an EPS: (1) CISPR 11 (Class A Equipment), “Industrial, scientific and medical equipment—Radio-frequency disturbance—Limits and methods of measurement”; (2) UL 1480A, “Standard for Speakers for Commercial and Professional Use”; (3) UL 813, “Standard for Commercial Audio Equipment”; and (4) UL 1727, “Standard for Commercial Electric Personal Grooming Appliances”; or
(b) Such device being excluded or exempted from inclusion within, or conformance with, a law, regulation, or broadly-accepted industry standard where such exclusion or exemption applies only to non-consumer products;
(7) A power supply distributed in commerce for use with an end-use device where:
(a) The end-use device is not a consumer product, as evidenced by either the circumstances in (6)(a) or (6)(b) of this section; and
(b) The end-use device for which the power supply is distributed in commerce is reasonably disclosed to the public, such as by identification of the end-use device on the packaging for the power supply, documentation physically present with the power supply, or on the manufacturer's or private labeler's public website; or
(8) A power supply that is not marketed for residential or consumer use, and that is clearly marked (or, alternatively, the packaging of the individual power supply, the shipping container of multiple such power supplies, or associated documentation physically present with the power supply when distributed in commerce is clearly marked) “FOR USE WITH COMMERCIAL OR INDUSTRIAL EQUIPMENT ONLY” or “NOT FOR RESIDENTIAL OR CONSUMER USE,” with the marking designed and applied so that the marking will be visible and legible during customary conditions for the item on which the marking is placed.
As provided in the current guidance, non-material deviations from such marking cited in (8) would not preclude satisfaction of the circumstances set forth in that paragraph. In addition, DOE may in its discretion determine that a power supply satisfies the circumstances set forth in (8) (provided all other conditions are satisfied) where such marking consists of language other than that specified in (8) but that nonetheless clearly conveys that the power supply is not marketed or intended for use with consumer products.
DOE requests comment on the criteria specifying the scope of applicability of the EPS definition.
As discussed, DOE has issued test procedure waivers for several basic models of adaptive EPSs that meet the provisions of industry standard IEC 62680-1-2. (Case Nos. EPS-001, EPS-002, EPS-003, EPS-004, 2017-014, 2018-005, and 2018-010.) The IEC
As described in the notice of decision and order granting waivers to Apple, Microsoft, Poin2, and Bitland, DOE determined that applying the DOE test procedure to USB-PD EPSs would yield results that would be unrepresentative of the active-mode efficiency of those products. 83 FR 11738, 11739. Section 4(a)(i)(C) of Appendix Z requires that active-mode efficiency be measured at four loading conditions (100%, 75%, 50%, and 25%) relative to the nameplate output current of the EPS. Section 4(a)(i)(E) of Appendix Z further requires that for adaptive EPSs, the average active-mode efficiency must be measured by testing the unit twice—once at the highest achievable output voltage and once at the lowest. Thus, for an adaptive EPS with a nameplate output current of 3 amps the four active mode loading conditions are 3 amps, 2.25 amps, 1.5 amps, and 0.75 amps. The adaptive EPS would be tested using these four loading conditions at its highest achievable output voltage and its lowest achievable output voltage, which is 5 volts for USB-PD EPSs. For those USB-PD EPSs specified in the waiver orders, DOE determined that operating the EPS at the 3 amps and 5 volts test condition (resulting in a 15W output power) would not reflect the actual use in the field of USB-PD EPSs at the lowest achievable output voltage. Although the USB-PD specification requires the lowest operating point for these EPSs to be 15W at 5 volts, USB-PD EPSs operating at 5 volts generally do not exceed 10W for almost all usage conditions. When charging a product, such as a laptop, that is sold or intended to be used with a USB-PD EPS, the EPS typically charges at 5 volts only if the product has a fully discharged or fully charged battery, and in such cases, the charging current would typically be 0.5 amps or less. At all other times when more power is needed, the EPS will typically switch to a higher voltage. If these adaptive EPSs are used to power other products such as mobile phones or tablets, the EPS will typically revert back to the lowest output voltage of 5 volts, but would generally have a charging current of no more than 2 amps (corresponding to an output power of 10W). According to data presented by manufacturers in their requests for a waiver, the bulk of consumer products that are capable of being powered by such an adaptive EPS are represented by these mobile phones, tablets and laptops. For these reasons, petitioners asserted, USB-PD EPSs are highly likely to only output power at less than 10W at an output voltage of 5 volts.
After reviewing the data provided by the petitioners, DOE concluded that when using a USB-PD EPS to charge an end-use product at the lowest voltage level of 5 volts, the product would rarely draw more than 2 amps of current at 5 volts (
For USB-PD EPSs, DOE prescribed an alternate test procedure to measure their energy efficiency. Specifically, USB-PD EPSs covered by the referenced waivers must be tested such that when testing at the lowest achievable output voltage (
DOE notes that with any waiver it grants, it must also, as soon as practicable, publish a NOPR in the
When DOE finalized the current testing requirements for adaptive EPSs in the August 2015 final rule, the IEC 62680-1-2 standard had not yet been published.
Since publishing the August 2015 final rule, DOE has reviewed existing and legacy USB specifications as well as existing products with USB output ports. While the legacy USB specifications (USB 2.0, USBBC 1.2) published prior to March 2016 limit the current output to 1.5 amps, several consumer devices on the market today operate with USB EPSs with nameplate output currents of 2.0 amps or 2.4 amps at nameplate output voltages of 5 volts. These EPSs, operating at power ratings higher than those specified in legacy
Based on this review of USB products on the market and the recent waiver requests from industry for USB-PD EPSs, limiting the current draw at the 100% loading condition to 2 amps when testing at the lowest nameplate output voltage would ensure that testing is performed in a manner that is representative of typical use. 42 U.S.C. 6293(b)(3)
Accordingly, DOE is proposing to add definitions for USB-PD EPSs and the physical USB Type-C connector that supports it in section 3 of Appendix Z to reflect the voltage and current requirements specified in IEC 62680-1-2. In particular, DOE proposes to define the term USB Power Delivery (“USB-PD”) EPS to mean “an adaptive EPS that utilizes a USB Type-C output port and uses a digital protocol to communicate between the EPS and the end-user product to automatically switch between an output voltage of 5 volts and one or more of the following voltages: 9 volts, 15 volts, or 20 volts. The USB-PD output bus must be capable of delivering 3 amps at an output voltage of 5 volts, and the voltages and currents must not exceed any of the following values for the supported voltages: 3 amps at 9 volts; 3 amps at 15 volts, and; 5 amps at 20 volts”. DOE additionally proposes to define the term USB Type-C as “the reversible 24-pin physical USB connector system that supports USB-PD and allows for the transmission of data and power between compatible USB products.”
Alternatively, DOE is also considering referencing IEC 62680-1-2 in the proposed USB-PD EPS and USB Type-C definitions. With this approach, the definitions would either reference the entire standard, or individual pertinent sections.
DOE requests comment on its proposed definitions for USB-PD EPSs, and whether it accurately captures the specifications required to distinguish a USB-PD device from other adaptive EPSs. Similarly, DOE requests comments on its proposed definition for the USB Type-C connector and whether it accurately captures the specifications required to distinguish it from other physical port designs that can support adaptive external power supplies. DOE also requests comment on its alternate suggestion for defining a USB-PD EPS by referencing the IEC 62680-1-2 standard, either in its entirety or individual pertinent sections. For the latter, DOE seeks feedback on which individual sections of IEC 62680-1-2 would be pertinent in distinguishing a USB-PD device from other adaptive EPSs. If neither DOE's proposed definition nor the alternate suggestion is appropriate, DOE requests comment on the appropriate specification to reference as well as the reasons for it.
Additionally, DOE is proposing to require that USB-PD EPSs be tested at the lowest nameplate output voltage (
While the existing testing requirements for adaptive EPSs are specified in paragraph 4(a)(i)(E) in Appendix Z, DOE is proposing to remove this paragraph and add a new section 6 in Appendix Z that would specify the testing requirements for all adaptive EPSs. The proposed requirement for single-voltage adaptive EPSs that meet the IEC 62680-1-2 specification would be specified in a new paragraph 6(a)(1)(iii)(B) of Appendix Z, and those for multiple-voltage adaptive EPSs would be specified in a new paragraph 6(b)(1)(iii)(B).
DOE requests comment on its proposed amendments for USB-PD EPS and is particularly interested in whether the 2-amp limit is appropriate to use for the maximum current at the lowest nameplate output voltage for these products.
In addition to proposing testing requirements for USB-PD EPSs, DOE is also proposing to amend the related certification requirements for these products. The current certification requirements for adaptive EPSs at 10 CFR 429.37(b)(2)(iii) require reporting the nameplate output power in W at the highest and lowest nameplate output voltages, among other reported values. Section 2 of Appendix Z defines nameplate output power as the power output as specified on the manufacturer's label on the power supply housing or, if absent from the housing, as specified in documentation provided by the manufacturer. Under the current test procedure, for a USB-PD EPS, the nameplate output power at the lowest nameplate voltage of 5 volts would be 15W. However, since DOE is proposing that these EPSs be tested at a maximum output current of 2 amps, corresponding to an output power of 10W, DOE is proposing that such EPSs would be certified at 10W as well. Accordingly, DOE is proposing to amend the definition of nameplate output power in Appendix Z to explicitly state that for USB-PD ports, nameplate output power is 10W at the 5 volt level and as specified on the manufacturer's label or documentation at the highest voltage.
For example, a USB-PD EPS that is rated at 5 volts, 3 amps at the lowest nameplate output voltage and 9 volts, 1.5 amps at the highest nameplate output voltage, would be tested at 5 volts, 2 amps (
DOE is also proposing corresponding amendments to the certification requirements for single-voltage adaptive EPSs in 10 CFR 429.37(b)(2)(iii). Specifically, DOE is proposing that for all USB-PD EPSs, all of the required reported values must be provided, but with the loading conditions at the lowest operating voltage scaled such that the output current at the 100%, 75%, 50% and 25% loading conditions would be set at 2 amps, 1.5 amps, 1 amp and 0.5 amps, respectively.
DOE's test procedure for EPSs account for the different configurations that these devices can have. Because a given EPS's configuration is tied to its capabilities, DOE's procedure attempts to address these design aspects when evaluating the energy efficiency of a given EPS. The various issues encountered by DOE regarding the testing of EPSs with different design configurations follow.
Stakeholders raised questions regarding how to load an EPS that is able to convert to only one output voltage at a time and has multiple output busses (
DOE recognizes, however, that since the publication of the August 2015 final rule, rapid innovation has led to single-voltage EPSs with multiple output busses becoming much more prevalent on the market, making it appropriate now to include more explicit directions for these EPSs. Therefore, DOE proposes to add regulatory text providing that any EPS that outputs the same voltage across multiple output busses must be tested in a configuration such that all busses are simultaneously loaded to their maximum output at the 100% loading condition, utilizing the proportional allocation method where necessary. This proposed amendment, which would be made at paragraph 5(a)(1)(iv) of Appendix Z, would require that each output be appropriately scaled for testing the 75%, 50%, and 25% loading conditions. DOE is also proposing to apply the same approach to adaptive EPSs that have multiple output busses that are capable of outputting the same voltage simultaneously. Accordingly, DOE is proposing to include this requirement in paragraph 6(a)(1)(iv) of Appendix Z.
This approach addresses two possible scenarios when testing single-voltage EPSs with multiple output busses. First, an EPS may list one nameplate output current that corresponds to the sum of the maximum current that can be drawn from all ports. As one example, consider an EPS with three ports, each of which can support the same maximum output current of 0.5 amps, with a total nameplate output current of 1.5 amps. Each port would be loaded to 0.5 amps at 100% load (for a total current load of 1.5 amps). Each load would then be scaled down as necessary to test at all the remaining loading conditions (
The second possible scenario involves a single-voltage EPS with multiple output busses for which the total nameplate output current is less than the sum of the maximum current that can be drawn from each of the individual ports. In this scenario, the load at each port would be appropriately scaled down using the proportional allocation method. For example, consider an EPS with three ports, each of which can support the same maximum output current of 0.5 amps, with a total nameplate output current of 1.2 amps. At the 100% loading condition, each port could not be loaded to 0.5 amps, because the total current (1.5 amps) would exceed the EPS's total nameplate output current of 1.2 amps. In this scenario, the load would be appropriately scaled down using the proportional allocation method, such that each port would be loaded to 0.4 amps at 100% load (for a total current load of 1.2 amps). Each load would then be further scaled down as necessary to test at all the remaining loading conditions (
The additional detail described in this section for testing single-voltage EPSs with multiple output busses is being proposed to reflect current industry practice. DOE requests comment on these proposed provisions.
Stakeholders have also inquired about how to test adaptive EPSs that operate as multiple-voltage EPSs. The definition of multiple-voltage EPS, as well as the new proposed definition of adaptive EPS, both apply to a multiple-voltage EPS with multiple output busses in which one or more of the busses are adaptive. Currently, section 4(a)(i)(E) of Appendix Z requires testing adaptive EPSs twice—once at the highest nameplate output voltage and once at the lowest nameplate output voltage. At each output voltage, adaptive EPSs are tested at the four loading conditions specified in Table 1 of Appendix Z (100%, 75%, 50%, and 25%). Separately, section 4(b)(i)(B) of Appendix Z requires testing multiple-voltage EPSs at four loading conditions (100%, 75%, 50%, and 25%) derated according to the proportional allocation method, with all busses loaded and tested simultaneously. Taking these two testing requirements into account, adaptive EPSs that operate as multiple-voltage EPSs are required to be tested once at the highest nameplate output voltage and once at the lowest nameplate output voltage, and for each test, all available busses must be loaded and derated according to the proportional allocation method. DOE also notes that such EPSs are subject to the multiple-voltage EPS standards.
To more explicitly address testing and certifying adaptive EPSs that operate as multiple-voltage EPSs, DOE is proposing to add new sections 6(a) and 6(b) to Appendix Z, to explicitly address single-voltage adaptive EPSs and multiple-voltage adaptive EPSs, respectively. The proposed requirements for testing both single-voltage and multiple-voltage adaptive EPSs are similar to the requirements for testing all other single-voltage and multiple-voltage EPSs, and would include the exception regarding USB-PD EPSs when testing at the lowest nameplate output voltage, as discussed previously in section III.B. DOE is also proposing to amend the certification requirements for switch-selectable and adaptive EPSs at 10 CFR 429.37(b)(2)(ii) and (b)(2)(iii) to clarify that the requirements apply to both single-voltage as well as multiple-voltage switch-selectable and adaptive EPSs, respectively.
DOE has also identified EPSs with multiple USB output ports at 5 volts and one or more adaptive outputs with a default voltage of 5 volts, but whose output voltage varies according to the demand of the product connected to that port. Under the default operating condition, the EPS operates as a single-voltage EPS because it outputs only one voltage to all available ports. However, in a different operating condition, the adaptive output may provide a higher voltage while the other outputs remain at 5 volts. In this condition, the EPS operates as a multiple-voltage EPS because it is providing more than one output voltage simultaneously. For such a product, the definition of single-voltage EPS would not apply because
With these proposed amendments, an EPS that has both adaptive and non-adaptive output busses would be considered a multiple-voltage adaptive EPS and would be tested under the newly proposed section 6(b) of Appendix Z. Both the adaptive and non-adaptive ports would be tested twice—first with the adaptive port at the highest nameplate output voltage and the non-adaptive ports at their fixed voltage; and again with the adaptive port at the lowest nameplate output voltage and the non-adaptive ports remaining at their fixed voltage. At each of the two test voltages, the proportional allocation method can continue to be used to derate the loading conditions where necessary. As proposed, this testing approach for EPSs with both adaptive and non-adaptive ports would be made explicit in the newly proposed section 6(b)(1)(iii)(F) of Appendix Z. DOE does not intend for this proposal to change the existing testing requirements for this type of EPS, but rather intends for these amendments to provide additional detail and more specific instruction for this type of EPS, consistent with how such EPSs are currently tested and rated. Consequently, this amendment would not require re-testing or re-rating of any existing EPSs with both adaptive and non-adaptive ports.
DOE requests comment on all proposed updates related to adaptive EPSs that operate as multiple-voltage EPSs.
DOE received questions about whether non-EPS-related functions are permitted to be disconnected during testing for products with USB ports. The existing test procedure at Appendix Z in 10 CFR 430, Subpart B specifies that EPSs must be tested in their final completed configuration. For example, the efficiency of a bare circuit board power supply (
DOE requests comment on the proposed update to the test procedure regarding the disconnecting of functions unrelated to the EPS.
The current test procedure for EPSs incorporates by reference the entire IEC 62301 Ed. 2.0 industry standard. However, only a few specific sections of the standard are referenced in the test procedure. Therefore, DOE proposes to add a new section 1—“Incorporation by Reference”—in Appendix Z to reference only those sections that are used in the EPS test procedure. Further, in incorporating IEC 62301 Ed. 2.0 by reference in section 1 of Appendix Z, DOE also proposes to identify this industry standard as “IEC 62301-Z” to indicate that the reference applies exclusively to Appendix Z. This is consistent with the nomenclatures used with other DOE test procedures that also incorporate by reference sections of IEC 62301 Ed. 2.0. Finally, in places where a current reference to IEC 62301 Ed. 2.0 restates the requirement from that standard, DOE proposes removing those redundant references to the standard.
DOE requests comment on its proposal to add in Appendix Z a new section 1 titled, “Incorporation by Reference,” in Appendix Z that would incorporate only those sections of IEC 62301 Ed. 2.0 that are referenced in the EPS test procedure at Appendix Z.
DOE is proposing additional revisions throughout Appendix Z to remove no longer relevant definitions, centralize the remaining definitions, consolidate generally applicable requirements, and improve the delineation of requirements for single-voltage, multiple-voltage, and adaptive EPSs. This proposal is intended solely to improve the readability of the test procedure by presenting the procedure in an easy-to-understand format without resulting in substantive changes.
DOE proposes to remove certain definitions in Appendix Z that had been carried over from previous revisions of the test procedure but are no longer referenced in either the current or the proposed test procedure. This proposal would ensure that only definitions relevant to the test procedure remain in Appendix Z. Specifically, DOE proposes to remove the definitions of “apparent power”, “instantaneous power”, “nameplate input frequency”, “nameplate input voltage”, and “true power factor”.
DOE requests comment on its proposal to remove these definitions, and whether the removal of these definitions would negatively impact manufacturers' ability to make representations about the efficiency of their products to other agencies.
DOE proposes to move all EPS-related terms that are currently defined in 10 CFR 430.2 to the EPS test procedure at Appendix Z. This proposal would ensure that all EPS-specific definitions are in one place and allow users of the test procedure to review these definitions at once without having to navigate between multiple areas of the CFR. Specifically, DOE proposes to move from 10 CFR 430.2 to Appendix Z the definitions of “adaptive external power supply”, “basic-voltage external power supply”, “direct operation external power supply”, “indirect operation external power supply”, and “low-voltage external power supply”. DOE is not proposing to amend the substance of these definitions.
The definition of “external power supply” will remain in 10 CFR 430.2, but DOE proposes to add a sentence to the definition directing the reader to Appendix Z for other EPS-related definitions. This will ensure that even though the EPS-related definitions are specified in the test procedure, they would apply throughout 10 CFR part 430, including 10 CFR 430.32. For the definition of “Class A external power supply”, which is statutorily defined in EPCA, DOE proposes to add it to the EPS test procedure at Appendix Z but also retain it at 10 CFR 430.2, where it currently exists.
Additionally, DOE proposes to modify the definition of “average active-mode efficiency” in Appendix Z to explicitly
Section 3 of Appendix Z currently includes two subsections that specify the test apparatus and general instructions—one subsection specifies the requirements for single-voltage EPSs, and the other specifies the requirements for multiple-voltage EPSs. The requirements in these two subsections are largely the same. DOE proposes to combine these requirements and remove the separate subsections for single-voltage and multiple-voltage EPSs in order to provide a single, unified section for the test apparatus provisions and general instructions. Under this proposed change, the requirements would largely remain the same, but would appear in a single subsection that would apply to both single-voltage and multiple-voltage EPSs.
DOE also proposes consolidating the requirements regarding the required test load from sections 4(a)(i)(F) and 4(b)(i)(D) into a new subsection 4(f) of Appendix Z, since this requirement would remain the same across all EPSs. Similarly, DOE proposes to consolidate the requirements regarding how to attach power metering equipment from sections 4(a)(i)(A) and 4(b) into a new subsection 4(g) of Appendix Z.
DOE proposes amending sections 4(a) and 4(b) of Appendix Z. These sections provide testing requirements for single-voltage and multiple-voltage EPSs, respectively, and DOE's proposal would harmonize these requirements. Applying both a similar structure and common set of instructions to these sections would improve the procedure's readability and reduce the likelihood of procedural errors during testing. These proposed updates would retain the current testing requirements.
Section 4(a)(i)(C)2 of Appendix Z currently specifies for single-voltage EPSs that if the EPS cannot sustain output at one or more of the loading conditions prescribed by the procedure (
Further, DOE proposes to reorganize this provision of the test procedure pertaining to unsustainable loading conditions by moving the part of this instruction related to the efficiency calculation to a newly designated section 5(a)(1)(vi), which would specify the requirements for calculating the tested EPS's efficiency. DOE also proposes to replicate the same requirements in the newly designated sections 5(b)(1)(vi), 6(a)(1)(vi), and 6(b)(1)(vi) for multiple-voltage, single-voltage adaptive, and multiple-voltage adaptive EPSs, respectively.
DOE proposes revising the current section 4(b)(i) of Appendix Z to correct a reference error. This section would be revised to refer to “Table 2” rather than “Table 1,” as currently referenced.
In light of the proposed restructuring of the test procedure, the proposed regulatory text presented in this document includes the entire EPS test procedure appendix language, including language that is not being changed from the existing requirements. Presenting the regulatory text in its entirety will assist stakeholders when reviewing the extent of the changes that DOE is proposing to make. DOE requests comment on all of the proposed changes related to the EPS test procedure raised in the preceding discussion in Section III.E.
EPCA requires that test procedures proposed by DOE not be unduly burdensome to conduct. As discussed in the previous sections, DOE proposes to amend the existing test procedure for EPSs by: (1) Providing additional detail reflective of its current application; (2) adding revisions to address adaptive EPSs to reflect current industry testing standards and provide more representative results; and (3) adding detail to address the distinction between different types of EPSs with multiple ports. This document also proposes minor amendments to consolidate duplicative testing requirements, harmonized testing requirements for single-voltage and multiple-voltage EPSs, and improved organization of the test provisions regarding unsustainable loading conditions. DOE has tentatively determined that these proposed amendments would not be unduly burdensome for manufacturers to conduct.
DOE's analysis of this proposal indicates that, if finalized, it would not result in any additional costs or cost savings to manufacturers.
Further discussion of the cost impacts of the proposed test procedure amendments are presented in the following paragraphs.
If adopted, the proposed amendments would provide updates and supplemental details for how to conduct the test procedure and would neither increase complexity to test conditions/setup nor add new test steps. For example, the proposal would add references to specific sections of industry standards to provide precise direction to test technicians when conducting the test procedure. Consistent with industry inquiries and requests, DOE is proposing to revise or add definitions and test conditions to provide more specific direction. Further, DOE reorganized content and aligned terminology among relevant sections of the CFR to improve readability and provide clarity in the specifications referred to throughout the sampling requirements, test procedure, and applicable energy conservation standards. DOE does not anticipate that the amendments proposed in this NOPR would impact test costs.
DOE is also proposing to codify characteristics that can be used to differentiate between EPSs used to operate consumer products and power supplies that are used to operate non-consumer products (
With respect to USB-PD EPSs, DOE is proposing amendments based on the previously-mentioned petition for waiver filed by ITI on behalf of petitioners Apple, Microsoft, Poin2, and Bitland. In conjunction with this proposed change, because EPSs are required to be tested at their nameplate output power, DOE is proposing to amend the definition of “nameplate output power” to provide an exception for USB-PD EPSs, which would be tested at 10W at the lowest voltage instead of at their maximum capability at that voltage. The proposal would change the operating point at which testing is performed, but would not require any additional tests than are already required under the current test procedure. Hence, manufacturers would not incur any additional costs compared to the existing test procedure. Further, DOE is proposing to add further specification to the testing requirements for adaptive EPSs that also operate as multiple-voltage EPSs. The testing requirements for such EPSs would not change under this proposal. Accordingly, DOE does not anticipate that its proposal will result in any additional costs compared to the current test procedure.
DOE is also proposing to provide more explicit instructions for testing single-voltage EPSs that have multiple output busses. For such EPSs, DOE's proposal would not change the existing testing requirements. Instead, the proposal would improve the readability of the existing requirements. If finalized, these proposed amendments would provide supplemental detail but would not require manufacturers to test EPSs any differently and would result in no change in the associated testing cost compared to the current test procedure.
DOE also proposes to reorganize the test procedure to centralize the EPS-related definitions and relevant, general requirements, and better delineate the specific requirements for single-voltage, multiple-voltage, and adaptive EPSs. This proposed reorganization, like the amendments described earlier, are intended to improve the readability of the test procedure while avoiding any substantive changes; therefore, there would be no change in the associated testing cost compared to the current test procedure.
DOE has preliminarily concluded that the proposed amendments, if made final, would not impact the scope of the test procedure (
DOE requests comment on its understanding of the impact of the proposals presented in this document in relation to the test burden and costs of the current test procedure.
Appendix Z of 10 CFR part 430, subpart B incorporates by reference certain provisions of IEC 62301 Ed. 2.0. These provisions contain specifications for testing equipment and methods for measuring power consumption. DOE proposes to specify in section 1 of Appendix Z the relevant sections of IEC 62301 Ed. 2.0 that are referenced in Appendix Z. DOE requests comments on the benefits and burdens of the proposed updates to the industry standard referenced in the test procedure for EPSs.
DOE seeks comment on the degree to which the DOE test procedure should consider, and be harmonized further with, the most recent relevant industry standards for EPSs and whether there are any changes to the Federal test method that would provide additional benefits to the public. DOE also requests comment on the benefits and burdens of adopting any industry/voluntary consensus-based or other appropriate test procedure, without modification.
In addition to the issues identified earlier, DOE welcomes comment on any other aspect of the existing test procedure for EPSs not already addressed by the specific areas identified in this document. DOE particularly seeks information that would improve the ability of the test procedure to measure the energy efficiency/use of an EPS during a representative average use cycle or period of use. Comments regarding repeatability and reproducibility are also welcome.
DOE also requests information that would help DOE create procedures that would limit manufacturer test burden through streamlining or simplifying testing requirements. In particular, DOE notes that under Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs,” Executive Branch agencies such as DOE must manage the costs associated with the imposition of expenditures required to comply with Federal regulations. 82 FR 9339 (February 3, 2017). Consistent with that Executive Order, DOE encourages the public to provide input on measures DOE could take to lower the cost of its regulations applicable to EPSs consistent with the requirements of EPCA.
EPCA prescribes that all representations of energy efficiency and energy use, including those made on marketing materials and product labels, must be made in accordance with an amended test procedure, beginning 180 days after publication of such a test procedure final rule in the
Should DOE amend the test procedure to address the issues presented in a waiver, the waiver would automatically terminate on the date on which use of that test procedure is required to demonstrate compliance. 10 CFR 430.27(h)(2). Recipients of any such waivers would be required to test those products that were subject to the waiver according to the amended test procedure as of the effective date of the amended test procedure. Some of the amendments proposed in this document would pertain to issues addressed by the waivers granted to Apple, Microsoft, Poin2, Bitland, and Huawei for testing
The Office of Management and Budget (“OMB”) has determined that test procedure rulemakings do not constitute “significant regulatory actions” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 58 FR 51735 (October 4, 1993). Accordingly, this action was not subject to review under the Executive Order by the Office of Information and Regulatory Affairs (“OIRA”) in OMB.
On January 30, 2017, the President issued Executive Order (“E.O.”) 13771, “Reducing Regulation and Controlling Regulatory Costs.” E.O. 13771 stated the policy of the executive branch is to be prudent and financially responsible in the expenditure of funds, from both public and private sources. E.O. 13771 stated it is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.
Additionally, on February 24, 2017, the President issued E.O. 13777, “Enforcing the Regulatory Reform Agenda.” E.O. 13777 required the head of each agency to designate an agency official as its Regulatory Reform Officer (“RRO”). Each RRO oversees the implementation of regulatory reform initiatives and policies to ensure that agencies effectively carry out regulatory reforms, consistent with applicable law. Further, E.O. 13777 requires the establishment of a regulatory task force at each agency. The regulatory task force is required to make recommendations to the agency head regarding the repeal, replacement, or modification of existing regulations, consistent with applicable law. At a minimum, each regulatory reform task force must attempt to identify regulations that:
(i) Eliminate jobs, or inhibit job creation;
(ii) Are outdated, unnecessary, or ineffective;
(iii) Impose costs that exceed benefits;
(iv) Create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies;
(v) Are inconsistent with the requirements of the Information Quality Act, or the guidance issued pursuant to that Act, in particular those regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard for reproducibility; or
(vi) Derive from or implement Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified.
DOE initially concludes that this rulemaking is consistent with the directives set forth in these executive orders. As described above, DOE has preliminarily determined that the proposed rule would not yield any costs or cost savings. Therefore, if finalized as proposed, this rule is expected to be an E.O. 13771 other action.
The Regulatory Flexibility Act (5 U.S.C. 601
DOE reviewed this test procedure NOPR pursuant to the Regulatory Flexibility Act and the procedures and policies previously discussed. DOE has concluded that this rule would not have a significant impact on a substantial number of small entities. The factual basis for this certification is set forth below. DOE will consider any comments on the certification in determining whether to adopt the proposed amendments to the test procedure contained in this document.
For manufacturers of EPSs, the Small Business Administration (“SBA”) has set a size threshold, which defines those entities classified as “small businesses” for the purposes of the statute. DOE used the SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. 13 CFR part 121. The size standards are listed by North American Industry Classification System (“NAICS”) code and industry description and are available at
DOE consulted its CCMS database to determine the total number of original device manufacturers (“ODMs”) with manufacturing facilities located in the United States that meet the SBA's definition of a “small business.” Due to the wide variety of applications that use EPSs, there were numerous EPS manufacturers listed in the CCMS database. However, the vast majority of EPS manufacturers are foreign companies. Of the few domestic companies listed, all of these companies exceed the size threshold defined by SBA and manufactured their EPSs abroad. Therefore, as in the 2015 test procedure final rule, DOE has determined that there are no small businesses that manufacture EPSs in the United States.
Therefore, DOE concludes that the impacts of the proposed test procedure amendments proposed in this NOPR would not have a “significant economic impact on a substantial number of small entities,” and that the preparation of an IRFA is not warranted. DOE will transmit the certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the Small Business Administration for review under 5 U.S.C. 605(b).
DOE requests comment on its determination that there are no small EPS ODMs with manufacturing facilities located in the U.S.
Manufacturers of EPSs must certify to DOE that their products comply with any applicable energy conservation standards. To certify compliance, manufacturers must first obtain test data for their products according to the DOE test procedures, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including EPSs. (10 CFR part 429, subpart B.) The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (“PRA”). This requirement has been
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
In this proposed rule, DOE proposes test procedure amendments that it expects will be used to develop and implement future energy conservation standards for external power supplies. DOE has determined that this proposed rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Executive Order 13132, “Federalism,” 64 FR 43255 (August 10, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE has examined this proposed rule and has determined that it 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. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this proposed rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.
Title II of the Unfunded Mandates Reform Act of 1995 (“UMRA”) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a proposed regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820; also available at
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This proposed rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights” 53 FR 8859 (March 18, 1988), that this proposed regulation would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Regarding the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a clear legal standard for affected conduct rather than a general standard; and (4) promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in sections 3(a) and 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the proposed rule meets the relevant standards of Executive Order 12988.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
The proposed regulatory action to amend the test procedure for measuring the energy efficiency of EPSs is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.
Under section 301 of the Department of Energy Organization Act (Pub. L. 95-91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; “FEAA”) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (“FTC”) concerning the impact of the commercial or industry standards on competition.
The proposed modifications to the test procedure for EPSs do not incorporate any new industry standards.
In this NOPR, DOE proposes to maintain the current incorporation by reference of IEC 62301 Ed. 2.0 in 10 CFR 430.3, and create a new section 1 in Appendix Z, titled “incorporation by reference”, to enumerate the specific provisions of the standard that are applicable to the EPS test procedure in Appendix Z. While incorporating IEC 62301 Ed. 2.0 by reference in section 1 of Appendix Z, DOE proposes to identify it as “IEC 62301-Z” to indicate the provisions of IEC 62301 that are applicable to Appendix Z. This is consistent with the nomenclature used with other DOE test procedures that also incorporate by reference sections of IEC 62301 Ed. 2.0. Specifically, section 1 of Appendix Z would limit use of the material incorporated by reference to the following sections of the IEC 62301:
(1) IEC 62301, “Household electrical appliances—Measurement of standby power,” Edition 2.0, 2011-01:
• Section 4.4.1, “Power measurement uncertainty”;
• Section 5.3.3, “Average reading method”;
• Annex B, “Notes on the measurement of low power modes”; and
• Annex D, “Determination of uncertainty of measurement”.
IEC 62301 is an industry-accepted standard for measuring the standby power of household electrical appliances. This standard is reasonably available and can be obtained from the American National Standards Institute at the following addresses:
American National Standards Institute, 25 W 43rd Street, 4th Floor, New York, NY 10036, (212) 642-4936, or by visiting
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Although DOE welcomes comments on any aspect of this proposal, DOE is particularly interested in receiving comments and views of interested parties concerning the following issues:
1. DOE requests comment on its proposed definition for “commercial and industrial power supply” to clarify the scope of applicability of the EPS test procedure. See section III.A for further detail.
2. DOE requests comment on its proposed definition for USB-PD EPSs, and whether it accurately captures the specifications required to distinguish a USB-PD device from other adaptive EPSs. Similarly, DOE requests comments on its proposed definition for the USB Type-C connector and whether it accurately captures the specifications required to distinguish it from other physical port designs that can support adaptive external power supplies. DOE also requests comment on its alternate suggestion for defining a USB-PD EPS by referencing the IEC 62680-1-2 standard, either in its entirety or individual pertinent sections. For the latter, DOE seeks feedback on which individual sections of IEC 62680-1-2 would be pertinent in distinguishing a USB-PD device from other adaptive EPSs. If neither DOE's proposed definition nor the alternate suggestion is appropriate, DOE requests comment on the appropriate specification to reference as well as the reasons for it. See section III.B for further detail.
3. DOE requests comment on its proposed amendments for USB-PD EPSs; and specifically, whether the 2-amp limit is appropriate for the maximum current at the lowest nameplate output voltage. If this proposed limit is appropriate, please state your reasons why—and if it is not appropriate, why not?
4. DOE seeks comment on its proposal to make more explicit the requirements for testing single-voltage EPSs with multiple output busses. DOE is specifically interested in feedback on whether there are any potential complications with this clarified testing methodology—and if so, the nature of those complications and possible solutions that DOE should consider adopting to address them. See section III.C.1 for further detail.
5. DOE requests comment on whether to treat adaptive EPSs that have both adaptive and non-adaptive output busses as multiple-voltage adaptive EPSs. DOE also requests comment on the proposed testing methods for multiple-voltage adaptive EPSs outlined in the proposed version of paragraph 6(b)(i)(C)(6) of Appendix Z. See section III.C.2 for further detail.
6. DOE requests comment on the proposed update to the test procedure in section 4(i) regarding the disconnecting of functions unrelated to the EPS.
7. DOE requests comment on its proposal to add a new section “Incorporation by Reference” in section 1 of Appendix Z to list the specific sections of IEC 62301 that are referenced in the EPS test procedure at Appendix Z. See section III.C.3 for further detail.
8. DOE requests comment on its proposal to remove redundant definitions that are no longer referenced in either the current or proposed test procedure at Appendix Z. See section III.E.1 for further detail.
9. DOE requests comment on its proposal to move all EPS-related definitions that are currently specified in 10 CFR 430.2 to the EPS test procedure at Appendix Z. See section III.E.2 for further detail.
10. DOE requests comment on its proposal to consolidate the general test requirements for single-voltage and multiple-voltage adaptive and non-adaptive EPSs into section 4 of Appendix Z. See section III.E.3 for further detail.
11. DOE requests comment on its proposal to further clarify that if an EPS can only sustain one output current at any of the output busses it must be tested at the loading condition that allows for the maximum output power on that bus. See section III.E.5 for further detail.
12. DOE requests comment on the accuracy of its understanding of the likely impact of its proposal in relation to the test burden and costs of the current test procedure. See section III.F.1 for further detail.
13. DOE seeks comment on the degree to which the DOE test procedure should consider and be harmonized further
14. DOE requests comment on its current determination that there are no small EPS ODMs with manufacturing facilities located in the U.S. See section IV.C for further details.
15. In addition to the issues identified earlier, DOE welcomes comment on any other aspect of the existing test procedure for EPSs not already addressed by the specific areas identified in this document. DOE particularly seeks information that would improve the representativeness of the test procedure, as well as information that would help DOE create a procedure that would limit manufacturer test burden. Comments regarding repeatability and reproducibility are also welcome.
The Secretary of Energy has approved publication of this proposed rule.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Reporting and recordkeeping requirements.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Incorporation by reference, Intergovernmental relations, Small businesses.
For the reasons stated in the preamble, DOE is proposing to amend parts 429 and 430 of Chapter II of Title 10, Code of Federal Regulations as set forth below:
42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
(b) * * *
(2) * * *
(ii) Switch-selectable external power supplies: The average active mode efficiency as a percentage (%) value, no-load mode power consumption in watts (W) using the lowest and highest selectable output voltages, nameplate output power in watts (W), and, if missing from the nameplate, the output current in amperes (A).
(iii) Adaptive external power supplies: The average active-mode efficiency as a percentage (%) at the highest and lowest nameplate output voltages, no-load mode power consumption in watts (W), nameplate output power in watts (W) at the highest and lowest nameplate output voltages, and, if missing from the nameplate, the output current in amperes (A) at the highest and lowest nameplate output voltages. For USB-PD EPSs, as defined in appendix Z of part 430, subpart B of this chapter, all of the above values must be provided but with the loading conditions at the lowest operating voltage scaled such that the output current at the 100%, 75%, 50% and 25% loading conditions are 2A, 1.5A, 1A and 0.5A, respectively. Accordingly, for USB-PD EPSs, certify each adaptive port at 10W at the lowest nameplate output voltage.
42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
The addition and revision reads as follows:
(1) A power supply that require a 3-phase input power and that is incapable of operating on household current;
(2) A DC-DC only power supply that is incapable of operating on household current;
(3) A power supply with a fixed, non-removable connection to an end-use device that is not a consumer product as defined under the Energy Policy and Conservation Act of 1975 (as amended);
(4) A power supply whose output connector is uniquely shaped to fit only an end-use device that is not a consumer product;
(5) A power supply that cannot be readily connected to an end-use device that is a consumer product without significant modification or customization of the power supply itself or the end-use device;
(6) A power supply packaged with an end-use device that is not a consumer product, as evidenced by either:
(i) Such device being certified as, or declared to be in conformance with, a specific standard applicable only to non-consumer products. For example, a power supply model intended for use with an end-use device that is certified to the following standards would not meet the EPCA definition of an EPS:
(A) CISPR 11 (Class A Equipment), “Industrial, scientific and medical equipment—Radio-frequency disturbance—Limits and methods of measurement”;
(B) UL 1480A, “Standard for Speakers for Commercial and Professional Use”;
(C) UL 813, “Standard for Commercial Audio Equipment”; and
(D) UL 1727, “Standard for Commercial Electric Personal Grooming Appliances”; or
(ii) Such device being excluded or exempted from inclusion within, or conformance with, a law, regulation, or broadly-accepted industry standard where such exclusion or exemption applies only to non-consumer products;
(7) A power supply distributed in commerce for use with an end-use device where:
(i) The end-use device is not a consumer product, as evidenced by either the circumstances in paragraph (6)(i) or (ii) of this definition; and
(ii) The end-use device for which the power supply is distributed in commerce is reasonably disclosed to the public, such as by identification of the end-use device on the packaging for the power supply, documentation physically present with the power supply, or on the manufacturer's or private labeler's public website; or
(8) A power supply that is not marketed for residential or consumer use, and that is clearly marked (or, alternatively, the packaging of the individual power supply, the shipping container of multiple such power supplies, or associated documentation physically present with the power supply when distributed in commerce is clearly marked) “FOR USE WITH COMMERCIAL OR INDUSTRIAL EQUIPMENT ONLY” or “NOT FOR RESIDENTIAL OR CONSUMER USE,” with the marking designed and applied so that the marking will be visible and legible during customary conditions for the item on which the marking is placed.
(1) Light-emitting diodes providing illumination;
(2) Organic light-emitting diodes providing illumination; or
(3) Ceiling fans using direct current motors.
(bb)
Starting on [DATE 180 days after publication of the final rule in the
1.
DOE incorporated by reference the entire standard for IEC 62301 in § 430.3; however, only enumerated provisions of this document is applicable to this appendix, as follows:
(a) IEC 62301, (“IEC 62301-Z”), Household electrical appliances—Measurement of standby power, (Edition 2.0, 2011-01), as follows:
(i) Section 4.3.2 “Supply voltage waveform”;
(ii) Section 4.4.1 “Power measurement uncertainty”;
(iii) Section 5.3.3 “Average reading method”;
(iv) Annex B “Notes on the measurement of low power modes”; and
(v) Annex D “Determination of uncertainty of measurement.”
(b) Reserved.
2.
This appendix covers the test requirements used to measure the energy consumption of direct operation external power supplies and indirect operation Class A external power supplies subject to the energy conservation standards set forth at § 430.32(w)(1).
3.
Class A external power supply—
(1) Means an external power supply device that—
(i) Is designed to convert line voltage AC input into lower voltage AC or DC output;
(ii) Is able to convert to only one AC or DC output voltage at a time;
(iii) Is sold with, or intended to be used with, a separate end-use product that constitutes the primary load;
(iv) Is contained in a separate physical enclosure from the end-use product;
(v) Is connected to the end-use product via a removable or hard-wired male/female electrical connection, cable, cord, or other wiring; and
(vi) Has nameplate output power that is less than or equal to 250 watts;
(2) But, excludes any device that—
(i) Requires Federal Food and Drug Administration listing and approval as a medical device in accordance with section 513 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360(c)); or
(ii) Powers the charger of a detachable battery pack or charges the battery of a product that is fully or primarily motor-operated.
(1) If the external power supply can be connected to an end-use consumer product and that consumer product can be operated using battery power, the method for determining whether that external power supply is incapable of operating that consumer product directly is as follows:
(i) If the end-use product has a removable battery, remove it for the remainder of the test and proceed to the step in paragraph (1)(v) of this definition. If not, proceed to the step in paragraph (1)(ii) of this definition.
(ii) Charge the battery in the application via the external power supply such that the application can operate as intended before taking any additional steps.
(iii) Disconnect the external power supply from the application. From an off-mode state, turn on the application and record the time necessary for it to become operational to the nearest five second increment (5 sec, 10 sec, etc.).
(iv) Operate the application using power only from the battery until the application stops functioning due to the battery discharging.
(v) Connect the external power supply first to mains and then to the application. Immediately attempt to operate the application. If the battery was removed for testing and the end-use product operates as intended, the external power supply is not an indirect operation external power supply and paragraph 2 of this definition does not apply. If the battery could not be removed for testing, record the time for the application to become operational to the nearest five second increment (5 seconds, 10 seconds, etc.).
(2) If the time recorded in paragraph (1)(v) of this definition is greater than the summation of the time recorded in paragraph (1)(iii) of this definition and five seconds, the external power supply cannot operate the application directly and is an indirect operation external power supply.
(1) Connected to the main electricity supply;
(2) The output is not connected to any load; and
(3) All manual on-off switches are turned off.
4.
(a) Any power measurements recorded, as well as any power measurement equipment utilized for testing, shall conform to the uncertainty and resolution specifications in section 4.4.1, “Power measurement uncertainty,” as well as Annexes B, “Notes on the measurement of low power modes,” and D, “Determination of uncertainty of measurement,” of IEC 62301-Z.
(b) Carry out tests in a room that has an air speed close to the unit under test (UUT) of ≤0.5 m/s. Maintain ambient temperature at 20 ± 5 °C throughout the test. Do not intentionally cool the UUT, for example, by use of separately powered fans, air conditioners, or heat sinks. Test the UUT on a thermally non-conductive surface. Products intended for outdoor use may be tested at additional temperatures, provided those are in addition to the conditions specified above and are noted in a separate section on the test report.
(c) If the UUT is intended for operation on AC line-voltage input in the United States, test it at 115 V at 60 Hz. If the UUT is intended for operation on AC line-voltage input but cannot be operated at 115 V at 60 Hz, do not test it. Ensure the input voltage is within ±1% of the above specified voltage and the input frequency is within ±1% of the specified frequency.
(d) The input voltage source must be capable of delivering at least 10 times the nameplate input power of the UUT as is specified in IEEE 1515-2000 (Referenced for guidance only, see § 430.4). Regardless of the AC source type, the THD of the supply voltage when supplying the UUT in the specified mode must not exceed 2%, up to and including the 13th harmonic. The peak value of the test voltage must be within 1.34 and 1.49 multiplied by its RMS value.
(e) Select all leads used in the test set-up with appropriate wire gauges and lengths to minimize voltage drops across the wires during testing. See Table B.2—“Commonly used values for wire gages [
(f) Test Load. To load the power supply to produce all active-mode loading conditions, use passive loads, such as rheostats, or active loads, such as electronic loads. Resistive loads need not be measured precisely with an ohmmeter; simply adjust a variable resistor to the point where the ammeter confirms that the desired percentage of nameplate output current is flowing. For electronic loads, adjust the desired output current in constant current mode rather than adjusting the required output power in constant power mode.
(g) Test the external power supply at the end of the wire or cord that connects to an end-use product, regardless of whether the end of the wire or cord is integrated into an end-use product or plugs into and out of an end-use product. If a separate wire or cord is provided by the manufacturer to connect the external power supply to an end-use product, use this wire or cord and perform tests at the end of the cord that connects to an end-use product. If a wire or cord is not supplied by the manufacturer, test the external power supply at the output electrical contact that
(1) Cut the cord immediately adjacent to the output connector, or
(2) Attach leads and measure the efficiency from the output connector itself. If the connection to an end-use product is not removable, cut the cord immediately adjacent to the powered product and connect measurement probes at that point. Connect any additional metering equipment such as voltmeters and/or ammeters used in conjunction with resistive or electronic loads directly to the end of the output cable of the UUT. Conduct the tests on the sets of output wires that constitute the output busses. If the product has more than two output wires, including those wires that are necessary for controlling the product, the manufacturer must supply a connection diagram or test fixture that will allow the testing laboratory to put the UUT into active-mode. Figure 1 of this section provides one illustration of how to set up a single-voltage external power supply for testing; however, the actual test setup may vary pursuant to the type of external power supply being tested and the requirements of this appendix.
(h) While external power supplies must be tested in their final, completed configuration in order to represent their measured efficiency on product labels or specification sheets, any functionality that is unrelated to the external power supply circuit may be disconnected during testing as long as the disconnection does not impact the functionality of the external power supply itself. Test the external power supply in its final configuration to the extent possible (within its enclosure and with all output cords that are shipped with it).
(i) If a product serves one or more other major functions in addition to converting household electric current into DC current or lower-voltage AC current, components of the product that serve other functions may be disconnected before testing so that test measurements do not include power used by other functions and as long as disconnecting such components do not affect the ability of the product to convert household electric current into DC current or lower-voltage AC current. For example, consider a surge protector that offers outlets supplying AC household electric current and one or more USB outputs supplying DC current. If power is provided to the AC outlets through a surge protection circuit, but power to the USB outlet(s) is not, then the surge protection circuit may be disconnected from AC power during testing. Similarly, if a lighted manual on-off switch disconnects power only to the AC outlets, but not the USB outputs, then the manual on-off switch may be turned off and power to the light disconnected during testing.
5.
(a) Single-Voltage External Power Supply
(1) Standby Mode and Active-Mode Measurement.
(i) Place in the “on” position any built-in switch in the UUT controlling power flow to the AC input, and note the existence of such a switch in the final test report.
(ii) Operate the UUT at 100% of nameplate output current for at least 30 minutes immediately prior to conducting efficiency measurements. After this warm-up period, monitor AC input power for a period of 5 minutes to assess the stability of the UUT. If the power level does not drift by more than 5% from the maximum value observed, the UUT is considered stable. If the UUT is stable, record the measurements obtained at the end of this 5-minute period. Measure subsequent loading conditions under the same 5-minute stability parameters. Note that only one warm-up period of 30 minutes is required for each UUT at the beginning of the test procedure. If the AC input power is not stable over a 5-minute period, follow the guidelines established by section 5.3.3 of IEC 62301-Z for measuring average power or accumulated energy over time for both input and output.
(iii) Test the UUT at the nameplate output voltage(s) at the loading conditions listed in Table 1, derated per the proportional allocation method presented in paragraph 5(a)(1)(iv) of this appendix. Conduct efficiency measurements in sequence from Loading Condition 1 to Loading Condition 4 as indicated in Table 1 of this section. For Loading Condition 5, place the UUT in no-load mode, disconnect any additional signal connections to the UUT, and measure input power.
The 2% allowance pertains to nameplate output current, not the calculated current value. For example, a UUT at Loading Condition 3 may be tested in a range from 48% to 52% of the derated output current.
(A) If testing of additional, optional loading conditions is desired, conduct that testing in accordance with this test procedure and subsequent to completing the sequence described in paragraph 5(a)(1)(iii) of this appendix.
(B) Where the external power supply lists both an instantaneous and continuous output current, test the external power supply at the continuous condition only.
(C) If an external power supply cannot sustain output at one or more of the Loading Conditions 1-4 as specified in Table 1, test the external power supply only at the loading conditions for which it can sustain output.
(iv) Proportional allocation method for loading single-voltage external power supplies with multiple busses. Use the following proportional allocation method to provide consistent loading conditions for single-voltage external power supplies with multiple output busses. For additional explanation (provided for guidance only), please refer to section 6.1.1 of the California Energy Commission's “Generalized Test Protocol for Calculating the Energy Efficiency of Internal Ac-Dc Power Supplies Revision 6.7,” March 2014.
(A) Consider a power supply with N output busses, each with the same nameplate output voltages V
(B) If D ≥1, then loading every port to its nameplate output current does not exceed the overall maximum output power for the power supply. In this case, load each output bus to the percentages of its nameplate output current listed in Table 1. However, if D <1, it is an indication that loading each port to its nameplate output current will exceed the overall maximum output power for the power supply. In this case, and at each loading condition, load each output bus to the appropriate percentage of its nameplate output current as listed in Table 1, multiplied by the derating factor D.
(v) Test switch-selectable single-voltage external power supplies twice—once at the highest nameplate output voltage and once at the lowest.
(vi) Efficiency calculation. Calculate and record efficiency at each loading point by dividing the UUT's measured active output power at a given loading condition by the active AC input power measured at that loading condition.
(A) Calculate and record average efficiency of the UUT as the arithmetic mean of the efficiency values calculated at Loading Conditions 1, 2, 3, and 4 in Table 1 of this section.
(B) If, when tested, a UUT cannot sustain output current at one or more of the loading conditions as specified in Table 1, the average active-mode efficiency is calculated as the average of the loading conditions for which it can sustain output.
(C) If the UUT can only sustain one output current at any of the output busses, test it at the loading condition that allows for the maximum output power on that bus (
(vii) Power consumption calculation. The power consumption of Loading Condition 5 (no-load) is equal to the active AC input power (W) at that loading condition.
(viii) Off-Mode Measurement. If the UUT incorporates manual on-off switches, place the UUT in off-mode, and measure and record its power consumption at Loading Condition 5 in Table 1 of this section. The measurement of the off-mode energy consumption must conform to the requirements specified in section 5(a)(1) of this appendix, except that all manual on-off switches must be placed in the “off” position for the off-mode measurement. The UUT is considered stable if, over 5 minutes with samples taken at least once every second, the AC input power does not drift from the maximum value observed by more than 1% or 50 milliwatts, whichever is greater. Measure the off-mode power consumption of a switch-selectable single-voltage external power supply twice—once at the highest nameplate output voltage and once at the lowest.
(b) Multiple-Voltage External Power Supply.
(1) Standby-Mode and Active-Mode Measurement.
(i) Place in the “on” position any built-in switch in the UUT controlling power flow to the AC input, and note the existence of such a switch in the final test report.
(ii) Operate the UUT at 100% of nameplate output current for at least 30 minutes immediately prior to conducting efficiency measurements. After this warm-up period, monitor AC input power for a period of 5 minutes to assess the stability of the UUT. If the power level does not drift by more than 1% from the maximum value observed, the UUT is considered stable. If the UUT is stable, record the measurements obtained at the end of this 5-minute period. Measure subsequent loading conditions under the same 5-minute stability parameters. Note that only one warm-up period of 30 minutes is required for each UUT at the beginning of the test procedure. If the AC input power is not stable over a 5-minute period, follow the guidelines established by section 5.3.3 of IEC 62301-Z for measuring average power or accumulated energy over time for both input and output.
(iii) Test the UUT at the nameplate output voltage(s) at the loading conditions listed in Table 2, derated per the proportional allocation method presented in paragraph 5(b)(1)(iv) of this appendix. Active or passive loads used for efficiency testing of the UUT must maintain the required current loading set point for each output voltage within an accuracy of ±0.5%. Conduct efficiency measurements in sequence from Loading Condition 1 to Loading Condition 4 as indicated in Table 2. For Loading Condition 5, place the UUT in no-load mode, disconnect any additional signal connections to the UUT, and measure input power.
The 2% allowance pertains to nameplate output current, not the calculated current value. For example, a UUT at Loading Condition 3 may be tested in a range from 48% to 52% of the derated output current.
(A) If testing of additional, optional loading conditions is desired, conduct that testing in accordance with this test procedure and subsequent to completing the sequence described in paragraph 5(b)(1)(iii) of this appendix.
(B) Where the external power supply lists both an instantaneous and continuous output current, test the external power supply at the continuous condition only.
(C) If an external power supply cannot sustain output at one or more of the Loading Conditions 1-4 as specified in Table 2 of this section, test the external power supply only at the loading conditions for which it can sustain output.
(iv) Proportional allocation method for loading multiple-voltage external power supplies. Use the following proportional allocation method to provide consistent loading conditions for multiple-voltage external power supplies. For additional explanation (provided for guidance only), please refer to section 6.1.1 of the California Energy Commission's “Proposed Test Protocol for Calculating the Energy Efficiency of Internal Ac-Dc Power Supplies Revision 6.7,” March 2014.
(A) Consider a power supply with N output busses, and nameplate output voltages V
(B) If D ≥1, then loading every bus to its nameplate output current does not exceed the overall maximum output power for the power supply. In this case, load each output bus to the percentages of its nameplate output current listed in Table 2. However, if D <1, it is an indication that loading each bus to its nameplate output current will exceed the overall maximum output power for the power supply. In this case, and at each loading condition, load each output bus to the appropriate percentage of its nameplate output current listed in Table 2, multiplied by the derating factor D.
(v) Minimum output current requirements. Depending on their application, some multiple-voltage power supplies may require a minimum output current for each output bus of the power supply for correct operation. In these cases, ensure that the load current for each output at Loading Condition 4 in Table 2 is greater than the minimum output current requirement. Thus, if the test method's calculated load current for a given voltage bus is smaller than the minimum output current requirement, the minimum output current must be used to load the bus. This load current shall be properly recorded in any test report.
(vi) Efficiency calculation. Calculate and record efficiency at each loading point by dividing the UUT's measured active output power at a given loading condition by the active AC input power measured at that loading condition.
(A) Calculate and record average efficiency of the UUT as the arithmetic mean of the efficiency values calculated at Loading Conditions 1, 2, 3, and 4, in Table 2 of this section.
(B) If, when tested, a UUT cannot sustain output current at one or more of the loading conditions as specified in Table 2 of this section, the average active mode efficiency is calculated as the average of the loading conditions for which it can sustain output.
(C) If the UUT can only sustain one output current at any of the output busses, test it at the loading condition that allows for the maximum output power on that bus (
(vii) Power consumption calculation. The power consumption of Loading Condition 5 (no-load) is equal to the active AC input power (W) at that loading condition.
(2) Off-mode Measurement—If the UUT incorporates manual on-off switches, place the UUT in off-mode and measure and record its power consumption at Loading Condition 5 in Table 2 of this section. The measurement of the off-mode energy consumption must conform to the requirements specified in paragraph (5)(b)(1) of this appendix, except that all manual on-off switches must be placed in the “off” position for the off-mode measurement. The UUT is considered stable if, over 5 minutes with samples taken at least once every second, the AC input power does not drift from the maximum value observed by more than 1% or 50 milliwatts, whichever is greater.
6.
(a) Single-Voltage Adaptive External Power Supply.
(1) Standby Mode and Active-Mode Measurement.
(i) Place in the “on” position any built-in switch in the UUT controlling power flow to the AC input, and note the existence of such a switch in the final test report.
(ii) Operate the UUT at 100% of nameplate output current for at least 30 minutes immediately prior to conducting efficiency measurements. After this warm-up period, monitor AC input power for a period of 5 minutes to assess the stability of the UUT. If the power level does not drift by more than 5% from the maximum value observed, the UUT is considered stable. If the UUT is stable, record the measurements obtained at the end of this 5-minute period. Measure subsequent loading conditions under the same 5-minute stability parameters. Note that only one warm-up period of 30 minutes is required for each UUT at the beginning of the test procedure. If the AC input power is not stable over a 5-minute period, follow the guidelines established by section 5.3.3 of IEC 62301-Z for measuring average power or accumulated energy over time for both input and output.
(iii) Test the UUT at the nameplate output voltage(s) at the loading conditions listed in Table 3, derated per the proportional allocation method presented in paragraph 6(a)(1)(iv) of this appendix. Adaptive external power supplies must be tested twice—once at the highest nameplate output voltage and once at the lowest nameplate output voltage as described in the following sections.
(A) At the highest nameplate output voltage, test adaptive external power supplies in sequence from Loading Condition 1 to Loading Condition 4, as indicated in Table 3 of this section. For Loading Condition 5, place the UUT in no-load mode, disconnect any additional signal connections, and measure the input power.
(B) At the lowest nameplate output voltage, with the exception of USB-PD EPSs, test all adaptive external power supplies in sequence from Loading Condition 1 to Loading Condition 4, as indicated in Table 3 of this section. For USB-PD adaptive external power supplies, at the lowest nameplate output voltage, test the external power supply such that for Loading Conditions 1, 2, 3, and 4, all adaptive ports are loaded to 2 amperes, 1.5 amperes, 1 ampere and 0.5 amperes respectively. All non-adaptive ports will continue to be loaded as indicated in Table 3 of this section. For Loading Condition 5, test all adaptive external power supplies by placing the UUT in no-load mode, disconnecting any additional signal connections, and measuring the input power.
The 2% allowance pertains to nameplate output current, not the calculated current value. For example, a UUT at Loading Condition 3 may be tested in a range from 48% to 52% of the derated output current.
(C) If testing of additional, optional loading conditions is desired, conduct that testing in accordance with this test procedure and subsequent to completing the sequence described in paragraph 6(a)(1)(iii) of this appendix.
(D) Where the external power supply lists both an instantaneous and continuous output current, test the external power supply at the continuous condition only.
(E) If an external power supply cannot sustain output at one or more of the Loading Conditions 1-4 as specified in Table 3 of this section, test the external power supply only at the loading conditions for which it can sustain output.
(iv) Proportional allocation method for loading single-voltage adaptive external power supplies with multiple ports. Use the following proportional allocation method to provide consistent loading conditions for single-voltage adaptive external power supplies with multiple output busses. For additional explanation, please refer to section 6.1.1 of the California Energy Commission's “Proposed Test Protocol for Calculating the Energy Efficiency of Internal Ac-Dc Power Supplies Revision 6.7,” March 2014.
(A) Consider a power supply with N output busses, each with the same nameplate output voltages V
For USB-PD adaptive external power supplies, at the lowest nameplate output voltage, limit the contribution from each port to 10W when calculating the derating factor.
(B) If D ≥1, then loading every port to its nameplate output current does not exceed the overall maximum output power for the power supply. In this case, load each output bus to the percentages of its nameplate output current listed in Table 3 of this section. However, if D <1, it is an indication that loading each port to its nameplate output current will exceed the overall maximum output power for the power supply. In this case, and at each loading condition, each output bus will be loaded to the appropriate percentage of its nameplate output current listed in Table 3 of this section, multiplied by the derating factor D.
(v) Efficiency calculation. Calculate and record the efficiency at each loading point by dividing the UUT's measured active output power at that loading condition by the active AC input power measured at that loading condition.
(A) Calculate and record average efficiency of the UUT as the arithmetic mean of the efficiency values calculated at loading conditions 1, 2, 3, and 4 in Table 3 of this section.
(B) If, when tested, a UUT cannot sustain the output current at one or more of the loading conditions as specified in Table 3 of this section, the average active-mode efficiency is calculated as the average of the Loading Conditions for which it can sustain output.
(C) If the UUT can only sustain one output current at any of the output busses, test it at the loading condition that allows for the maximum output power on that bus (
(vi) Power consumption calculation. The power consumption of Loading Condition 5 (no-load) is equal to the active AC input power (W) at that loading condition.
(2) Off-Mode Measurement—If the UUT incorporates manual on-off switches, place the UUT in off-mode, and measure and record its power consumption at loading condition 5 in Table 3. The measurement of the off-mode energy consumption must conform to the requirements specified in paragraph 6(a)(1) of this appendix, except that all manual on-off switches must be placed in the “off” position for the off-mode measurement. The UUT is considered stable if, over 5 minutes with samples taken at least once every second, the AC input power does not drift from the maximum value observed by more than 1% or 50 milliwatts, whichever is greater. Measure the off-mode power consumption of a single-voltage adaptive external power supply twice—once at the highest nameplate output voltage and once at the lowest.
(b) Multiple-Voltage Adaptive External Power Supply.
(1) Standby Mode and Active-Mode Measurement.
(i) Place in the “on” position any built-in switch in the UUT controlling power flow to the AC input, and note the existence of such a switch in the final test report.
(ii) Operate the UUT at 100% of nameplate output current for at least 30 minutes immediately prior to conducting efficiency measurements. After this warm-up period, monitor AC input power for a period of 5 minutes to assess the stability of the UUT. If the power level does not drift by more than 1% from the maximum value observed, the UUT is considered stable. If the UUT is stable, record the measurements obtained at the end of this 5-minute period. Measure subsequent loading conditions under the same 5-minute stability parameters. Note that only one warm-up period of 30 minutes is required for each UUT at the beginning of the test procedure. If the AC input power is not stable over a 5-minute period, follow the guidelines established by section 5.3.3 of IEC 62301-Z for measuring average power or accumulated energy over time for both input and output.
(iii) Test the UUT at the nameplate output voltage(s) at the loading conditions listed in Table 4, derated per the proportional allocation method presented in paragraph 6(b)(1)(iv) of this appendix. Active or passive loads used for efficiency testing of the UUT must maintain the required current loading set point for each output voltage within an accuracy of ±0.5%. Adaptive external power supplies must be tested twice—once at the highest nameplate output voltage and once at the lowest nameplate output voltage as described in the following sections.
(A) At the highest nameplate output voltage, test adaptive external power supplies in sequence from Loading Condition 1 to Loading Condition 4, as indicated in Table 4 of this section. For Loading Condition 5, place the UUT in no-load mode, disconnect any additional signal connections, and measure the input power.
(B) At the lowest nameplate output voltage, with the exception of USB-PD EPSs, test all other adaptive external power supplies, in sequence from Loading Condition 1 to Loading Condition 4, as indicated in Table 4 of this section. For USB-PD adaptive external power supplies, at the lowest nameplate output voltage, test the external power supply such that for Loading Conditions 1, 2, 3, and 4, all adaptive ports are loaded to 2 amperes, 1.5 amperes, 1 ampere and 0.5 amperes respectively. All non-adaptive ports will continue to be loaded as indicated in Table 4 of this section. For loading condition 5, test all adaptive external power supplies by placing the UUT in no-load mode, disconnecting any additional signal connections, and measuring the input power.
The 2% allowance pertains to nameplate output current, not the calculated current value. For example, a UUT at Loading Condition 3 may be tested in a range from 48% to 52% of the derated output current.
(C) If testing of additional, optional loading conditions is desired, conduct that testing in accordance with this test procedure and subsequent to completing the sequence described in paragraph 6(b)(1)(iii) of this appendix.
(D) Where the external power supply lists both an instantaneous and continuous output current, test the external power supply at the continuous condition only.
(E) If an adaptive external power supply is operating as a multiple-voltage external power supply at only the highest nameplate output voltage or lowest nameplate output voltage, test this external power supply as a multiple-voltage adaptive external power supply at both the highest nameplate output voltage and the lowest nameplate output voltage.
(F) If an external power supply has both adaptive and non-adaptive ports, and these ports operate simultaneously at multiple voltages, ensure that testing is performed with all ports active at both the highest and lowest nameplate output voltage. For example, if an external power supply has an USB-PD adaptive output bus that operates at 5 volts and 20 volts and a second non-adaptive output bus that operates at 9 volts, test this EPS at the highest nameplate output voltage with both the adaptive and non-adaptive ports respectively loaded at 20 volts and 9 volts; likewise, test it at the lowest nameplate output voltage with both the adaptive and non-adaptive ports respectively loaded at 5 volts and 9 volts.
(G) If an external power supply cannot sustain output at one or more of the Loading Conditions 1-4 as specified in Table 4 of this section, test the external power supply only
(iv) Proportional allocation method for loading multiple-voltage adaptive external power supplies. Use the following proportional allocation method to provide consistent loading conditions for multiple-voltage adaptive external power supplies. For additional explanation, please refer to section 6.1.1 of the California Energy Commission's “Proposed Test Protocol for Calculating the Energy Efficiency of Internal Ac-Dc Power Supplies Revision 6.7,” March 2014.
(A) Consider a multiple-voltage power supply with N output busses, and nameplate output voltages V
For USB-PD adaptive external power supplies, at the lowest nameplate output voltage, limit the contribution from each port to 10W when calculating the derating factor.
(B) If D ≥1, then loading every bus to its nameplate output current does not exceed the overall maximum output power for the power supply. In this case, load each output bus to the percentages of its nameplate output current listed in Table 4 of this section. However, if D <1, it is an indication that loading each bus to its nameplate output current will exceed the overall maximum output power for the power supply. In this case, at each loading condition, load each output bus to the appropriate percentage of its nameplate output current listed in Table 4, multiplied by the derating factor D.
(v) Minimum output current requirements. Depending on their application, some multiple-voltage adaptive external power supplies may require a minimum output current for each output bus of the power supply for correct operation. In these cases, ensure that the load current for each output at Loading Condition 4 in Table 4 of this section is greater than the minimum output current requirement. Thus, if the test method's calculated load current for a given voltage bus is smaller than the minimum output current requirement, use the minimum output current to load the bus. Record this load current in any test report.
(vi) Efficiency calculation. Calculate and record the efficiency at each loading point by dividing the UUT's measured active output power at that loading condition by the active AC input power measured at that loading condition.
(A) Calculate and record average efficiency of the UUT as the arithmetic mean of the efficiency values calculated at Loading Conditions 1, 2, 3, and 4 in Table 4 of this section.
(B) If, when tested, a UUT cannot sustain the output current at one or more of the loading conditions as specified in Table 4, the average active-mode efficiency is calculated as the average of the loading conditions for which it can sustain output.
(C) If the UUT can only sustain one output current at any of the output busses, test it at the loading condition that allows for the maximum output power on that bus (
(vii) Power consumption calculation. The power consumption of loading condition 5 (no-load) is equal to the active AC input power at that loading condition.
(2) Off-mode Measurement—If the UUT incorporates manual on-off switches, place the UUT in off-mode, and measure and record its power consumption at loading condition 5 in Table 4. The measurement of the off-mode energy consumption must conform to the requirements specified in paragraph (6)(b)(1) of this appendix, except that all manual on-off switches must be placed in the “off” position for the off-mode measurement. The UUT is considered stable if, over 5 minutes with samples taken at least once every second, the AC input power does not drift from the maximum value observed by more than 1% or 50 milliwatts, whichever is greater. Measure the off-mode power consumption of a multiple-voltage adaptive external power supply twice—once at the highest nameplate output voltage and once at the lowest.
Bureau of Consumer Financial Protection.
Proposed rule with request for public comment.
The Electronic Fund Transfer Act (EFTA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), establishes certain protections for consumers sending international money transfers, or remittance transfers. The Bureau of Consumer Financial Protection's (Bureau) remittance rule in Regulation E (Remittance Rule or Rule) implements these protections. The Bureau is proposing changes to the Rule to mitigate the effects of the expiration of a statutory exception that allows insured institutions to disclose estimates instead of exact amounts to consumers. That exception expires on July 21, 2020. In addition, the Bureau is proposing to increase a safe harbor threshold in the Rule related to whether a person makes remittance transfers in the normal course of its business, which would have the effect of reducing compliance costs for entities that make a limited number of remittance transfers annually.
Comments must be received on or before January 21, 2020.
You may submit comments, identified by Docket No. CFPB-2019-0058 or RIN 3170-AA96, by any of the following methods:
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All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Comments will not be edited to remove any identifying or contact information.
Yaritza Velez, Counsel, or Kristine M. Andreassen, Krista Ayoub, or Jane Raso, Senior Counsels, Office of Regulations, at 202-435-7700. If you require this document in an alternative electronic format, please contact
The Bureau is proposing several amendments to the Remittance Rule,
Second, the Bureau is proposing changes to the Rule to mitigate the effects of the expiration of a statutory exception that allows insured institutions to disclose estimates to consumers of the exchange rate and covered third-party fees instead of exact amounts. That exception expires on July 21, 2020. Specifically, with respect to the exchange rate, the Bureau is proposing to adopt a permanent exception that would permit insured institutions to estimate the exchange rate for a remittance transfer to a particular country if, among other things, the designated recipient will receive funds in the country's local currency and the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to that country when the designated recipients received funds in the country's local currency. With respect to covered third-party fees, the Bureau is proposing to adopt a permanent exception that would permit insured institutions to estimate covered third-party fees for a remittance transfer to a particular designated recipient's institution if, among other things, the insured institution made 500 or fewer remittance transfers to that designated recipient's institution in the prior calendar year. The temporary exception and its statutorily mandated expiration date are in existing § 1005.32(a)(1) and (2); the Bureau's proposed changes to mitigate the expiration of that exception appear in proposed § 1005.32(b)(4) and (5) and related commentary, along with conforming changes in §§ 1005.32(c), 1005.33(a)(1)(iii)(A), and 1005.36(b)(3) and in the commentary accompanying §§ 1005.32, 1005.32(b)(1), (c)(3), and (d), and 1005.36(b).
Finally, the Bureau is also seeking comment on a permanent exception in the Rule (in § 1005.32(b)(1)) permitting providers to use estimates for transfers to certain countries and the process for adding countries to the safe harbor countries list maintained by the Bureau.
The Bureau has received a number of suggestions for other changes to the Remittance Rule to improve its effectiveness in helping consumers or to reduce the burden on providers. However, in light of the time sensitivity of the expiration of the temporary exception, this proposal is limited to the issues described above.
Due to changes in requirements by the Office of the Federal Register, when amending commentary the Bureau is
Consumers in the United States send billions of dollars in remittance transfers to recipients in foreign countries each year. The term “remittance transfers” is sometimes used to describe consumer-to-consumer transfers of small amounts of money, often made by immigrants supporting friends and relatives in other countries. The term may also include, however, payments of larger amounts, for instance, to pay bills, tuition, or other expenses.
Money services businesses (MSBs) as well as banks and credit unions send remittance transfers on behalf of consumers. MSBs, however, provide the overwhelming majority of remittance transfers for consumers in the United States. For example, in the Bureau's October 2018 Remittance Rule Assessment Report,
Banks and credit unions generally send fewer remittance transfers on behalf of consumers than MSBs. The Bureau found that in 2017, banks and credit unions conducted 4.2 and 0.2 percent of all remittance transfers, respectively. However, the average amount that banks and credit unions transferred was much greater than the average amount transferred by MSBs. For example, based on the Bureau's analysis, the average transfer size of a bank-sent remittance transfer was more than $6,500.
In addition, MSBs differ from banks and credit unions in the means by which they provide remittance transfers. Traditionally, MSBs sending remittance transfers have predominantly relied on a storefront model and a network of the MSBs' employees and agents (such as grocery stores and neighborhood convenience stores).
In contrast to MSBs, banks and credit unions have predominantly utilized an “open network” payment system made up of the correspondent banking network
Prior to the Dodd-Frank Act, remittance transfers fell largely outside of the scope of Federal consumer protection laws. Section 1073 of the Dodd-Frank Act amended EFTA by adding a new section 919, which created a comprehensive system for protecting consumers in the United States who send remittance transfers to individuals and businesses in foreign countries.
The Bureau adopted subpart B of Regulation E to implement EFTA section 919 through a series of rulemakings that were finalized in 2012 and 2013, and which became effective on October 28, 2013.
The Bureau has received feedback regarding the Remittance Rule over time through both formal and informal channels. The following is a brief summary of some of the Bureau's requests for information regarding the Rule and recent informal feedback received by the Bureau outside those channels.
Separately, in 2018, the Bureau issued a series of RFIs as part of a call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.
Industry commenters that responded to the three RFIs mentioned above suggested a variety of modifications to the Rule. Many recommended changing the scope of coverage of the Rule in various ways,
The Bureau was also concerned about the Rule's effects on certain remittance transfer providers that account for a small portion of the overall number of remittance transfers but nonetheless are subject to the Rule because they provide more than 100 transfers annually and thus are unable to rely on the current normal course of business safe harbor. The Bureau thus sought information in the 2019 RFI on possible changes to the current safe harbor threshold in the Rule
The Bureau received approximately 44 comments on the 2019 RFI.
Section 1073 of the Dodd-Frank Act created a new section 919 of EFTA requiring remittance transfer providers to provide disclosures to senders of remittance transfers, pursuant to rules prescribed by the Bureau. In particular, providers must give a sender a written pre-payment disclosure containing specified information applicable to the sender's remittance transfer, including the amount to be received by the designated recipient. The provider must also provide a written receipt that includes the information provided on the pre-payment disclosure, as well as additional specified information.
In addition to the Dodd-Frank Act's statutory mandates, EFTA section 904(a) authorizes the Bureau to prescribe regulations necessary to carry out the purposes of EFTA. The express purposes of EFTA, as amended by the Dodd-Frank Act, are to establish “the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems” and to provide “individual consumer rights.”
EFTA section 919(g)(3) defines “remittance transfer provider” to be a person or financial institution providing remittance transfers for a consumer in the “normal course of its business.” The Rule uses a similar definition.
When the Bureau finalized the normal course of business 100-transfer safe harbor threshold in August 2012, it stated that it intended to monitor that threshold over time.
Since August 2012, the Bureau has received feedback suggesting that the 100-transfer safe harbor threshold is too low, including in response to several RFIs issued by the Bureau as well as during market monitoring and other outreach to industry. (See part III above for more information on these RFIs and other outreach.)
The consumer advocacy group opposed any changes to the threshold, asserting that there is insufficient evidence to make such changes.
Several industry commenters also asserted, among other things, that complying with the Remittance Rule has caused credit unions and community banks to exit the remittance transfer market, limit the number of transfers that they provide, or increase the price of transfers, which they asserted has resulted in consumer harm in the form of reduced access and other inconveniences. Several industry commenters offered anecdotes of one or two customers sending a high volume of transfers that pushed a bank or credit union beyond the 100-transfer safe harbor threshold. Some industry commenters suggested that raising the threshold may encourage banks and credit unions that have stopped or limited providing remittance transfers to begin offering them again or relax the limits. A number of industry commenters also stated that raising the threshold would promote competition and thus increase options for consumers and possibly lower prices. In addition, several industry commenters asserted that raising the threshold would increase consumer access to remittance transfer services, especially for consumers in rural areas or locations serviced primarily by local banks or credit unions.
Several industry commenters, including credit unions, banks, and trade associations, alternatively or additionally suggested basing the safe harbor threshold on something other than the number of transfers. Suggestions included, among other things, basing the threshold on the percentage of an entity's customers that send remittance transfers, or the percentage of an entity's transfers that are remittance transfers. A few industry commenters suggested setting a dollar amount threshold (
A few industry commenters noted the overlap between the expiration of the temporary exception and coverage of certain remittance transfer providers under the Rule. Several trade associations stated that raising the normal course of business safe harbor threshold would address concerns from credit unions and community banks regarding the expiration of the temporary exception. These commenters asserted that a small number of credit unions have already stopped providing remittance transfers anticipating the temporary exception's expiration in July 2020, and that community banks will discontinue providing transfers if they can no longer disclose estimates.
Several banks, credit unions, credit union trade associations, and a payments service provider to banks and credit unions suggested exempting from the Remittance Rule credit unions or financial institutions altogether, arguing that such institutions account for a small percentage of the total number of remittance transfers sent and therefore do not actually provide remittance transfers in the normal course of their business.
As discussed in part III above, the Bureau has engaged in ongoing market monitoring and other outreach to industry and other stakeholders regarding the Remittance Rule. As in their comments on the 2019 RFI, the general consensus from industry representatives in these meetings and discussions was that the 100-transfer safe harbor threshold is too low. Representatives from two credit unions suggested raising the threshold to 500 transfers annually. One also suggested the Bureau create an accommodation for recurring transfers and stated that it did not believe a small financial institution exemption would be helpful. Several other entities' representatives noted that market dynamics (
Representatives of several entities suggested other metrics for a safe harbor. A representative for a credit union stated that whether an entity provides remittance transfers in the “normal course of business” should be based on the entity's proportion of customers sending remittance transfers to total customers overall, while representatives of several other credit unions offered ideas for tying the safe harbor to an entity's asset size. Similarly, a representative of a bank suggested using relative size measures, such as the percentage of an entity's total transactions that are remittance transfers, or the percentage of an entity's revenue that is earned from providing remittance transfers.
Representatives of several banks offered insights as to the kind of information that entities not subject to the Rule provide or would provide to consumers. The representative for a bank currently subject to the Rule stated that if the bank no longer had to comply with the Rule, it would end its correspondent banking relationship
The Bureau has monitored the normal course of business 100-transfer safe harbor threshold in the years since the Rule became effective. Based on comments received on the 2019 RFI, other previous RFIs, the results of the Assessment, and other informal feedback received over time, the Bureau is preliminarily persuaded that the safe harbor threshold should be increased to 500 transfers and that such a change is appropriate to implement Congress' definition of remittance transfer provider in EFTA section 919(g)(3) as a person or financial institution providing remittance transfers in the normal course of its business, whether or not the consumer holds an account with such person. The Bureau believes that a threshold of 500 transfers may be more appropriate to identify persons who occasionally provide remittance transfers, but not in the normal course of their business, and would remove them from coverage under the Rule. Five hundred transfers annually would be equivalent to an average of approximately 10 transfers per week, which the Bureau believes would allow entities to send a relatively limited number of transfers without having to incur the costs of developing and implementing processes and procedures to comply with the Rule or the costs of continued compliance with the Rule. The Bureau believes that, at this volume, entities are generally offering remittance transfers as an accommodation for their account-holding customers rather than operating a separate remittance transfers line of business. In addition, the Bureau believes that raising the safe harbor threshold would mitigate any issues that insured institutions currently providing between 101 and 500 transfers annually
The Bureau seeks comment on its proposal to increase the normal course of business safe harbor threshold. Specifically, the Bureau seeks comment on its proposed 500-transfer safe harbor threshold, as well as on whether a different threshold, such as 200 or a number between 200 and 500, would be more appropriate. In particular, the Bureau requests data or other evidence that would assist it in determining what number would be most appropriate for the safe harbor threshold in the Remittance Rule. The Bureau also seeks comment on whether its proposal to increase the safe harbor threshold would in fact help reduce burden for banks and credit unions that provide transfers only as an accommodation to their customers. The Bureau also recognizes that any safe harbor interpreting the phrase “normal course of business” could limit the protections afforded to some consumers and seeks data and other information demonstrating the nature and magnitude of any harm to consumers as a result of such a limit.
The Bureau believes that raising the safe harbor threshold to 500 transfers would appropriately implement the purposes of EFTA section 919, including the statutory definition of remittance transfer provider, by helping to reduce burden for banks and credit unions that provide transfers only as an accommodation to their customers, thereby ensuring that banks and credit unions continue to offer the service to benefit consumers and do not bear a disproportionate cost to do so. The data now available through Call Reports
Specifically, based on the Bureau's analysis of the 2018 Call Report data, raising the threshold from 100 to 500 transfers would remove approximately 414 banks and 247 credit unions (which represent 54.6 percent and 62.3 percent of such entities currently covered by the Remittance Rule, respectively). These entities account for 0.8 percent (92,600) of bank transfers and 6.2 percent (49,300) of credit union transfers, for a total of approximately 141,900 transfers that would no longer be covered by the Rule. Given that MSBs provide more than 95 percent of remittance transfers annually (discussed in greater detail in part II above), the combined number of bank and credit union transfers that would no longer be covered at a threshold of 500 represents only a minimal percentage of all transfers—specifically, under 0.059 percent of all remittance transfers.
If the Bureau were to raise the threshold from 100 to 200 transfers, it would remove 156 banks and 138 credit unions (which represent 20.6 percent and 34.8 percent of such entities currently covered by the Remittance Rule, respectively). These entities account for 0.18 percent (19,900) of bank transfers and 2.31 percent (18,200) of credit union transfers, for a total of approximately 38,100 transfers that would no longer be covered by the Rule. As with the proposed increase from 100 transfers to 500 transfers, given that MSBs provide more than 95 percent of remittance transfers annually, the combined number of bank and credit union transfers that would no longer be covered at a threshold of 200 represents only a minimal percentage of all transfers—specifically, under 0.016 percent of all remittance transfers.
The Bureau notes that the safe harbor, as it currently exists in the Rule as well as with the proposed modification, is not limited to depository institutions but rather is applicable to all persons. However, the types of entities that would qualify for the proposed safe harbor are predominantly banks and credit unions. MSBs provide far greater numbers of transfers annually. The Bureau is not aware of any MSBs providing such a low volume of remittance transfers that they would qualify for the proposed 500-transfer safe harbor threshold, much less a 200-transfer safe harbor threshold.
As noted above, some industry representatives have claimed that some community banks and credit unions have stopped or limited remittance transfer services due to the Remittance Rule. The Bureau in its Assessment found no evidence that, on net, banks or credit unions ceased or limited providing remittance transfers because of the safe harbor threshold.
The Bureau acknowledges that raising the safe harbor threshold would likely result in a reduction of protections for some consumers, because consumers that send remittance transfers from entities that newly qualify for the safe harbor would likely receive less information about the exchange rates and fees related to their remittance transfers, and those entities would likely not give the same cancellation rights or error resolution protections as required under the Remittance Rule. However, based on the results of the Assessment, as well as the updated analysis contained herein, the Bureau understands that the number of affected consumers would likely be relatively small, given that the banks and credit unions that would no longer be covered by the Rule if the Bureau raised the safe harbor threshold to 500 transfers account for a very small proportion of all remittance transfers annually.
Based on the data the Bureau currently has, and in order to effectuate the purposes of EFTA and to facilitate compliance, the Bureau is proposing to raise the safe harbor threshold from 100 to 500 remittance transfers. Specifically, the Bureau is proposing to revise existing § 1005.30(f)(2)(i) to state that a person is deemed not to be providing remittance transfers for a consumer in the normal course of its business (and thus not subject to the Remittance Rule), if the person provided 500 or fewer transfers in the previous calendar year and provides 500 or fewer transfers in the current calendar year. The Bureau is also proposing to revise part of existing § 1005.30(f)(2)(ii) regarding the safe harbor transition period to reflect the proposed 500-transfer safe harbor threshold and the proposed effective date for this rulemaking. (The proposed effective date is discussed in more detail in part VI below.) Specifically, the proposed revision to § 1005.30(f)(2)(ii) states that if, beginning on July 21, 2020, a person that provided 500 or fewer remittance transfers in the previous calendar year provides more than 500 remittance transfers in the current calendar year, and if that person is then providing remittance transfers for a consumer in the normal course of its business pursuant to § 1005.30(f)(1), the person has a reasonable period of time, not to exceed six months, to begin complying with subpart B.
The Bureau is also proposing to add new § 1005.30(f)(2)(iii) to address the transition period for persons qualifying for the safe harbor. Proposed § 1005.30(f)(2)(iii) states that if a person who previously provided remittance transfers in the normal course of its business in excess of the safe harbor threshold set forth in § 1005.30(f)(2) determines that, as of a particular date, it will qualify for the safe harbor, it may cease complying with the requirements of subpart B of Regulation E with respect to any remittance transfers for which payment is made after that date. The requirements of EFTA and Regulation E, including those set forth in §§ 1005.33 and 1005.34, as well as the requirements set forth in § 1005.13, continue to apply to transfers for which payment is made prior to that date.
The Bureau notes that existing language in § 1005.30(f)(2)(ii) regarding the six month transitional period for coming into compliance after ceasing to qualify for the safe harbor, as well as the proposed language in § 1005.30(f)(2)(iii) regarding newly qualifying for the safe harbor, both peg their requirements for particular transfers based on when payment is made for such transfers. The phrase “payment is made” is used numerous times throughout the Rule, and the Bureau believes that it provides a clear test as to whether any particular transfer is or is not subject to the Rule.
With respect to transfers scheduled before the date of transfer pursuant to § 1005.36, in particular for a series of transfers that are scheduled in advance, the Bureau notes that remittance transfer providers subject to the Rule are required to give consumers disclosures in accordance with the Rule's requirements, including but not limited to consumers' cancellation and error resolution rights. The Bureau notes that the transition from being covered by the Rule to qualifying for the safe harbor is not a new issue presented by this proposal, and seeks comment on what persons that were remittance transfer providers subject to the Rule before qualifying for the safe harbor have done—or expect to do—with respect to any transfers scheduled in advance after they qualify for the safe harbor. The Bureau further seeks comment on whether it is necessary and appropriate for the Bureau to prescribe specific notice obligations in this situation and, if so, what those obligations should be. The Bureau notes that if a provider gives consumers the required disclosures under the Rule, but does not subsequently inform consumers of its changed compliance obligations with respect to what it has previously disclosed, that person risks exposing itself to potential liability under the Dodd-Frank Act or other laws.
With respect to the commentary accompanying § 1005.30(f), first, the Bureau is proposing to revise the last sentence in existing comment 30(f)-2.i in order to avoid potential conflict or confusion with the proposed safe harbor threshold of 500 transfers. The Bureau is also proposing to revise existing comments 30(f)-2.ii and iii regarding the safe harbor and transition period for consistency with the proposed changes to § 1005.30(f)(2)(i) and (ii). In addition, the Bureau is proposing to add a sentence in comment 30(f)-2.ii that states that on July 21, 2020, the safe harbor threshold in § 1005.30(f)(2)(i) changed from 100 transfers to 500 transfers, to memorialize the change. The Bureau is also proposing to renumber existing comment 30(f)-2.iv as 30(f)-2.iv.A (in order to add two additional examples, described below), to revise the heading for this comment to make clear that it provides an example of the safe harbor and transition period for the 100-transfer safe harbor threshold that was effective prior to the proposed effective date of July 21, 2020, and to change the verb tense from present to past throughout the example. The Bureau requests comment on whether it is useful to retain this example, as it has proposed to do, or whether the example should be eliminated.
The Bureau is proposing to add new comment 30(f)-2.iv.B to provide an example of the safe harbor for a person that provided 500 or fewer transfers in 2019 and provides 500 or fewer transfers in 2020. The Bureau is also proposing to add new comment 30(f)-2.iv.C, which provides an example of the safe harbor and transition period for the 500-transfer threshold that would be effective beginning on the proposed effective date of July 21, 2020. This proposed comment is based on the example in existing comment 30(f)-2.iv, with modifications to reflect the changes the Bureau is proposing to § 1005.30(f)(2).
Finally, the Bureau is proposing to add new comment 30(f)-2.v to address continued obligations under the Rule with respect to transfers for which payment was made before a person qualifies for the safe harbor. The proposed comment states that proposed § 1005.30(f)(2)(iii) addresses situations where a person who previously was required to comply with subpart B of Regulation E newly qualifies for the revised safe harbor in proposed § 1005.30(f)(2)(i). It explains that proposed § 1005.30(f)(2)(iii) states that the requirements of EFTA and Regulation E, including those set forth in §§ 1005.33 and 1005.34 (which address procedures for resolving errors and procedures for cancellation and refund of remittance transfers, respectively), as well as the requirements set forth in § 1005.13 (which, in part, governs record retention), continue to apply to transfers for which payment is made prior to the date the person qualifies for the safe harbor in § 1005.30(f)(2)(i). The comment also explains that qualifying for the safe harbor in § 1005.30(f)(2)(i) likewise does not excuse compliance with any other applicable law or regulation. For example, if a remittance transfer is also an electronic fund transfer, any requirements in subpart A of Regulation E that apply to the transfer continue to apply, regardless of whether the person must comply with subpart B. Relevant requirements in subpart A of Regulation E may include, but are not limited to, those relating to initial disclosures, change-in-terms notices, liability of consumers for unauthorized transfers, and procedures for resolving errors.
The Bureau seeks comment on its proposed revisions and additions to commentary, as described above. The Bureau also requests comment on whether any additional clarification or guidance regarding the proposed revised safe harbor threshold is needed and, if so, what specifically should be addressed. In particular, the Bureau seeks comment on whether and to what extent providers have encountered transitional issues when qualifying for the existing safe harbor after complying with the Rule, as well as whether providers who expect to qualify for the proposed revised safe harbor anticipate any transitional issues. The Bureau also solicits comment on whether providers anticipate any particular issues with a mid-year effective date (July 21, 2020) for its proposed change to the safe harbor threshold (see also the discussion of the proposed effective date in part VI below). Finally, the Bureau seeks comment on whether there are any other provisions in existing commentary that should be modified or removed in light of the changes proposed herein.
The Bureau notes that it considered these and other approaches when it finalized the 100-transfer safe harbor threshold in 2012. The Bureau stated it did not believe it was appropriate, based on the administrative record at the time, to define a safe harbor based on a relative size measure, such as percentage of revenue, or other suggested criteria, and that commenters did not provide, and the Bureau did not have data suggesting, across the remittance transfer industry, why any of the suggestions made by commenters would be an appropriate basis for the safe harbor threshold. The Bureau also stated that it believed that due to the wide variety of business models for offering remittance transfers and lack of currently available data, it would be difficult to craft a single standalone measure of relative size for identifying persons who provide remittance transfers on only a limited basis.
Entities are familiar with tracking their remittance transfers for purposes of the current safe harbor, Call Report requirements, and other purposes; the Bureau does not believe that tracking remittance transfer volume in order to confirm that entities qualify for the safe harbor will be any more difficult if the safe harbor threshold were 500 than it is with the current threshold of 100. While tracking total revenue (rather than profits) from remittance transfers may also be somewhat straightforward, the Bureau is particularly concerned that some alternative approaches, such as tracking a proportion (
Nonetheless, the Bureau solicits comment on whether it should adopt any alternate or additional approach for the safe harbor from the “normal course of business” definition. Specifically, regarding the suggestion to base the safe harbor threshold on the percentage of an entity's customers that send remittance transfers, the Bureau seeks comment on whether this would be a viable approach and if so, what the appropriate percentage of customers would be and why. In addition, the Bureau seeks comment on the time frame over which any such alternate approach should be tracked and the timing for any transitional provisions that might be necessary using such an approach. The Bureau also seeks comment on the potential burdens to entities, or challenges that could arise, in basing the safe harbor on an approach other than the annual number of remittance transfers.
In the 2019 RFI, the Bureau also requested information and evidence to determine whether an exception for small financial institutions (for example, based on asset size) might be appropriate.
As discussed in part II above, a significant consumer protection provided by the Remittance Rule is the requirement that remittance transfer providers disclose certain information to consumers that send remittance transfers. Specifically, a provider generally must provide a pre-payment disclosure (as set forth in § 1005.31(b)(1)) to a sender when the sender requests the remittance transfer, but prior to payment for the transfer. The provider also generally must provide a receipt (as required by § 1005.31(b)(2)) to the sender when payment is made for the remittance transfer. As an alternative to providing the separate pre-payment disclosure and the receipt, a provider may provide a combined disclosure (as described in § 1005.31(b)(3)) to the sender when the sender requests a remittance transfer, but prior to payment. Section 1005.36(a)(1) and (2) sets forth special rules for when the disclosures must be given for a one-time transfer scheduled five or more business days before the date of transfer or for the first in a series of preauthorized remittance transfers.
The disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) include a disclosure of the exchange rate if the transfer will be received in a currency other than the one in which the transfer was funded, as described in § 1005.31(b)(1)(iv). The disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) also must include the following disclosures as set forth in § 1005.31(b)(1)(v) through (vii), respectively: (1) If “covered third-party fees” as defined in § 1005.30(h) are imposed, the total amount that will be transferred to the recipient inclusive of the covered third-party fees; (2) the amount of any covered third-party fees; and (3) the amount that will be received by the designated recipient (after deducting any covered third-party fees). The above disclosures set forth in § 1005.31(b)(1)(v) through (vii) must be provided in the currency in which the designated recipient will receive the funds.
Relatedly, an important requirement established by EFTA section 919 is that remittance transfer providers generally must disclose (both prior to and at the time the consumer pays for the transfer) the exact exchange rate and the amount to be received by the designated recipient of a remittance transfer.
As noted above, EFTA section 919 sets forth a temporary exception that permits certain financial institutions to disclose estimates instead of exact amounts to consumers. Remittance transfer providers qualify for the temporary exception in EFTA section 919 if: (i) They are insured depository institutions or insured credit unions (collectively, “insured institutions”) that make a transfer from an account that the sender holds with them; and (ii) they are unable to know, for reasons beyond their control, the amount of currency that will be made available to the designated recipient. If these conditions are met, EFTA's temporary exception provides that these institutions need not disclose the amount of currency that will be received by the designated recipient but rather may disclose “a reasonably accurate
EFTA set the temporary exception to expire five years from the enactment of the Dodd-Frank Act. EFTA also provided a one-time ability for the Bureau to extend the exception for up to five more years, until July 21, 2020, if the Bureau determined that the expiration of the exception would negatively affect the ability of insured institutions to send remittance transfers to foreign countries. In 2014, the Bureau by rule extended the exception for five years to July 21, 2020.
In implementing the temporary exception in EFTA section 919, § 1005.32(a)(1) provides that a remittance transfer provider may give estimates in compliance with § 1005.32(c) for the exchange rate (if applicable), covered third-party fees, and certain other disclosures if the provider meets three conditions. The three conditions are: (1) The provider must be an insured institution; (2) the provider must not be able to determine the exact amounts to be disclosed for reasons beyond its control; and (3) the transfer generally must be sent from the sender's account with the insured institution.
Section 1005.32(a)(3) provides that insured depository institutions, insured credit unions, and uninsured U.S. branches and agencies of foreign depository institutions are considered “insured institutions” for purposes of the temporary exception. MSBs are not “insured institutions” for purposes of the temporary exception. The Bureau is not proposing to amend § 1005.32(a) but provides a discussion of this provision and related comments received in response to the 2019 RFI as background to explain its proposed two new exceptions in § 1005.32(b)(4) and (5), discussed below.
As discussed in part II above, banks and credit unions have predominantly utilized an “open network” payment system made up of the correspondent banking network to send remittance transfers on behalf of consumers, and most banks and credit unions only maintain a relatively small number of correspondent banking relationships. As such, in many cases involving remittance transfers sent via the correspondent banking network, the sending institution must find a chain of one or more intermediary financial institutions to transmit funds from the sending institution to the designated recipient's institution.
There are two basic ways of how such a chain works where the originating (sending) institution has no correspondent banking relationship with the designated recipient's institution: the “serial” method and the “cover” method (also known as the “split and cover” method).
As discussed above, the temporary exception permits insured institutions to disclose estimates (rather than exact amounts) of the exchange rate and covered third-party fees (and other amounts that have to be estimated because the exchange rate and covered third-party fees are estimated). With respect to the exchange rate, insured institutions and their trade associations have reported to the Bureau that because exchange rates fluctuate, sending institutions comply with the requirement to disclose exact exchange rates by “fixing” the exchange rate at the time a sender requests a remittance transfer. They do this by converting the funds to the applicable foreign currency up front themselves, or by using their correspondent bank or third-party service provider (instead of having an intermediary financial institution or the designated recipient's institution perform the foreign currency conversion). As discussed in greater detail below in the section-by-section analysis of proposed § 1005.32(b)(4), insured institutions may face a number of hurdles with respect to converting funds to certain currencies upfront. In such cases, they may rely on the temporary exception with respect to the disclosure of the exchange rate.
The Bureau has continued to monitor the remittance transfer market since the publication of the Assessment Report and observes that most of these developments continue to progress. Examples include: (1) The continued growth and expanding functionality of the Society for Worldwide Interbank Financial Telecommunication (SWIFT)'s “global payment innovation” (gpi) tracking product, which can increase the amount of up-front information available to sending
These developments suggest that in the future there may be means by which banks and credit unions could reduce their remaining reliance on estimates. These developments all share a fundamental similarity: They all apply elements of a closed network payment system to cross-border money transfers sent by banks and credit unions. As discussed in part II above, in a closed network payment system, a single entity generally exerts a high degree of end-to-end control over a transaction. This control generally facilitates standardization and uniformity over terms, conditions, and processes to which participants in a closed network payment system must adhere. That standardization and uniformity, in turn, can provide a great deal of certainty to all participants in such a system as to the terms and conditions that will apply to individual transactions within that system.
To the degree banks and credit unions increase their reliance on closed network payment systems for sending remittance transfers and other cross-border money transfers, the Bureau notes that this could result in greater standardization and ease by which sending institutions can quote exact covered third-party fees and exchange rates. The Bureau also believes that expanded adoption of SWIFT's gpi product or Ripple's suite of products could similarly allow banks and credit unions to know the exact final amount that recipients of remittance transfers will receive before they send the transfer.
However, based on comments that banks, credit unions, and their trade associations submitted in response to the 2019 RFI and the Bureau's own market monitoring, the Bureau believes it is unlikely in the short-to-medium term that the developments described above will be able to fully eliminate reliance on the correspondent banking network as the predominant method for banks and credit unions to send remittance transfers. There are thousands of financial institutions worldwide that could receive remittance transfers. If, as noted above, the different approaches described above share the similarity of replicating some elements of a closed network payment system, they likely would need to enroll all or most of those financial institutions into their platforms to offer banks and credit unions up-front certainty when sending transfers for which they currently rely on the temporary exception. It may be costly, excessively time-consuming, or otherwise difficult to enroll all or even most of these institutions, especially the smaller ones. Accordingly, the Bureau believes that it is unlikely in the short-to-medium term for the developments discussed above to replace the correspondent banking system as the predominant means that banks and credit unions use to send remittance transfers.
As noted in part III above, the Bureau in the 2019 RFI sought information on the upcoming expiration of the temporary exception and potential options to mitigate its impact. In response to the 2019 RFI, the overwhelming majority of comments came from banks, credit unions, their trade associations, and their service providers. The Bureau received one comment from a “fintech” nonbank remittance transfer provider and one comment from a consumer advocacy group.
Several industry commenters asserted that insured institutions might stop sending remittance transfers in situations where the insured institutions cannot provide exact disclosures of the exchange rate or covered third-party fees. Several other industry commenters acknowledged that it is possible for them to send certain remittance transfers for consumers via international ACH, or use nonbank service providers, closed network payment systems, or other methods that could allow them to control or eliminate covered third-party fees and thus provide exact amounts of those fees in the disclosures required by the Remittance Rule. They also asserted, however, that none of these methods provide a comprehensive alternative to the correspondent banking system.
Several industry commenters asserted that after the temporary exception expires, if the Bureau does not allow insured institutions to continue providing estimates, it will hurt smaller insured institutions and their customers. These industry commenters indicated that if the larger correspondent banks react to the expiration of the temporary exception by limiting or increasing the cost of their offerings, there will likely be a domino effect in the industry that will negatively influence the cost of, or access to, these services for consumers. Several industry commenters indicated that if community banks and credit
Several industry commenters indicated that insured institutions that continue to offer remittance transfers may see costs increase when sending transfers to certain destinations if insured institutions have to change the ways they provide remittance transfers in order to disclose exact amounts. With respect to the exchange rate, two bank commenters indicated that if banks have to move to providing an exact exchange rate for all wire transfers, banks will have no choice but to build in an extra buffer in the exact exchange rate disclosed, so that they do not lose money on the transactions. One trade association indicated that (1) for credit unions that rely primarily on correspondent institutions to provide exchange rate and fee information, the expiration of the temporary exception could have indirect effects if correspondent banks adopt costlier processes for ensuring accurate disclosure of amounts received; and (2) if the compliance costs of correspondents are passed on to credit unions, this could further challenge credit unions' ability to offer remittance transfers at reasonable and competitive rates.
Several industry commenters asserted that they believed that there is no evidence of consumer harm from disclosing estimates rather than exact amounts. Several trade associations indicated that banks maintain databases of fee information to allow them to provide highly reliable estimates when they are unable to know with certainty the exact covered third-party fees that will be assessed.
Based on the concerns discussed above, a number of industry commenters requested that the Bureau exempt all wire transfers from the requirement to disclose the exact exchange rate and covered third-party fees to accommodate the characteristics of remittance transfers sent through correspondent banks in an open network payment system. They asserted that the Bureau could use its general exception and adjustment authority under EFTA section 904(c) to exempt wire transfers from the requirement to provide exact exchange rates or covered third-party fees (and the disclosures that depend on those amounts) when insured institutions are not able to determine exact amounts. In the alternative, several trade associations suggested that the Bureau should use its authority under EFTA section 919(c) to exempt wire transfers where exact amounts cannot reasonably be determined in advance.
Other industry commenters discussed other approaches to address concerns specifically related to providing exact exchange rates, and these approaches are discussed below in the section-by-section analysis of proposed § 1005.32(b)(4). Industry suggestions to address concerns specifically relating to providing exact covered third-party fees are discussed below in the section-by-section analysis of proposed § 1005.32(b)(5).
Several industry trade associations indicated that, if the Bureau does not extend or make permanent the temporary exception, the Bureau should adopt a one-year transition period to provide a safe harbor for banks' good faith implementation and compliance efforts. These trade associations indicated that this one-year transition period is needed because of the complexities of determining how any changes in a final rule will affect services to consumers and other banks, the need to communicate those impacts to customers, and the need to create new procedures and training to enable compliance.
As noted in part III above, the Bureau has engaged in ongoing market monitoring and other outreach to industry and other stakeholders regarding the Remittance Rule. As in their comments on the 2019 RFI, the general consensus from industry in these meetings and discussions was that, if the Bureau does not take steps to allow estimates of the exchange rate or covered third-party fees to mitigate the expiration of the temporary exception, insured institutions may stop sending remittance transfers in situations where, despite reasonable efforts, they cannot provide exact disclosures. One trade association emphasized the difficulties that some
Several large insured institutions provided information on the circumstances in which they use the temporary exception and discussed their concerns about the potential impact its expiration would have on whether they could continue to provide certain remittance transfers. These institutions indicated that they do not rely on the temporary exception to estimate the exchange rate but do rely on it in certain circumstances to estimate covered third-party fees. They also described the actions they have taken or plan to take to mitigate the potential impacts of the expiring temporary exception, and potential measures that the Bureau could take to limit further its impact. One large insured institution also identified the countries where it uses the temporary exception most often to estimate covered third-party fees, and for each of these countries provided information about the number of remittance transfers for which it uses the temporary exception.
The Bureau also received a letter from several members of Congress expressing concern that if insured institutions are no longer able to provide estimates of exchange rates and covered third-party fees after the temporary exception expires, many institutions would likely discontinue providing remittance transfer services to their customers because they would be unable to comply with the Remittance Rule. These members of Congress requested that the Bureau use its authority under EFTA section 904(a) and (c), or its authority under EFTA section 919(c), or its authority under section 1032 of the Dodd-Frank Act, to allow insured institutions to continue providing estimates of exchange rates and covered third-party fees in cases where exact disclosures are not possible. These members of Congress stated that a solution should be permanent, not temporary, so insured institutions are able to make long-term decisions regarding the provision of remittance transfer services.
To mitigate the impact of the temporary exception's expiration, the Bureau is proposing two new permanent exceptions, as discussed in greater detail below in the section-by-section analyses of proposed § 1005.32(b)(4) and (5). The Bureau is retaining the temporary exception in § 1005.32(a)(1), with the current sunset date of July 21, 2020. As discussed in the 2019 RFI, EFTA section 919 expressly limits the length of the temporary exception to July 21, 2020. The Bureau, therefore, is not proposing to extend the exception or make it permanent. As such, the exception will expire on July 21, 2020 unless Congress changes the law. For similar reasons, the Bureau is not proposing to replicate the temporary exception, as some trade association commenters suggested the Bureau should do.
The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) that must be disclosed in the disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) in certain circumstances. This proposed exception is designed to help mitigate the impact of the expiration of the temporary exception on consumers' access to certain remittance transfers.
Several industry commenters asserted that insured institutions have difficulty knowing the exact exchange rate at the time they must provide the disclosures required by the Remittance Rule. For example, several industry trade associations indicated that (1) insured institutions can provide the exact exchange rate in the disclosures if the insured institution, its service provider, or its correspondent bank conducts the foreign currency exchange prior to the transfer; they noted, however, that it may be difficult for this to occur for all remittance transfers sent by insured institutions; (2) in many cases, local customs or practices may make foreign currency exchange outside the United States difficult or impossible even if these restrictions are not pursuant to the laws of the receiving country; (3) for some currencies, the market is too small and illiquid, which makes maintenance of a currency-trading desk in the United States difficult or impossible; (4) for other currencies, it may not be economically viable for a correspondent bank to conduct the foreign currency exchange for other reasons, including that some currencies may just simply be difficult or expensive to purchase; and (5) banks generally profit on their foreign currency exchange services, and some foreign banks may refuse to process incoming wire transfers not denominated in U.S. dollars so as not to lose the revenue they receive from exchanging the currency themselves. One bank also indicated that it is expensive to “lock in” an exchange rate for highly volatile currencies because of the fluctuations in those exchange rates.
As discussed in more detail above in the section-by-section analysis of § 1005.32(a), several industry commenters indicated that if the Bureau does not adopt an exception that allows insured institutions to continue to estimate the exchange rate in certain circumstances, insured institutions may stop sending remittance transfers in situations where the insured institutions cannot disclose the exact exchange rate. Several other industry commenters indicated that insured institutions that continue to offer remittance transfers may see costs increase when sending transfers to certain countries if insured institutions have to change the ways they provide transfers in order to disclose exact exchange rates.
Several trade associations suggested that the Bureau should permit exchange rate estimates for any remittance transfer that involves exchanging a foreign currency if the remittance transfer provider or its foreign currency provider is unable to conduct foreign currency exchange “in the ordinary course of its business.” The trade associations indicated that this suggested exception would cover the following situations: (1) Local customs and practices, rather than specific laws, prevent banks from disclosing the exact exchange rate; (2) currencies with very small or illiquid markets, which makes the maintenance of a currency-trading desk in the U.S. difficult or impossible;
In addition, one credit union raised a specific issue related to Department of Defense (DoD) regulations that require the credit union to benchmark the exchange rate it offers as a credit union on a military installation in a foreign country to the Military Banking Facility (MBF) rate. For one-time transfers scheduled one to four days in advance, the credit union indicates that it uses the temporary exception to estimate the exchange rate because it does not know the benchmark rate that will apply on the date of transfer and does not qualify for the existing permanent exception in § 1005.32(b)(2), which permits estimates for transfers scheduled five or more business days before the date of transfer when certain conditions are met.
The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) in certain circumstances. Based on the comments received on the 2019 RFI and other outreach and research, the Bureau is concerned that if it does not adopt any additional exceptions that allow estimates of the exchange rate after the temporary exception expires, some insured institutions may choose to stop sending remittance transfers to recipients in certain countries. These insured institutions may choose to stop providing certain remittance transfers because they deem the costs of determining exact amounts for the exchange rate to be prohibitively expensive. The Bureau is concerned that if these institutions discontinue providing such transfers, consumer access to remittance transfer services for certain countries may be reduced or eliminated. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), it appears increasingly unlikely that any new technologies or partnerships will be able to fully eliminate insured institutions' reliance on estimates in the short-to-medium term.
Also, the Bureau is concerned that, when the temporary exception expires, if the Rule does not allow estimates of the exchange rate in certain circumstances, insured institutions that continue to offer remittance transfer services may see costs increase when sending transfers to certain countries if insured institutions have to change the ways they provide remittance transfers in order to disclose exact exchange rates. This would predictably lead to increased prices for consumers. In addition, the Bureau is concerned that prices for consumers may also increase for transfers to certain countries (due to reduced competition) if the number of remittance transfer providers offering remittance transfers to such countries is reduced due to some providers eliminating or curtailing transfer services because they could not determine and disclose exact exchange rates for those countries.
Proposed § 1005.32(b)(4)(i) generally provides that for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be provided for a remittance transfer to a particular country in accordance with § 1005.32(c) for the amounts required to be disclosed under § 1005.31(b)(1)(iv) through (vii) if the designated recipient of the remittance transfer will receive funds in the country's local currency and all of the following conditions are met: (1) The remittance transfer provider is an insured institution as defined in § 1005.32(a)(3); (2) the insured institution cannot determine the exact exchange rate for that particular remittance transfer at the time it must provide the applicable disclosures; (3) the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country's local currency; and (4) the remittance transfer generally is sent from the sender's account with the insured institution.
Proposed § 1005.32(b)(4)(i) would generally apply to the following disclosures set forth in § 1005.31(b)(1)(iv) through (vii) respectively: (1) The exchange rate (as applicable); (2) if “covered third-party fees” as defined in § 1005.30(h) are imposed, the total amount that will be transferred to the recipient inclusive of the covered third-party fees; (3) the amount of any covered third-party fees; and (4) the amount that will be received by the designated recipient (after deducting any covered third-party fees). Proposed § 1005.32(b)(4)(ii) makes clear, however, that the total amount that will be transferred to the recipient inclusive of covered third-party fees, the amount of covered third-party fees, and the amount that will be received by the designated recipient (after deducting covered third-party fees) may be estimated under proposed § 1005.32(b)(4)(i) only if the exchange rate is permitted to be estimated under proposed § 1005.32(b)(4)(i) and the estimated exchange rate affects the amount of such disclosures. For example, if a remittance transfer will be received by the designated recipient in the same currency as the one in which the transfer is funded, the insured institution would not disclose an exchange rate for the transfer, and the total amount that will be transferred to the recipient inclusive of covered third-party fees, the amount of covered third-party fees, and the amount that will be received by the designated recipient (after deducting covered third-party fees) will not be affected by an exchange rate. In that case, an insured institution may not use proposed § 1005.32(b)(4) to estimate those disclosures. The insured institution, however, may be able to use another permanent exception set forth in § 1005.32(b), including the exception in proposed § 1005.32(b)(5), to estimate those disclosures if the conditions of those exceptions are met.
Proposed § 1005.32(b)(4) also would apply only if the designated recipient of the remittance transfer will receive funds in the country's local currency. Current comment 31(b)(1)(iv)-1 provides guidance on how a remittance transfer provider can determine in which currency the designated recipient will receive the funds. The comment provides that for purposes of determining whether an exchange rate is applied to the transfer, if a remittance transfer provider does not have specific knowledge regarding the currency in which the funds will be received, the provider may rely on a sender's representation as to the currency in which funds will be received. For example, if a sender requests that a remittance transfer be deposited into an account in U.S. dollars, the provider need not disclose an exchange rate, even if the account is denominated in Mexican pesos and the funds are
Each of the four conditions set forth in proposed § 1005.32(b)(4)(i)(A) through (D) is discussed in more detail below. The Bureau solicits comment generally on this proposed exception, and on each condition as discussed in more detail below.
Nonetheless, the Bureau understands that some remittance transfer providers that are not insured institutions could use the correspondent banking system to send remittance transfers.
Proposed comment 32(b)(4)-1.i provides an example of when an insured institution cannot determine an exact exchange rate under proposed § 1005.32(b)(4)(i)(B) for a remittance transfer. Proposed comment 32(b)(4)-1.ii provides two examples of when an insured institution can determine an exact exchange rate under proposed § 1005.32(b)(4)(i)(B) for a remittance transfer, and thus the insured institution may not use the proposed exception in proposed § 1005.32(b)(4) to estimate the disclosures required under § 1005.31(b)(1)(iv) through (vii) for the remittance transfer. The Bureau solicits comment on the condition set forth in proposed § 1005.32(b)(4)(i)(B) generally, and on the guidance and examples set forth in proposed comment 32(b)(4)-1 for whether an insured institution can or cannot determine the exact exchange rate for a remittance transfer for purposes of proposed § 1005.32(b)(4)(i)(B).
Proposed comment 32(b)(4)-2.i provides that for purposes of determining whether an insured institution made 1,000 or fewer remittance transfers in the prior calendar year to a particular country pursuant to proposed § 1005.32(b)(4)(i)(C), the number of remittance transfers provided includes transfers in the prior calendar year to that country when the designated recipients of those transfers received funds in the country's local currency regardless of whether the exchange rate was estimated for those transfers. The proposed comment provides an example to illustrate. Also, proposed comment 32(b)(4)-2.ii provides that for purposes of the 1,000 transfer threshold, the number of remittance transfers does not include remittance transfers to a country in the prior calendar year when the designated recipients of those transfers did not receive the funds in the country's local currency. The proposed comment provides an example to illustrate.
The Bureau is concerned that if an insured institution is sending 1,000 or fewer remittance transfers to a particular country in the country's local currency, it may be unduly costly for the institution to establish and maintain currency-trading desk capabilities and risk management policies and practices related to foreign exchange trading of that currency, or to use service providers, correspondent institutions, or persons that act as the insured institution's agent to obtain exact exchange rates for that currency. Based on the comments received on the 2019 RFI and additional outreach and research, the Bureau believes that cost is a primary factor in whether an insured institution will perform the currency exchange and thus whether it would know the exact exchange rate to provide in its disclosures. In these cases where the volume is less than the proposed
The Bureau has received feedback from banks, credit unions, and their trade associations that there are other circumstances in which an insured institution does not perform the foreign currency conversion upfront, and they do not appear to be directly or primarily related to the cost to the insured institution of performing the currency exchange or the scale of an insured institution's foreign exchange business. For example, some trade association commenters on the 2019 RFI asserted that local customs or practices may make foreign currency exchange outside the United States “difficult or impossible” even if these restrictions are not pursuant to the laws of the receiving country, or that some foreign banks may refuse to process incoming wire transfers not denominated in U.S. dollars so as not to lose the revenue they receive from performing the currency exchange themselves. Based on outreach and its understanding of the market, however, the Bureau believes that insured institutions with foreign currency exchange businesses that have reached a sufficient or large-enough scale may be better-equipped at navigating these situations. As such, the proposed threshold, if adopted, should largely obviate the concerns related to these circumstances.
The Bureau solicits comment generally on this proposed condition and, in particular, on the proposed 1,000-transfer threshold. The Bureau solicits comment on whether the proposed 1,000-transfer threshold is an appropriate number of transfers to avoid institutions incurring undue costs in establishing and maintaining currency-trading desks and managing the risks related to foreign exchange trading of currency for certain countries, or to use service providers, correspondent institutions, or persons that act as the insured institution's agent to obtain exact exchange rates for those currencies. The Bureau also solicits comment on whether some other number of transfers would be more appropriate in light of these cost considerations. The Bureau further solicits comment on whether there are other defined conditions which would warrant an exemption.
The Bureau notes that the proposed threshold amount focuses on the number of transfers to a particular country (in the country's local currency) that the insured institution made to that country in the previous calendar year. Unlike covered third-party fees, where the amount of the fees charged vary by institution, the Bureau understands that the exchange rate generally is determined at the country level. Nonetheless, the Bureau recognizes that in some cases, several countries may use the same currency, such as the Euro currency, and that in other cases one country may use more than one currency, such as Bhutan which officially allows both the ngultrum and the Indian rupee currencies to be used in the country.
The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate covered third-party fees (and other disclosures that depend on the covered third-party fees) that must be included in certain circumstances in the disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2). This proposed exception is designed to help mitigate the impact of the expiration of the temporary exception on consumers' access to certain remittance transfers.
The term “covered third-party fees” is defined in § 1005.30(h)(1) to mean any fees (other than “non-covered third-party fees” described in § 1005.30(h)(2)) that a person other than the remittance transfer provider imposes on the transfer. Fees imposed on a wire transfer by an intermediary institution are covered third-party fees. In addition, fees imposed by a designated recipient's institution on a wire transfer are covered third-party fees if the designated recipient's institution acts as an agent for the remittance transfer provider.
In contrast, the term “non-covered third-party fees” is defined as any fees imposed by the designated recipient's institution for receiving a remittance transfer into an account except if the institution acts as an agent of the remittance transfer provider. Fees a designated recipient's institution imposes on a wire transfer are non-covered third-party fees if the designated recipient's institution does not act as an agent of the remittance transfer provider. The term “agent” is defined in § 1005.30(a) to mean an agent, authorized delegate, or person affiliated with a remittance transfer provider, as defined under State or other applicable law, when such agent, authorized delegate, or affiliate acts for that remittance transfer provider.
Many industry commenters noted that most transfers sent by insured institutions are wire transfers sent through correspondent banks in an open network payment system. Several industry trade associations indicated that currently there are two ways in which an insured institution may know the amount of covered third-party fees for a remittance transfer sent through correspondent banks in an open network payment system. One way is for the insured institution to form correspondent banking relationships with other financial institutions, because such relationships allow the insured institution to know or control the transaction fees that could apply to a remittance transfer. The other way is for the insured institution to send payments to institutions using the cover method as discussed above in the section-by-section analysis of § 1005.32(a) and the “OUR” charge code.
Several industry commenters indicated, however, that it is not possible to use correspondent relationships or the cover method for all remittance transfers sent through correspondent banks in an open network payment system. One bank indicated that due to its size and its volume of remittance transfers, it is not feasible for the bank to develop correspondent banking relationships in many foreign countries.
As discussed in more detail above in the section-by-section analysis of § 1005.32(a), several industry commenters indicated that if the Bureau does not adopt any additional exceptions that allow insured institutions to continue to estimate covered third-party fees in certain circumstances, insured institutions may stop sending remittance transfers in situations where the insured institutions cannot provide exact disclosures of covered third-party fees. Several other industry commenters indicated that insured institutions that continue to offer remittance transfers may see costs increase when sending transfers to certain designated recipients' institutions if insured institutions have to change the ways they provide remittance transfers in order to disclose exact covered third-party fees.
One trade association suggested that the Bureau should expand the definition of “non-covered third-party fees” to cover any fees imposed by a third-party that the insured institution cannot determine after reasonable inquiry, thereby no longer requiring the disclosure of those fees. (As discussed above, non-covered third-party fees are not required to be disclosed under the Remittance Rule.) The trade association also suggested that the Bureau should amend the definition of “error” in § 1005.33, or provide relevant interpretive guidance, to ensure that the definition of “error” does not include instances in which covered third-party fees are charged that were not previously identified during a reasonable review by the remittance transfer provider.
The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate the amount of covered third-party fees (and other disclosures that depend on the amount of those fees) in certain circumstances. Based on the comments received on the 2019 RFI and other outreach and research, the Bureau is concerned that if it does not adopt any additional exceptions that allow estimates of covered third-party fees after the temporary exception expires, some insured institutions may choose to stop sending remittance transfers to recipients with accounts at certain designated recipients' institutions. These insured institutions may choose to stop providing certain remittance transfers because they deem the costs of determining exact covered third-party fees to be prohibitively expensive. The Bureau is concerned that if these institutions discontinue providing such transfers, consumer access to remittance transfer services for certain designated recipients' institutions may be reduced or eliminated. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), it appears increasingly unlikely that any new technologies or partnerships will be able to fully eliminate insured institutions' reliance on estimates in the short-to-medium term.
Also, the Bureau is concerned that in a scenario where the Bureau provides no additional exceptions that allow estimates of covered third-party fees when the temporary exception expires, insured institutions that continue to offer remittance transfer services may see costs increase when sending transfers to certain designated recipients' institutions if insured institutions have to change the ways they provide remittance transfers in order to disclose exact covered third-party fees. This would predictably lead to increased prices for consumers. In addition, the Bureau is concerned that prices for consumers may also increase for transfers to certain designated recipients' institutions (due to reduced competition) if the number of remittance transfer providers offering remittance transfers to such designated recipients' institutions is reduced due to some providers eliminating or curtailing transfer services because they could not determine and disclose exact covered third-party fees for those designated recipients' institutions.
Proposed § 1005.32(b)(5)(i) generally provides that for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be provided for a remittance transfer to a particular designated recipient's institution in accordance with § 1005.32(c) for the amounts required to be disclosed under § 1005.31(b)(1)(vi) through (vii), if all of the following conditions are met: (1) The remittance transfer provider is an insured institution, as defined in § 1005.32(a)(3); (2) the insured institution cannot determine the exact covered third-party fees for a remittance transfer to a particular designated recipient's institution at the time it must provide the applicable disclosures; (3) the insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient's institution; and (4) the remittance transfer generally is sent from the sender's account with the insured institution.
Proposed § 1005.32(b)(5)(i) would generally apply to the following disclosures set forth in § 1005.31(b)(1)(vi) through (vii) respectively: (1) The amount of any covered third-party fees; and (2) the amount that will be received by the designated recipient (after deducting any covered third-party fees). Proposed § 1005.32(b)(5)(ii) makes clear, however, that the amount that will be received by the designated recipient (after deducting covered third-party fees) may be estimated under proposed § 1005.32(b)(5)(i) only if covered third-party fees are permitted to be estimated under proposed § 1005.32(b)(5)(i) and the estimated covered third-party fees affect the amount of such disclosure. For example, if the covered third-party fees for a remittance transfer may not be estimated under proposed § 1005.32(b)(5), the amount that will be received by the designated recipient (after deducting any covered third-party
Each of the four conditions set forth in proposed § 1005.32(b)(5)(i)(A) through (D) is discussed in more detail below. The Bureau solicits comment generally on this proposed exception, and on each condition as discussed in more detail below.
In contrast, proposed comment 32(b)(5)-2 provides that for purposes of proposed § 1005.32(b)(5)(i)(B), an insured institution can determine, at the time it must provide the applicable disclosures, exact covered third-party fees for a remittance transfer, and thus the insured institution may not use the exception in proposed § 1005.32(b)(5) to estimate the disclosures required under § 1005.31(b)(1)(vi) or (vii) for the transfer, if any of the following conditions are met: (1) An insured institution has a correspondent relationship with the designated recipient's institution; (2) the designated recipient's institution acts as an agent of the insured institution; (3) an insured institution has an agreement with the designated recipient's institution with respect to the imposition of covered third-party fees on the remittance transfer; or (4) an insured institution knows at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution. The Bureau believes that proposed comment 32(b)(5)-2 sets forth the circumstances in which an insured institution can determine the exact covered third-party fees for remittance transfers sent through a correspondent banks in an open network payment system and seeks comment on this provision.
The Bureau solicits comment on the condition set forth in proposed § 1005.32(b)(5)(i)(B) generally, and on the guidance set forth in proposed comments 32(b)(5)-1 and -2 for whether an insured institution can or cannot determine the exact covered third-party fees for a remittance transfer for purposes of proposed § 1005.32(b)(5)(i)(B).
Proposed comment 32(b)(5)-3.i provides that for purposes of determining whether an insured institution made 500 or fewer remittance transfers in the prior calendar year to a particular designated recipient's institution pursuant to proposed § 1005.32(b)(5)(i)(C), the number of remittance transfers provided includes remittance transfers in the prior calendar year to that designated recipient's institution regardless of whether the covered third-party fees were estimated for those transfers. The proposed comment provides an example to illustrate.
Proposed comment 32(b)(5)-3.ii also provides that for purposes of the proposed 500 threshold, the number of remittance transfers includes remittance transfers provided to the designated recipient's institution in the prior calendar year regardless of whether the designated recipients received the funds in the country's local currency or in another currency. The proposed comment provides an example to illustrate.
The Bureau is concerned that if an insured institution is sending 500 or fewer transfers annually to a given designated recipient's institution, it may be unduly costly for the insured institution to establish the necessary relationships to know the covered third-party fees that will apply to a remittance transfer at the time the disclosures must be given. For example, based on comments received on the 2019 RFI and other outreach and research, the Bureau understands insured institutions sending remittance transfers through correspondent banks in an open network payment system would know the exact amount of covered third-party fees that will apply to a remittance transfer at the time disclosures are given if the insured institution has a correspondent relationship with the designated recipient's institution. The Bureau understands that another way in which the insured institution may know at the time the disclosures must be given the exact amount of covered third-party fees for a particular remittance transfer is through using the cover method under the SWIFT network, as discussed above. To use the cover method, the insured institution would need an RMA with the designated recipient's institution.
The Bureau understands that there are costs to maintaining the relationships that are needed to enable insured institutions to provide exact disclosures of covered third-party fees for remittance transfers.
The Bureau also recognizes that transfer volume is not the only factor in determining whether an insured institution enters into a correspondent banking relationship or an RMA with another financial institution. Industry commenters on the 2019 RFI identified factors that relate to the insured institution's risk assessment requirements and asked the Bureau to take these into consideration when contemplating regulatory solutions. It appears that these risk assessment requirements weigh various risk factors, such as cybercrime risk, to the insured institution. Because insured institutions could take significantly different approaches to managing such risks, based on their risk appetite, the Bureau believes that it would be difficult to adopt specific exceptions to address all of these risk factors and the varying risk appetites across institutions. Thus, with respect to permitting estimates of covered third-party fees, the Bureau is proposing a bright-line threshold of insured institutions making 500 or fewer transfers to a particular designated recipient's institution in the prior calendar year. The Bureau believes the proposed threshold, if adopted, would obviate a number of the concerns related to these risk factors.
The Bureau solicits comment generally on this proposed condition, and in particular, on the proposed 500 transfer threshold amount. The Bureau solicits comment on whether the proposed 500 transfer threshold is appropriate in determining whether it is cost effective for insured institutions to incur the costs of establishing and maintaining the necessary relationships so that they can determine the exact covered third-party fees for remittance transfers to that designated recipient's institution. The Bureau also solicits comment on whether the transfer threshold should be higher or lower than 500 transfers to achieve this objective. The Bureau further solicits comment on whether there are other defined conditions which would warrant an exemption.
As discussed above, EFTA generally requires a remittance transfer provider to disclose the exact exchange rate to be applied to a remittance transfer.
The Bureau implemented section 919(c) of EFTA in § 1005.32(b)(1), creating a “permanent exception for transfers to certain countries.” The exception is available in two situations. First, § 1005.32(b)(1)(i) permits providers to use estimates if they cannot determine exact amounts because (A) the laws of the recipient country do not permit such a determination, or (B) the method by which transactions are made in the recipient country does not permit such determination. Comment 32(b)(1)-2.i explains that, for example, under the first category, the laws do not permit exact disclosures when the exchange rate is determined after the provider sends the transfer or at the time of receipt. Comment 32(b)(1)-3 offers an example of a situation that qualifies for the methods exception. The example provided is a situation where transactions are sent via international ACH on terms negotiated between the U.S. government and the recipient country's government, under which the exchange rate is a rate set by the recipient country's central bank or other governmental authority after the provider sends the remittance transfer. Comments 32(b)(1)-4.i through iii provide additional examples of situations that do and do not qualify for the methods exception.
Second, § 1005.32(b)(1)(ii) offers a safe harbor allowing remittance transfer providers to disclose estimates instead of exact amounts for remittance transfers to certain countries as determined by the Bureau. Notably, however, the Rule does not allow a remittance transfer provider to use the safe harbor if the provider has information that a country's laws or the method by which transactions are conducted in that country permits a determination of the exact disclosure amount.
In 2012, the Bureau issued a list of five countries—Aruba, Brazil, China, Ethiopia, and Libya—that qualify for this safe harbor.
The Bureau has received feedback over the years from some remittance transfer providers and their trade associations regarding the Bureau's countries list. In the 2019 RFI, the Bureau again sought comment on what other countries, if any, should be added to the list because their laws do not permit the determination of exact amounts at the time the pre-payment disclosure must be provided.
The Bureau again seeks comment on the permanent exception in § 1005.32(b)(1) and the Bureau's process for adding countries to the list. The Bureau requests that any commenters seeking to have particular countries added to the list describe how the relevant laws or method prevent such a determination. The Bureau is particularly interested in whether these countries are ones for which remittance transfer services are not currently being provided, or whether providers are currently relying on estimates for providing disclosures required by the Rule.
The Bureau has, to date, only put countries on the list where the
The Bureau is also interested in suggestions regarding possible changes to the processes and standards by which it adds countries to the countries list, including standards related to the nature or quantum of evidence needed for the Bureau to determine that the law or method of transfer to a country precludes providing exact disclosures. Currently, the Bureau's instructions to persons wishing to have countries considered for the countries list is to send feedback regarding whether the Bureau should make changes to the list, and any supporting materials (in English), to a specified email or mailing address. The Bureau has only included countries on the countries list where it has been able to verify that the law or regulation warrants inclusion. The Bureau has not, historically, added countries to the list when it has not been able to verify that they merit inclusion. The Bureau seeks comment on whether, in order to facilitate its review of countries list requests, it should articulate a more detailed list of information and documents (such as copies of relevant laws and regulations, as well as affidavits) that an applicant might submit to make such a request of the Bureau.
Given the new permanent exceptions proposed herein to address the expiration of the temporary exception, the Bureau seeks comment on whether insured institutions expect that proposed § 1005.32(b)(4) and (5) will address their concerns regarding providing estimates or whether they would additionally need to rely on § 1005.32(b)(1). The Bureau relatedly requests comment on the volume of transfers that remittance transfer providers send to the countries that are currently on the countries list as well as to those that they are requesting be added.
Finally, the Bureau seeks comment on whether any remittance transfer providers use estimates pursuant to § 1005.32(b)(1)(i) with respect to any countries that are not on the countries list. As the Bureau has stated in the past, that provision permits a remittance transfer provider to make its own determination that the laws of other recipient countries not on the list, or the method of sending transfers to such countries, do not permit a determination of exact amounts.
The Bureau notes that its focus in this rulemaking is to address the expiration of the temporary exception and the safe harbor threshold. Accordingly, the Bureau cautions that, in light of its time frame for doing so, it will give priority to addressing those issues over the issues relating to the countries list.
The Bureau is proposing that any final rule take effect on July 21, 2020. The Bureau anticipates that at least 30 days prior to July 21, 2020, it will publish any final rule in the
The Bureau's proposed change to the safe harbor threshold in § 1005.30(f)(2) will also, among other things, mitigate the effect of the temporary exception's expiration on insured institutions that provide between 100 and 500 remittance transfers per year. Given the Bureau's expected timing for publication of a final rule addressing the safe harbor threshold and provisions to mitigate the expiration of the temporary exception, and the interplay between the safe harbor threshold and the temporary exception, the Bureau is likewise proposing that the change to the safe harbor threshold become effective on July 21, 2020. The Bureau seeks comment on this aspect of the proposal. The Bureau also seeks comment on whether a mid-year change in the safe harbor threshold would pose any complications for providers or cause confusion, and if so, whether the Bureau should make the change to the safe harbor threshold effective on some later date, such as January 1, 2021.
The Bureau also solicits comment on any compliance issues that might arise for insured institutions when transitioning from use of the temporary exception to use of the two new proposed exceptions set forth in proposed § 1005.32(b)(4) and (5).
After considering comments on this proposal, the Bureau intends to publish a final rule with respect to the safe harbor threshold and provisions to mitigate the expiration of the temporary exception.
In developing the proposed rule, the Bureau has considered the potential benefits, costs, and impacts.
The proposed rule would amend several elements of the Remittance Rule. (1) It would raise the safe harbor threshold for providing remittance transfers in the normal course of business from 100 transfers to 500 transfers. Under this proposed change, a person that provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year would be deemed not to be providing remittance transfers in the normal course of its business and thus is not subject to the Rule. (2) It would provide a permanent exception that would allow insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) under certain conditions when sending to a country, principally that the designated recipient of the remittance transfer will receive funds in the country's local currency and (a) the insured institution made 1,000 or fewer
The Bureau would generally consider the benefits, costs, and impacts of the proposed rule against the baseline in which the Bureau takes no action. Under that approach, the baseline would be premised on an assumption that the Rule's existing temporary exception allowing certain insured institutions to disclose estimates instead of exact amounts to consumers would expire and the normal course of business safe harbor threshold would remain at 100 transfers. However, if the Bureau adopts the proposal as set forth herein, certain entities currently benefitting from the temporary exception would be exempt from the Rule entirely because of the expansion of the normal course of business safe harbor threshold. These entities would obtain no additional reduction in burden from the permanent exceptions for exchange rates and covered third-party fees because they would be excepted entirely from the Rule. Given this, the Bureau believes it is appropriate to consider the reduction in burden from the proposed permanent exceptions against a baseline in which the Bureau has amended the normal course of business safe harbor threshold as proposed. In other words, the Bureau considers the potential benefits, costs, and impacts of the proposed permanent exceptions only on insured institutions that provide more than 500 transfers in the prior and current calendar years. The impact analysis therefore discusses two baselines in sequence, as follows: (1) For purposes of considering the proposed normal course of business safe harbor threshold of 500 transfers, the Bureau uses a no-action baseline that assumes the temporary exception will expire and no permanent exceptions will be adopted; and (2) for purposes of considering the proposed permanent exceptions for exchange rates and covered third-party fees, the Bureau uses a baseline in which the temporary exception has expired and the agency has amended the normal course of business safe harbor threshold as proposed, so entities that provide 500 or fewer transfers in the previous and current calendar years are excluded.
With respect to the provisions of the proposed rule, the Bureau's analysis considers the benefits and costs to remittance transfer providers (covered persons) and as well as to senders (consumers). The Bureau has discretion in any rulemaking to choose an appropriate scope of analysis with respect to benefits, costs, and impacts, as well as an appropriate baseline or baselines.
The discussion in this impact analysis relies on data the Bureau obtained from industry, other regulatory agencies, and publicly available sources. The Bureau has done extensive outreach on many of the issues the proposal raises, including conducting the Assessment and issuing the Assessment Report as required under section 1022(d) of the Dodd-Frank Act, issuing the 2019 RFI, holding discussions with a number of remittance transfer providers that are banks and credit unions of different sizes, and consulting with other stakeholders. However, as discussed further below, the data with which to quantify the potential costs, benefits, and impacts of the proposed rule are generally limited.
Quantifying the benefits of the proposed rule for consumers presents certain challenges. As discussed further below, the proposed rule would tend to preserve access to wire transfers, the great majority of which are provided by insured institutions, and would tend to hold steady the pricing of wire transfers for certain, but not necessarily all, consumers who send wire transfers. The proposed rule would allow some insured institutions to continue using estimates in disclosures while other insured institutions would have to provide exact amounts in disclosures. Determining the number of consumers experiencing these different effects would require representative market-wide data on the prevalence of consumers who receive exact amounts versus estimated amounts in disclosures as well as the costs to providers of conveying this information to consumers in compliance with the Rule and the Bureau's proposed amendments thereto. The Bureau would then need to predict the responses of providers to these costs and the prevalence of consumers who would receive exact information versus estimated information in disclosures under the proposed rule. The Bureau does not have the data needed to quantify these effects, nor could it readily quantify the benefits to consumers of these effects. The Bureau asks interested parties to provide data, research results, and other factual information that would allow the Bureau to further quantify the effects of the proposed rule.
In light of these data limitations, the analysis below provides both a quantitative and qualitative discussion of the potential benefits, costs, and impacts of the proposed rule. Where possible given the data available, the Bureau has made quantitative estimates based on economic principles. Where the data is limited or not available, the Bureau relies on general economic principles and the Bureau's experience and expertise in consumer financial markets to provide a qualitative discussion of the benefits, costs, and impacts of the proposed rule.
As discussed above in explaining the baseline, the cost to certain insured institutions of the expiration of the temporary exception would be mitigated, although to differing extents, by the proposed increase in the normal course of business safe harbor threshold and the proposed permanent exceptions that would permit insured institutions to provide estimates of exchange rates and covered third-party fees in certain circumstances. In particular, insured institutions that currently provide between 101 and 500 transfers
As explained above, the Bureau is not aware of any nonbank remittance transfer providers that would qualify for exclusion from the Rule under the proposed 500-transfer normal course of business safe harbor threshold. In particular, the Bureau believes that all MSBs that provide remittance transfers provide more than 500 transfers annually. Further, the two proposed permanent exceptions would apply only to insured institutions and would not apply to nonbank remittance transfer providers like MSBs.
In light of the above, the proposed rule overall could affect MSBs only indirectly, through shifts in the volume of remittance transfers sent by MSBs relative to the volume sent by insured institutions. The Bureau believes, however, that these shifts would be limited because MSBs provide a somewhat different service than banks and credit unions to meet different consumer demands. For example, as discussed in part II above, in the Assessment Report, the Bureau found that the dollar value of the average remittance transfer provided by MSBs is typically much smaller (approximately $381 on average) than the dollar value of transfers (more than approximately $6,500 on average) provided by banks or credit unions.
The proposed rule would raise the normal course of business safe harbor threshold for Rule coverage from 100 transfers to 500 transfers. Under the proposed rule, a person that provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year would be deemed not to be providing remittance transfers in the normal course of its business and thus would not be subject to the Rule. Based on their respective Call Reports,
As discussed above, 414 banks and 247 credit unions subject to the Rule under the no-action baseline would no longer incur the compliance costs of the Rule if the 500-transfer safe harbor threshold were adopted as proposed. The Bureau does not have a precise estimate of the costs these institutions would stop incurring if the Bureau adopts the 500-transfer normal course of business safe harbor threshold. However, the Assessment Report discusses the kinds of compliance costs faced by providers covered by the Rule.
In addition, if any banks and credit unions were restricting the number of remittance transfers that they provide to 100 or fewer in order to qualify for the existing normal course of business safe harbor threshold, it is possible they may decide to start providing more remittance transfers if the threshold were increased to 500 transfers as proposed. However, the Assessment Report indicates that banks and credit unions did not limit the number of transfers to stay under the existing normal course of business safe harbor threshold, nor did banks or credit unions appear to cease providing remittance transfers because of the Rule.
Finally, it is possible that some insured institutions would see effects from an increased normal course of business safe harbor threshold because of the preferences of their customers. One possibility is that the customers of insured institutions that would be excluded from coverage if the Bureau were to increase the normal course of business safe harbor threshold to 500 transfers, might decide to start transferring with insured institutions that would remain subject to the Rule. These customers might prefer receiving the pre-payment disclosure and receipts or having the error resolution rights required under the Rule, even if they have to pay more to send remittance transfers. Conversely, if the price of sending remittance transfers is lower with the newly non-covered institutions, some customers may switch to those institutions. Given the inconvenience of changing remittance transfer providers, and the analysis of the impact of the 100-transfer normal course of business safe harbor threshold in the Assessment Report,
In 2018, insured institutions that would not have been covered if the normal course of business safe harbor threshold was set at 500 transfers provided approximately 141,900 transfers.
The proposed rule has potential benefits and costs to the remittance customers of banks and credit unions providing between 101 and 500 remittance transfers annually. The benefits include potentially lower prices for consumers if the remittance transfer provider passes on any reduction in regulatory compliance costs. As discussed in the Assessment Report, at least some bank and credit union providers reported to the Bureau that in response to the Rule, they increased the price they charged consumers to send remittance transfers.
The costs to customers of banks and credit unions providing between 101 and 500 remittance transfers annually are the potential loss of the Rule's pre-payment disclosures, which may facilitate comparison shopping, and other Rule protections, including cancellation and error resolution rights. The Bureau does not have the information necessary to quantify these costs. The Bureau has received relatively few complaints from consumers arising from transfers provided by banks and credit unions not covered by Rule.
As noted above, it is possible that, to the extent any banks and credit unions intentionally provide 100 or fewer transfers (so as to qualify for the existing normal course of business safe harbor), it is possible they may decide to start providing more if the proposed rule was adopted. The Assessment Report did not find that banks or credit unions were limiting the number of transfers they provided to stay under the existing 100-transfer normal course of business safe harbor threshold or that banks or credit unions had stopped providing remittance transfers because of the Rule.
The Bureau is considering an alternative 200-transfer threshold for the normal course of business safe harbor threshold. There were 156 banks and 138 credit unions in 2018 that provided between 101 and 200 transfers in either 2017 or 2018, but not more than 200 in either year, based on their respective Call Reports. As reported above, the corresponding numbers under the proposed rule are 414 banks and 247 credit unions. Thus, the proposed rule more than doubles the number of banks that would not be subject to the Rule relative to the alternative. The corresponding relative increase under the proposed rule for credit unions is 79 percent. Under the alternative, the banks and credit unions that would not be subject to the Rule represent 21 percent of banks providing more than 100 transfers in either 2017 or 2018 and 35 percent of credit unions providing more than 100 transfers in either 2017 or 2018. As reported above, the corresponding numbers under the proposed rule are 55 percent for banks and 62 percent for credit unions. The other impacts as described above for a 500-transfer normal course of business safe harbor threshold would follow for a 200-transfer threshold.
The total number of transfers in 2018 for banks and credit unions that provided between 101 and 200 transfers in either 2017 or 2018, but not more than 200 in either year, were 19,900 bank transfers and 18,200 credit union transfers. As reported above, the corresponding numbers under the proposed rule are approximately 92,600 bank transfers and 49,300 credit union transfers. Thus, the proposed rule would more than quadruple the number of bank transfers and would more than double the number of credit unions transfers that would not be subject to the Rule relative to the alternative. Under the alternative, the bank and credit union transfers in 2018 that would not be subject to the proposed rule represent 0.18 percent of transfers by banks providing more than 100 transfers in either 2017 or 2018, and 2.31 percent of transfers by credit unions providing more than 100 transfers in either 2017 or 2018. Overall this is 0.32 percent of transfers in 2018 by insured institutions providing greater than 100 transfers in either 2017 or 2018. The corresponding numbers under the proposed rule are 0.83 percent for bank transfers and 6.3 percent for credit union transfers. As reported above, this is 1.2 percent of all 2018 transfers by insured institutions providing more than 100 transfers in either 2017 or 2018. Again, the other impacts as described above for a 500-transfer normal course of business safe harbor threshold would follow for a 200-transfer threshold.
The Bureau has also considered, and is soliciting comment on, whether it should adopt any alternate or additional measures for the “normal course of business” safe harbor. As stated above, the Bureau particularly seeks comment on whether to base the term “normal course of business” on the percentage of an entity's customers that send remittance transfers, and if so, what the appropriate percentage of customers should be and why. In addition, the Bureau seeks comment on the time frame over which any such alternate metric should be tracked and the timing for any transitional provisions that might be necessary using such a metric. The Bureau also seeks comment on the potential burden to entities, or challenges that could arise, in basing the safe harbor on an approach other than the annual number of remittance transfers.
A limitation on the ability of the Bureau to consider the impacts of this alternative is the lack of institutional-level data or representative averages for groups of institutions on, among other things, the percentage of customers that send remittance transfers, the average number of remittance transfers sent by customers who send remittance transfers, and the distribution of transfers across customers (
This section considers the benefits, costs, and impacts of the two permanent exceptions proposed by the Bureau that would allow remittance transfer providers that are insured institutions to estimate exchange rates and covered third-party fees in certain circumstances. This analysis proceeds in two steps. First, it examines the information available to the Bureau to determine the likely impact of the expiration of the existing temporary exception. The analysis then considers the likely benefits, costs, and impacts of the proposed permanent exceptions. For reasons explained above, the analysis generally considers only the impacts of the expiration and proposed permanent exceptions on banks and credit unions that provide more than 500 transfers annually.
According to their Call Reports, of 343 banks providing more than 500 transfers in 2017 or 2018, 48 (14 percent) reported using the temporary exception in 2018.
Bank Call Reports do not differentiate between the use of the temporary exception for exchange rates and covered third-party fees. From discussions with some large banks and a trade association representing a number of the largest banks, the Bureau understands that the temporary exception generally is not used by very large banks to estimate exchange rates because providing the exact exchange rate is not difficult for such banks. Accordingly, the analysis assumes that a substantial majority of the remittance transfers and institutions using the temporary exception are using it exclusively for covered third-party fees. The Bureau requests additional data and other information on the share of remittance transfers that rely on the temporary exception to estimate exchange rates alone, covered third-party fees alone, and both exchange rates and covered third-party fees.
The proposed rule would provide a permanent exception that would allow insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) under certain conditions when sending to a country. Principally, these conditions are that the designated recipient of the remittance transfer will receive funds in the country's local currency and (a) the insured institution made 1,000 or fewer transfers in the prior calendar year to that country where the designated recipients received funds in the country's local currency and (b) the insured institution cannot determine the exact exchange rate for that particular transfer at the time it must provide the applicable disclosures.
The information available to the Bureau indicates that the predominant use of the temporary exception is for estimating covered third-party fees. However, as discussed below, the Bureau understands that certain insured institutions may incur additional costs in order to disclose exact exchange rates. Further, these costs, as well as the willingness to incur them, may differ across insured institutions. Thus, under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, it is possible that the requirement to disclose exact exchange rates may cause some insured institutions to cease providing transfers to certain countries. The proposed permanent exception for estimating exchange rates would tend to mitigate cost increases and reductions in the provision of remittance transfers at any particular insured institution.
Under the baseline, insured institutions that are covered by the Rule and have been using the temporary exception to estimate exchange rates would either need to provide exact exchange rate disclosures or stop sending those transfers. To provide exact exchange rate disclosures, these insured institutions would incur certain costs. An insured institution may need to establish and maintain currency-trading desk capabilities and risk management policies and practices related to the foreign currency and country or to use service providers, correspondent institutions, or persons that act as the insured institution's agent. These additional costs may also differ across insured institutions, due to differences in existing arrangements with service providers or correspondent banks, the ability to negotiate changes in those arrangements, the expertise of existing staff, and the likely volume of transfers. Insured institutions may also
The Bureau believes that the proposed permanent exception for estimating the exchange rate would tend to mitigate these costs and impacts. The Bureau lacks information about the percentage of transfers by recipient country that rely on the temporary exception for exchange rates and the portion of those transfers that could rely on the permanent exception being proposed. However, the Bureau understands that insured institutions are predominantly using the temporary exception to estimate covered third-party fees, rather than exchange rates. Thus, the Bureau believes that the additional costs under the baseline may be relatively modest overall, and the proposed permanent exception could mitigate most of the increase that would otherwise occur. Further, it is the Bureau's understanding from discussion with some large banks and a trade association representing a number of the largest banks that providing exact exchange rates is not difficult for very large banks. Thus, to the extent that very large banks would have an advantage under the baseline in sending transfers to particular countries, the proposed permanent exception would mitigate this advantage by allowing smaller institutions to continue to estimate exchange rates in disclosures for certain remittance transfers.
Some insured institutions that currently provide exact exchange rates might have been able to accommodate customers from other insured institutions that currently use the temporary exception and that would choose not to begin providing exact exchange rates under the baseline. Under the proposed permanent exception for estimation of exchange rates, these insured institutions will not obtain the benefit of these new customers.
Under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, the preferred insured institution for some consumers might not be able to provide an exact exchange rate disclosure for transfers to certain countries. Some consumers, therefore, would need to seek out an alternate remittance transfer provider to send transfers to those countries. As noted above, it is the Bureau's understanding from discussion with some large banks and a trade association representing a number of the largest banks that providing the exact exchange rate is not difficult for very large banks. Thus, to the extent that a consumer's preferred insured institution cannot provide the exact exchange rate, there would likely be a less preferred insured institution that could provide the exact exchange rate and send the transfer.
Under the proposed permanent exception for estimating the exchange rate, more consumers would be able to continue to use their preferred insured institution to send transfers. These consumers may also potentially be able to do so at lower prices if, for example, an insured institution decided to pass on the higher costs incurred to obtain exact exchange rate information.
The cost to these consumers is that they will not receive exact disclosures. Disclosures that include exact exchange rate information make it easier for a consumer to know whether a designated recipient is going to receive an intended sum of money, or the amount in U.S. dollars that the consumer must send to deliver a specific amount of foreign currency to a designated recipient. Requiring the disclosure of exact exchange rates may also make it easier for consumers to compare prices across providers. The proposed permanent exception for estimating exchange rates may therefore impose a cost on certain consumers in the form of these foregone benefits.
Overall, the evidence available to the Bureau suggests that the costs to consumers of allowing providers to use estimates for exchange rates are not likely to be significant. Certain consumers may be less likely to engage in comparison shopping or the comparison shopping may be less effective. However, as discussed above, the Bureau believes the proposed permanent exception for estimating exchange rates would be used for only a small portion of all remittance transfers sent by insured institutions. Further, as discussed in the Assessment Report and noted above, the Bureau reviewed evidence from its complaints database and did not find evidence of significant consumer complaints regarding the use of estimates for exchange rates or for covered third-party fees.
As noted above, under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, the Bureau estimates that approximately 70 insured institutions would need to stop providing estimated disclosures for 822,000 transfers. Based on its analysis of available information, the Bureau expects that many of these insured institutions could form additional relationships or set up new systems to provide exact fee disclosures for a large portion of the transfers currently using the temporary exception for estimating covered third-party fees. The Bureau held discussions with banks and a trade association representing a number of the largest banks, reviewed comments from the 2019 RFI, and analyzed Call Reports from banks that have reduced their reliance on the temporary exception. Based on the information received from these sources, banks appear to be willing to set up the relationships or establish other systems (such as international ACH) necessary to reduce their reliance on estimates to around half of the number of transfers for which they used the temporary exception in 2018.
There are a limited number of outcomes for the remaining half of
The Bureau does not have the information necessary to quantify how many transfers would fall into each category. For purposes of the analysis below, the Bureau assumes that under the baseline, customers of an insured institution that would no longer send remittance transfers to a designated recipient's institution would generally search for and find a different insured institution that would send the transfer. The Bureau considers it unlikely that no insured institution or MSB (or combination of MSBs), at any price, could send the desired amount of funds to a designated recipient's institution.
Under the proposed permanent exception for estimating covered third-party fees, transfers covered by the Rule fall into two main categories: (1) Transfers that are below the threshold for covered third-party fees, and therefore disclose estimates, but under the baseline would have been provided with exact disclosures at a higher price or by a remittance transfer provider other than the consumer's first choice; or (2) transfers that are above the threshold for covered third-party fees, and so will be provided with exact disclosures for fees under both the proposed rule and baseline. Relative to the baseline, in which all bank or credit union transfers that take place would have exact disclosures, only (1) represents a change considered for the costs or benefits of the proposed permanent exception for estimating covered third-party fees.
As stated above, under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, the Bureau estimates that approximately 70 insured institutions would need to stop providing estimated disclosures for 822,000 transfers. While the Bureau does not have market-wide information, information provided by certain large banks suggests that there are few designated recipient banks to which these large banks individually send more than 500 transfers and with which these large banks would not be able or willing to set up a relationship sufficient to provide exact disclosures. Based on this information, the Bureau expects that under both the baseline and the proposed permanent exception for estimating covered third-party fees, these 70 institutions will form roughly the same number of relationships and will provide exact disclosures for about half of these transfers. Forming these relationships comes at some cost to insured institution providers, and some of these costs could be passed on to consumers.
As explained above, under the baseline, the other half of the remittance transfers with estimated disclosures would no longer be provided by the insured institutions that currently send them but would be sent by different insured institutions. Based on the information available from certain large banks, under the proposed permanent exception for estimating covered third-party fees, the Bureau expects that the insured institutions that currently send these transfers would continue to send them. These transfers (category (1) above) provide estimated disclosures, so these insured institutions would not need to form additional relationships. These insured institutions would benefit from not turning away potential customers and by being able to continue providing a valuable service to their customers. These benefits might be significant, although they are difficult quantify.
Under category (1) above, certain remittance transfers would have been provided with exact disclosures under the baseline but at higher price or by a remittance transfer provider other than the consumer's first choice. As discussed above, the Bureau expects that the proposed permanent exception for estimating covered third-party fees when an insured institution makes 500 or fewer transfers to the designated recipient's institution in the prior calendar year would mitigate all or almost all of the costs to consumers from the loss of access to transfers to certain designated recipient's institutions under the baseline. These remittance transfers represent the most important benefit of the proposed permanent exception for consumers. While the Bureau does not have the information to quantify the number of transfers in this category or the exact value to consumers, the benefit to consumers of continued access is potentially large.
Under category (1) above, consumers will receive disclosures containing estimates. As discussed above in considering the impact of the proposed permanent exception for exchange rates, the use of estimates for covered third-party fees may make it more difficult for consumers to engage in comparison shopping and impose a cost on consumers by making disclosures less accurate.
For purposes of considering the effects of the proposed permanent exceptions that allow institutions to estimate exchange rates and covered third-party fees, the Bureau used a baseline in which the temporary exception expired and the Bureau amended the normal course of business safe harbor threshold as proposed. If instead the Bureau maintains the existing normal course of business safe harbor threshold at 100 transfers, then this provision of the current Rule would be part of the baseline, along with the expiration of the temporary exception.
Under this baseline, the proposed permanent exceptions that would allow institutions to estimate exchange rates and covered third-party fees would have effects on insured institutions that provide between 101 and 500 remittance transfers per year and the consumers on whose behalf these institutions send remittance transfers. These effects would be in addition to the effects on insured institutions that provide more than 500 remittance transfers per year and the consumers on
As discussed above, 414 banks and 247 credit unions provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year. In 2018, they respectively sent about 92,600 and 49,300 transfers. These banks and credit unions would remain covered by the Rule under the alternative since the normal course of business safe harbor threshold remains at 100 transfers. However, all of these insured institutions would necessarily meet the respective 500-transfer and 1,000-transfer threshold requirements in the proposed permanent exceptions. Thus, all of these insured institutions could continue to disclose estimates for exchange rates and covered third-party fees to the extent that they already do so. The ability to disclose estimates under the proposed permanent exceptions would mitigate costs relative to the baseline used here.
These insured institutions currently provide error resolution rights and meet the other conditions of the Rule. These insured institutions would continue to do so under both the baseline used here and under the alternative proposed rule, that provided only the permanent exceptions for estimating exchange rates and covered third-party fees.
As stated above, based on their Call Reports, 414 banks and 247 credit unions provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year. Of these, 386 banks and all 247 credit unions had $10 billion or less in total in assets in 2018. Some of these insured institutions currently provide exact disclosures (based on Call Report data) and all of them would have to provide exact disclosures under the baseline expiration of the temporary exception. None of these insured institutions would be covered by the Rule under the proposed increase in the normal course of business safe harbor threshold. It follows that the large majority of the banks and all of the credit unions affected by the proposed change in the normal course of business safe harbor threshold have $10 billion or less in assets. Thus, the impacts of the proposed increase in the normal course of business safe harbor threshold, described above, are also generally the specific impacts for depository institutions and credit unions with $10 billion or less in total assets.
In addition, 190 banks and 142 credit unions with $10 billion or less in assets in 2018 provided more than 500 transfers in 2017 or 2018. As above, some of these banks and credit unions currently provide exact disclosures, and all of them would have to provide exact disclosures under the baseline expiration of the temporary exception. These banks and credit unions would not be directly affected by the proposed change in the normal course of business safe harbor threshold. They might be affected, compared to the baseline expiration of the temporary exception, by the proposed permanent exceptions for estimating the exchange rate and covered third-party fees. According to the bank Call Report data, only 18 of these banks reported using the temporary exception, and they did so for approximately 66,600 transfers. As discussed above, the Bureau understands that remittance transfer providers that are smaller depository institutions and credit unions obtain information about exchange rates and covered third-party fees from a limited number of service providers that are either very large insured institutions or large nonbank service providers. Given this reliance, the impacts of the proposed permanent exceptions, described above, are also generally the specific impacts for depository institutions and credit unions with $10 billion or less in total assets.
Consumers in rural areas may experience different impacts from the proposed rule than other consumers. The Bureau has discretion to define rural areas as appropriate for this impact analysis. For the impact analysis in this section, the Bureau used its 2018 rural counties list.
According to the Call Reports, 83 banks provided between 101 and 500 remittance transfers in either 2017 or 2018, but not more than 500 in either year, and were headquartered in rural counties. These banks provided 17,000 transfers in 2018. Further, 15 credit unions provided between 101 and 500 remittance transfers in either 2017 or 2018, but not more than 500 in either year, and were located in rural counties. These credit unions provided 2,200 transfers. Finally, three banks provided more than 500 transfers in either 2017 or 2018, were located in rural areas, and reported relying on the temporary exception. These banks reported that they relied on the temporary exception for 2,000 transfers total. Assuming reliance on the temporary exception is similar for credit unions, the four credit unions that provided more than 500 transfers in either 2017 or 2018 and were located in rural areas would have used the temporary exception for approximately 900 transfers.
Consumers in rural areas may have access to fewer remittance transfers providers and therefore may benefit more than other consumers from a rule change that keeps more insured institutions in the market or helps reduce costs to the extent that cost reductions are passed on to consumers. However, these consumers will also disproportionately lose consumer protections relative to other consumers, under the baseline in which the temporary exception expires, to the extent that the banks and credit unions that provide remittance transfers to these consumers are disproportionately excluded from the Rule or use the permanent exceptions under the proposed rule. As stated above, the 414 banks and 247 credit unions that provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year, represent 55 percent of the banks and 62 percent of the credit unions that provided more than 100 transfers in both years. In rural areas, the corresponding 83 banks and 15 credit unions represented 75 percent of the banks and 79 percent of the credit unions that provided more than 100 transfers in both years in rural areas. Thus, the proposed increase in the normal course of business safe harbor threshold would have somewhat larger effects in rural areas in both preserving access to remittance transfer providers and possibly reducing the protections provided by the Rule, as described previously.
The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires each agency to consider the potential impact of its regulations on small entities, including small businesses, small governmental units, and small not-for-profit organizations.
The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.
An IRFA is not required for this proposal because the proposal, if adopted, would not have a significant economic impact on a substantial number of small entities. The Bureau does not expect the final rule to impose costs on small entities relative to the baseline. Under the baseline, the temporary exception expires, and therefore no remittance transfer providers—including small entities—would be able to provide estimates using that exception. Under the proposed rule, certain small entities that would otherwise be covered by the Remittance Rule would not be covered by the Rule and certain other small entities would be able to provide estimates in certain circumstances. Thus, the Bureau believes that the proposed rule would only reduce burden on small entities relative to the baseline.
Accordingly, the undersigned certifies that this proposal, if adopted, would not have a significant economic impact on a substantial number of small entities. The Bureau requests comment on its analysis of the impact of the proposed rule on small entities and requests any relevant data.
Under the Paperwork Reduction Act of 1995 (PRA),
As explained below, the Bureau has determined that this proposed rule does not contain any new or substantively revised information collection requirements other than those previously approved by OMB under that OMB control number. The proposed rule would amend 12 CFR part 1005 (Regulation E), which implements EFTA. The Bureau's OMB control number for Regulation E is 3170-0014.
Under Regulation E, the Bureau generally accounts for the paperwork burden for the following respondents pursuant to its administrative enforcement authority: Federally insured depository institutions with more than $10 billion in total assets, their depository institution affiliates, and certain non-depository institutions. The Bureau and the FTC generally both have enforcement authority over non-depository institutions subject to Regulation E. Accordingly, the Bureau has allocated to itself half of the proposed rule's estimated reduction in burden on non-depository financial institutions subject to Regulation E. Other Federal agencies, including the FTC, are responsible for estimating and reporting to OMB the paperwork burden for the institutions for which they have enforcement and/or supervision authority. They may use the Bureau's burden estimation methodology, but need not do so.
The Bureau does not believe that this proposed rule would impose any new or substantively revised collections of information as defined by the PRA. Specifically, based on the above analysis, the Bureau believes that the overall impact of the proposal to increase the normal course of business safe harbor threshold to 500 and to allow limited use of estimates for covered third-party fee and exchange rate disclosures is small. The Bureau recognizes, however, that it lacks data with which to determine the precise impact of the proposal. Comments are specifically requested concerning information that would assist the Bureau with making a determination on the impact of allowing limited use of estimates in certain disclosures on the Bureau's current collection of information pursuant to Regulation E.
In addition, the Bureau estimates that Bureau respondents will incur one-time costs of $6.886 million under the proposed rule, mostly to form new relationships with designated recipients' institutions.
The Bureau has determined that the proposed rule does not contain any new or substantively revised information collection requirements as defined by the PRA and that the burden estimate for the previously approved information collections should be revised as
Automated teller machines, Banking, Banks, Consumer protection, Credit unions, Electronic fund transfers, National banks, Remittance transfers, Reporting and recordkeeping requirements, Savings associations.
For the reasons set forth above, the Bureau proposes to amend 12 CFR part 1005 as set forth below:
12 U.S.C. 5512, 5581; 15 U.S.C. 1693b. Subpart B is also issued under 12 U.S.C. 5601 and 15 U.S.C. 1693o-1.
(f) * * *
(2) * * *
(i) * * *
(A) Provided 500 or fewer remittance transfers in the previous calendar year; and
(B) Provides 500 or fewer remittance transfers in the current calendar year.
(ii)
(iii)
The additions read as follows:
(b) * * *
(4)
(A) The remittance transfer provider is an insured institution as defined in paragraph (a)(3) of this section;
(B) At the time the insured institution must provide, as applicable, the disclosure required by § 1005.31(b)(1) through (3) or § 1005.36(a)(1) or (2), the insured institution cannot determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) for that remittance transfer;
(C) The insured institution made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country's local currency; and
(D) The remittance transfer is sent from the sender's account with the insured institution; provided however, for the purposes of this paragraph (b)(4)(i)(D), a sender's account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account.
(ii) The disclosures in § 1005.31(b)(1)(v) through (vii) may be estimated under paragraph (b)(4)(i) of this section only if the exchange rate is permitted to be estimated under paragraph (b)(4)(i) of this section and the estimated exchange rate affects the amount of such disclosures.
(5)
(A) The remittance transfer provider is an insured institution as defined in paragraph (a)(3) of this section;
(B) At the time the insured institution must provide, as applicable, the disclosure required by § 1005.31(b)(1) through (3) or § 1005.36(a)(1) or (2), the insured institution cannot determine the exact covered third-party fees required to be disclosed under § 1005.31(b)(1)(vi) for that remittance transfer;
(C) The insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient's institution; and
(D) The remittance transfer is sent from the sender's account with the insured institution; provided however, for the purposes of this paragraph (b)(5)(i)(D), a sender's account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account.
(ii) The disclosure in § 1005.31(b)(1)(vii) may be estimated under paragraph (b)(5)(i) of this section only if covered third-party fees are permitted to be estimated under paragraph (b)(5)(i) of this section and the estimated covered third-party fees affect the amount of such disclosure.
The revisions and additions read as follows:
1.
2.
ii.
iii.
iv.
B.
C.
v.
3.
1.
1.
i. Set by the government of the recipient country after the remittance transfer provider sends the remittance transfer or
ii. Set when the designated recipient receives the funds.
2.
i. The laws of the recipient country do not permit a remittance transfer provider to determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) when, for example, the government of the recipient country, on a daily basis, sets the exchange rate that must, by law, apply to funds received and the funds are made available to the designated recipient in the local currency the day after the remittance transfer provider sends the remittance transfer.
ii. In contrast, the laws of the recipient country permit a remittance transfer provider to determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) when, for example, the government of the recipient country ties the value of its currency to the U.S. dollar.
3.
4.
i. The method by which transactions are made in the recipient country does not permit a remittance transfer provider to determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) when the provider sends a remittance transfer via international ACH on terms negotiated between the United States government and the recipient country's government, under which the exchange rate is a rate set by the recipient country's central bank on the business day after the provider has sent the remittance transfer.
ii. In contrast, a remittance transfer provider would not qualify for the § 1005.32(b)(1)(i)(B) methods exception if it sends a remittance transfer via international ACH on terms negotiated between the United States government and a private-sector entity or entities in the recipient country, under which the exchange rate is set by the institution acting as the entry point to the recipient country's payments system on the next business day. However, a remittance transfer provider sending a remittance transfer using such a method may qualify for the § 1005.32(a) temporary exception or the exception set forth in § 1005.32(b)(4).
iii. A remittance transfer provider would not qualify for the § 1005.32(b)(1)(i)(B) methods exception if, for example, it sends a remittance transfer via international ACH on terms negotiated between the United States government and the recipient country's government, under which the exchange rate is set by the recipient country's central bank or other governmental authority before the sender requests a transfer.
5.
6.
7.
ii. If the laws of a recipient country change such that a remittance transfer provider cannot determine exact disclosure amounts, the remittance transfer provider may provide estimates under § 1005.32(b)(1)(i), even if that country does not appear on the list published by the Bureau.
1.
i.
A. An insured institution or its service provider does not set the exchange rate required to be disclosed under § 1005.31(b)(1)(iv), and the rate is set when the funds are deposited into the recipient's account by the designated recipient's institution that does not have a correspondent relationship with, and does not act as an agent of, the insured institution.
ii.
A. An insured institution has a correspondent relationship with an intermediary financial institution (or the intermediary financial institution acts as an agent of the insured institution) and that intermediary financial institution sets the exchange rate required to be disclosed under § 1005.31(b)(1)(iv) for a remittance transfer.
B. An insured institution or its service provider converts the funds into the local currency to be received by the designated recipient for a remittance transfer using an exchange rate that the insured institution or its service provider sets. The insured institution can determine the exact exchange rate for purposes of § 1005.32(b)(4)(i)(B) for the remittance transfer even if the insured institution does not have a correspondent relationship with an intermediary financial institution in the transmittal route or the designated recipient's institution, and an intermediary financial institution in the transmittal route or the designed recipient's institution does not act as an agent of the insured institution.
2.
i. The number of remittance transfers provided includes transfers in the prior calendar year to that country when the designated recipients of those transfers received funds in the country's local currency regardless of whether the exchange rate was estimated for those transfers. For example, an insured institution exceeds the 1,000 threshold in the prior calendar year if the insured institution provided 700 remittance transfers to a country in the prior calendar year when the designated recipients of those transfers received funds in the country's local currency when the exchange rate was estimated for those transfers and also sends 400 remittance transfers to the same country in the prior calendar year when the designated recipients of those transfers received funds in the country's local currency and the exchange rate for those transfers was not estimated.
ii. The number of remittance transfers does not include remittance transfers to a country in the prior calendar year when the designated recipients of those transfers did not receive the funds in the country's local currency. For example, an insured institution does not exceed the 1,000 threshold in the prior calendar year if the insured institution provides 700 remittance transfers to a country in the prior calendar year when the designated recipients of those transfers received funds in the country's local currency and also sends 400 remittance transfers to the same country in the prior calendar year when the designated
1.
i. The insured institution does not have a correspondent relationship with the designated recipient's institution;
ii. The designated recipient's institution does not act as an agent of the insured institution;
iii. The insured institution does not have an agreement with the designated recipient's institution with respect to the imposition of covered third-party fees on the remittance transfer (
iv. The insured institution does not know at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution.
2.
i. An insured institution has a correspondent relationship with the designated recipient's institution;
ii. The designated recipient's institution acts as an agent of the insured institution;
iii. An insured institution has an agreement with the designated recipient's institution with respect to the imposition of covered third-party fees on the remittance transfer; or
iv. An insured institution knows at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution.
3.
i. The number of remittance transfers provided includes remittance transfers in the prior calendar year to that designated recipient's institution regardless of whether the covered third-party fees were estimated for those transfers. For example, an insured institution exceeds the 500 threshold in the prior calendar year if an insured institution provides 300 remittance transfers to the designated recipient's institution in the prior calendar year when the covered third-party fees were estimated for those transfers and also sends 400 remittance transfers to the designated recipient's institution in the prior calendar year and the covered third-party fees for those transfers were not estimated.
ii. The number of remittance transfers includes remittance transfers provided to the designated recipient's institution in the prior calendar year regardless of whether the designated recipients received the funds in the country's local currency or in another currency. For example, an insured institution exceeds the 500 threshold in the prior calendar year if the insured institution provides 300 remittance transfers to the designated recipient's institution in the prior calendar year when the designated recipients of those transfers received funds in the country's local currency and also sends 400 remittance transfers to the same designated recipient's institution in the prior calendar year when the designated recipients of those transfers did not receive funds in the country's local currency.
1.
1.
1.
2.
3.