This rule (84 FR 58522) was issued under Section 10113 of Public Law 115-334, the Agriculture Improvement Act of 2018 (2018 Farm Bill). Section 10113 amended the Agricultural Marketing Act of 1946 (AMA) by adding Subtitle G (sections 297A through 297D of the AMA). Section 297B of the AMA requires the Secretary of Agriculture (Secretary) to evaluate and approve or disapprove State or Tribal plans regulating the production of hemp. Section 297C of the AMA requires the Secretary to establish a Federal plan for producers in States and territories of Indian Tribes not covered by plans approved under section 297B. Lastly, section 297D of the AMA requires the Secretary to promulgate regulations and guidelines relating to the production of hemp in consultation with the U.S. Attorney General. USDA is committed to issuing the final rule expeditiously after reviewing public comments and obtaining additional information during the initial implementation. USDA may request more comments after the 2020 growing season has ended. In response to requests by commenters to AMS and executive departments and agencies that the public comment due date for this rule be extended, AMS is extending the comment period by an additional thirty (30) days to January 29, 2020.

I. Description of Technical Corrections

On November 13, 2019, the OCC, together with the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (collectively, the agencies), published in the Federal Register a final rule titled “Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations” (the CBLR final rule).1

Under the CBLR final rule, qualifying community banking organizations that opt into the community bank leverage ratio framework are not required to calculate tier 2 capital. The Supplementary Information section of the final rule stated, “[C]ertain of the agencies' non-capital rules refer to `capital stock and surplus' (or similar items)[,] which is generally defined as tier 1 capital and tier 2 capital plus the amount of allowances for loan and lease losses not included in tier 2 capital. The final rule amends standards referencing `capital stock and surplus' (or similar items) so that an electing banking organization uses tier 1 capital plus allowances for loan and lease losses (or adjusted allowance for credit losses, as applicable).” 2

In separate final rules titled “Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations” (CECL final rule) 3 and “Other Real Estate Owned and Technical Amendments” (OREO final rule),4 the OCC made further revisions to the defined term “capital and surplus.” These final rules became effective or will become effective before the effective date for the CBLR final rule. Due to the specific phrasing of its amendatory instructions, the CBLR final rule as currently published would have inadvertently reversed certain changes made by the CECL and OREO final rules. In one instance, for example, the CBLR final rule would have reinserted a definition for “capital and surplus” that was removed by the OREO final rule. Accordingly, the OCC is correcting sections of the CBLR final rule that would have revised the term “capital and surplus” to re-incorporate the intended changes made in the CECL final rule and OREO final rule. The OCC is also making certain stylistic edits to these sections of the CBLR final rule to align them with the CECL final rule.

The term “total capital” includes tier 2 capital and therefore was revised by the CBLR final rule for the same reasons described above. The Supplementary Information section of the final rule stated, “The final rule amends standards referencing total capital so that an electing banking organization uses tier 1 capital instead of total capital.” 5 The CBLR final rule would have amended an instance of the term “total capital” in paragraph (h)(2) of 12 CFR 5.58 but not a similar instance of the term in paragraph (h)(3). Accordingly, the OCC is also making a conforming edit to 12 CFR 5.58(h)(3) to incorporate the change made to paragraph (h)(2).

Under 5 U.S.C. 553(b)(B) of the Administrative Procedure Act (APA), an agency may, for good cause, find (and incorporate the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. As described above in this Supplementary Information section, this Federal Register notice makes non-substantive, technical corrections to the CBLR final rule. For that reason, the OCC has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary.

The effective date of these corrections is January 1, 2020. Under 5 U.S.C. 553(d)(3) of the APA, the required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except, among other things, as provided by the agency for good cause found and published with the rule. The OCC has concluded that these technical corrections are not substantive within the meaning of the APA's delayed effective date provision. Moreover, the OCC finds that there is good cause for dispensing with the delayed effective date requirement, even if it applied, because OCC-supervised institutions, from review of the CBLR final rule, CECL final rule, and OREO final rule, were given sufficient notice as to the effects and purposes of those rules and would not have reasonably relied on the errors addressed by these technical corrections.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking when a general notice of proposed rulemaking is not required. 5 U.S.C. 603 and 604. As noted previously, the OCC has determined that it is unnecessary to publish a general notice of proposed rulemaking for technical corrections. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) states that no agency may conduct or sponsor, nor is the respondent required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC has determined that these technical corrections do not create any new, or revise any existing, collections of information pursuant to the Paperwork Reduction Act. Consequently, no information collection request will be submitted to the OMB for review.

Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded Mandates Act), 2 U.S.C. 1532, requires the OCC to prepare a budgetary impact statement before promulgating any final rule for which a general notice of proposed rulemaking was published. As discussed above, the OCC has determined that the publication of a general notice of proposed rulemaking is unnecessary. Accordingly, these technical corrections are not subject to section 202 of the Unfunded Mandates Act.

Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 (RCDRIA) (12 U.S.C. 4802) requires that each Federal banking agency, in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions (IDIs), 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.6 In addition, new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally must take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.7

Because these technical corrections do not impose additional reporting, disclosure, or other requirements on IDIs, section 302 of RCDRIA does not apply.

The OMB has determined that these technical corrections are not a “major rule” within the meaning of the Congressional Review Act.

In the final rule published on November 13, 2019, at 84 FR 61776, the following corrections are made:

Background

To provide better customer service and most efficiently manage our workloads, while maintaining accuracy and fundamental fairness in our hearing process, we seek to maximize the case processing efficiencies and flexibility allowed by all appropriate manners of appearance at hearings. Available manners of appearance for hearings include in person, by VTC, and in limited circumstances, by telephone. In support of these goals, our Office of the Inspector General and the Administrative Conference of the United States (ACUS) have repeatedly recommended that we increase use of VTC technology to conduct administrative hearings. As well, the Social Security Advisory Board (SSAB) has commented that the use of VTC “obviously meets the requirements of due process and it is in widespread use in other types of adjudications.” 1

To achieve the increased efficiency and reduced processing delays of hearings referenced by ACUS and the SSAB, we published a notice of proposed rulemaking (NPRM) in the Federal Register on November 15, 2018.2 In the NPRM, we proposed clarifications and revisions to our rule for setting the manner of appearance for parties and witnesses at a hearing. To the extent that we already discussed at length the reasons for and details of the proposed changes, we will not repeat that information here.

The changes that we proposed and are now adopting will provide us with the flexibility we need to address service challenges by allowing us to balance our hearing workloads in a way that we expect will reduce overall wait and processing times across the country, and the processing time disparities among offices. However, in response to the overwhelming preference expressed by public commenters in response to the NPRM, we are retaining the existing option for a party to a hearing to opt out of appearing by VTC at the ALJ hearing level. If the AC exercises removal authority for a case, it will continue to follow all the rules that apply to the ALJ level of adjudication.3

Besides the changes we proposed for setting the time, place, and manner of appearance for hearings, we also proposed one clarification to our rule regarding the notice of hearing at the ALJ hearing level. Under our current rule, we send a notice of hearing at least 75 days prior to the date of the scheduled hearing to all parties and their representative, if any.4 In addition to the time and place of a hearing, the notice has other information, including the issues to be decided, the right to representation, how to request a change in the time of the hearing, and how appearances will be made. We proposed to clarify that when we send an amended notice of hearing or notice of supplemental hearing, we would send the amended notice or notice of supplemental hearing at least 20 days prior to the hearing. If we need to change the date of a hearing, the date we choose will always be at least 75 days from the date we first sent the claimant a notice of hearing, unless the claimant has waived his or her right to advance notice.

Finally, we also proposed in the NPRM to make changes to our rule about scheduling hearings before disability hearing officers (DHO) in §§ 404.914 and 416.1414. Our proposed changes to those sections generally tracked our proposed changes to the regulations that regard scheduling hearings before ALJs, including our proposal to not allow a party to a hearing to opt out of appearing by VTC. We are not pursuing changes to §§ 404.914 and 416.1414 at this time.

We made changes from the proposed rule in the final rule.

• We removed the proposed revisions to §§ 404.914 and 416.1414.

• We changed “them” to “witnesses” for clarity in final §§ 404.936(c)(4) and 416.1436(c)(4).

• We retained existing §§ 404.936(d) and 416.1436(d), which allow a party to a hearing before an ALJ to object to appearing by VTC, and we moved and re-ordered the proposed text from the NPRM paragraphs (d) and (e) to (e) and (f) respectively.

• We added “or notice of supplemental hearing” to the paragraph heading in final §§ 404.938(d) and 416.1438(d) to ensure readers understand the breadth of the paragraphs.

In response to the NPRM, we received and posted 244 public comments that addressed issues within the scope of our proposed rule, and we received one comment that we did not post because an individual made it in his or her official capacity as a Social Security Administration (SSA) employee. Below we respond to the significant concerns that public commenters raised that are within the scope of the final rule.

Comment: Some commenters opposed our proposal to allow the agency, rather than an ALJ, to set the time, place, and manner of appearance for the hearing. They maintained that our proposed changes are inconsistent with longstanding rule providing that ALJs set the time, place, and manner of appearance at hearings, and that ALJs should continue to do so as a fundamental function of their authority.

Response: Because the agency, rather than any individual adjudicator, is responsible for managing our nationwide hearing process, we are best placed to appropriately balance the overriding concerns that have animated our hearing process since it began in 1940: Our hearing process provides due process for each claimant and works efficiently and uniformly across the country.5 We intend to balance concerns about due process, efficiency, and uniformity under this final rule and implement a standard, uniform scheduling process nationwide, while keeping maximum flexibility. By managing the process of scheduling hearings, maximizing our ability to transfer workloads, and exercising flexibility to determine the manner of appearance, we intend to promote a more timely hearing process that provides greater consistency between the length of time a claimant requests a hearing and the date a hearing can be held. We expect that shifting the administrative task of scheduling hearings from individual ALJs to the agency will allow us to increase the overall efficiency of our hearing process and provide more consistent service to the public.

Further, allowing the agency to set the claimant's manner of appearance is an administrative, logistical function that does not affect an ALJ's qualified decisional independence or significantly alter the functioning of our hearing process. Under this final rule, our current policy of generally assigning cases to ALJs on a rotational basis with the earliest hearing requests receiving priority will remain the same. We will also continue to make scheduling decisions in conjunction and consultation with our ALJs. Our ALJs will continue to provide their availability for hearings, decide necessary participants to the hearing, and evaluate the sufficiency of a record in determining when a hearing should be held. As part of this evaluation, the ALJ will have the opportunity to raise any factors in a particular case that would assist us in choosing the most appropriate time, place, and manner of appearance for the parties and witnesses.

Comment: Some commenters expressed concern that the rule does not define any standards to determine whether a VTC hearing is less efficient than conducting a hearing in-person, nor does the rule include any standards for determining if there is good reason to conduct a hearing by VTC or in person.

Response: When we consider whether it would be less efficient to schedule a party to appear by VTC, we will consider the overall efficiency of our hearing process. As we explained above and in our NPRM, we expect the final rule to help us reduce imbalances in the wait time among hearing offices by making it easier for us to shift cases from overburdened hearing offices to hearing offices with fewer requests for hearing pending per ALJ. Leveraging VTC technology to better balance our workloads is key to addressing our oldest pending cases, and it also allows us to act quickly when service needs arise from unanticipated emergencies, e.g., by transferring cases to a hearing office not in close geographical proximity to the claimant. All of these efficiencies will promote our ultimate goal of decreasing the total number of cases pending at the hearing level, and giving each claimant a more timely hearing and hearing decision.

Moreover, due to advances in video technology and our investments in VTC technology, our adjudicators are able to hear, see, and interact with the parties to a hearing as effectively through VTC as they would during an in-person appearance. Accordingly, we do not believe there are categorical circumstances that will always provide a good reason to schedule an individual to appear by VTC or in person. The overall efficiency of the hearing process and the need to provide fair, timely hearings to each claimant will continue to guide our decisions on how we schedule the manner of appearance under the final rule.

Comment: Multiple commenters stated that claimants should continue to have the option to opt out of or object to appearing by VTC in favor of appearing in person. Some commenters noted that when we revised our rule related to VTC hearings in the past, we specifically declined to require claimants to appear by VTC. The commenters maintained that our current policy works well and should not be changed.

Response: We acknowledge the commenters' near-universal preference for our current policy, which allows a party to a hearing before an ALJ to opt out of appearing by VTC. In response to this expressed preference, in the final rule we retained the regulatory provision allowing a party to a hearing before an ALJ to opt out of appearing by VTC, as it currently appears in §§ 404.936(d) and 416.1436(d). The AC will continue to follow all the rules that apply to ALJs when they remove a case.6 However, we maintain our position, which we stated in the NPRM, that an individual's decision to decline appearing by VTC can adversely affect the efficiency of our hearing process, and may result in a longer wait time for the individual's in-person hearing.

While we are retaining the opt out provision, we note that VTC technology is expected to help us reduce imbalances in the wait time among hearing offices. As well, the use of VTC technology allows us to shift cases in which the claimant did not object to appearing by VTC from overburdened hearing offices to hearing offices with fewer requests for hearing pending per ALJ. We anticipate that the effect of these process improvements will be to improve the balance across the country and decrease the total number of cases pending at the ALJ hearing level, thereby providing claimants with more timely hearing decisions and benefit payments to individuals whom we find entitled to disability benefits.

Comment: A commenter also expressed that we should retain the ability to opt out of appearing by VTC based on the commenter's assertion that not all individuals with disabilities have access, nor can they arrange access, to the internet to appear by VTC.

Response: As previously mentioned, under this final rule, a party to a hearing before an ALJ will still have an opportunity to opt out of appearing by VTC. Nevertheless, we note that this comment appears to reflect a misunderstanding of our intent and how we conduct VTC hearings. We conduct VTC hearings in our facilities or at those representative's offices that are suitably equipped. We do not require any individual to have internet access at their home when we conduct a VTC hearing.

Comment: Many commenters said that our proposed rule would violate section 504 of the Rehabilitation Act of 1973 (section 504).7 These comments primarily regarded our proposal to remove the option for parties to opt out of or object to appearing at a hearing by VTC.

Response: As noted above, we are not proceeding with our proposal to remove the option for parties to opt out of or object to appearing at a hearing by VTC. Moreover, we have pre-existing procedures for handling section 504 accommodation requests that we will continue to follow after the effective date of this final rule.

Comment: Some commenters alleged that there are substantive differences between VTC hearings and in-person hearings when the adjudicator has to make findings about the intensity, persistence, and limiting effects of the individual's symptoms. The commenters opined that when an individual appears by VTC, the adjudicator may not be able to evaluate the intensity, persistence, and limiting effects of his or her symptoms in a policy compliant manner. Other commenters also asserted that only an in-person appearance can adequately convey some aspects of a claimant's presence, such as odor. These commenters noted that grooming and hygiene are among the activities of daily living that an adjudicator considers when deciding some claims such that a claimant may reasonably prefer to appear in person to permit the adjudicator to smell him or her. Several commenters also expressed concerns about technological issues and variability in the quality of VTC hearings.

Response: We are committed to ensuring all hearings are conducted in a consistent and fair manner using modern technology, and because of the efforts we have made to ensure this happens, we disagree that an appearance by VTC may adversely affect the adjudicator's ability to evaluate the intensity, persistence, and limiting effects of an individual's symptoms. Due to advances in video technology and our investment in VTC technology, our adjudicators are able to hear, see, and interact with the parties to a hearing as effectively through VTC as they would during an in-person appearance. Our video network infrastructure allows us to conduct daily business in a reliable and stable manner, including holding over 1.7 million video hearings since we began conducting video hearings 8 and opened five National Hearing Centers that exclusively use video technology in their business process. Moreover, as we explained in the NPRM, over the past three years we have refreshed all VTC equipment and infrastructure, resulting in better technological quality and experience for users. All SSA-owned video units on our network use the Real Presence Group platform, which is designed for large enterprise-wide usage necessary for a national network of our size. Our video platform provides clear picture and audio for all participants. Desktop video units have been replaced with new larger Convene desktops with a 27-inch flat panel monitor and Eagle Eye camera, ideal for smaller spaces. Hearing rooms are also equipped with a 65-inch monitor and Eagle Eye camera. We will continue to refresh our video inventory to keep pace with new technology and industry standards, including consulting ACUS's recommendations. Our ALJs and staff are properly trained to operate the VTC equipment and to alert management of any technical issues, which can be dealt with on a case-by-case basis by support personnel.

The high quality of our VTC hearings, and the essential parity in quality between VTC and in-person hearings, is further evidenced by a study conducted by our Office of Quality Review (OQR) in 2017 (which we included in the rulemaking docket when we published the NPRM). This study found that there was no statistically significant difference in the quality rates of fully favorable or unfavorable decisions, regardless of whether the hearings were conducted in person or by VTC.

We also disagree with the comments that claimants must be in the same room as adjudicators to detect aspects of the claimant's presence that can only be discerned in person, such as odor. We note that when an adjudicator evaluates an individual's symptoms, he or she is required to limit the evaluation to the individual's statements about symptoms and the evidence in the record that is relevant to the individual's impairments and activities of daily living.9 An adjudicator does not assess the individual's overall character or truthfulness in the manner typically used during an adversarial proceeding.10 Instead, when relevant, the adjudicator receives testimony from the claimant about his or her activities of daily living, and evaluates whether the claimant's statements are consistent with the objective and other evidence of record. Moreover, although an adjudicator cannot make firsthand observations about an individual's body odor when the individual appears by VTC, the distance between the adjudicator and the individual during an in-person appearance may similarly render the adjudicator unable to make firsthand observations about body odor.

Objection To Scheduling Expert Witnesses To Appear by Telephone

Comment: Some commenters also objected to our proposal to schedule expert witnesses to appear by telephone, stating that we should remove this option (which already exists). These commenters cited concerns regarding assumed technical difficulties with telephone connections, concerns that expert witnesses appearing via telephone would not adequately pay attention to the hearing proceedings, and concerns about the security of personally identifiable information (PII) if the expert witness is not in a private location. Commenters also stated that experts appearing via telephone may not be able to view the electronic file during the hearing to review evidence submitted at or shortly after the hearing.

Response: We disagree with these comments, and note that under our existing procedures, we already use telephone hearings for expert witnesses without experiencing the projected technical difficulties cited by the commenters. Under our current rule, expert witnesses frequently appear at hearings by telephone. Experts conducted 21 percent of hearing testimony via telephone in FY 2018 and 37 percent thus far in 2019.11

In the past, we have encountered some complications when a hearing office did not place calls to expert witnesses through the video units, but instead used desk phones or teleconference lines. In such situations, the participants at the other video site may have had difficulty hearing the expert witness. To avoid this problem, we issued reminder instructions to all hearing office managers to place calls to experts using the video equipment. Additionally, we require expert witnesses to have a landline telephone connection, which should minimize any connection issues that may be associated with wireless calls. If an expert witness did not comply with our expectations and requirements for hearings testimony, we would address those compliance issues as we do now, in a manner separate and apart from this final rule. Similarly, we already require expert witnesses to properly protect PII,12 and any issues related to this concern would not be affected by this final rule.

Moreover, our subregulatory guidance provides procedures for ALJs to follow to ensure all participants are able to hear the ALJ and other participants, if multiple participants appear by different means.13 Our subregulatory guidance also provides procedures for ALJs to ensure that expert witnesses review any additional evidence received between the time the expert reviewed the file and the time of the hearing and to summarize on the record any pertinent testimony for expert witnesses who do not attend the entire hearing.14 We do not plan to modify those existing procedures under the final rule.

Sending an Amended Notice of Hearing or Notice of Supplemental Hearing 20 days Before the Date of the Hearing

Comment: A number of commenters opposed our proposal to clarify that when we need to update the information in a notice of hearing at the ALJ hearing level, we will send an amended notice of hearing or notice of supplemental hearing at least 20 days, rather than 75 days, in advance of the date of the scheduled hearing. Noting that we generally allow 5 days mailing time for notices to arrive, these commenters stated that claimants and appointed representatives may receive the amended notice fewer than 20 days, and possibly only 15 days, before the hearing. Observing that claimants often need to arrange transportation (e.g., paratransit, a ride from a friend or relative, etc.), arrange childcare, reschedule medical appointments, or meet other needs, these commenters further stated that it would be inappropriate and insufficient for us to provide only 20 or fewer days' notice about a change to the date or time of a hearing. The commenters additionally stated that if claimants receive an amended notice only 15 calendar days before the scheduled hearing, these claimants may be unable to meet other requirements that apply at the ALJ hearing level, such as: (1) Requesting a subpoena at least 10 business days in advance of a scheduled hearing, or (2) informing the ALJ about or submitting written evidence at least 5 business days before the date of the scheduled hearing.

Another commenter stated that our proposal to reduce the amount of advance notice that we must provide when updating “critical facts” about a scheduled hearing is problematic. This commenter stated that our current practice, which allows a party to a hearing to waive the right to advance notice of the hearing, is sufficient, and that the proposed changes will lead to inefficiencies and fewer policy-compliant decisions.

Response: We disagree with the commenters. As we explained in our NPRM, if we need to change the date of a scheduled hearing, the new date will always be at least 75 days from the date we first sent the claimant a notice of hearing, unless the claimant has waived the right to advance notice. With this safeguard in place, we expect that the vast majority of claimants will be able to meet other requirements that apply at the ALJ hearing level.15 However, if a claimant is unable to comply with relevant timeframes based on his or her receipt of an amended notice of hearing, the claimant can inform us of that difficulty and request an exception based on an unusual, unexpected, or unavoidable circumstance beyond the claimant's control that prevented him or her from complying with the applicable timeframe.16

Further, we frequently send amended hearing notices to update information other than the time or date of the hearing. For example, we send an amended notice of hearing when we change the name of the medical or vocational expert who will testify, add a new witness, change the manner of appearance, or change the ALJ assigned to the case. As explained in the NPRM, under our current rule, these changes required us to send a notice 75 days in advance, resulting in rescheduled hearings and unnecessary delays in many cases. By changing the timeframe to 20 days, we are able to make these types of changes with less impact to our hearings workload and without unnecessarily delaying the hearing.

If we need to change the time or date of a scheduled hearing, we will continue to work with both claimants and representatives to accommodate schedules, including following our standard business process of requesting potential dates and times that the representative will be available for hearing.17 In this regard, we understand that a representative's schedule of availability, once provided to a hearing office, may change. We remain committed to working with both claimants and representatives when we need to reschedule a hearing and will make every effort to provide adequate advance notice that will not impede the claimant's ability to comply with deadlines like the 10-day deadline for submitting subpoena requests and the 5-day deadline for submitting or informing us of written evidence. Additionally, we will continue to consider good cause for changing the time of the hearing due to issues including, but not limited to, the availability of transportation.

Comment: Some commenters expressed that we failed to demonstrate VTC hearings are more efficient than in-person hearings, or that they reduce processing times. These commenters further stated that we did not provide adequate data to justify the proposed changes, and that we relied on outdated data to support our rationale that more VTC appearances will result in more timely hearings. Some commenters criticized the quality of the data we relied on, and provided studies they asserted refute our conclusions.

Response: We disagree with these commenters. In the preamble to our NPRM, we provided an extensive discussion about our historical and ongoing experience using VTC technology and the flexibility it provides to manage our hearing workloads. We also explained that the number of ALJs available to conduct in-person hearings is generally limited to those ALJs stationed at, or geographically close to, the assigned hearing office or within travel distance to one of our permanent remote sites. As we explained, requiring an ALJ to travel to a remote hearing site for an in-person hearing reduces the amount of time the ALJ can devote to holding other hearings and issuing decisions from his or her assigned hearing office.

We further explained that prior studies, both internal and external, have found that utilizing VTC technology to conduct administrative hearings provides multiple benefits, including improved processing times and additional flexibility with respect to aged and backlogged hearing requests.

We stand by the quality of the data we relied on in the 2017 study by our OQR, which found there was no statistically significant difference in the quality rates of fully favorable or unfavorable decisions, regardless of whether the hearings were held in person or via VTC. The data used in the study represented a national random sample of recent cases. The data sample also fully accounts for improved technological changes that we implemented in the past three years.

Several commenters said that a 2018 Government Accountability Office (GAO) study refutes our findings, and supports the conclusion that individuals who had in-person hearings received favorable decisions at a higher rate than claimants who had VTC hearings.18 However, unlike our studies, the GAO study was not designed to study the effects of VTC on allowance rates, and it did not account for all factors that could affect this relationship. Further, GAO's study covered cases from 2007 to 2015, the earlier of which did not benefit from technological enhancements that we fully accounted for in the more recent OQR study. GAO studied variances in allowance rates, but not the accuracy of the decisions. Notably, the GAO study found there was no meaningful difference in allowance rates between similar claims decided by adjudicators at our National Hearing Centers, which exclusively conduct VTC hearings, and traditional hearing offices.

Many of the studies and articles cited by commenters in support of their statements that VTC will impact the fairness of hearings do not account for technological enhancements that occurred after the respective studies were conducted, or the non-adversarial nature of our proceedings. For example, one commenter relied on a study from the 1970s that found differences between video testimony and live testimony, particularly with regard to the perception of honesty.19 However, that study does not reflect the significant technological advancements that have occurred since the 1970s; these advancements enable the fact finder to see, hear, and interact with individuals as easily by VTC as in person. A 2007 article, also cited by commenters, that examined eviction hearings held by VTC, and that analyzed the impact of the conclusions in the criminal proceedings, is also not directly relevant to our VTC hearings.20 SSA hearings are non-adversarial and have the benefit of technological enhancements over the past 12 years. Another commenter cited the Advisory Committee Notes to Rule 43 of the Federal Rules of Civil Procedure regarding testimony at trial, which is distinguishable because our hearings are not trials, and adjudicators are not bound by the procedures set forth in the Federal Rules of Evidence.

As we previously explained, we expect that we will be able to better balance our workloads by increasing our use of VTC technology. Specifically, we expect that we will be able to decrease the total number of cases pending at the ALJ hearing level by shifting cases from overburdened hearing offices to hearing offices with fewer requests for hearing pending per ALJ. In addition, as we discussed earlier, we are retaining the existing option allowing a claimant to decline a video hearing, which already exists at the ALJ hearing level, and the AC will continue to apply ALJ hearing rules for cases they remove for a hearing.

Discussion of Our Use of the ACUS and SSAB Studies

Comment: Some commenters stated that we mischaracterized the findings of a study from ACUS to justify our proposed changes. Specifically, commenters stated that we implied that ACUS's report endorses mandatory appearances by VTC.

Response: We disagree that we mischaracterized ACUS's study, as evidenced by the fact that when ACUS submitted a comment on our proposed rule, ACUS merely stated that its views were already reflected in its reports and recommendations, and ACUS thanked us for considering its views and drawing upon its research studies. Moreover, in the NPRM, we explained that ACUS: Has identified a number of advantages to using VTC at administrative hearings; has noted that agencies with high volume caseloads are likely to receive the most benefit, cost savings, or both from using VTC; published a Handbook on Best Practices for Using Video Teleconferencing in Adjudicatory Hearings; 21 documented that VTC has been widely accepted as an important tool that increases our ability to hold hearings and improve public service; and has repeatedly recommended that we increase our use of VTC hearings to achieve greater efficiency. Thus, we did not state or imply that ACUS supported our specific proposal to disallow the parties to a hearing to opt out of or object to appearing by VTC.

We recognize that ACUS specifically recommended expansion of VTC on a voluntary basis, while allowing a party to have an in-person hearing or proceeding if he or she selected that option.22 However, as set forth in our NPRM, we based our proposed rule not solely on the ACUS study, but also on: Our own extensive experience with VTC hearings; multiple internal and external studies that have documented the benefits of VTC hearings; technological advances that enable an adjudicator to see, hear, and interact with individuals as easily by VTC as in person; our need to balance workloads and address service challenges while maintaining fairness and participant satisfaction; and SSAB's specific recommendation that we eliminate the ability to opt-out of VTC hearings. Regardless, we reiterate that we are retaining the existing option for a party to a hearing to opt out of appearing by VTC at the ALJ hearing level and AC hearing removal.

Comment: One commenter objected to the NPRM based on the assertion that the NPRM, and thus this final rule, require a Regulatory Flexibility Act (RFA) analysis. The commenter made several claims to support this view, including, “[s]ome claimants will withdraw hearing requests rather than go through with a VTC hearing” which, the commenter contends, will affect experts and representatives. The commenter also contended “[r]epresentatives with disabilities that require the reasonable modification of an in-person hearing will have to stop or curtail their work on Social Security cases if they can no longer choose to represent only claimants who have opted out of video hearings.” Finally, the commenter stated, “The proposed changes to notice rules may also require additional travel costs or hiring of supplemental staff for representatives if hearings are changed with only 20 days' notice.”

Response: We disagree with this commenter. In our NPRM, we explained that our proposed rule would not have a significant economic impact on a substantial number of small entities because they would affect individuals only. Accordingly, we certified that an analysis as provided in the RFA, as amended, was not required. We certify the same with respect to this final rule.

We note that the commenter's assertion that an RFA analysis is required is predicated, in part, on our proposal to disallow a party to a hearing to opt out of, or object to, appearing by VTC. As previously mentioned, in this final rule, we are retaining the existing option for a party to a hearing before an ALJ to object to appearing by VTC. Additionally, at this time, we are not pursuing changes to our rule about scheduling hearings before DHOs.

While the commenter also asserted that our proposal to send an amended notice of hearing or notice of supplemental hearing at least 20 days before the date of the hearing would require additional travel or supplemental staff costs, the commenter did not explain why. Furthermore, as explained above, if we need to change the date of a hearing, the date we choose will always will be at least 75 days from the date we first sent the claimant a notice of hearing, unless the claimant has waived his or her right to advance notice. Additionally, if we need to change the date or time of a hearing, or schedule a supplemental hearing, we will continue to work with claimants and representatives to accommodate schedules.

Comment: The same commenter stated our NPRM was invalid because we stated in the preamble that the proposed rule did not impose any new or significantly revise existing public reporting requirements under the Paperwork Reduction Act (PRA), and the commenter did not believe this to be correct.

Response: The rationale the commenter provided to support this assertion reflected a misunderstanding of the PRA. When we published the NPRM, our PRA characterization was accurate: We were not creating, nor were we revising, any public information collection tools. The public already uses existing form HA-55 (Objection to Appearing by Video Teleconferencing (OMB No. 0960-0671)) to request a change in time, place, or manner of hearing. We will not be substantively changing this form, particularly since we are retaining the opt-out provision. We will be adding very minor language changes in the supplemental explanation section of this form; this language will clarify that if one declines the VTC option, there is a chance a delay in hearing will result. This change is considered non-substantive under the PRA because it does not add or remove any questions, nor does it provide new information that is needed to complete the form. Accordingly, although we are submitting a non-substantive change request for this modification, we do not need to undergo full PRA approval, nor do we need to seek public comment on the change.

As well, we are making a minor change to form HA-510 (Waiver of Written Notice of Hearing (Form HA-510, OMB No. 0960-0671)) to reflect that we will now be providing a notice of amended or supplemental hearing 20, not 75 days, in advance of the hearing. Because we already solicited comment on this change through the proposed rule (i.e., the form language change is simply a reflection of the policy change), we do not need to seek additional comment under the PRA. We are thus clearing this change as well through the non-substantive change request process.

We consulted with the Office of Management and Budget (OMB) and determined that this final rule did not meet the requirements for a significant regulatory action under Executive Order 12866 as supplemented by Executive Order 13563. Thus, OMB did not conduct formal review of this final rule.

This rule is not subject to the requirements of Executive Order 13771 because it is administrative in nature, and it will result in no more than de minimis, if any, costs in any one year after implementation.

At this time, the Office of the Chief Actuary estimates that this final rule will have a negligible effect on scheduled old-age, survivors, and disability insurance benefits and Federal Supplemental Security Income payments.

The Office of Budget, Finance, and Management estimates administrative savings of less than 15 work years and $2 million annually.

We certify that this final rule will not have a significant economic impact on a substantial number of small entities because it only affects individuals. Accordingly, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

SSA already has existing OMB PRA-approved information collection tools relating to this final rule: Objection to Appearing by Video Teleconferencing (Form HA-55, OMB No. 0960-0671), and Waiver of Written Notice of Hearing (Form HA-510, OMB No. 0960-0671). Because we are retaining the opt-out provision for video teleconference (VTC) in this final rule, we are only adding minor instructional changes to Form HA-55 to caution claimants that by opting out of appearing by VTC, they may experience a delay in being scheduled for a hearing. In addition, due to the change in timing for amended or continued hearing notices, we are also making a minor change to Form HA-510 to show the change in timing for requesting the waiver for those affected by this change. However, because these modifications are minor in nature, and either reflect existing policy (HA-55), or have already been presented for public comments through rulemaking (HA-510), we will obtain OMB approval for these changes through a non-substantive change request, which does not require public notice and comment under the PRA. Thus, this final rule does not create or significantly alter any existing information collections under the PRA.

For the reasons set out in the preamble, we are amending 20 CFR chapter III, parts 404 and 416, as set forth below:

Background I. Corporate Divisions Under Sections 355 and 368(a)(1)(D)

Congress enacted section 355 “to permit the tax-free division of existing business arrangements among existing shareholders.” See S. Rep. No. 105-33, at 139 (1997) (Senate Report). Under section 355(a)(1), if certain requirements are met, a corporation (Distributing) may distribute stock, or stock and securities, of a controlled corporation (Controlled) to Distributing's shareholders, or to its shareholders and security holders, without recognition of gain or loss to, or inclusion of any amount in income of, the distributees upon receipt (Distribution). Section 355(c) generally provides that no gain or loss is recognized to Distributing upon a Distribution of qualified property which is not in pursuance of a plan of reorganization. Section 355(c)(2)(B) refers to Controlled stock and Controlled securities as “qualified property.” If Distributing distributes property other than qualified property in a Distribution and the fair market value of such property exceeds its adjusted basis, gain is recognized to Distributing as if the property were sold to the distributee at its fair market value. See section 355(c)(2)(A).

Taxpayers also may carry out a Distribution as part of a “divisive reorganization” under section 368(a)(1)(D). A divisive reorganization is a transfer by Distributing of part of its assets to Controlled if, immediately after the transfer, one or more of the shareholders of Distributing (including persons who were shareholders immediately before the transfer) have control, as defined in section 368(c), of Controlled, but only if, in pursuance of the plan, stock or securities of Controlled are distributed in a Distribution. Section 361(c) generally provides that no gain or loss is recognized to Distributing upon a Distribution of qualified property in pursuance of a plan of reorganization. Section 361(c)(2)(B) defines “qualified property” as (i) any stock, right to acquire stock, or obligation (including a security) of Distributing, or (ii) any stock, right to acquire stock, or obligation (including a security) of Controlled received by Distributing as part of the divisive reorganization. If Distributing distributes property other than qualified property in a Distribution as part of a divisive reorganization and the fair market value of such property exceeds its adjusted basis, gain is recognized to Distributing as if the property were sold to the distributee at its fair market value. See section 361(c)(2)(A).

Although a Distribution is generally tax-free under sections 355 and 361, Congress has determined that recognition of corporate-level gain by Distributing is appropriate “[i]n cases in which it is intended that new shareholders will acquire ownership of a business in connection with a [Distribution],” because the overall transaction “more closely resembles a corporate level disposition of the portion of the business that is acquired.” Senate Report at 139-140. Accordingly, the enactment of the Taxpayer Relief Act of 1997, Public Law 105-34 (111 Stat. 788 (1997)), added section 355(e) to the Code. Under section 355(e), stock or securities of Controlled generally will not be treated as qualified property for purposes of section 355(c)(2) or section 361(c)(2) if the stock or securities are distributed as part of a plan or series of related transactions (Plan) pursuant to which one or more persons acquire directly or indirectly stock representing a “50-percent or greater interest” in the stock (Planned 50-percent Acquisition) of Distributing or Controlled. The term “50-percent or greater interest,” as defined in section 355(e)(4)(A) by reference to section 355(d)(4), means stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock. Section 1.355-7(b) provides detailed guidance regarding the meaning and determination of the existence of a Plan.

Section 355(e)(4)(D) provides that, for purposes of section 355(e), “any reference to [Controlled] or [Distributing] shall include a reference to any predecessor or successor of such corporation.” However, Section 355(e) does not define the terms “predecessor” and “successor.” To provide definitions for the terms “predecessor” and “successor” for purposes of section 355(e), as well as guidance regarding their application, the Department of the Treasury (Treasury Department) and the IRS issued proposed regulations in 2004 (2004 Proposed Regulations) and temporary and proposed regulations in 2016 (2016 Regulations).

The general theory underlying the 2004 Proposed Regulations and the 2016 Regulations was that section 355(e) should apply if a Distribution is used to combine a tax-free division of the assets of a corporation other than Distributing or Controlled (Divided Corporation) with a Planned 50-percent Acquisition of the Divided Corporation. The Treasury Department and the IRS view this type of transaction as a “synthetic spin-off” of the assets that are transferred by the Divided Corporation to Distributing and then to Controlled. For example, a synthetic spin-off could be achieved through the following series of transactions occurring pursuant to a Plan (Base Case Example): (1) A corporation (P) merges into Distributing in a reorganization described in section 368(a)(1)(A), (2) Distributing contributes some (but not all) of P's assets to Controlled in a reorganization described in section 368(a)(1)(D), and (3) Distributing distributes all of the stock of Controlled in a Distribution.

In the Base Case Example, the Divided Corporation (that is, P) could have separated its assets in its own Distribution. In that case, the Divided Corporation would have been a Distributing itself, and section 355(e) clearly would have applied to the Distribution if it were combined with a Planned 50-percent Acquisition of the Divided Corporation. However, the Treasury Department and the IRS observed that if a Distribution by a Distributing is used as the vehicle for a synthetic spin-off by the Divided Corporation, the synthetic spin-off would not be subject to section 355(e) unless the Divided Corporation is treated as a predecessor of Distributing under section 355(e)(4)(D) (Predecessor of Distributing, or POD). Accordingly, the Treasury Department and the IRS issued the 2004 Proposed Regulations and the 2016 Regulations to treat the Divided Corporation in the Base Case Example as a POD.

On November 22, 2004, the Treasury Department and the IRS published in the Federal Register (69 FR 67873) the 2004 Proposed Regulations (REG-145535-02). In general, the 2004 Proposed Regulations would have defined a Predecessor of Distributing as any corporation the assets of which a Distributing has acquired in a transaction to which section 381(a) applies (Section 381 Transaction) and then divided tax-free through a Distribution. The 2004 Proposed Regulations referred to the Section 381 Transaction and the contribution to Controlled of some (but not all) of the assets of the POD prior to the Distribution as a “combining transfer” and a “separating transfer,” respectively. The Treasury Department and the IRS drafted the 2004 proposal primarily to address combining and separating transfers carried out to effect transactions similar to the Base Case Example (in other words, synthetic spin-offs effectuated through Section 381 Transactions).

After considering all comments received regarding the 2004 Proposed Regulations, on December 19, 2016, the Treasury Department and the IRS published temporary regulations (TD 9805) in the Federal Register (81 FR 91738) (2016 Temporary Regulations), which adopted the 2004 Proposed Regulations with significant modifications. On the same day, the Treasury Department and the IRS published in the Federal Register (81 FR 91888) a notice of proposed rulemaking (REG-140328-15) (2016 Proposed Regulations), which cross-referenced the 2016 Temporary Regulations. A correction to the 2016 Temporary Regulations was published in the Federal Register (82 FR 8811) on January 31, 2017. (References to § 1.355-8T in this preamble refer to the text of the 2016 Temporary Regulations as contained in 26 CFR part 1 revised as of April 1, 2019.)

Although the 2016 Regulations generally retained the synthetic spin-off theory underlying the 2004 Proposed Regulations, the Treasury Department and the IRS significantly broadened the scope of the POD definition (but also significantly narrowed its potential application, as described later in this part III.B). Commenters on the 2004 Proposed Regulations noted that a corporation could have been a POD only if the corporation transferred property to Distributing in a Section 381 Transaction (such as the merger in the Base Case Example) and questioned whether that approach was under-inclusive. In particular, one commenter explained that a taxpayer could structure a series of transactions to achieve many of the same tax and economic objectives as the Base Case Example without using a Section 381 Transaction.

To illustrate that point, the commenter described the following series of transactions, all of which occur as part of the same Plan (2016 Preamble Example). First, Distributing (the common parent of a consolidated group) acquires all of the stock of P. P then contributes some (but not all) of its assets to a wholly owned subsidiary of Distributing (Internal Distributing) in a transaction to which section 351 applies. See § 1.1502-34. Thereafter, Internal Distributing (i) contributes one of the P assets to Controlled, and (ii) distributes all of the stock of Controlled to Distributing in a Distribution. Finally, Distributing distributes all of the stock of Controlled in a Distribution.

In response to these comments, the Treasury Department and the IRS broadened the POD definition in the 2016 Regulations by removing the requirement of a Section 381 Transaction from the definition. Under the 2016 Regulations, no particular transactional form was required; rather, the 2016 Regulations focused on the tax-free division of the POD's property (however effected). The Treasury Department and the IRS revised the POD definition in this manner to ensure that section 355(e) would apply to the Base Case Example, the 2016 Preamble Example, and more generally to any synthetic spin-off that is combined with a Planned 50-percent Acquisition of the Divided Corporation. Importantly, however, the 2016 Regulations significantly limited POD treatment to transactions in which all of the steps involved in the tax-free division of property of the POD occur as part of a Plan. See section 355(e)(2)(A)(ii).

Because of these revisions to the 2004 Proposed Regulations, a variety of new transactional structures resulted in POD treatment under the 2016 Regulations. For instance, as illustrated in § 1.355-8T(h), Example 5 (Example 5), a corporation was treated as a POD as a result of the following transactions, each of which occurs pursuant to the same Plan. First, P transfers some (but not all) of its assets to Distributing in exchange for 10 percent of the stock of Distributing in a transaction to which section 351 applies (leaving Distributing's other shareholder, Y, with 90 percent of Distributing's stock). Distributing then (i) contributes some (but not all) of the P assets to Controlled in a reorganization described in section 368(a)(1)(D), and (ii) distributes all of the stock of Controlled to P and Y pro rata. Finally, individual Z acquires 51 percent of the P stock. Because the assets of P were divided tax-free as part of a Plan, the 2016 Regulations treated P as a POD. As described in part II of the Summary of Comments and Explanation of Revisions, in response to comments, the Treasury Department and the IRS have further limited the scope of the POD definition in the final regulations to ensure that P will not be treated as a POD in Example 5.

In expanding the definition of a Predecessor of Distributing, the 2016 Regulations introduced the term “Potential Predecessor.” See § 1.355-8T(b)(2)(ii). Under the POD definition in the 2016 Regulations, only a Potential Predecessor could be a POD. See § 1.355-8T(b)(1)(i). Thus, if a corporation were not a Potential Predecessor, it could not have been a POD under the 2016 Regulations. The 2016 Regulations defined a Potential Predecessor as any corporation other than Distributing or Controlled. See § 1.355-8T(b)(2)(ii).

Comments were received regarding the 2016 Regulations, but no public hearing was requested or held. After consideration of these comments, this Treasury decision adopts the 2016 Proposed Regulations with limited modifications, and it removes the 2016 Temporary Regulations. In general, the final regulations follow the approach of the 2016 Regulations while incorporating certain requested clarifications and minor revisions.

The Treasury Department and the IRS are promulgating the final regulations with the same goal as the 2004 Proposed Regulations and the 2016 Regulations: To ensure that section 355(e) applies properly to synthetic spin-offs of a Divided Corporation's assets. As noted in part II of the Background, Congress has determined that corporate-level gain should be recognized by a Distributing “[i]n cases in which it is intended that new shareholders will acquire ownership of a business in connection with a [Distribution],” because the overall transaction “more closely resembles a corporate level disposition of the portion of the business that is acquired.” Senate Report at 139-140. Consistent with this policy, the final regulations provide that a corporation cannot qualify as a POD unless the corporation's assets are divided through a Distribution (that is, unless the corporation is a Divided Corporation).

The Treasury Department and the IRS have determined that, by limiting POD treatment to Divided Corporations, the final regulations will further the policy of section 355(e) while continuing to permit tax-free divisions of existing business arrangements among existing shareholders. See Senate Report at 139. In particular, the Treasury Department and the IRS have sought to avoid definitions that would cause section 355(e) to apply to transactions that do not resemble sales. For example, starting with the 2004 Proposed Regulations, the Treasury Department and the IRS have rejected a POD definition that would include any corporation that, without more, transfers assets to a Distributing in a Section 381 Transaction.

The following example illustrates how that rejected POD definition would have run contrary to the policies of section 355 and section 355(e). As part of a Plan, P merges tax-free into Distributing in a reorganization described in section 368(a)(1)(A), with the P shareholders receiving 40 percent of the stock of Distributing. Distributing then distributes all of the stock of Controlled (which holds none of the P assets) in a Distribution. If P were treated as a POD, the Distribution would result in gain recognition under section 355(e), because it occurred as part of the same Plan as an acquisition of a 50-percent or greater interest in P (that is, a Planned 50-percent Acquisition). See section 355(e)(3)(B). However, the Treasury Department and the IRS have determined that the policy of section 355(e) does not warrant the recognition of gain in this case, because the assets of P have not been divided and neither Distributing nor Controlled has undergone a Planned 50-percent Acquisition. Rather, the Distribution effected a division of existing business arrangements among existing shareholders, and Congress intended section 355 to afford tax-free treatment to such a transaction. See Senate Report at 139.

Commenters criticized the breadth of the POD definition in the 2016 Regulations. Although commenters generally supported the treatment of P as a POD in the 2016 Preamble Example, commenters questioned the policy of treating P as a POD in Example 5. See part III.B of the Background section (describing the 2016 Preamble Example and Example 5). After considering all comments received on this issue, and as discussed further in the remainder of this part II, the Treasury Department and the IRS have determined that the series of transactions set forth in Example 5 should not be viewed as a synthetic spin-off, and that P therefore should not be treated as a POD in Example 5.

When a corporation distributes an appreciated asset with respect to its stock, the corporation disposes of the asset for no consideration, reducing both the total value and the total built-in gain inside the corporation. In this regard, the synthetic spin-off by P in the Base Case Example resembles an actual Distribution by P of stock of a controlled corporation holding the P assets actually held by Controlled. Both transactions reduce the total value and built-in gain of P (which, in the Base Case Example, becomes part of Distributing) by the value of, and built-in gain in, the P assets held by Controlled.

By contrast, Example 5 involves a section 351 exchange by P, which reduces neither the total value nor the total built-in gain inside P. In the section 351 exchange, P exchanges assets for Distributing stock of equal value. Under section 358, P's basis in this Distributing stock is determined by reference to P's basis in the assets exchanged therefor, and is then allocated between P's Distributing stock and the Controlled stock P receives in the Distribution. Therefore, upon the conclusion of Example 5, P holds Distributing stock and Controlled stock with an aggregate value and built-in gain equal to the aggregate value of, and built-in gain in, the assets P transferred to Distributing. Rather than disposing of an asset for no consideration (as is the case in an actual distribution of property with respect to a Distributing's stock), P merely has exchanged one asset for another in Example 5. As a result, the Treasury Department and the IRS have determined that the series of transactions set forth in Example 5 does not resemble an actual Distribution by P and should not be viewed as a synthetic spin-off.

The key distinction between the 2016 Preamble Example and Example 5 is the relative ease with which a subsequent restructuring could be undertaken to eliminate P's substituted built-in gain in the 2016 Preamble Example. The 2016 Preamble Example, like Example 5, involves a section 351 exchange in which P exchanges assets for Internal Distributing stock with the same value and built-in gain. Unlike in Example 5, however, Distributing in the 2016 Preamble Example directly and indirectly owns 100 percent of the stock of both P and Internal Distributing. As a result, in the 2016 Preamble Example, Distributing could unilaterally eliminate the built-in gain preserved in P's Internal Distributing stock through an internal restructuring. The occurrence of such an internal restructuring would make the 2016 Preamble Example difficult to distinguish from the Base Case Example.

By contrast, upon the conclusion of Example 5, P owns only 10 percent of the stock of each of Distributing and Controlled, whereas corporation Y owns 90 percent. Although it may be theoretically possible for P to eliminate its built-in gain in this stock through certain transactions involving Distributing and Controlled, P lacks any meaningful control over either corporation. In addition, the Treasury Department and the IRS note that such built-in gain elimination transactions generally would carry significant non-tax consequences. Therefore, it would be unreasonable to assume that such transactions would occur and that P's built-in gain in the Distributing and Controlled stock would be eliminated after the Distribution.

One commenter asserted that there is little opportunity for P to engage in a subsequent restructuring to eliminate its built-in gain in Distributing or Controlled stock in a case like Example 5 or the 2016 Preamble Example unless P is a member of Distributing's affiliated group (as defined in section 1504 without regard to section 1504(b)) (Expanded Affiliated Group). The Treasury Department and the IRS agree with this comment.

Based on the foregoing, the final regulations define the term Potential Predecessor as any corporation other than Distributing or Controlled, but only if either (i) as part of a Plan, the corporation transfers property to a Potential Predecessor, Distributing, or a member of the same Expanded Affiliated Group as Distributing in a Section 381 Transaction (as in the Base Case Example), or (ii) immediately after completion of the Plan, the corporation is a member of the same Expanded Affiliated Group as Distributing (as in the 2016 Preamble Example). Accordingly, under the final regulations, P in Example 5 is not a Potential Predecessor (and thus cannot be a POD).

Under the 2016 Regulations, a Potential Predecessor qualified as a POD only if two pre-Distribution requirements and one post-Distribution requirement were satisfied. The Treasury Department and the IRS intended that these requirements, taken together, (i) composed a technical description of a synthetic spin-off, and (ii) limited POD treatment to Potential Predecessors the assets of which are divided tax-free through a Distribution by Distributing. The following discussion summarizes these requirements.

To satisfy the first pre-Distribution requirement, any Controlled stock distributed in the Distribution must have been (i) Relevant Property, the gain on which was not recognized in full as part of a Plan, or (ii) acquired by Distributing for Relevant Property, the gain on which was not recognized in full as part of a Plan, and that was held by Controlled immediately before the Distribution (Relevant Property Requirement). The term “Relevant Property” generally referred to any property held by the Potential Predecessor at any point during the Plan Period (that is, the period that ends immediately after the Distribution and begins on the earliest date on which any part of the Plan is agreed to or understood, arranged, or substantially negotiated). See § 1.355-8T(b)(2)(iv).

To satisfy the second pre-Distribution requirement, any Controlled stock distributed in the Distribution must have reflected the basis of any Separated Property (Reflection of Basis Requirement). In general, the 2016 Regulations defined the term “Separated Property” as any Relevant Property relied on to satisfy the Relevant Property Requirement. See § 1.355-8T(b)(2)(vii). The 2016 Regulations did not define the phrase reflect the basis.

To satisfy the post-Distribution requirement, immediately following the Distribution, ownership of Relevant Property must have been divided between Controlled, on the one hand, and Distributing or the Potential Predecessor, on the other hand (Division of Relevant Property Requirement).

One commenter requested clarification of the Relevant Property Requirement's application to a case in which (i) gain on Relevant Property is fully recognized at some point during the Plan Period, but (ii) the Relevant Property subsequently appreciates so that built-in gain exists at the time of the Distribution. The Treasury Department and the IRS did not intend for fluctuations in value to affect the determination of POD status under the 2016 Regulations. Consequently, the final regulations replace the requirement that gain on Relevant Property not be recognized in full “as part of a Plan” with the requirement that gain (if any) on Relevant Property not be recognized in full “at any point during the Plan Period.”

The Treasury Department and the IRS have received numerous comments requesting clarification of the Reflection of Basis Requirement's scope and purpose. These comments arose from the failure of the 2016 Regulations to define the phrase reflect the basis.

To highlight the potential overbreadth of this undefined phrase, one commenter questioned whether P could qualify as a POD solely through a basis adjustment under § 1.1502-32. In the commenter's example, P and unrelated Distributing (which is the common parent of a consolidated group) form corporation X in a section 351 exchange in which P contributes Asset 1 and Distributing contributes other assets in exchange for X stock, with Distributing receiving at least 80 percent of X's stock by vote and value. Thereafter, Distributing contributes its X stock to Controlled in exchange for Controlled stock. Then, because of items relating to Asset 1, Distributing's basis in its Controlled stock is adjusted under § 1.1502-32. Finally, Distributing distributes all of the stock of Controlled. Based on this illustrative example, the commenter expressed concern that the § 1.1502-32 basis adjustment could cause Distributing's Controlled stock to reflect the basis of Asset 1, and the commenter asserted that treating P as a POD in this case would be inappropriate.

The Treasury Department and the IRS did not intend the Reflection of Basis Requirement in the 2016 Regulations to be satisfied solely by a basis adjustment under § 1.1502-32. The Reflection of Basis Requirement served two related purposes. First, the Treasury Department and the IRS intended the Reflection of Basis Requirement to ensure a connection between the gain in the POD's property held by Controlled and the gain that Distributing must recognize under section 355(e). Second, the Treasury Department and the IRS intended this requirement to avoid improper duplication of gain if Controlled stock is distributed in multiple Distributions as part of the same Plan. See § 1.355-8T(h), Example 7 (concluding with respect to consecutive Distributions that, although P is a POD with respect to the first Distribution, P is not a POD with respect to the second Distribution because the C stock distributed in the second Distribution did not reflect the basis of any Separated Property).

The Treasury Department and the IRS have addressed these concerns in the final regulations by clearly articulating the Reflection of Basis Requirement. The final regulations clarify that the Reflection of Basis Requirement is satisfied only if any Controlled stock that satisfies the Relevant Property Requirement had a basis prior to the Distribution that was determined, in whole or in part, by reference to the basis of Separated Property. The final regulations make the same clarification to the two other provisions that, under the 2016 Regulations, referred to a reflection of basis: § 1.355-8T(b)(2)(vi)(B)(2) (regarding the treatment of Controlled stock as a Substitute Asset); and § 1.355-8T(b)(2)(x) (providing a deemed exchange rule for purposes of the Relevant Property Requirement, the Reflection of Basis Requirement, and the Substitute Asset definition).

In addition, the final regulations clarify that the Reflection of Basis Requirement is satisfied only if, during the Plan Period prior to the Distribution, any Controlled stock that satisfies the Relevant Property Requirement (and the first prong of the Reflection of Basis Requirement) was neither distributed in a section 355(e) distribution nor transferred in a transaction in which the gain (if any) on that Controlled stock was recognized in full. This clarification ensures that the final regulations cannot be interpreted in a manner that would give rise to improper duplication of gain, a policy objective of the Treasury Department and the IRS in issuing the 2016 Regulations.

One commenter requested that the Treasury Department and the IRS clarify that property acquired by a Potential Predecessor during the Plan Period would not be treated as Relevant Property if not acquired pursuant to a Plan. In particular, the commenter presented an example in which a Potential Predecessor becomes a member of Distributing's consolidated group pursuant to a Plan. Prior to a Distribution, the Potential Predecessor acquires from other members of Distributing's consolidated group property that had not been transferred directly or indirectly to Distributing pursuant to the Plan. The commenter requested clarification that this property is not Relevant Property.

The commenter's specific concern was already addressed by an exception to the Relevant Property definition in the 2016 Regulations (see § 1.355-8T(b)(2)(iv)(B)), and the final regulations retain this exception. This exception provides that property held directly or indirectly by Distributing is Relevant Property of a Potential Predecessor only to the extent that the property (1) was transferred directly or indirectly to Distributing during the Plan Period, and (2) was Relevant Property of the Potential Predecessor before the direct or indirect transfers. This exception exempts the property in the commenter's example from treatment as Relevant Property because the property was not transferred directly or indirectly to Distributing during the Plan Period.

In addition, the final regulations include a Plan limitation in the Division of Relevant Property Requirement. Thus, the Division of Relevant Property Requirement will be satisfied only if ownership of a Potential Predecessor's Relevant Property has been divided as part of a Plan. Both the preamble to the 2016 Regulations and the text of § 1.355-8T(a)(3) (summarizing the POD definition) described the Division of Relevant Property Requirement in the 2016 Regulations as including a Plan limitation, and the Treasury Department and the IRS had intended for § 1.355-8T(b)(1)(iii) (the Division of Relevant Property Requirement) to include this limitation. The Treasury Department and the IRS intend that the Plan limitation in the Division of Relevant Property Requirement will ensure more generally that Relevant Property acquired by a Potential Predecessor during the Plan Period, but not pursuant to a Plan, will not result in an inappropriate application of section 355(e).

One commenter questioned whether a reference in § 1.355-8T(b)(2)(v) (limiting the circumstances under which Distributing stock is treated as Relevant Property) to § 1.355-8T(b)(1)(ii) (the Relevant Property Requirement and the Reflection of Basis Requirement) was intended to refer instead to § 1.355-8T(b)(1)(iii) (the Division of Relevant Property Requirement). The Treasury Department and the IRS intended for § 1.355-8T(b)(2)(v) to reference the Division of Relevant Property Requirement and have incorporated this revision into the final regulations.

Although § 1.355-7 generally governs the determination of whether a Distribution and an acquisition of a 50-percent or greater interest in a POD have occurred as part of the same Plan, the 2016 Regulations contained special rules in this regard. See § 1.355-8T(a)(4)(ii). In general, references to Distributing in § 1.355-7 included references to a POD. However, any agreement, understanding, arrangement, or substantial negotiations regarding the acquisition of the stock of a POD were analyzed under § 1.355-7 with respect to the actions of officers or directors of Distributing or Controlled, controlling shareholders of Distributing or Controlled, or a person acting with permission of one of those persons. For that purpose, references in § 1.355-7 to Distributing did not include references to a POD. Therefore, the actions of officers, directors, or controlling shareholders of a POD, or of a person acting with the implicit or explicit permission of one of those persons, would not have been considered for this purpose unless those persons otherwise would have been treated as acting on behalf of Distributing or Controlled under § 1.355-7. The final regulations retain these rules.

One commenter expressed concern regarding the potential scope of the “implicit permission” concept in § 1.355-7 given that the 2016 Regulations contemplated that actions on behalf of a Potential Predecessor may be taken into account if such actions were carried out with the implicit permission of Distributing. The Treasury Department and the IRS have not addressed this comment in the final regulations because the implicit permission concept is a component of § 1.355-7 and therefore is beyond the scope of this Treasury decision.

Under section 355(e)(4)(D), any reference to Controlled or Distributing includes a reference to any successor of such corporation (Successor). Like the 2004 Proposed Regulations, the 2016 Regulations limited the definition of the term Successor to a corporation to which Distributing or Controlled (as the case may be) transfers property in a Section 381 Transaction after the Distribution. A partnership cannot receive assets in a Section 381 Transaction. Accordingly, a partnership could not have been a Successor under either the 2004 Proposed Regulations or the 2016 Regulations. As noted later in this part V, the final regulations retain this approach.

The 2004 Proposed Regulations and the 2016 Regulations also contained a deemed acquisition rule (see § 1.355-8T(d)(2)). Under this rule, after a Section 381 Transaction, an acquisition of stock of the acquiring corporation is treated also as an acquisition of the stock of the distributor or transferor corporation in the Section 381 Transaction. Thus, if the assets of Distributing or any POD are acquired by another corporation in a Section 381 Transaction, then any subsequent acquisition of the stock of the acquiring corporation is treated also as an acquisition of the stock of Distributing or the POD, as the case may be.

As a result of these rules, a corporation's status as a Successor of Distributing or Controlled matters only insofar as an acquisition of its stock is treated as an acquisition of the stock of Distributing or Controlled, respectively, which could result in a Planned 50-percent Acquisition of Distributing or Controlled. Therefore, the only significance of a Planned 50-percent Acquisition of a Successor is its treatment as a deemed Planned 50-percent Acquisition of Distributing or Controlled (as the case may be). Accordingly, if any of the stock of Distributing or Controlled has been acquired in, or prior to, a Section 381 Transaction, the application of section 355(e) will turn on whether a Planned 50-percent Acquisition of Distributing or Controlled has occurred, taking into account acquisitions of the stock of Distributing or Controlled in, and prior to, the Section 381 Transaction, as well as any acquisitions of the stock of the Successor following the Section 381 Transaction.

Commenters supported this approach, and the Treasury Department and the IRS have retained it in the final regulations. Thus, under the final regulations, a Successor of Distributing or of Controlled must be a corporation to which Distributing or Controlled, respectively, transfers property in a Section 381 Transaction after the Distribution. A partnership cannot be a Successor of Distributing or Controlled under the final regulations for purposes of section 355(e). Certain references in the 2016 Regulations to a Planned 50-percent Acquisition of a Successor have been refined to clarify the significance of Successor status.

Taken together, sections 355(e), 355(c), and 361(c) generally require Distributing to recognize any gain in Controlled stock and securities distributed in a Distribution that is part of the same Plan as a Planned 50-percent Acquisition of a POD, Distributing, or Controlled (the amount of such gain, Statutory Recognition Amount). However, the 2016 Regulations contained special rules that limited the amount of gain that section 355(e) causes Distributing to recognize in certain cases involving a POD. In cases involving a Planned 50-percent Acquisition of a POD, § 1.355-8T(e)(2) (POD Gain Limitation Rule) generally limited the amount of gain Distributing was required to recognize to any built-in gain in the POD's Separated Property (generally, POD assets held by Controlled). Similarly, in cases involving a Planned 50-percent Acquisition of Distributing as the result of a transfer by a POD to Distributing in a Section 381 Transaction, § 1.355-8T(e)(3) (Distributing Gain Limitation Rule) generally reduced the amount of gain Distributing was required to recognize by the built-in gain in the POD's Separated Property. In addition, in cases involving multiple Planned 50-percent Acquisitions, § 1.355-8T(e)(1) generally provided that the total gain limitation applicable under § 1.355-8T(e) is determined by adding the Statutory Recognition Amount (subject to the POD Gain Limitation Rule and the Distributing Gain Limitation Rule) with respect to each Planned 50-percent Acquisition. Finally, § 1.355-8T(e)(4) provided that the amount required to be recognized by Distributing under section 355(e) with regard to a single Distribution will not exceed the Statutory Recognition Amount.

Commenters questioned why the 2016 Regulations limited the Distributing Gain Limitation Rule to Section 381 Transactions, and recommended expanding the Distributing Gain Limitation Rule so that it applies to any Planned 50-Percent Acquisition of Distributing. In particular, one commenter asserted that the form of the transaction in which a Planned 50-percent Acquisition of Distributing occurs should not be relevant to the application of the gain limitation rules.

As discussed in the preamble to the 2016 Regulations, the Treasury Department and the IRS intended the Distributing Gain Limitation Rule to minimize the Federal income tax impact of directionality between economically equivalent Section 381 Transactions. In other words, the Distributing Gain Limitation Rule was intended to ensure that the amount of gain required to be recognized under section 355(e) would be the same regardless of whether the smaller or the larger corporation in a Section 381 Transaction acts as the acquiring corporation. The Distributing Gain Limitation Rule was limited to Section 381 Transactions in the 2016 Regulations because the direction of other types of transactions (such as section 351 exchanges) generally cannot be reversed without changing the substance of the transaction, and thus generally do not implicate the policy of directional neutrality. However, upon further study, the Treasury Department and the IRS have determined that the policy underlying the Distributing Gain Limitation Rule should not be limited to directional neutrality.

The POD definition is based on the theory that a Distribution that effects a tax-free division of the assets of a corporation other than Distributing (a POD) may be viewed as two separate Distributions: One by the POD (of a Controlled holding the Separated Property) (POD Distribution), and one by Distributing (of a Controlled holding all of the property held by Controlled in the actual Distribution other than the Separated Property) (Non-POD Distribution). Section 355(e) requires gain recognition when new shareholders acquire ownership of a business in connection with a spin-off. Thus, when a Planned 50-percent Acquisition of a POD occurs in connection with a POD Distribution, the final regulations require gain recognition under section 355(e). However, unless there is also a Planned 50-percent Acquisition of Distributing, the Non-POD Distribution represents a division of existing business arrangements among existing shareholders, to which Congress intended to afford tax-free treatment. See Senate Report at 139-140. Accordingly, the POD Gain Limitation Rule limits the amount of gain required to be recognized to the built-in gain on the Separated Property.

The same policy goals justify the expansion of the Distributing Gain Limitation Rule so that it applies to any Planned 50-percent Acquisition of Distributing—however and by whomever effected. If a Distribution involves a POD and occurs in connection with a Planned 50-percent Acquisition of Distributing (but no Planned 50-percent Acquisition of the POD or Controlled), then the POD Distribution should not be subject to gain recognition because it represents a division of existing business arrangements among existing shareholders.

Accordingly, the Distributing Gain Limitation Rule in the final regulations applies if there is a Planned 50-percent Acquisition of Distributing. However, consistent with the policy underlying the Distributing Gain Limitation Rule, a Distribution will benefit from the Distributing Gain Limitation Rule only if a POD exists and does not also undergo a Planned 50-percent Acquisition. If no POD exists, then the limitation under the Distributing Gain Limitation Rule will equal the Statutory Recognition Amount, because there is no Separated Property. If a POD exists but also undergoes a Planned 50-percent Acquisition, then Distributing must recognize the Statutory Recognition Amount with respect to the Planned 50-percent Acquisition of the POD (subject to the POD Gain Limitation Rule) and the Planned 50-percent Acquisition of Distributing (subject to the Distributing Gain Limitation Rule). See § 1.355-8(e)(1)(ii) of the final regulations (Multiple Planned 50-percent Acquisitions). Similarly, if there are Planned 50-percent Acquisitions of both Distributing and Controlled, Distributing must recognize the Statutory Recognition Amount with respect to the Planned 50-percent Acquisition of Controlled (which is not eligible for limitation under any gain limitation rule) and the Planned 50-percent Acquisition of Distributing (subject to the Distributing Gain Limitation Rule). Although the multiple Planned 50-percent Acquisition rule just described may deny any benefit under the gain limitation rules, in no event will the final regulations require Distributing to recognize an amount that exceeds the Statutory Recognition Amount with regard to a single Distribution. See § 1.355-8(e)(4) of the final regulations (gain recognition limited to Statutory Recognition Amount).

The Treasury Department and the IRS have clarified the gain limitation rules in the final regulations to make them easier to understand and apply. The Treasury Department and the IRS also have refined the calculation of the gain limitation under the Distributing Gain Limitation Rule to account for the possibility of more than one POD with respect to a single Distribution. In addition, to clarify that both built-in gain and built-in loss assets are taken into account in computing any applicable gain limitation, the Treasury Department and the IRS have refined the description of gain in the Relevant Property Requirement by adding the parenthetical phrase “(if any),” and have added a similar clarification to the Separated Property definition.

The 2016 Temporary Regulations used the defined term “Relevant Stock” (stock that is Relevant Property) in connection with the defined terms “Separated Property” and “Underlying Property” (property directly or indirectly held by a corporation that is the issuer of Relevant Stock). See § 1.355-8T(b)(2)(iv), (vii), and (viii). These terms were used to ensure that gain would not be duplicated in determining the applicable gain limitation amount (if any) if the Relevant Property held by Controlled included stock in a corporation. The potential for duplication existed because the gain limitation is calculated based on the built-in gain in Relevant Property held by Controlled, and the definition of “Relevant Property” included assets held directly or indirectly (and thus included both stock of a corporation and any assets held by the corporation).

The Treasury Department and the IRS have determined that a similar risk of duplicated gain exists when Relevant Property includes an interest in a partnership. Accordingly, the final regulations replace the term “Relevant Stock” with the term “Relevant Equity,” which means Relevant Property that is an equity interest in a corporation or a partnership. This clarification relates only to the determination of the limitation on gain under § 1.355-8(e) of the final regulations (if any).

The 2016 Regulations prohibited a section 336(e) election if the amount of gain required to be recognized by Distributing with respect to the Distribution was less than the Statutory Recognition Amount due to the POD Gain Limitation Rule or the Distributing Gain Limitation Rule. This prohibition applied even if Distributing chose to recognize the Statutory Recognition Amount under § 1.355-8T(e)(4). One commenter criticized this prohibition as “inequitable as a policy matter and unnecessary as an administrative one.”

Although the final regulations retain this prohibition, the Treasury Department and the IRS continue to study and request comments on the following issues: (1) Whether permitting a section 336(e) election in this context would be consistent with the policy of section 336(e), (2) whether permitting a section 336(e) election in this context could give rise to inappropriate planning opportunities, (3) whether permitting a section 336(e) election in this context only if the Separated Property accounts for a certain minimum percentage of Controlled's value or built-in gain would be appropriate, and (4) whether limiting the deemed asset disposition that results from a section 336(e) election in this context to a deemed disposition of the Separated Property would be appropriate.

Section 355(e)(3)(B) provides a special rule for certain asset acquisitions. For purposes of section 355(e), if the assets of Distributing or Controlled are acquired by a successor corporation in a transaction described in section 368(a)(1)(A), (C), or (D), or in any other transaction specified in regulations, the shareholders (immediately before the acquisition) of the successor corporation are treated as acquiring stock in Distributing or Controlled, respectively, except as otherwise provided in regulations. Similarly, the 2016 Regulations provided that any Section 381 Transaction is treated as an acquisition of stock in the distributor or transferor corporation by shareholders of the acquiring corporation. A commenter pointed out a mathematical error in the textual example that followed this rule (in § 1.355-8T(d)(1)). The final regulations correct this error and make minor clarifications to improve the readability of the operative rule.

One commenter suggested that the Treasury Department and the IRS clarify that no inference should be drawn from the examples in § 1.355-8T(h) as to the intended application of the step transaction doctrine and other general Federal income tax principles. The Treasury Department and the IRS did not intend for any such inference to be drawn, and have added a specific disclaimer to this effect in the final regulations.

The 2016 Regulations generally applied to Distributions occurring after January 18, 2017. However, under a transition rule, the 2016 Regulations generally did not apply to a Distribution that was (A) made pursuant to a binding agreement in effect on or before December 16, 2016 and at all times thereafter; (B) described in a ruling request submitted to the IRS on or before December 16, 2016; or (C) described on or before December 16, 2016 in a public announcement or in a filing with the Securities and Exchange Commission. For the transition rule to apply, the agreement, ruling request, public announcement, or filing described in the preceding sentence had to describe all steps relevant to the determination of POD status. See § 1.355-8T(i)(2)(ii).

One commenter criticized the “all relevant steps” rule in § 1.355-8T(i)(2)(ii) as “extremely narrow” and inappropriate for immediately effective regulations. This commenter contended that it is “unlikely that all such transactions would be described . . . until very late in the long and expensive process of a corporate separation, if at all.”

The Treasury Department and the IRS note that the 2016 Regulations were not immediately applicable; they were published on December 19, 2016, but they generally applied only to Distributions that occurred after January 18, 2017. Moreover, the final regulations do not contain a transition rule, so the commenter's concern is relevant only to transactions that were the subject of an agreement, ruling request, public announcement, or public filing that occurred in 2016 (or before). Finally, despite the commenter's general concern, the Treasury Department and the IRS are unaware of any transactions that failed to qualify for the transition rule due to the “all relevant steps” rule in § 1.355-8T(i)(2)(ii). Accordingly, the Treasury Department and the IRS have determined that it is not necessary to reconsider the transition rule in the 2016 Regulations as part of this Treasury decision.

Commenters noted generally that certain aspects of the 2016 Regulations were complicated and difficult to understand. The Treasury Department and the IRS have refined and clarified certain aspects of the 2016 Regulations in the final regulations to make the rules easier to follow and understand. For instance, certain paragraphs in the 2016 Regulations that were long and contained multiple distinct rules have been subdivided in the final regulations. In addition, defined terms have been added for certain rules (such as the Relevant Property Requirement, the Reflection of Basis Requirement, and the Division of Relevant Property Requirement). These defined terms are intended to allow the reader to more intuitively grasp the meaning of the numerous provisions cross-referenced in the final regulations.

Section 1.355-8T(c)(1) defined the term “Predecessor of Controlled” and provided certain rules relating to Predecessors of Controlled. One of these rules provided that, for purposes of § 1.355-8T(c)(1), a reference to Controlled included a reference to a Predecessor of Controlled. However, another provision in the 2016 Regulations (§ 1.355-8T(a)(4)(i)) provided more generally that, except as otherwise provided, any reference to Controlled included, as the context may have required, a reference to any Predecessor of Controlled. Accordingly, the rule in § 1.355-8T(c)(1) was unnecessary, and the Treasury Department and the IRS have omitted it in the final regulations.

The Treasury Department and the IRS have modified three of the examples contained in the 2016 Regulations (Examples 5, 7, and 8), and omitted one example (Example 6), for the reasons described in this part XIII. All of the retained examples have been updated to reflect modifications in the final regulations. For instance, the POD analyses in Examples 3 and 4 eliminate the statement that Controlled stock is Separated Property, because that fact is no longer relevant under the revised Reflection of Basis Requirement. In some of the examples, the analysis has been clarified to make it easier to follow and understand.

The facts of Example 5 of the 2016 Regulations have been retained, but the consequences of the example have changed due to the modification the Treasury Department and the IRS have made to the Potential Predecessor definition. As a result of this modification, P in Example 5 is no longer a Potential Predecessor (and thus is not a POD for that reason).

Example 6 of the 2016 Regulations has been omitted. This example illustrated a variation on Example 5 that used a forward triangular merger instead of a section 351 exchange. However, due to the modification to the Potential Predecessor definition, P in Example 6 is no longer a Potential Predecessor (and thus is not a POD for that reason), which eliminates the utility of this example.

Example 7 of the 2016 Regulations has been incorporated into new Example 6 in the final regulations, which is based on the 2016 Preamble Example.

Example 8 of the 2016 Regulations has been retained as Example 7 in the final regulations, but has been modified so that P1 and P2 are Potential Predecessors under the final regulations. In particular, the section 351 exchange between P2 and D has been replaced by a Section 381 Transaction in which P2 merges into D.

Section 7805(b)(1)(A) and (B) of the Code generally provide that no temporary, proposed, or final regulation relating to the internal revenue laws may apply to any taxable period ending before the earliest of (A) the date on which such regulation is filed with the Federal Register, or (B) in the case of a final regulation, the date on which a proposed or temporary regulation to which the final regulation relates was filed with the Federal Register. In addition, section 7805(e) provides that any temporary regulation shall also be issued as a proposed regulation, and that such temporary regulation shall expire within 3 years after the date of issuance of the temporary regulation.

The final regulations, the substance of which is generally the same as that of the 2016 Regulations, apply to Distributions that occur after December 15, 2019, the day before the expiration date of the 2016 Temporary Regulations.

This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these regulations would primarily affect large corporations with a substantial number of shareholders, as well as corporations that are members of large corporate groups. Additionally, the Treasury Department and the IRS have determined that no additional burden will be associated with these final regulations. Therefore, a regulatory flexibility analysis is not required.

Pursuant to section 7805(f) of the Internal Revenue Code, the 2016 Proposed Regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small businesses, and no comments were received.

The principal author of these regulations is W. Reid Thompson of the Office of Associate Chief Counsel (Corporate). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code II. Background Information and Regulatory History

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 it is impractical. This urgent security zone is required to protect the military vessel, the surrounding waterway and the 10th Avenue Marine Terminal. It is impracticable to publish an NPRM because we must establish this security zone by December 18, 2019 and lack sufficient time to provide a reasonable comment period and then consider those comments before issuing the rule.

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 Federal Register. Delaying the effective date of this rule would be contrary to public interest because immediate action is needed to provide the security of the military vessel and the waterways and structures nearby.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The Captain of the Port Sector San Diego (COTP) has determined that the presence of the military vessel loaded with narcotics presents a potential target for terrorist attack, sabotage, or other subversive acts, accidents, or other causes of similar nature. This rule is needed to protect military personnel, the public and the navigable waters in the vicinity of the 10th Avenue Marine Terminal.

This rule establishes a security zone from 7 a.m. until noon on December 18, 2019. The security zone will cover all navigable waters within a 100-yards radius around the military vessel moored at berth four of the 10th Avenue Marine Terminal located at 32°41′56.6″ N and 117°9′31.9″ W. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while the vessel's personnel are offloading narcotics. No vessel or person will be permitted to enter the security zone without obtaining permission from the COTP or a designated representative.

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 size, location and limited duration of the security zone. This zone impacts a small designated area of the San Diego bay for a very limited period. Furthermore, vessel traffic can safely transit around the security zone.

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 security 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 would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

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 FOR FURTHER INFORMATION CONTACT section above.

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 establishment of a security zone lasting only 5 hours on the navigable waters of San Diego Bay. 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 is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

I. Table of Abbreviations CFR Code of Federal Regulations COTP Captain of the Port Southeast Alaska DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code II. Background Information and Regulatory History

Contract Drilling & Blasting LLC notified the Coast Guard that it will be conducting explosive dredging from 30 minutes after sunrise to one hour before sunset between December 16, 2019 and January 31, 2020. The operation will take place approximately 300 yards southwest of Berth II in Ketchikan, AK. Hazards from explosive dredging include concussive forces. The COTP has determined that potential hazards associated with the explosives to be used in this operation would be a safety concern for anyone above the water's surface within a 500-yard radius of Pinnacle Rock (located at approximately latitude 55°20′37″ N, longitude 131°38′96″ W).

In response, on November 22, 2019, the Coast Guard published a notice of proposed rulemaking (NPRM) titled “Temporary Safety Zone for Explosive Dredging, Tongass Narrows, Ketchikan, AK” (84 FR 64445). There we stated why we issued the NPRM, and invited comments on our proposed regulatory action related to this safety zone. During the comment period that ended December 9, 2019, we received eight comments.

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 Federal Register. Delaying the effective date of this rule would be impracticable because immediate action is needed to protect the public from the potential safety hazards associated with the explosive dredging operation, which is scheduled to begin on December 16, 2019.

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 hazards associated with the explosives to be used in this operation would be a safety concern for anyone above the water's surface within a 500-yard radius of Pinnacle Rock (located at approximately latitude 55°20′37″ N, longitude 131°38′96″ W). The purpose of this rulemaking is to ensure the safety of vessels and the navigable waters of the Tongass Narrows, from shoreline to shoreline, within a 500-yard radius of Pinnacle Rock before, during, and after the scheduled operation December 16, 2019 and January 31, 2020.

As noted above, we received eight comments on our NPRM published on November 22, 2019. Five comments were supportive. Three comments raised concerns regarding the operation's affect on marine wildlife. We considered these comments and believe the City of Ketchikan has a sufficient and comprehensive plan to protect marine wildlife from harm; the city will employ mitigation measures to include having three dedicated, full-time Protected Species Observers to monitor the area and will have designated shut down zones where operations will cease if Alaskan marine mammals are observed. There are no changes in the regulatory text of this rule from the proposed rule in the NPRM.

This rule establishes a safety zone from 30 minutes after sunrise to one hour before sunset between December 16, 2019 and January 31, 2020. The safety zone would cover all navigable waters within 500 yards of Pinnacle Rock during explosive dredging operations in the Tongass Narrows located approximately 300 yards southwest of Berth II in Ketchikan, AK. The duration of the zone is intended to ensure the safety of vessels and these navigable waters before, during, and after the daily 35-minute period of explosive dredging. No vessel or person would be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative. The regulatory text appears at the end of this document.

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 size, location, duration, time-of-day and time-of-year of the safety zone. Vessel traffic would be able to safely transit around this safety zone, south of Pennock Island, which would impact a small designated area of the Tongass Narrows for less than one hour per day when Contract Drilling & Blasting LLC would decide to detonate the explosives. The Coast Guard will issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the zone.

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 received no comments from the Small Business Administration on this rulemaking. 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 would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

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 FOR FURTHER INFORMATION CONTACT section.

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 lasting less than an hour daily for 47 days that would prohibit entry within 500 yards of an explosive dredging operation in the Tongass Narrows. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

On July 31, 2019, the United States Patent and Trademark Office (USPTO) published in the Federal Register (84 FR 37081, July 31, 2019) a final rule amending the regulations to mandate electronic filing of trademark applications and all submissions associated with trademark applications and registrations, and to require the designation of an email address for receiving USPTO correspondence, with limited exceptions. The effective date of the July 31, 2019 rule was delayed from October 5, 2019 until December 21, 2019 (84 FR 52363, October 2, 2019). A correction to the July 31, 2019 rule was published on December 13, 2019 (84 FR 68045) and is also effective on December 21, 2019.

In response to recent feedback received from external stakeholders regarding their need to more fully comprehend the nature of, and prepare to comply with, the new requirements before they become effective, the effective date of both the July 31, 2019 final rule and the December 13, 2019 correction is being delayed until February 15, 2020. This final rule will also allow the USPTO additional time to ensure that internal implementation of the requirements associated with the mandate that applicants and registrants electronically file their trademark applications and all submissions associated with trademark applications and registrations, and that they designate an email address for receiving USPTO correspondence, is in place.

Administrative Procedure Act: This final rule revises the effective date of the July 31, 2019 final rule implementing procedures requiring the electronic filing of trademark applications and all submissions associated with trademark applications and registrations, and the subsequent correction rule published on December 13, 2019, and it is a rule of agency practice and procedure, and/or interpretive rules pursuant to 5 U.S.C. 553(b)(A). See JEM Broad. Co. v. F.C.C., 22 F.3d 32. (D.C. Cir. 1994) (“[T]he `critical feature' of the procedural exception [in 5 U.S.C. 553(b)(A)] `is that it covers agency actions that do not themselves alter the rights or interests of parties, although [they] may alter the manner in which the parties present themselves or their viewpoints to the agency.'” (quoting Batterton v. Marshall, 648 F.2d 694, 707 (D.C. Cir. 1980))); see also Bachow Commc'ns Inc. v. F.C.C., 237 F.3d 683, 690 (D.C. Cir. 2001) (rules governing an application process are procedural under the Administrative Procedure Act); Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals were procedural where they did not change the substantive standard for reviewing claims). Accordingly, prior notice and opportunity for public comment are not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law). See Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice” (quoting 5 U.S.C. 553(b)(A)).

Moreover, the Director of the USPTO, pursuant to authority at 5 U.S.C. 553(b)(B), finds good cause to adopt the change in this final rule without prior notice and an opportunity for public comment, as such procedures would be impracticable and contrary to the public interest. Immediate implementation of the delay in effective date is in the public interest, because it is responsive to recent feedback received from external stakeholders regarding their need to more fully comprehend the nature of, and prepare to comply with, the new requirements before they are effective. It will also allow the USPTO additional time to ensure that internal implementation of the requirements associated with the July 31, 2019 final rule and the December 13, 2019 correction is in place. Delay of the July 31, 2019 final rule and the December 13, 2019 correction to provide prior notice and comment procedures is impracticable, because it would allow the July 31, 2019 final rule and December 13, 2019 correction to go into effect before external stakeholders are ready to comply with, and the agency is ready to implement, the new requirements. Therefore, the Director finds there is good cause to waive notice and comment procedures for this rule.

Finally, the change in this final rule may be made effective earlier than the required 30-day delay in effectiveness because this is not a substantive rule under 35 U.S.C. 553(d). Moreover, pursuant to 5 U.S.C. 553(d)(3), the Director finds good cause to waive the 30-day delay in effectiveness for this final rule because such a delay would allow the July 31, 2019 final rule and December 13, 2019 correction to go into effect before external stakeholders are ready to comply with, and the agency is ready to implement, the new requirements.

Throughout this document wherever “we,” “us,” or “our” is used, it refers to the EPA.

On October 25, 2018, the Alaska Department of Environmental Conservation (ADEC) made a submission addressing the interstate transport requirements of CAA section 110(a)(2)(D)(i)(I) for the 2015 ozone NAAQS.1 This “good neighbor” provision of the CAA requires that a SIP for a new or revised NAAQS must contain adequate provisions prohibiting any source or other type of emissions activity within the State from emitting air pollutants in amounts that will significantly contribute to nonattainment of such NAAQS in any other state or that will interfere with maintenance of the NAAQS in any other state.

On June 5, 2019, we proposed to approve Alaska's SIP submission (84 FR 26041). The reasons for our proposed approval are included in the proposed action and will not be restated here. The public comment period for the proposed action closed on July 5, 2019. We received adverse comments from one anonymous commenter. Following is our response to each distinct issue raised by the commenter.

Comment 1: The commenter stated that the EPA should not approve Alaska's SIP submission because ADEC did not model Alaska emissions and the effect of those emissions on other states and Canada.

Response 1: The commenter is correct that ADEC did not model Alaska emissions and the effect of those emission on other states and Canada. However, that is not a basis for disapproval in this instance. Alaska's SIP submission included information and analysis on the amount and sources of ozone precursor emissions from Alaska, trends in monitored ambient ozone levels, meteorological conditions, distances from Alaska to the nearest receptors in other states, and intervening geography that isolates Alaska from other areas that have ozone problems. ADEC concluded that emissions from Alaska sources do not significantly contribute to nonattainment of the 2015 ozone NAAQS in any other state and do not interfere with maintenance of the 2015 ozone NAAQS in any other state.

In our review, we evaluated Alaska's SIP submission and conducted our own weight of evidence analysis to determine whether we agreed with ADEC's conclusion. We assessed emissions inventory data, monitoring trends, geography, meteorology, and current SIP-approved provisions. We found these factors sufficiently informative regarding Alaska's potential to adversely impact air quality in downwind states without conducting modeling of emissions as suggested by the commenter, and therefore, proposed to approve the SIP submission. We note this is not a new approach. The EPA has conducted weight of evidence analyses to evaluate prior Alaska interstate transport SIP submissions, and we believe it to be a reasonable and appropriate approach in this instance.2

The EPA further agrees that ADEC did not analyze potential transport to Canada, but that is not a deficiency in the State's analysis. The evaluation of international air quality impacts is not a requirement under CAA section 110(a)(2)(D)(i)(I), which is the only provision of the statute addressed in this action.3

Comment 2: The commenter stated, “the EPA can't rely on relative emissions to justify [a finding of] no significant contribution or interference with maintenance” of the 2015 ozone NAAQS. The commenter also noted that, in our proposal, we showed that nitrogen oxide (NOX) emissions from certain Alaska sources ranked second highest in the region.

Response 2: The commenter is correct that, based on the 2014 National Emissions Inventory (2014 NEI), NOX emissions from mobile and stationary sources in Alaska ranked second highest of the Region 10 states.4 Our analysis, however, also compared Alaska emissions to those nationwide and determined that, based on the 2014 NEI, NOX emissions from Alaska mobile and stationary sources totaled just one percent of national NOX emissions.5 This comparison of relative emissions puts Alaska emissions estimates into context and is a useful exercise in evaluating the Alaska ozone interstate transport SIP submission. Importantly, this was just one factor in our weight of evidence analysis and was considered in conjunction with other factors including monitoring trends, geography, meteorology, and current SIP-approved provisions. In particular, the fact that other, geographically-closer states with comparable or greater emission levels did not impermissibly impact downwind air quality problems supports the conclusion that Alaska emissions are not likely to be linked to identified nonattainment and maintenance receptors in any other state with respect to the 2015 ozone NAAQS. We continue to find this to be true.

Comment 3: The commenter took issue with the EPA's evaluation of in-state monitored ozone levels. The commenter asserted that in-state levels are not predictive of downwind levels.

Response 3: We found it informative to review in-state monitored ozone levels as part of our weight of evidence analysis. This kind of information can shed light on whether in-state conditions are changing and whether those changes could have downwind implications. For example, if ozone levels at monitoring sites in Alaska were rising over time, it could suggest increased precursor emissions from Alaska sources which could also have impacts on downwind air quality in other states. In our proposal, we assessed monitored ozone trends in Alaska and determined that in-state ozone levels were well below the 2015 ozone NAAQS. The table of design values in our proposal illustrated that trends have been generally flat from 2010 to 2017, suggesting that in-state sources of precursor emissions may not be changing much, and may not be a big factor potentially contributing to future transport problems.6 We reiterate that in-state monitored ozone levels were just one piece of information that helped to inform the EPA's analysis and conclusion.

Comment 4: The commenter said we failed to mention that Alaska was not included in the EPA's modeling and suggested the EPA may have considered Alaska as an international contributor. The commenter concluded that we ignored Alaska emissions in our modeling and for that reason it is not appropriate to use the EPA's modeling data to identify downwind receptors in the first step of our analysis.

Response 4: We disagree that the proposal failed to explain the scope of the modeling. Our proposal clearly stated that the EPA conducted modeling and released the data to states in the form of several memoranda, but that “none [of the memoranda] project[ed] design values at monitoring sites located in Alaska, nor apportion[ed] specific downwind impacts to Alaska.” 7 We also stated that the memorandum released in March of 2018 helped to identify potential downwind receptors in the first step of our analysis, but that it did not inform whether Alaska was sufficiently linked to those receptors, under the second step of EPA's four-step analysis.8

Our proposal described the EPA's modeling domain (which included the 48 contiguous United States and the District of Columbia) and referenced the 2018 memorandum, placed in the docket for this action.9 The EPA did not consider Alaska as an international contributor to downwind states, nor did we ignore Alaska emissions. Any pollutant concentrations from Alaska emissions would have been included as part of the boundary condition concentrations used as inputs to the model. These boundary conditions along the perimeter of our modeling domain were derived from simulations of the GEOSChem global chemistry model for the year 2011.10 A description of the GEOSChem modeling platform leveraged for these boundary conditions has been placed in the docket for this action.11 We continue to believe it is appropriate to use the modeling data released in the EPA's March 2018 memorandum to identify potential downwind receptors at the first step in our analysis.

Comment 5: The commenter claimed that the EPA erred in calculating and using geographic distance and the relative emissions of intervening states as factors in our analysis. The commenter argued that it would be hard to imagine other states making this kind of assertion and the EPA treating it as a valid approach.

Response 5: We believe it is appropriate and reasonable to consider the approximately 1,000-mile distance from Alaska's southernmost border to the nearest identified nonattainment and maintenance receptors (located in Sacramento, California) as part of our weight of evidence analysis in this action. We also believe it is appropriate to compare Alaska's emissions to those of intervening states (Washington and Oregon), which are closer to the Sacramento, California nonattainment and maintenance receptors, and which are not linked by the EPA's modeling to those Sacramento receptors. Our weight of evidence analytical approach is specific to Alaska and the submission before us, and functions, in the absence of the contribution data available with respect to impacts on downwind states within our modeling domain, to provide a screening level of analysis that Alaska's emissions are not significantly contributing to a downwind air quality problem.12 Our evaluation considers not just that the intervening states have higher emissions, but that at those higher levels, the impact on downwind air quality problems does not exceed the 1% air quality threshold. Thus, it is reasonable for the EPA to conclude that Alaska, at a greater distance and with lower emission levels, will also not exceed that threshold. The EPA has in fact employed this rationale in other actions under the good neighbor provision, where contribution modeling data was unavailable.13

Comment 6: The commenter said the EPA should not point to the Alaska SIP-approved major new source review permitting programs as programs that help address potential future interstate transport of pollutants. The commenter claimed no such program has ever prevented a source from being constructed due to interstate transport concerns. The commenter further claimed that state permitting officials routinely “look the other way” and that source owners and operators try to find loopholes or restrict their modeling to avoid performing analyses which would show impacts to nearby states.

Response 6: In our proposal, we pointed to Alaska's SIP-approved preconstruction permitting programs (known as “new source review”) as one piece of evidence in our weight of evidence analysis. We believe it is appropriate for the EPA to evaluate the current Federally-approved Alaska SIP on its face for measures that control emissions of ozone precursors. Alaska's new source review permitting programs are Federally-enforceable measures designed to control emissions from proposed new and modified stationary sources of regulated air pollutants, including NOX and VOCs as precursors to ozone.

We most recently approved revisions to Alaska's new source review permitting programs on August 29, 2019 (84 FR 45419). Alaska routinely evaluates new source review permit applications from subject sources in Alaska and issues permits containing emission limits, work practice standards, monitoring requirements and other controls designed to ensure compliance with emission limits and provide for continued attainment of the ozone NAAQS. The EPA cited this program as helping to ensure that future changes in emissions from Alaska are not likely to lead to impermissible impacts on air quality in downwind states. Nonetheless, because the EPA finds in this action that Alaska will not significantly contribute to nonattainment or interfere with maintenance of the 2015 ozone NAAQS downwind based on current emission levels, Alaska does not have an obligation to prohibit any specific level of emissions in the State under the good neighbor provision. Other provisions of the CAA (e.g., sections 110(k)(5) and 126(b)) provide bases for reevaluating this conclusion if future changes in emissions change Alaska's impact on downwind states.

With respect to the commenter's concerns about implementation of permitting programs, the comment is vague and lacks supporting evidence or documentation. Moreover, this comment is related to implementation of the SIP, and is therefore outside the scope of this action. In the context of acting on infrastructure and interstate transport submissions, the EPA evaluates the submitting state's SIP for facial compliance with statutory and regulatory requirements, not for the state's implementation of its SIP.14 The EPA has other authority to address any issues concerning a state's implementation of the rules, regulations, consent orders, etc. that comprise its SIP.

Comment 7: The commenter asserted the EPA should perform modeling and affirmatively determine whether Alaska sources significantly contribute to nonattainment of the 2015 ozone NAAQS in any other state or interfere with maintenance of the 2015 ozone NAAQS in any other state.

Response 7: To help states develop interstate transport SIPs for the 2015 ozone NAAQS, the EPA modeled the contiguous United States and the District of Columbia and produced data projecting future design values at monitoring sites and apportioning specific downwind impacts to upwind states.15 The EPA's modeling did not quantify Alaska's contribution to downwind receptors, however nothing in the CAA requires the EPA to do so where other reasonable means are available for evaluating Alaska' s impact to downwind receptors. The EPA did not include Alaska in the modeling domain primarily because it is remote and isolated in relation to other states with identified nonattainment and/or maintenance receptors for the 2015 ozone NAAQS.

The EPA relied on the best information available to inform its decision and evaluated Alaska's SIP submission through a weight of evidence analysis of information, including emissions inventory data, monitoring trends, geography, meteorology, and SIP-approved provisions that limit current and future emissions of ozone precursors. The EPA has used a weight of evidence analysis to assess Alaska interstate transport SIP submissions in the past, most recently on June 27, 2018 (83 FR 30048).16 None of the comments justify altering our proposed approval of Alaska's interstate transport SIP submission for the 2015 ozone NAAQS. Therefore, we are finalizing our action as proposed.

We approve the Alaska SIP as meeting CAA section 110(a)(2)(D)(i)(I) requirements for the 2015 ozone NAAQS. This action is being taken under section 110 of the CAA.

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA 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, provided that 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 et seq.);

• 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 et seq.);

• 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 Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide the 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 the 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 it 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).

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. The EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 18, 2020. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. See section 307(b)(2).

For the reasons set forth in the preamble, 40 CFR part 52 is amended as follows:

This action relates to companies that produce and distribute distillate diesel fuel. Categories and entities that might be affected include the following:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely covered by these rules. This table lists the types of entities that we are aware may be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your activities are regulated by this action, you should carefully examine the applicability criteria in the referenced regulations. You may direct questions regarding the applicability of this action to the persons listed in the preceding FOR FURTHER INFORMATION CONTACT section.

EPA adopted sulfur standards for marine diesel fuel under Clean Air Act authority (42 U.S.C. 7401-7671q). The amendments in this rule are covered by that same authority.

Section 553(d)(1) of the Administrative Procedure Act, 5 U.S.C. 553(d)(1), provides that final rules shall not become effective until 30 days after publication in the Federal Register “except . . . a substantive rule which grants or recognizes an exemption or relieves a restriction.” The purpose of this provision is to “give affected parties a reasonable time to adjust their behavior before the final rule takes effect.” Omnipoint Corp. v. Fed. Commc'n Comm'n, 78 F.3d 620, 630 (D.C. Cir. 1996); see also United States v. Gavrilovic, 551 F.2d 1099, 1104 (8th Cir. 1977) (quoting legislative history). However, when the agency grants or recognizes an exemption or relieves a restriction, affected parties do not need a reasonable time to adjust because the effect is not adverse. EPA is issuing this final rule under Clean Air Act section 307(d), which states “The provisions of section 553 through 557. . . of Title 5 shall not, except as expressly provided in this section, apply to actions to which this subsection applies.” 42 U.S.C. 7607(d)(1). Thus, section 553(d) of the Administrative Procedures Act does not apply to this rule. EPA is nevertheless acting consistently with the policies underlying APA section 553(d) in making the regulations contained in this final rule effective upon publication in the Federal Register. The regulatory amendments to 40 CFR part 80, subpart I, conditionally exempt distillate marine diesel fuel from the prohibition against distributing distillate diesel fuel that exceeds the sulfur content limits for ultra low-sulfur diesel (ULSD) fuel and Emission Control Area (ECA) marine fuel. This action will allow for distribution of distillate diesel fuel used as global marine fuel that complies with the 5,000 ppm 1 global fuel sulfur content limit contained in MARPOL Annex VI, which goes into effect on January 1, 2020; this fuel may not be used in the U.S. ECAs. Accordingly, it is in keeping with the policy underlying the Administrative Procedures Act for the regulatory amendments to 40 CFR part 80, subpart I, to take effect upon publication in the Federal Register.

The United States ratified Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI) and became a Party to this Protocol effective January 2009. To address ship sulfur oxides (SOX) and particulate matter (PM) emissions, the Annex contains limits on the sulfur content of fuel used in global shipping. The sulfur content limit is currently 35,000 ppm, decreasing to 5,000 ppm beginning January 1, 2020. This sulfur limit is not as stringent as the limit that applies in designated Emission Control Areas (ECAs), currently set at 1,000 ppm, but is more stringent than the current global limit and is expected to lead to significant health and welfare benefits globally.2

The U.S. refining industry has indicated to EPA that they are well positioned to supply fuel meeting this new 2020 global marine fuel standard, for use outside of ECA boundaries.3 They will do this by providing compliant distillate- or residual-type fuel; blended fuel may be residual or distillate. However, as explained below, they also expressed a concern that existing provisions in our Clean Air Act (CAA) diesel fuel regulations may prevent them from distributing compliant fuel in the United States. We therefore need to amend the CAA fuel regulations at 40 CFR part 80 to allow distribution in the United States of distillate fuel meeting the 2020 global marine fuel standard, for use outside of ECA boundaries. These amendments will help facilitate smooth implementation of the 2020 global marine fuel standard.

There are two broad categories of marine fuel: Distillate fuel and residual fuel. The International Organization for Standardization (ISO) distinguishes these fuel types based on their kinematic viscosity (see ISO 8217:2017(E)): Residual fuel ranges from 10 to 700 mm2/s at 50 °C while distillate fuel ranges from 1,400 to 11,000 mm2/s at 40 °C, meaning that residual fuel is much less viscous than distillate fuel. Residual fuel also has a higher sulfur content, as it is the residue of the refining process. The ISO fuel specifications note that while sulfur content is defined by the purchaser, it is generally subject to a maximum value of 15,000 ppm for distillate fuel. There is no maximum sulfur limit that applies when selling residual fuel, and the sulfur content can be 35,000 ppm or more. MARPOL Annex VI requires any fuel used onboard a ship to not exceed 35,000 ppm when the ship is operating outside of designated ECAs, and this global marine fuel has consistently been residual fuel, not distillate fuel. Beginning in 2020, however, the lower sulfur content of global marine fuel means that compliant fuel can be distillate, residual, or blends of both. ISO does not currently have specifications for blended fuel, however they have issued ISO/PAS 23263 (2019-09), “Considerations for fuel suppliers and users regarding marine fuel quality in view of the implementation of maximum 0.50% sulfur in 2020.” 4 This document “defines general requirements that apply to all 0.50 mass % sulfur (S) fuels and confirms the applicability of ISO 8217 for those fuels.”

Our CAA fuel program, contained in 40 CFR part 80, defines distillate fuel based on the T90 value of the fuel; this is the temperature at which 90 percent volume of the fuel evaporates. According to our regulations, distillate fuel has a T90 value below 700 °F. Marine distillate fuel sold or distributed in the United States under the CAA program has been subject to an EPA-established 15 ppm sulfur limit since 2012; see 40 CFR 80.510(c). In contrast, ECA marine fuel, both distillate and residual, sold or distributed in the United States has been subject to a 1,000 ppm sulfur limit since June 2014. See 40 CFR 80.510(k). This date was meant to facilitate availability of ECA fuel prior to the January 1, 2015, effective date of the 1,000 ppm fuel sulfur limit that would apply in our ECAs. Our CAA program does not contain requirements for residual fuel that is not ECA fuel.

When the United States ratified MARPOL Annex VI in 2008, we did not revise our CAA fuel program to address the global fuel standards, for two reasons. First, the international global marine standards were set at 45,000 ppm until 2012, when it would decrease to 35,000 ppm. Ship owners were expected to use lower-cost residual fuel to comply with those limits, which was not covered by our CAA program, and there were no regulatory requirements for distributing it. Second, the 2020 global marine fuel sulfur limit was subject to an IMO availability review to be completed by 2018, making it premature to adopt the 5,000 ppm limit in 2010, when we modified our CAA fuel program to incorporate the ECA program. The availability review was completed early, in 2016, and the IMO's Marine Environment Protection Committee (MEPC) confirmed the 2020 effective date.5

Distillate fuel is expected to play a significant role in meeting the 2020 global marine fuel standard, either as pure distillate fuel or as a component of blended fuel. This is due to the relatively high cost of removing sulfur from low-value residual fuel. U.S. fuel suppliers have informed EPA that they expect to meet the international requirement by providing either distillate fuel or distillate/residual blends; the blended fuel might have a T90 value below 700 °F. But, absent amendment, EPA's existing regulations preclude the distribution in the United States of distillate fuel above the ECA fuel sulfur limit. This limitation would hinder the ability of U.S. refiners to supply compliant 2020 global marine fuel to ships engaged in international transportation, because they would be limited to providing only fuel with a T90 at or above 700 °F. This means that a ship wishing to purchase fuel in the United States would be able to buy only 5,000 ppm residual fuel—if it is available; otherwise, the ship would be limited to purchasing higher-price ECA fuel or delaying its fuel purchase to the next port of call to avoid that additional cost. In addition, U.S. fuel providers wishing to participate in the global fuel market would be faced with exporting 2020 distillate global marine fuel with the higher T90 value for distribution elsewhere, which would lead to inefficiencies and increased costs, as well as loss of some portion of the U.S. share of the global fuel market.

In sum, removing the restriction on the distribution of distillate fuel between 1,000 ppm and 5,000 ppm in the United States, for use outside of ECA boundaries, will provide greater flexibility for U.S. fuel suppliers participating in the global marine fuel market, which could reduce fuel costs in that the ship operator would not be faced with either purchasing more expensive ECA fuel or going to another country to purchase fuel. This change, requested by U.S. refiners, will also provide a level playing field for all potential U.S. suppliers—those that supply distillate or blends as well as residual fuel. Such clarity will aid them in finalizing their fuel supply and distribution plans.

This action amends the regulations at 40 CFR part 80, subpart I, to allow for distribution of distillate diesel fuel that complies with the 5,000 ppm global sulfur standard contained in Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI).

This action includes several regulatory changes to accommodate the supply and distribution of distillate diesel fuel as global marine fuel. Primarily we are conditionally exempting distillate diesel fuel from the prohibition against distributing distillate diesel fuel that exceeds the ULSD and ECA marine fuel sulfur standards. This exemption includes several conditions. (1) The fuel must not exceed 0.50 weight percent (0.50% m/m, which is 5,000 ppm) sulfur; (2) fuel manufacturers must designate the fuel as global marine fuel; (3) product transfer documents accompanying the fuel must identify it as global marine fuel; (4) global marine fuel must be segregated from other fuel that is subject to the diesel fuel standards in 40 CFR part 80, subpart I; (5) the fuel may not be used in any vehicles, engines, or equipment operating in the United States (including vessels operating in an ECA or ECA-associated area); and (6) manufacturers and distributors must meet conventional recordkeeping requirements. These changes largely mirror what we currently require for the manufacturers and distributors of home heating oil, which is another class of distillate fuel not subject to diesel fuel standards under 40 CFR part 80. The conditions imposed on home heating oil and the conditions we are including in this final rule are designed to prevent higher sulfur distillate fuel from being diverted into markets that are subject to 15 ppm ULSD standard or the 1,000 ppm ECA marine standard. The conditions that apply for distribution of global marine fuel include basic designation, PTD, segregation and recordkeeping requirements. These conditions are similar to those previously adopted for distribution of heating oil. The conditions for distribution of global marine fuel also require the fuel to meet a 5,000 ppm sulfur limit. This condition is designed to ensure that the exempted fuel will be used consistent with its designation as global marine fuel. This reduces the potential for higher sulfur global marine fuel to be improperly diverted to the ULSD and ECA marine fuel markets.

As noted above, the narrow set of amendments in this rule are intended to remove a regulatory obstacle to the distribution and sale in the United States of marine fuel that meets MARPOL Annex VI global sulfur standard of 5,000 ppm sulfur. In the future, after we have a better understanding of the nature of the fuel made available to comply with the 2020 global marine fuel standard (i.e., whether it is mostly distillate fuel, blended fuel, or residual fuel), we may consider a supplemental rule to address any additional implementation questions with respect to residual fuel.

The purpose of the amendments is to ensure that U.S. refiners can permissibly distribute distillate marine fuel up to the 5,000 ppm sulfur limit, which will facilitate smooth implementation of the 2020 global marine fuel standard. This is likely to reduce the costs of compliant fuel for ships, although the savings impacts are impossible to estimate without knowledge of the grades of fuel that will be made available for this emerging market beginning in January 2020 and their prices. While there are minor recordkeeping costs for fuel suppliers associated with the exemption described in Section III, there are no requirements to reduce the sulfur content of global marine fuel beyond what is already required by Annex VI.

With respect to environmental and health impacts, the amendments to the CAA fuel regulations are not expected to alter the benefits of EPA's coordinated strategy to reduce emissions from large marine diesel engines and their fuel. This is because the coordinated strategy relies, in part, on the stringent international fuel sulfur limits that apply in United States ECAs, which include the coasts of the continental United States, the main Hawaiian Islands, southeastern portions of Alaska (U.S. portions of the North American ECA), and the Commonwealth of Puerto Rico and the U.S. Virgin Islands (U.S. Caribbean Sea ECA). The ECA fuel sulfur requirements for the North American and U.S. Caribbean Sea ECAs went into force in August 2012 and January 2014, respectively, one year after they were designated by amendment to MARPOL Annex VI.6 The global fuel sulfur program may provide additional air quality benefits, for example, in those areas of the United States where the ECA is narrow, such as southern Florida, or in areas that are not covered by the ECA, such as Guam and western and northern Alaska. Note however that those benefits would be a consequence of the MARPOL Annex VI global sulfur requirements and would therefore accrue with or without the amendments in this final rule.

We received several comments on the proposed provisions for global marine fuel.7 Commenters generally supported our proposal and agreed with our rationale to avoid unintended limitations on the supply and distribution of distillate global marine fuel.8 These commenters noted that EPA did not intend to limit options for compliance with the 2020 global marine fuel standards when it codified the ULSD and ECA marine fuel standards in 40 CFR part 80. We appreciate comments in support of our proposed provisions for global marine fuel and are finalizing in this action provisions to allow under our CAA regulations for the supply and distribution of distillate marine fuel meeting the 2020 global marine fuel standards.

One commenter argued that the proposed rule was not in accordance with the requirements of Annex VI.9 They contend that Annex VI does not create caps or standards for fuel—instead equivalent measures such as scrubbers are allowed to be used to achieve the same sulfur reductions and that EPA's proposal would effectively set a cap on distillate marine fuel.

As noted in the proposal, we are not setting a 0.50 weight percent sulfur standard on global marine fuel under the CAA, Annex VI, or the Act to Prevent Pollution from Ships (APPS), which is the authority for implementing and enforcing MARPOL Annex VI requirements in the United States. We already have sulfur limits established under the CAA that apply to all distillate marine fuel. This action provides an exemption to the sulfur limits established under the CAA so parties can supply and distribute distillate marine fuel for meeting the 2020 global marine fuel standard. Without this action, parties could not permissibly supply and distribute such fuel within the United States, which as other commenters noted, could have adverse effects on global marine fuel supply.

We do not believe this rulemaking would unnecessarily limit the opportunities for parties to offer fuel that exceeds the 2020 global marine fuel standard, such as for vessels with installed scrubbers. As stated in the proposal,10 we believe the Annex VI global marine fuel standard of 3.50 weight percent that has been in place for some time was met almost exclusively with residual fuel. We believe it is unlikely that parties would refine a distillate fuel with greater than 0.50 weight percent (5,000 ppm) sulfur content to use in vessels with scrubbers when substantially cheaper residual fuel with higher sulfur levels are available for use. This rule does not preclude the availability of such fuel for vessels with scrubbers installed. Blenders at any point in the distribution system would be able to mix distillate fuel and residual fuel such that the blended fuel has more than 5,000 ppm sulfur, as long as the blended fuel has a T90 distillation point above 700 °F, since the mixture would be residual fuel according to the definitions in 40 CFR part 80.

One commenter noted that EPA staff claimed the proposed rule was needed so EPA can enforce the 2020 global marine fuel standard.11 The commenter argued that the proposed rule is not needed to enforce the 2020 global marine fuel standard and that EPA, the U.S. Coast Guard, and Department of Justice can enforce the 2020 standard under APPS.

We agree with the commenter that this rule is not necessary to enforce distillate marine fuel requirements under the CAA or take enforcement actions related to the Annex VI standards under APPS. The purpose of this action is to allow parties to supply and distribute distillate global marine fuel under the CAA and is unrelated to our authority to enforce global marine fuel standards under APPS. We consider such comments related to enforcement of MARPOL Annex VI under APPS outside the scope of this final rule. However, we note that in addition to allowing distribution of distillate marine fuel to meet the 2020 global marine fuel standards, the amendments will help to avoid contamination of the distillate marine fuel subject to a sulfur standard by exempting distillate marine fuel used to meet the 2020 global marine fuel standards.

One commenter argued that the proposed rule is outside the scope of EPA's authority to impose regulatory requirements and standards under the CAA and APPS.12 The commenter noted that nothing in the CAA or APPS provides EPA with the authority to regulate the sulfur content of fuel used entirely outside the United States. The commenter also suggested that EPA staff suggested EPA's proposal was intending to establish requirements under APPS. Finally, the commenter suggested that EPA's proposal exceeds any authority granted to it under MARPOL.

We disagree with the commenter's suggestion that EPA lacks authority to propose an exemption to existing regulatory requirements under the CAA. We have imposed standards and requirements for all distillate marine fuel introduced into commerce in the United States under CAA section 211 at 40 CFR part 80, subpart I.13 This action does not impose new standards under the CAA as the commenter suggests. As noted in the proposal 14 and in public comments from other stakeholders,15 this rule is necessary to allow parties to supply and distribute distillate 2020 global marine fuel that, prior to this amendment, was prohibited under previous rulemakings limiting distribution of distillate marine fuel with sulfur content exceeding standards under 40 CFR part 80. We are not taking this action under APPS or IMO Annex VI, so comments related to our authority under APPS or IMO Annex VI are outside the scope of this action.

One commenter contended that the proposed rule was overly complex because it imposed designation and documentation requirements (through PTDs) for distillate global marine fuel instead of simply excluding all fuel used as bunker fuel outside of U.S. waters from the 40 CFR part 80 diesel fuel standards.16 The commenter pointed to EPA's treatment of stationary distillate fuel and exported distillate fuel as examples of cases where EPA has excluded fuel from the diesel fuel standards of 40 CFR part 80. We disagree that the rule is overly complex. The exemption for 2020 distillate global marine fuel functions in the same way that other exemptions to the diesel fuel standards function under the regulations at 40 CFR part 80, subpart I. This includes identifying the fuel as exempt (using designations on PTDs), ensuring that the fuel is segregated from fuel that is subject to the diesel sulfur standards, and keeping records to demonstrate that the fuel was appropriately designated and distributed as allowed under the regulations. Other exemptions to the diesel fuel standards of 40 CFR part 80, subpart I, also require that such fuel is used for the purpose that the fuel is exempt (or prohibit the use of such fuel for a different purpose).17 In the case of exports specifically, parties must designate the distillate fuel for export (see 40 CFR 80.598(a)(2)) on PTDs (see 40 CFR 80.590(a)(6) or (b)(2)) and keep records of such designations and PTDs (see 40 CFR 80.592(a)(1) and 80.602(a)(1)). We imposed these provisions on exports in prior rulemakings to help ensure that exported distillate fuel did not contaminate distillate fuel that is subject to diesel fuel standards. We have the same concerns with distillate global marine fuel since parties could distribute such fuel with distillate fuel subject to the diesel fuel standards. Therefore, we are imposing necessary and reasonable conditions for parties claiming an exemption for distillate global marine fuel consistent with how we currently treat exempted fuel under 40 CFR part 80, subpart I.

One commenter suggested that EPA's proposal misinterpreted its 40 CFR part 80 regulations by noting that distribution of distillate marine fuel containing more than 1,000 ppm sulfur content could not be supplied and distributed as global marine fuel.18 The commenter pointed to substitute PTD language requirements for high-sulfur fuel used in marine vessels under MARPOL Annex VI, Regulations 3 and 4 as an example of how EPA misinterpreted its regulations to limit the sulfur content of distillate marine fuel. The commenter also suggested that the classification of a distillate fuel determines whether the fuel is subject to EPA's diesel fuel requirements. The commenter states that since EPA staff recognized that distillate fuel is sometimes not subject to EPA's requirements (e.g., distillate fuel used for power generation), that EPA's regulations at 40 CFR part 80 do not cover high-sulfur distillate fuel used in marine engines.

We also disagree with the suggestion that because stationary distillate fuel does not have to meet the diesel fuel standards of 40 CFR part 80, a category of distillate marine fuel is not subject to the diesel fuel requirements under 40 CFR part 80 and that a fuel is only subject to the regulation if a party classifies the fuel as a fuel that is subject to the regulatory requirements. While the regulatory provisions in 40 CFR part 80 may not cover all distillate products, the regulations clearly apply to distillate fuel intended for use, made available for use, and used in marine engines. The regulations at 40 CFR 80.2(aaa) and (ppp) broadly define both distillate fuel and locomotive or marine (LM) diesel fuel. Furthermore, the regulation at 40 CFR 80.501 clearly specifies that marine diesel fuel and other types of distillate fuel are subject to the provisions of 40 CFR part 80, subpart I.19 These definitions and the regulations that cover which types of fuel are subject to our regulations are not based solely on how the fuel is classified, as suggested by the commenter, but also on how the fuel is intended for use, made available for use, and ultimately used. For example, the definitions of “marine diesel fuel” and “ECA marine fuel” make clear that the definition covers the specified fuel “used, intended for use, or made available for use” (40 CFR 80.2(ppp) and (ttt)). Thus, claiming that a distillate fuel was intended for use in stationary internal combustion engines and then making that fuel available for use or using that fuel in a marine engine would still subject that fuel to the marine diesel fuel requirements. The regulations at 40 CFR part 80 require that such fuel must either meet the appropriate diesel sulfur standard or be exempted from the applicable standards, subject to certain conditions.

We also disagree that the allowance of substitute language for high-sulfur fuel used in marine vessels under MARPOL Annex VI, Regulations 3 and 4 implies that distillate marine fuel containing more than 1,000 ppm is exempt from the regulations at 40 CFR part 80, subpart I. First, for a party to use the substitute PTD language for marine fuel at 40 CFR 80.590(b)(5)-(7), the party and the fuel would need to be subject to the provisions under 40 CFR part 80, subpart I. Second, the commenter misunderstands that these language provisions are in place for residual fuel (which is covered under the regulations at 40 CFR part 80 when used as ECA marine fuel) to demonstrate that they are not subject to diesel fuel and ECA marine standards and can only be used in vessels that can lawfully use that fuel. That does not mean that the fuel and parties that supply and distribute such fuel are not subject to the requirements or exempt from diesel fuel standards.

Two commenters asked EPA to clarify whether residual fuel would be affected by the proposed provisions.20 These commenters suggested minor revisions to the definition of global marine fuel and the proposed regulations to clarify EPA's intent to apply the exemption provisions only to distillate fuel already subject to 40 CFR part 80 requirements. As noted in the proposal 21 and in Section II of this preamble, 40 CFR part 80, subpart I, does not impose new standards on residual fuel, which makes an exemption unnecessary. We do not intend to introduce residual fuel regulations as part of this action. We agree with commenters' suggestions to clarify the scope of the proposed changes to 40 CFR part 80, subpart I, and have made corresponding changes to the regulations in response to these comments.

One commenter asked for clarification on when designation and segregation would apply to distillate global marine fuel.22 In this action we are finalizing the proposed condition that, for distillate global marine fuel to be exempt from the diesel sulfur requirements, the distillate global marine fuel would need to be designated as global marine fuel and segregated from fuel subject to the regulatory requirement from the point of production to the point where the fuel is supplied to marine vessels that would use the fuel. The same commenter asked for clarification that 2020-compliant fuel is allowed and that distillate fuel with sulfur content above 5,000 ppm could be sold as bunker fuel.23 As discussed above, this rule would not preclude the sale or distribution of residual fuel used to meet the 2020 standard, and we do not expect production of distillate marine fuel with sulfur content above 5,000 ppm, as it would be too costly.

Commenters also requested that EPA complete this action in a timely manner to avoid disruption in the supply and distribution of distillate global marine fuel ahead of the January 1, 2020 implementation date for the global marine fuel sulfur standard.24 Commenters noted that failure to modify the regulations to allow for the supply and distribution of distillate global marine fuel would have significant cost impacts and send signals of uncertainty to parties wishing to supply and distribute product to meet the demand for distillate global marine fuel in the United States. We appreciate the need to provide regulatory certainty and believe it is in the public interest to allow parties to supply and distribute distillate global marine fuel ahead of the January 1, 2020, implementation deadline. We are therefore making the regulatory changes for distillate global marine fuel effective on the date this action is published in the Federal Register.

This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.

This action is not an Executive Order 13771 regulatory action because this action is not significant under Executive Order 12866.

This action does not impose any new information collection burden under the PRA. OMB has previously approved the information collection activities contained in the existing regulations and has assigned OMB control number 2060-0308. We believe this action does not impose any new information collection burden as this action will provide clarity and additional flexibility to U.S. fuel suppliers providing distillate global marine fuel.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden, or otherwise has a positive economic effect on the small entities subject to the rule. This action will provide clarity and additional flexibility to U.S. fuel suppliers providing distillate global marine fuel. We have therefore concluded that this action will have no adverse regulatory impact for any directly regulated small entities.

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local, or tribal governments or the private sector.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the National Government and the states, or on the distribution of power and responsibilities among the various levels of government.

This action does not have tribal implications as specified in Executive Order 13175. This rule will be implemented at the Federal level and affects suppliers of global marine fuel. Thus, Executive Order 13175 does not apply to this action.

This action is not subject to Executive Order 13045 because it is not economically significant as defined in Executive Order 12866. This action's assessment of the environmental impact of the rule contained in Section IV shows that the rule will have no adverse impact. This action will therefore not affect children's health.

This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

This rulemaking does not involve technical standards.

EPA believes that this action does not have disproportionately high and adverse human health or environmental effects on minority populations, low income populations, and/or indigenous peoples, as specified in Executive Order 12898 (59 FR 7629, February 16, 1994). As discussed in Section IV, we do not expect this action to alter the benefits of EPA's coordinated strategy to reduce emissions from large marine diesel engines and their fuels.

This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

For the reasons set forth above, EPA is amending 40 CFR part 80 as follows:

This document announces that on December 3, 2019, OMB approved, for a period of three years, the information collection requirements relating to the rules and procedures contained in the Commission's Order, FCC 19-52, published at 84 FR 28761, June 20, 2019. The OMB Control Number is 3060-0568. The Commission publishes this document as an announcement of the effective date of the rules. If you have any comments on the burden estimates listed below, or how the Commission can improve the collections and reduce any burdens caused thereby, please contact Cathy Williams, Federal Communications Commission, Room 1-C823, 445 12th Street SW, Washington, DC 20554. Please include the OMB Control Number, 3060-0568, in your correspondence. The Commission will also accept your comments via email at PRA@fcc.gov.

To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email to fcc504@fcc.gov or call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), the FCC is notifying the public that it received final OMB approval on December 3, 2019, for the information collection requirements contained in revised rules 47 CFR 76.970(h) and 76.975(e).

Under 5 CFR part 1320, an agency may not conduct or sponsor a collection of information unless it displays a current, valid OMB Control Number.

No person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act that does not display a current, valid OMB Control Number. The OMB Control Number is 3060-0568.

The foregoing notice is required by the Paperwork Reduction Act of 1995, Public Law 104-13, October 1, 1995, and 44 U.S.C. 3507.

The total annual reporting burdens and costs for the respondents are as follows:

OMB Control Number: 3060-0568.

OMB Approval Date: December 3, 2019.

OMB Expiration Date: December 31, 2022.

Title: Sections 76.970, 76.971, and 76.975, Commercial Leased Access Rates, Terms and Conditions, and Dispute Resolution.

Form Number: N/A.

Respondents: Businesses or other for-profit entities; Not-for-profit institutions.

Number of Respondents and Responses: 2,677 respondents; 6,879 responses.

Estimated Time per Response: 0.5 hours to 40 hours.

Frequency of Response: Recordkeeping requirement; On occasion reporting requirement; Third-party disclosure requirement.

Obligation to Respond: Mandatory; Required to obtain or retain benefits. The statutory authority for this information collection is contained in sections 4(i), 303, and 612 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303, and 532.

Total Annual Burden: 17,131 hours.

Total Annual Cost: $118,000.

Nature and Extent of Confidentiality: There is no need for confidentiality with this collection of information.

Privacy Act Impact Assessment: No impact(s).

Needs and Uses: On June 7, 2019, in document FCC 19-52, the Commission released a Report and Order updating its leased access rules as part of its Modernization of Media Regulation Initiative. Two of the revised rules (47 CFR 76.970(h) and 76.975(e)) contained new or modified information collection requirements.

Title 47 CFR 76.970(h) requires cable operators to provide prospective leased access programmers with the following information within 30 calendar days of the date on which a bona fide request for leased access information is made, provided that the programmer has remitted any application fee that the cable system operator requires up to a maximum of $100 per system-specific bona fide request (for systems subject to small system relief, cable operators are required to provide the following information within 45 calendar days of a bona fide request):

(a) How much of the cable operator's leased access set-aside capacity is available;

(b) a complete schedule of the operator's full-time leased access rates;

(c) rates associated with technical and studio costs; and

(d) if specifically requested, a sample leased access contract.

Bona fide requests, as used in this section, are defined as requests from potential leased access programmers that have provided the following information:

(a) The desired length of a contract term;

(b) the anticipated commencement date for carriage; and

(c) the nature of the programming.

All requests for leased access must be made in writing and must specify the date on which the request was sent to the operator. Operators must maintain supporting documentation to justify scheduled rates, including supporting contracts, calculations of the implicit fees, and justifications for all adjustments.

Cable system operators must disclose on their own websites, or through alternate means if they do not have their own websites, a contact name or title, telephone number, and email address for the person responsible for responding to requests for information about leased access channels.

Title 47 CFR 76.975(e) provides that the cable operator or other respondent will have 30 days from service of the petition to file an answer. If a leased access rate is disputed, the answer must show that the rate charged is not higher than the maximum permitted rate for such leased access, and must be supported by the affidavit of a responsible company official. If, after an answer is submitted, the staff finds a prima facie violation of our rules, the staff may require a respondent to produce additional information, or specify other procedures necessary for resolution of the proceeding. Replies to answers must be filed within fifteen (15) days after submission of the answer.

I. Background

This rule will revise the Department of the Interior Acquisition Regulation (DIAR) in order to update references to other Federal and Departmental directives, remove obsolete material and remove obsolete references.

On November 24th, 2015, DOI's Office of Acquisition and Property Management (PAM) issued a policy that deviated from DIAR 1419.2, to revise the content in sections 1419.201 and 1419.202. This policy deviation was needed to comply with statutory requirements of the Small Business Act. This rule updates the DIAR with changes from the class deviation and subsequently allows the Department to rescind the class deviation.

The content of DIAR 1419.201 related to setting goals for small business contracting, the role of the Office of Small and Disadvantaged Business Utilization (OSDBU) and the appointment of Small Business Specialists was out of date and inconsistent with statutory requirements and the Federal Acquisition Regulation (FAR). The deviation ensured that DOI manages our small business goals in full compliance with SBA's procedures and adhered to FAR requirements regarding the role of the OSDBU and Small Business Specialists. This rule ensures that the role of the Director of the OSDBU is consistent with the Small Business Act 15 U.S.C. 644(k).

The rule simplifies DIAR 1419.202-70 to allow the OSDBU Director responsibility for issuing policy on the use and content of the Form DI-1886 “Acquisition Screening and Review Form”.

The rule further intends to remove the following from DIAR 1419:

Remove DIAR 1419.505, “Rejecting Small Business Administration recommendations.” The Department has determined that the procedures in FAR 19.505 are sufficient for documenting the rejection of Small Business Administration's recommendation and that further supplemental guidance in the DIAR is duplicative and redundant;

Remove DIAR 1419.506, “Withdrawing or modifying small business set-asides.” The Department has determined that the procedures in FAR 19.506 are sufficient for withdrawing or modifying small business set-asides and that further supplemental guidance in the DIAR is duplicative and redundant;

Remove DIAR 1419.7, “The Small Business Subcontracting Program”, in its entirety. DOI has determined that the procedures in FAR 19.7 are sufficient for managing the DOI's small business subcontracting program;

Remove DIAR 1419.803, “Selecting acquisitions for the 8(a) program” in its entirety.

DOI has determined that the procedures in FAR 19.8 are sufficient for managing DOI's responsibilities under the Section 8(a) program;

Remove DIAR 1419.9, “Contracting Opportunities for Women-Owned Small Businesses”, in its entirety. The Executive order supporting the regulation has been superseded by the Women Owned Small Business program established under 15 U.S.C 637(m);

Remove DIAR 1419.10, “Small Business Competitiveness Demonstration Program”, in its entirety. FAR 19.10 was established to meet the requirements of the Business Opportunity Development Reform Act of 1988 (Pub. L. 100-656). Section 1335 of the Small Business Jobs Act of 2010 (Pub. L. 111-240) amended the Business Opportunity Development Reform Act of 1988 and repealed the Small Business Competitiveness Demonstration Program.

DOI published the proposed rule 84 FR 17131 on April 24, 2019 in the Federal Register for a 60-day public comment period. The public comment period closed on June 24, 2019. DOI received no comments on the proposed rule in Docket No. DOI-2018-0018.

1. Regulatory Planning and Review (Executive Orders 12866 and 13563). Executive Order (E.O.) 12866 provides that the Office of Information and Regulatory Affairs (OIRA) will review all significant rules. OIRA has determined that this rule is not significant.

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 objectives. 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.

2. Regulatory Flexibility Act. The Secretary certifies that the adoption of this rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Therefore, under 5 U.S.C. 605(b), this rulemaking is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

3. Small Business Regulatory Enforcement Fairness Act. This rule is not a major rule under the Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)). This rule does not have an annual effect on the economy of $100 million or more. This rule will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. This rule does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

4. Unfunded Mandates Reform Act. This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local, or tribal governments, or the private sector nor does the rule impose requirements on State, local, or tribal governments. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.) is not required.

5. Takings (E.O. 12630). This rule does not affect a taking of private property or otherwise have taking implications under Executive Order 12630. A takings implication assessment is not required.

6. Federalism (E.O. 13132). Under the criteria in section 1 of E.O. 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. It would not substantially and directly affect the relationship between the Federal and state governments. A federalism summary impact statement is not required.

7. Civil Justice Reform (E.O. 12988). This rule complies with the requirements of E.O. 12988. Specifically, this rule (1) meets the criteria of section 3(a) of this E.O. requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and (2) meets the criteria of section 3(b)(2) of this E.O. requiring that all regulations be written in clear language and contain clear legal standards.

8. Consultation with Indian tribes (E.O. 13175). The Department strives to strengthen its government-to-government relationship with Indian tribes through a commitment to consultation and recognition of their right to self-governance and tribal sovereignty. We have evaluated this rule under the Department's consultation policy and under the criteria in E.O. 13175 and have determined that it has no substantial direct effect on federally recognized Indian tribes and that consultation under the Department's tribal consultation policy is not required. This rule does not apply to tribal awards made in accordance with the Indian Self-Determination and Education Assistance Act (Pub. L. 93-638, 88 Stat. 2204), as amended.

9. Paperwork Reduction Act, 44 U.S.C. 3501, et seq. This rule does not contain information collection requirements, and a submission to the Office of Management and Budget under the Paperwork Reduction Act (PRA) is not required.

10. National Environmental Policy Act. This rule does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed statement under the National Environmental Policy Act of 1969 (NEPA) is not required because the rule is covered by the categorical exclusion listed in 43 CFR 46.210(c). We have also determined that the rule does not involve any of the extraordinary circumstances listed in 43 CFR 46.215 that would require further analysis under NEPA.

11. Effects on the Energy Supply (E.O. 13211). This rule is not a significant energy action under the definition in E.O. 13211. A Statement of Energy Effects is not required.

12. Clarity of this Regulation. We are required by Executive Orders 12866 (section 1(b)(12)), and 12988 (section 3(b)(1)(B)), and 13563 (section 1(a)), and 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 common, everyday words and clear language rather than jargon; (4) be divided into short sections and sentences; and (5) use lists and tables wherever possible.

13. Public availability of comments. 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 publically 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.