The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the National Airspace System (NAS) as necessary to preserve the safe and efficient flow of air traffic.

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

Communications should identify both docket numbers (FAA Docket No. FAA-2022-1107; Airspace Docket No. 22-AGL-1) and be submitted in triplicate to the Docket Management Facility (see ADDRESSES section for address and phone number). You may also submit comments through the internet at www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-1107; Airspace Docket No. 22-AGL-1.” The postcard will be date/time stamped and returned to the commenter.

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

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

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Operations Support Group, Central Service Center, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177.

This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11F lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA is planning to decommission the Kalamazoo, MI, VOR in April 2023. The Kalamazoo VOR was one of the candidate VORs identified for discontinuance by the FAA's VOR MON program and listed in the Final policy statement notice, “Provision of Navigation Services for the Next Generation Air Transportation System (NextGen) Transition to Performance-Based Navigation (PBN) (Plan for Establishing a VOR Minimum Operational Network),” published in the Federal Register of July 26, 2016 (81 FR 48694), Docket No. FAA-2011-1082.

Although the VOR portion of the Kalamazoo VOR/DME is planned for decommissioning, the co-located DME portion of the NAVAID is being retained to support NextGen PBN flight procedure requirements.

The ATS routes affected by the Kalamazoo VOR decommissioning are VOR Federal airways V-156 and V-285. With the planned decommissioning of the Kalamazoo VOR, the remaining ground-based NAVAID coverage in the area is insufficient to enable the continuity of the airways. As such, modifications to the airways would result in V-156 and V-285 being shortened. Further, concurrent changes to V-285 have been proposed in a separate NPRM.

To overcome the loss of a portion of V-156 and V-285 by this action, instrument flight rules (IFR) traffic could use portions of adjacent VOR Federal airways V-55, V-274, and V-277 to circumnavigate the affected area, or receive air traffic control (ATC) radar vectors to fly through the affected area. Additionally, IFR pilots equipped with RNAV capabilities could file and navigate point to point using the existing fixes and waypoints that would remain in place, or could use area navigation (RNAV) route T-217 to support continued operations though the affected area. Visual flight rules (VFR) pilots who elect to navigate via the affected ATS routes could also take advantage of the adjacent ATS routes or ATC services listed previously.

The FAA is proposing an amendment to 14 CFR part 71 to amend VOR Federal airways V-156 and V-285 due to the planned decommissioning of the VOR portion of the Kalamazoo, MI (AZO), VOR/DME. The proposed airway actions are described below.

V-156: V-156 currently extends between the Cedar Rapids, IA, VOR/DME and the Kalamazoo, MI, VOR/DME. The FAA proposes to remove the airway segment overlying the Kalamazoo VOR/DME between the Gipper, MI, VOR/Tactical Air Navigation (VORTAC) and the Kalamazoo, MI, VOR/DME. The unaffected portions of the existing airway would remain as charted.

V-285: V-285 currently extends between the Brickyard, IN, VORTAC and the Victory, MI, VOR/DME. The FAA proposes to remove the airway segment overlying the Kalamazoo VOR/DME between the Goshen, IN, VORTAC and the Victory, MI, VOR/DME. Concurrent changes to other portions of the airway have been proposed in a separate NPRM. The unaffected portions of the existing route would remain as charted.

The NAVAID radials listed in the VOR Federal airway V-156 description below are unchanged and stated in True degrees.

VOR Federal airways are published in paragraph 6010(a) of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The ATS routes listed in this document would be published subsequently in FAA Order JO 7400.11.

FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

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

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” prior to any FAA final regulatory action.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the route structure as necessary to preserve the safe and efficient flow of air traffic within the National Airspace System (NAS).

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

Communications should identify both docket numbers (FAA Docket No.FAA-2022-1113; Airspace Docket No. 22-AGL-20) and be submitted in triplicate to the Docket Management Facility (see ADDRESSES section for address and phone number). You may also submit comments through the internet at www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No.FAA-2022-1113; Airspace Docket No. 22-AGL-20.” The postcard will be date/time stamped and returned to the commenter.

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

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

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Operations Support Group, Central Service Center, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177.

This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021 and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11F lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA is planning decommissioning activities for the VOR portion of the Litchfield, MI, VOR/DME in April 2023. The Litchfield, MI, VOR is a candidate VOR identified for discontinuance by the FAA's VOR MON program and listed in the final policy statement notice, “Provision of Navigation Services for the Next Generation Air Transportation System (NextGen) Transition to Performance-Based Navigation (PBN) (Plan for Establishing a VOR Minimum Operational Network),” published in the Federal Register of July 26, 2016 (81 FR 48694), Docket No. FAA-2011-1082.

Although the VOR portion of the Litchfield VOR/DME is planned for decommissioning, the co-located DME portion of the NAVAID is being retained.

The existing ATS route dependencies to the Litchfield, MI, VOR/DME NAVAID are VOR Federal airways V-6, V-10, V-30, V-100, and V-233. With the planned decommissioning of the VOR portion of the Litchfield VOR/DME, the remaining ground-based NAVAID coverage in the area is insufficient to enable the continuity of the affected airways. As such, proposed modifications to the affected VOR Federal airways would result in expanding the existing gaps in four of the airways (V-6, V-10, V-30, and V-233) and redefining an airway end point in the remaining airway (V-100).

To overcome the loss of the airway segments on all five affected airways, instrument flight rules (IFR) traffic may request air traffic control (ATC) radar vectors to fly through or circumnavigate the affected area. Additionally, IFR pilots equipped with area navigation (RNAV) capabilities may also navigate point to point using the existing Fixes that will remain in place as fixes or waypoints to support continued operations though the affected area. Visual flight rules (VFR) pilots who elect to navigate via the airways through the affected area could also take advantage of the ATC services listed previously.

Prior to this NPRM, the FAA published a rule for Docket No. FAA-2021-1043 in the Federal Register (87 FR 50563; August 17, 2022), amending VOR Federal airway V-100 by removing the airway segment between the Fort Dodge, IA, VOR/Tactical Air Navigation (VORTAC) and the Waterloo, IA, VOR/DME. That airway amendment, effective November 3, 2022, is included in this NPRM.

The FAA is proposing an amendment to 14 CFR part 71 to amend VOR Federal airways V-6, V-10, V-30, V-100, and V-233. The planned decommissioning of the VOR portion of the Litchfield, MI, VOR/DME has made this action necessary. The proposed VOR Federal airway changes are outlined below.

V-6: V-6 currently extends between the Oakland, CA, VOR/DME and the DuPage, IL, VOR/DME; between the intersection of the Chicago Heights, IL, VORTAC 358° and Gipper, MI, VORTAC 271° radials (NILES Fix) and the intersection of the Gipper, MI, VORTAC 092° and Litchfield, MI, VOR/DME 196° radials (MODEM Fix); and between the Philipsburg, PA, VORTAC and the La Guardia, NY, VOR/DME. The FAA proposes to remove the airway segment between the intersection of the Chicago Heights, IL, VORTAC 358° and Gipper, MI, VORTAC 271° radials (NILES Fix) and the intersection of the Gipper, MI, VORTAC 092° and Litchfield, MI, VOR/DME 196° radials (MODEM Fix). The unaffected portions of the existing airway would remain as charted.

V-10: V-10 currently extends between the Pueblo, CO, VORTAC and the intersection of the Bradford, IL, VORTAC 058° and Joliet, IL, VOR/DME 287° radials (PLANO Fix); between the intersection of the Chicago Heights, IL, VORTAC 358° and Gipper, MI, VORTAC 271° radials (NILES Fix) and the Litchfield, MI, VOR/DME; and between the Youngstown, OH, VORTAC and the Lancaster, PA, VOR/DME. The FAA proposes to remove the airway segment between the Gipper, MI, VORTAC and the Litchfield, MI, VOR/DME. The unaffected portions of the existing airway would remain as charted.

V-30: V-30 currently extends between the Badger, WI, VOR/DME and the Litchfield, MI, VOR/DME; and between the Philipsburg, PA, VORTAC and the Solberg, NJ, VOR/DME. The FAA proposes to remove the airway segment between the Pullman, MI, VOR/DME and the Litchfield, MI, VOR/DME. The unaffected portions of the existing airway would remain as charted.

V-100: V-100 currently extends between the Medicine Bow, WY, VOR/DME and the O'Neill, NE, VORTAC; between the Waterloo, IA, VOR/DME and the Dubuque, IA, VORTAC; and between the Northbrook, IL, VOR/DME and the Litchfield, MI, VOR/DME. The FAA proposes to remove the airway segment between the Keeler, MI, VOR/DME and the Litchfield, MI, VOR/DME. The unaffected portions of the existing airway would remain as charted.

V-233: V-233 currently extends between the Spinner, IL, VORTAC and the Litchfield, MI, VOR/DME; and between the Mount Pleasant, MI, VOR/DME and the Pellston, MI, VORTAC. The FAA proposes to remove the airway segment between the Goshen, IN, VORTAC and the Litchfield, MI, VOR/DME. The unaffected portions of the existing airway would remain as charted.

All radials listed in the VOR Federal airway descriptions below are unchanged and stated in True degrees.

VOR Federal airways are published in paragraph 6010(a) of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The VOR Federal airways listed in this document would be published subsequently in the FAA Order JO 7400.11.

FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

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

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

Background Identification of Section 1758 Technologies

As part of the National Defense Authorization Act (NDAA) for Fiscal Year 2019, Public Law 115-232, Congress enacted the Export Control Reform Act of 2018 (ECRA), 50 U.S.C. 4801-4852. Section 1758 of ECRA (as codified under 50 U.S.C. 4817) authorizes the Bureau of Industry and Security (BIS) to establish appropriate controls on the export, reexport or transfer (in-country) of emerging and foundational technologies essential to the national security of the United States. Due to the absence of specific definitions or other guidance in ECRA differentiating the terms “emerging technology” or “foundational technology,” and in order to ensure greater efficiency in implementing controls for such items, BIS has chosen to characterize such technologies as “Section 1758 technologies” for purposes of section 1758 of ECRA, rather than characterizing a specific technology as either “emerging” or “foundational.”

As described in section 1758(a)(2)(B) of ECRA, the identification of Section 1758 technologies takes into account: (i) the development of these technologies in foreign countries; (ii) the effect export controls imposed pursuant to this section may have on the development of such technologies in the United States; and (iii) the effectiveness of export controls imposed pursuant to this section on limiting the proliferation of the emerging and foundational technologies in foreign countries.

The Secretary of Commerce must establish appropriate controls on the export, reexport or transfer (in-country) of technology identified pursuant to the Section 1758 process. In so doing, the Secretary must consider the potential end-uses and end-users of Section 1758 technologies, and the countries to which exports from the United States are restricted ( e.g., embargoed countries). While the Secretary has discretion to set the level of export controls, at a minimum a license must be required for the export of such technologies to countries subject to a U.S. embargo, including those countries subject to an arms embargo.

In addition, section 1758(a)(2)(C) of ECRA (50 U.S.C. 4817(a)(2)(C)) requires the interagency process for identifying Section 1758 technologies to include a notice and comment period.

On November 19, 2018, BIS published an advance notice of proposed rulemaking, “Review of Controls for Certain Emerging Technologies” (83 FR 58201) (November 19 ANPRM). The November 19 ANPRM identified biotechnology in a representative list of fourteen technology categories concerning which BIS sought public comment to determine whether there are specific emerging technologies that are essential to U.S. national security and for which effective controls can be implemented. The biotechnology-related comments submitted to BIS in response to its November 19 ANPRM are not addressed in this ANPRM, because none of the comments specifically addressed the question of export controls on automated peptide synthesizers.

Instruments for the automated synthesis of peptides (automated peptide synthesizers) have been identified by BIS for evaluation according to the criteria in section 1758 of ECRA pertaining to emerging and foundational technologies.

Peptides and polypeptides are polymeric chains of amino acids, linked together by peptide bonds. Proteins are three-dimensional (3D) macromolecules composed of one or more folded large chains of polypeptides. Proteins must fold into the correct 3D shape to be functionally active. The first peptide bond was synthesized over 100 years ago. However, in the last few decades, advances in chemical synthesis methods have established automated peptide synthesis as a common laboratory technique. 1 Long-established synthesis methods using fluorenylmethyloxycarbonyl (Fmoc) chemistry can reliably and routinely produce high quality polypeptides around 50 amino acids in length. 2

Recent advances in peptide synthesis technology and instrumentation have increased both the speed of peptide synthesis and the length of peptide products, including peptides and proteins greater than 100 amino acids in length. 3 Most protein toxins that are controlled under Export Control Classification Number (ECCN) 1C351 on the Commerce Control List (CCL) (see Supplement No. 1 to part 774 of the EAR) are over 100 amino acids in length and have an average length of 300 amino acids (with the notable exception of conotoxins, which range between 10-100 amino acids in length). Consequently, absent the imposition of additional controls on the export, reexport or transfer (in-country) of certain peptide synthesis technology and instrumentation ( e.g., automated peptide synthesizers), there would be an increased risk that such technology and instrumentation could be used to produce controlled toxins for biological weapons purposes.

Consistent with section 1758(a)(2)(C) of ECRA (50 U.S.C. 4817(a)(2)(C)), BIS welcomes comments on the following questions. If specific automated peptide synthesizer instruments are described by respondents, BIS requests that this should be done, to the extent practicable, within the context of the following questions.

(1) What is the current state of development of automated peptide synthesizers in the United States, including those having primarily academic or commercial applications, and how does this compare with that of other countries ( e.g., is the United States at the forefront of such development in the academic and commercial fields)? Where possible, please identify any publicly available studies that support your position.

(2) What is the current availability and predominate application(s) of automated peptide synthesizers in the United States and how does this compare with that of other countries ( e.g., how common is the use of these instruments in life sciences laboratories/institutions and other academic or commercial settings)?

(3) To what extent are custom peptide synthesis services available in the United States and other countries, and would the availability of such services (particularly for academic or commercial applications) be likely to impact domestic or foreign demand for automated peptide synthesizers?

(4) To what extent are current or near-term developments in peptide synthesis technology expected to address the challenges of peptide length, sequence fidelity, and protein folding ( e.g., are efforts currently underway to integrate protein folding into the automation process)?

(5) To what extent would the establishment of Section 1758 technology export controls on automated peptide synthesizer instruments, and related “software” and “technology,” impact U.S. technological leadership in this field ( e.g., within the academic or commercial spheres) and would this impact be distinctly different if controls were placed primarily on “software” as opposed to hardware, or vice versa ?

(6) To what extent would the imposition of Section 1758 technology export controls on automated peptide synthesizer instruments, and related “software” and “technology,” likely be effective in terms of limiting the proliferation of these items abroad (including the potential use of such items to produce controlled toxins for biological weapons purposes)?

(7) To what extent has the increased availability of lower cost coupling reagents, together with recent advances in automated peptide synthesizers and related technology, overcome economic or technological factors that previously might have limited the availability and use of this technology, abroad?

(8) To what extent should Section 1758 technology export controls on peptide synthesizer technology be implemented multilaterally (rather than unilaterally), in the interest of increasing their effectiveness and minimizing their impact on U.S. industry?

Several respondents who commented on BIS's November 19 ANPRM indicated their preference for multilateral export controls over unilateral export controls, because the former typically place U.S. industry on a more level playing field with respect to producers/suppliers in other countries. In this regard, note that section 1758(c) of ECRA (as codified under 50 U.S.C. 4817(c)) provides that “the Secretary of State, in consultation with the Secretary [of Commerce] and the Secretary of Defense, and the heads of other Federal agencies, as appropriate, shall propose that any technology identified pursuant to subsection (a) [of ECRA] [which addresses the interagency process for identifying Section 1758 technologies] be added to the list of technologies controlled by the relevant multilateral export control regimes.”

Finally, BIS encourages comments addressing any other automated peptide synthesizer technology topics deemed to be relevant to this inquiry.

Comments should be submitted as described in the ADDRESSES section of this ANPRM and must be received no later than October 28, 2022.

This ANPRM has been designated a “significant regulatory action,” although not economically significant, under Executive Order 12866. Accordingly, this ANPRM has been reviewed by the Office of Management and Budget (OMB).

FDA is announcing the availability of a draft guidance for industry, entitled “Prior Notice of Imported Food Questions and Answers; Draft Guidance for Industry (Edition 4).” This draft revised guidance is being issued for public comment and has not yet been finalized. Until edition 4 is finalized, “Prior Notice of Imported Food Questions and Answers; Guidance for Industry (Edition 3),” updated most recently in 2016, remains in effect. We are issuing the draft guidance consistent with our good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized, will represent the current thinking of FDA on this topic. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternate approach if it satisfies the requirements of the applicable statutes and regulations.

FDA continues to believe that it is reasonable to maintain responses to questions concerning prior notice of imported food in a single document that is periodically updated in response to additional questions or regulatory or policy changes. As in the previous editions, the following indicators are used to help users identify revisions: (1) the guidance is identified as a revision of a previously issued document; (2) the revision date appears on the cover of the guidance; (3) the edition number of the guidance is included in its title; and (4) revised or added questions and answers are identified as such in the body of the guidance.

On November 7, 2008, we published a final rule in the Federal Register requiring submission to FDA of prior notice of food, including food for animals, that is imported or offered for import into the United States (73 FR 66294). The rule implements section 801(m) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 381(m)), which was added by section 307 of the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act) (Pub. L. 107-188) and requires that FDA receive prior notice of food imported or offered for import into the United States.

On December 16, 2003, FDA issued a guidance entitled “Prior Notice of Imported Food Questions and Answers (Edition 1).” FDA issued a second and third edition on May 3, 2004, and June 16, 2016, respectively. This draft will be the fourth edition of this document. FDA is issuing this draft guidance entitled “Prior Notice of Imported Food Questions and Answers (Edition 4)” as a level 1 guidance.

The draft fourth edition guidance adds three additional questions. One question relates to any effect systems recognition or equivalency determinations have on prior notice requirements. The other two questions relate to FDA's notice of a refusal under 801(m)(1) of the FD&C Act (in accordance with § 1.283 (21 CFR 1.283)) for inadequate prior notice or a hold under 801( l ) (in accordance with § 1.285 (21 CFR 1.285)) if the food article is from a foreign facility that is not registered, as well as address the timeframe for making requests for FDA review of such a refusal or hold. The draft guidance is intended to help clarify whether food imported from a country with which FDA has a Systems Recognition Arrangement or equivalence determination is exempted from prior notice requirements. The draft guidance also intends to clarify when FDA will provide notice of the refusal or hold to the relevant party, and when the 5-calendar-day clock to request a review of the refusal or hold begins. We are also making other technical amendments to the guidance due to the expanded capabilities of the U.S. Customs and Border Protection's Automate Broker Interface of the Automated Commercial Environment (ABI/ACE) system and FDA's 2017 technical amendments to the prior notice rule (82 FR 15627, March 20, 2017), such as replacing references to the Automated Commercial System (ACS) and successor system with the ABI/ACE system, removing references to requirements that certain prior notice submissions be submitted in FDA's Prior Notice Systems Interface (FDA PNSI), and updating outdated links and FDA contact information.

The draft fourth edition guidance clarifies that the existence of a Systems Recognition Arrangement with or an equivalence determination of a foreign country does not exempt imported foods from that country from FDA's prior notice requirements.

FDA's policy on and practice of communicating prior notice refusals and holds has changed over time. FDA previously stated that we intended to provide notice regarding refusals to carriers. Those carriers could then notify others, such as the entity that hired the carrier to transport the article of food, of a problem with the prior notice (see 73 FR 66294 at 66365). Subsequently, FDA's Guidance for Industry “Prior Notice of Imported Food Questions and Answers (Edition 3)” was published with the explanation that FDA will communicate the decision to examine articles of food to CBP.

The draft fourth edition clarifies that notification of these prior notice refusals and holds will be communicated to CBP and provided to the relevant party ( i.e., the submitter of prior notice) upon arrival of the article. FDA is clarifying its policy because providing advanced notice of a refusal or hold to a submitter could create incentives for bad actors, who may attempt to reroute their entries for the purpose of evading FDA requirements and importing unsafe food.

The draft fourth edition also clarifies the 5-calendar-day clock to request a review of these refusals and holds. Under §§ 1.283(d) and 1.285(j), certain parties may, for the enumerated reasons, request reviews of the prior notice refusals and holds within 5 calendar days of the hold or refusal. The draft fourth edition clarifies that FDA considers the 5-calendar-day clock to begin when FDA provides notice of the refusal or hold to the submitter.

Additionally, in 2016, CBP issued a notice announcing that ABI/ACE would replace ACS as the sole electronic data interchange system authorized by CBP for the processing of electronic entries of FDA-regulated products (see 81 FR 30320, May 16, 2016). ABI/ACE became the successor system to ACS. In 2017, we amended 21 CFR subpart I to replace references to ACS and successor system with ABI/ACE (see 82 FR 15627). As part of this rulemaking, we eliminated some requirements for submitting prior notice due to the expanded capabilities of ABI/ACE, such as the requirement to submit articles that have been refused under section 801(m)(1) of the FD&C Act or subpart I in FDA PNSI. Further, ABI/ACE can now accommodate entries it previously could not, such as articles of food arriving through international mail. Therefore, to reflect these changes that were implemented in the rulemaking and the expanded capabilities of ABI/ACE, we are replacing references in the guidance to ACS and successor system with ABI/ACE. In addition, we are providing clarification regarding how persons may submit prior notice for articles of food imported or offered for import by international mail.

This draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized, will represent the current thinking of FDA on “Prior Notice of Imported Food Questions and Answers (Edition 4).” It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.

While this guidance contains no collection of information, it does refer to previously approved FDA collections of information. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3521) is not required for this guidance. The previously approved collections of information are subject to review by OMB under the PRA. The collections of information in 21 CFR 1.278 to 1.282 have been approved under OMB control number 0910-0520.

Persons with access to the internet may obtain the draft guidance at https://www.fda.gov/food/importing-food-products-united-states/prior-notice-imported-foods, https://www.fda.gov/regulatory-information/search-fda-guidance-documents, or https://www.regulations.gov. Use the FDA website listed in the previous sentence to find the most current version of the guidance.

This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR part 301) to implement section 7803(e) of the Internal Revenue Code (Code). The proposed amendments (proposed regulations) relate to the resolution by the IRS Independent Office of Appeals (Appeals) of Federal tax controversies without litigation, including guidance regarding requests for referral to Appeals following the issuance of a notice of deficiency. (References in this preamble to “Appeals” include references to the former Office of Appeals where appropriate.)

Since its establishment by the IRS in 1927, Appeals' mission has been to resolve Federal tax controversies without litigation on a basis that is fair and impartial to both the Government and the taxpayer. 1 In doing so, Appeals has independently considered disputed administrative determinations made by the IRS in administering and enforcing the internal revenue laws arising from the IRS's examination or collection activities with respect to a particular taxpayer, and attempted to resolve those disputes without litigation. See House TFA Report, at 29. Appeals generally considers whether to resolve Federal tax controversies without litigation based on the likelihood of either the taxpayer's or the IRS's position prevailing if the Federal tax controversy was resolved before a court. When Appeals resolves a Federal tax controversy, it does so through an administrative settlement of the matter.

The IRS Restructuring and Reform Act of 1998 (RRA), Public Law 105-206 (112 Stat. 685, 689 (1998)) directed the Commissioner to restructure the IRS by establishing and implementing an organizational structure that ensured an independent appeals function within the IRS. Although the Code did not mandate the existence of an independent office within the IRS, provisions of the Code have required the independent administrative review of certain administrative determinations, such as section 6159 regarding terminating an installment agreement, sections 6320 and 6330 regarding notice and an opportunity for a hearing before a levy or upon the filing of a notice of lien, and section 7122 regarding rejections of an offer in compromise (OIC).

For decades the Internal Revenue Manual (IRM) has contained the mission statement of Appeals (Appeals Mission Statement), which is “to resolve [Federal] tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.” See IRM 8.1.1.1(1) (10-01-2016) (regarding accomplishing the Appeals mission).

On July 1, 2019, the President signed into law the Taxpayer First Act of 2019 (TFA), Public Law 116-25 (133 Stat. 981 (2019)). Among other things, the TFA added new section 7803(e) to the Code. New section 7803(e)(1) establishes the IRS Independent Office of Appeals “to codify the role of the independent administrative appeals function within the IRS.” See House TFA Report, at 29. New section 7803(e)(2) provides rules regarding the appointment, duties, qualifications, and compensation of the Chief of Appeals who is to supervise and direct Appeals, including that the Chief of Appeals is appointed by and reports directly to the Commissioner. In connection with expressly setting forth the role of Appeals, the TFA codified in new section 7803(e)(3) the Appeals Mission Statement, with the additional duty of resolving Federal tax controversies on a basis that “promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws.” See section 7803(e)(3)(B).

To meet Appeals' mission, new section 7803(e)(6)(A) provides that all IRS employees working within Appeals are to report to the Chief of Appeals. In addition, new section 7803(e)(6)(B) provides the Chief of Appeals with the authority to obtain legal assistance and advice from the staff of the IRS Office of the Chief Counsel (Chief Counsel) with regard to cases pending at Appeals, which, to the extent practicable, is to be provided by Chief Counsel staff who were not involved in advising the IRS employees directly working on the case prior to its referral to Appeals or in preparation of the case for litigation. See House TFA Report, at 30.

The remainder of this Background describes new sections 7803(e)(4) and 7803(e)(5), which are the primary focus of the guidance provided in the proposed regulations.

Section 7803(e)(4) of the Code, also enacted by the TFA, provides that “the resolution process [to resolve Federal tax controversies] shall be generally available to all taxpayers.” For example, a taxpayer who does not resolve the taxpayer's deficiency case with the IRS examiner assigned to the case usually will receive a 30-day letter of a proposed determination of tax liability that provides the position of the IRS regarding the taxpayer's Federal tax controversy. Generally, receipt of the 30-day letter triggers an opportunity for the taxpayer to request that Appeals consider the taxpayer's Federal tax controversy.

As an alternative to having a court decide Federal tax controversies without litigation (or without further litigation if the taxpayer has petitioned the United States Tax Court (Tax Court)) and to facilitate Appeals' function, Appeals uses one or more dispute resolution methods to settle Federal tax controversies. The Appeals dispute resolution methods may include, but are not limited to, a conference, correspondence, and certain Appeals-provided alternative dispute resolution services. These alternative dispute resolution services include fast-track settlement, fast-track mediation, post-Appeals mediation, Rapid Appeals Process, or early referral of issues to Appeals.

The most frequent type of Federal tax controversy involves a taxpayer disputing a liability that is subject to deficiency procedures under section 6212. In many of these cases the taxpayer requests an Appeals conference after the IRS has made a determination of the taxpayer's liability and sent a preliminary (30-day) letter to the taxpayer. In another group of cases, the taxpayer has received a notice of deficiency and filed a petition in the Tax Court, after which the docketed case may be forwarded to Appeals for consideration.

As discussed in more detail in section I.C. of the Explanation of Provisions, the TFA did not require that the IRS grant all requests for Appeals to consider any dispute regarding a Federal tax controversy. The Secretary of the Treasury or her delegate (Secretary) may provide exceptions that allow the IRS to deny requests for Appeals consideration of a Federal tax controversy. In general, it has been the historic practice of the Treasury Department and the IRS to publish limitations on the access to the Appeals resolution process in IRS guidance such as regulations, revenues procedures, and the IRM.

Although the TFA does not prohibit the IRS from denying requests for Appeals consideration for Federal tax controversies, the TFA did add new section 7803(e)(5) to the Code. After the enactment of the TFA, the IRS must follow the special notification procedures set forth in section 7803(e)(5) if a taxpayer who is in receipt of a notice of deficiency requests to have the Federal tax controversy referred to Appeals and that request is denied. In such a case, the IRS is required to provide the taxpayer a written notice containing a detailed description of the facts involved in the controversy, the basis for the decision to deny the request, a detailed explanation of how the basis for the decision applies to such facts, and the procedures for protesting the decision to deny the request.

Proposed §§ 301.7803-2 and 301.7803-3 would implement section 7803(e) as explained in sections I and II of this Explanation of Provisions, respectively. Proposed § 301.7803-2 implements section 7803(e)(3) and (4) regarding the resolution of Federal tax controversies by Appeals. Proposed § 301.7803-3 implements the special notice procedures of section 7803(e)(5) to be followed by the IRS upon denying taxpayer requests to have Federal tax controversies referred to Appeals for those taxpayers in receipt of a notice of deficiency.

As previously mentioned in the Background, in addition to establishing the IRS Independent Office of Appeals in section 7803(e)(1) to codify the role of the independent administrative appeals function and providing rules in section 7803(e)(2) regarding the supervision of Appeals by the Chief of Appeals, the TFA codified in section 7803(e)(3) the Appeals Mission Statement to resolve Federal tax controversies with respect to taxpayers without litigation. 2 Section 7803(e)(3) provides that “[i]t shall be the function of [Appeals] to resolve Federal tax controversies without litigation on a basis which (A) is fair and impartial to both the Government and the taxpayer, (B) promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and (C) enhances public confidence in the integrity and efficiency of the [IRS].” These functions are consistent with the historical functions of Appeals prior to the enactment of the TFA. As further indication that Congress intended Appeals to generally maintain its functions as they existed at the time the TFA was enacted, the legislative history provides that “Independent Appeals is intended to perform functions similar to those of the current Appeals.” See House TFA Report, at 30. Accordingly, proposed § 301.7803-2(a), consistent with the statutory text of section 7803(e)(3), provides that Appeals resolves Federal tax controversies without litigation on a basis that is fair and impartial to the Government and the taxpayer, promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and enhances public confidence in the integrity and efficiency of the IRS.

Section 7803(e)(4) provides that the Appeals resolution process described in section 7803(e)(3) to resolve Federal tax controversies without litigation “shall be generally available to all taxpayers.” Proposed § 301.7803-2(b)(1), consistent with the statutory text of section 7803(e)(4), provides that the Appeals resolution process is generally available to all taxpayers to resolve Federal tax controversies.

The statute does not define the term “Federal tax controversy.” Consistent with the excerpts of the House TFA Report described in the Background, proposed § 301.7803-2(b)(2) defines a “Federal tax controversy” as a dispute over an administrative determination with respect to a particular taxpayer made by the IRS in administering or enforcing the internal revenue laws, related Federal tax statutes, and tax conventions to which the United States is a party (collectively referred to as internal revenue laws) that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws. Under these proposed regulations, Appeals generally continues to resolve a Federal tax controversy based on the likelihood the taxpayer's or the IRS's position with respect to the administrative determination made by the IRS would prevail if the Federal tax controversy was resolved by a court, as it did before enactment of the TFA. In doing so, Appeals continues to independently consider disputed administrative determinations made by the IRS in administering or enforcing the internal revenue laws with respect to a particular taxpayer arising from the IRS's examination, collection, or execution of other activities with respect to the particular taxpayer and attempts to resolve the disputes without litigation.

Consistent with the practice of Appeals prior to the enactment of the TFA, the Appeals resolution process is also available to persons who seek review of certain administrative determinations made by the IRS with respect to such persons that do not directly involve their tax liabilities, penalties, or additions to tax. Even though such matters are not within the definition of a Federal tax controversy in proposed § 301.7803-2(b)(2), proposed § 301.7803-2(b)(3) provides that disputes over administrative determinations made by the IRS with respect to a particular person regarding the listed topics are treated as a Federal tax controversy. Appeals consideration of such administrative determinations made by the IRS is consistent with the historical functions of Appeals prior to the enactment of the TFA, which Congress intended to codify in section 7803(e)(3). Specifically, the legislative history states: “Independent Appeals is intended to perform functions similar to those of the current Appeals.” See House TFA Report, at 30. For example, Appeals considers determinations involving initial or continuing tax exemption or foundation classification of particular organizations, and initial or continuing qualification of particular employee plans, unless the issue underlying that determination is addressed by Chief Counsel through a technical advice issued by the office of an Associate Chief Counsel (Associate Office). See proposed § 301.7803-2(b)(3)(iv) and (v); sec. 12.01 of Rev. Proc. 2022-2 (2022-1 I.R.B. 120) (relating to use of technical advice); § 601.106(a)(1)(v)(a) of the Statement of Procedural Rules (26 CFR part 601) (same). In addition to the topics listed in proposed § 301.7803-2(b)(3)(i) through (vii), proposed § 301.7803-2(b)(3)(viii) includes any other topic that the IRS determines can be considered by Appeals. This proposed rule, therefore, allows Appeals to consider administrative determinations made by the IRS with respect to a particular person that are not Federal tax controversies within the meaning of proposed § 301.7803-2(b)(2) but that Appeals has historically considered and attempted to resolve without litigation. Based on its limited resources, the only disputes that are not Federal tax controversies as defined in proposed § 301.7803-2(b)(2) that Appeals has historically considered and continues to consider are those categories of disputes with respect to a particular person specified in proposed § 301.7803-2(b)(3)(i) through (vii). This proposed rule also allows the addition of new categories of administrative determinations made by the IRS with respect to a particular person that in the future may become evident as appropriate to fulfill the function of Appeals. See proposed § 301.7803-2(b)(3)(viii).

When the TFA was enacted, the Appeals resolution process was subject to exceptions and requirements that could limit use of that process. Congress recognized these limits, and the statute and legislative history demonstrate that the IRS retains discretion to have appropriate limits following the statutory codification of the role of an independent appeals function within the IRS (that is, Appeals). As mentioned previously, section 7803(e)(4) provides that “[t]he [Appeals] resolution process . . . shall be generally available to all taxpayers.” Section 7803(e)(4) (emphasis added). In choosing to use the words “generally available” in section 7803(e)(4), Congress made clear that the statute does not impose an unqualified requirement that the Appeals resolution process become a forum for any dispute with the IRS.

In addition to the statutory language of section 7803(e)(4), the House TFA Report also reflects the intention of Congress that the Treasury Department and the IRS retain after the enactment of the TFA their historical discretion to determine whether the resolution of particular types of disputes is appropriate for the Appeals resolution process, or the discretion of the IRS to determine whether a particular Federal tax controversy is appropriate for the Appeals resolution process:

The House TFA Report also explains that Congress knew the existing backdrop of Appeals exceptions when it passed the TFA: “The Committee is aware that the Code does not currently require that all taxpayers be provided an opportunity to contest an administrative decision in Appeals, although most taxpayers are afforded that opportunity.” See House TFA Report, at 29. The House TFA Report noted some of the existing exceptions:

Proposed § 301.7803-2(c) sets forth the exceptions to consideration of a Federal tax controversy by Appeals. These exceptions, which are listed in proposed § 301.7803-2(c)(1) through (24), generally predate the enactment of the TFA. The proposed exceptions to consideration by Appeals involve Federal tax controversies, or issues arising in these controversies, that are excepted from consideration by Appeals and matters or issues that are otherwise ineligible for consideration by Appeals because they are not Federal tax controversies as defined in proposed § 301.7803-2(b)(2) nor treated as Federal tax controversies in proposed § 301.7803-2(b)(3). To the extent that a matter or issue not eligible for consideration by Appeals is present in a case that otherwise is eligible for consideration by Appeals, the ineligible matter or issue will not be considered by Appeals in the resolution of the case.

The Treasury Department and the IRS request comments on the scope and rationale for the exceptions described in proposed § 301.7803-2(c)(1) through (24). To the extent any of the proposed exceptions may differ from prior Appeals practice, comments are requested on the effects of such differences and whether the objectives of such exceptions could be accomplished by alternative means while still allowing Appeals to function in accordance with section 7803(e)(3). Comments are also requested on whether any additional exceptions to Appeals consideration are warranted.

Proposed § 301.7803-2(c)(1) provides that Appeals consideration is not available for an administrative determination made by the IRS with respect to a particular taxpayer in which the IRS rejects a frivolous position, which includes any case solely involving the failure or refusal of the taxpayer to comply with the tax laws because of frivolous moral, religious, political, constitutional, conscientious, or similar grounds. A frivolous position includes a position the IRS has identified as frivolous for purposes of section 6702(c) of the Code (regarding listing of frivolous positions). A list of positions that the IRS has determined to be frivolous under section 6702(c) can be found in Notice 2010-33 (2010-17 I.R.B. 609 (April 26, 2010)). Proposed § 301.7803-2(c)(1) codifies the pre-TFA practice of the IRS of denying the request of a taxpayer for Appeals resolution of frivolous arguments, including cases based solely on frivolous moral, religious, political, constitutional, conscientious, or similar grounds.

This approach is also consistent with the restriction in section 7803(e)(5)(D), also added by the TFA, that the notice and protest procedures under section 7803(e)(5) do not apply to an Appeals referral request if the issue is frivolous within the meaning of section 6702(c). Appeals consideration of frivolous positions would facilitate the abuse of the tax system by allocating IRS and Appeals resources to a secondary review of positions that have already been designated as frivolous. Similar existing restrictions precluding the consideration of frivolous positions by Appeals can be found in § 601.106(b) of the Statement of Procedural Rules (26 CFR part 601) (regarding appeal procedures not extending to cases involving solely the failure or refusal to comply with tax laws because of frivolous moral, religious, political, constitutional, conscientious, or similar grounds), IRM 5.14.3.3(1) (10-20-2020) (relating to installment agreement requests made to delay collection action), and IRM 8.22.5.5.3 (11-08-2013) (relating to frivolous issues).

Similarly, proposed § 301.7803-2(c)(2) provides that Appeals consideration generally is not available regarding a penalty assessed by the IRS with respect to a particular taxpayer for asserting a frivolous position, making a frivolous submission, or for providing false information. Examples of such penalties include sections 6702 relating to frivolous tax submissions and 6682 relating to false information with respect to withholding. See IRM 8.11.8.2(1), (3) (10-28-2013) (relating to a section 6702 penalty for frivolous tax submissions); IRM 8.22.8.10.4(1) (08-26-2020) (relating to a frivolous tax submission penalty under section 6702 and a false Form W-2, “Wage and Tax Statement,” penalty under section 6682). These penalties are immediately assessable. The IRS notifies the taxpayer of the penalty assessment and makes a demand for payment. See sections 6703(b), 6671(a), and 6682(c) (relating to penalty assessment). A taxpayer seeking judicial review must first pay the entire penalty and then file a claim for refund with the IRS within two years of the date of payment. These penalties are designed to deter frivolous behavior or improper conduct by a taxpayer. If Appeals does not consider the merits of the taxpayer's frivolous position, it follows that Appeals should not consider the IRS's assessment of the penalty with respect to the taxpayer as well.

Similarly, under proposed § 301.7803-2(c)(2) Appeals consideration is not available regarding the IRS's assessment of a penalty with respect to a particular taxpayer who submits false information. Appeals consideration of an administrative determination made by the IRS to impose a penalty that stems from the particular taxpayer's improper conduct of submitting false information would be inconsistent with the purpose of the penalty, which is designed to disincentivize the taxpayer from engaging in this improper conduct and to encourage voluntary compliance.

Although penalties assessed by the IRS under sections 6702 and 6682 with respect to particular taxpayer generally are excepted from Appeals consideration, proposed § 301.7803-2(c)(2) recognizes that Appeals may obtain verification that the assessment of the penalties with respect to a particular taxpayer complied with sections 6203 (relating to method of assessment) and 6751(b) (relating to approval of assessment) of the Code in a collection due process (CDP) hearing. See section 6330(c)(1), section 6330(c)(4)(B), and IRM 8.22.8.10.4(1) and (11) (relating to Appeals review of certain limited issues in a CDP action). Appeals also may consider a non- frivolous challenge to an administrative decision made by the IRS in assessing a penalty under section 6702 or section 6682 with respect to a particular taxpayer in a CDP hearing. An example of such a non-frivolous argument that Appeals could consider is the argument that a section 6702 penalty was erroneously assessed by the IRS because the return the taxpayer filed does not fall within section 6702. For instance, if a taxpayer properly reported the taxpayer's income tax liability but included a statement objecting to pay the amount of reported liability that would otherwise go to the military and as a result the taxpayer is assessed a section 6702 penalty, Appeals could consider the taxpayer's non-frivolous argument that the IRS erroneously assessed the penalty because the return filed does not fall within section 6702.

Proposed § 301.7803-2(c)(3) provides that Appeals consideration is not available for any administrative determination made by the IRS under section 7623 relating to awards to whistleblowers. The IRS Whistleblower Office provides awards of up to 30 percent of the amount recovered in tax enforcement actions to individuals who provide credible evidence of tax fraud to the IRS. A whistleblower files a claim providing information of alleged tax fraud involving a taxpayer. The IRS Whistleblower Office notifies the whistleblower that it has received the claim, that it will use the information to determine whether to pursue an investigation, and that it will inform the whistleblower as to whether the information meets the criteria for paying an award. If the IRS Whistleblower Office subsequently evaluates the whistleblower's claim and determines that it does not meet the criteria for an award, Appeals consideration is not available to the particular whistleblower for the administrative determination made by the IRS under section 7623. Proposed § 301.7803-2(b)(2) defines a Federal tax controversy as a dispute over an administrative determination with respect to a particular taxpayer made by the IRS in administering or enforcing the internal revenue laws, related Federal tax statutes, and tax conventions to which the United States is a party (collectively referred to as internal revenue laws). An administrative determination made by the IRS is only with respect to a particular taxpayer and arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws. In a whistleblower case, the whistleblower's Federal tax liability is not at issue and Appeals is not reviewing a determination by the IRS in its examination, collection, or execution of other activities with respect to the whistleblower's Federal tax liability. Consequently, a whistleblower claim does not fall within the definition of a Federal tax controversy, and it is excepted from Appeals consideration consistent with Appeals' pre-TFA procedures. See sec. 4 of Rev. Proc. 2016-22 (2016-15 I.R.B. 577) (relating to practices for the administrative appeals process in Tax Court). It also is not treated as a Federal tax controversy under proposed § 301.7803-2(b)(3), which identifies certain matters with respect to a particular person subject to Appeals review that do not arise from the examination, collection, or execution of other activities concerning a taxpayer's Federal tax liability or directly involve the taxpayer's Federal tax liabilities, penalties, or additions to tax.

Proposed § 301.7803-2(c)(4) provides that Appeals consideration is not available for an administrative determination issued by an agency other than the IRS. An example is a determination by the Alcohol and Tobacco Tax and Trade Bureau (TTB) concerning an excise tax administered by and within the jurisdiction of TTB. Such taxes include an excise tax imposed by Chapter 32 (relating to firearms and ammunition); by Subtitle E (relating to alcohol, tobacco, and certain other excise taxes); or by Subchapter D of Chapter 78 (relating to U.S. possessions) of the Code, to the extent it relates to Subtitle E. This exclusion relating to the excise taxes administered by the TTB is currently found in § 601.106(a)(3) of the Statement of Procedural Rules (26 CFR part 601). Proposed § 301.7803-2(c)(4) is consistent with the statute and the definition of a Federal tax controversy in § 301.7803-2(b)(2) because the Appeals resolution process is available only for consideration of administrative determinations made by the IRS with respect to a particular taxpayer. Neither section 7803(e) nor the House TFA Report refers to any agency other than the IRS or contemplates Appeals consideration of a decision by any agency other than the IRS. See House TFA Report, at 31. Similarly, § 301.7803-2(b)(2) defines a Federal tax controversy as a dispute over an administrative determination with respect to a particular taxpayer made by the IRS in administering or enforcing the internal revenue laws, related Federal tax statutes, and tax conventions to which the United States is a party (collectively referred to as internal revenue laws). An administrative determination made by the IRS is only with respect to a particular taxpayer and arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws. Appeals therefore will not consider an administrative determination of a tax that is not administered by or within the jurisdiction of the IRS.

Proposed § 301.7803-2(c)(5) provides that Appeals consideration is not available for a decision made by the IRS not to issue a Taxpayer Assistance Order (TAO) under section 7811 of the Code (relating to TAOs) with respect to a particular taxpayer if the taxpayer submits a request for Taxpayer Advocate Service assistance. This clarification in the proposed rule is consistent with the general definition of a Federal tax controversy in proposed § 301.7803-2(b)(2) because the Office of the Taxpayer Advocate (commonly referred to as the Taxpayer Advocate Service) is an independent part of the IRS, and its decision not to issue a TAO is a process separate and distinct from an administrative determination made by the IRS with respect to a particular taxpayer that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws.

Proposed § 301.7803-2(c)(6) provides that Appeals consideration is not available for any decision by the IRS concerning material to be deleted from the text of a written determination with respect to a particular taxpayer pursuant to section 6110 of the Code (relating to public inspection of written determinations) unless the written determination is otherwise being reviewed by Appeals. Appeals did not consider these types of matters before the TFA was enacted, and these proposed regulations continue this exception. See sec. 4 of Rev. Proc. 2016-22. Like whistleblower awards, disputes under section 6110 do not involve the type of controversy that Appeals has traditionally handled, that is, reviewing an administrative determination made by the IRS with respect to a particular taxpayer that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws. A section 6110 dispute does not involve the resolution of a Federal tax controversy but rather is a dispute limited to whether particular information in a written determination to be issued by the IRS to the taxpayer is information that must be redacted before the written determination is released to the public as required by section 6110.

Proposed § 301.7803-2(c)(6) permits a disagreement concerning material to be deleted under section 6110 from the text of a written determination to be taken up at an Appeals conference that is otherwise scheduled regarding a taxpayer's determination. If Appeals is already considering the substantive content of the determination, minimal resources and time would be required to also review the redactions. See sec. 13.04 of Rev. Proc. 2022-5 (2022-1 I.R.B. 256) (relating to exempt organization and private foundation status). This review would not require the analysis of an entirely new dispute by Appeals, which would require significant resources.

Similarly, proposed § 301.7803-2(c)(7) provides that Appeals consideration is not available for any dispute regarding a determination of the IRS resulting in denial of access under the Privacy Act (5 U.S.C. 552a(d)(1)) (relating to access to records) to a particular person. Like a dispute involving section 6110, a dispute involving the denial of access under the Privacy Act does not involve the type of controversy that Appeals has traditionally handled. Rather than involving a controversy regarding an administrative determination made by the IRS with respect to a particular taxpayer that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws, such a dispute involves whether the Privacy Act prevents disclosure of records. In addition, 5 U.S.C. 552a(d)(2) and (3) creates administrative review rights for an agency's refusal to amend a record accessed under the Privacy Act, but there is no similar statutory authority to obtain administrative review, including by Appeals, of a denial of access under the Privacy Act. Rather, 5 U.S.C. 552a(g) provides that a civil action may be brought in certain cases.

Proposed § 301.7803-2(c)(8) provides that Appeals consideration is not available for any issue that the IRS and a particular taxpayer have resolved in an agreement described in section 7121 of the Code regarding closing agreements and for any decision by the IRS to enter into or not enter into such agreement. Proposed § 301.7803-2(c)(8) further provides that Appeals may consider the question of whether an item or items are covered by a closing agreement, and how the item or items are covered. Closing agreements are binding on the IRS and the taxpayer in accordance with section 7121. Under section 7121(b), a closing agreement between the IRS and a taxpayer is final unless fraud, malfeasance, or misrepresentation of a material fact can be shown; the case cannot be reopened as to the matters agreed upon or the agreement modified by any officer, employee, or agent of the United States. Therefore, any issue that is resolved by a closing agreement under section 7121 is statutorily precluded from being considered by Appeals.

According to section 7122(f) of the Code, if an OIC is not rejected within 24 months after submission, it shall be deemed to be accepted. An offer under section 7122 will not be deemed to be accepted if it is rejected or returned as nonprocessable or no longer processable within the 24 months. See sec. 1.07 of Notice 2006-68 (2006-31 I.R.B. 105 (July 31, 2006)) (relating to OICs). Proposed § 301.7803-2(c)(9) provides that Appeals consideration is not available when the IRS erroneously returns or rejects a taxpayer's OIC submitted under section 7122 as nonprocessable or no longer processable and the taxpayer requests Appeals consideration on the basis that the OIC should be deemed to be accepted under section 7122(f). This exception includes, for example, the claim that the IRS's mistaken rejection or return was in bad faith. Because the IRS returned or rejected the offer without making a determination regarding the OIC, there is no administrative determination made by the IRS for Appeals to review.

Proposed § 301.7803-2(c)(10) provides that Appeals consideration is not available for a Federal tax controversy with respect to a taxpayer while a criminal prosecution or a recommendation for criminal prosecution is pending against the taxpayer for a tax-related offense other than with the concurrence of Chief Counsel and the Department of Justice, as applicable. Appeals consideration therefore may be temporarily unavailable, and it may come later if the other requirements in proposed § 301.7803-2 are met. This proposed exception to Appeals consideration avoids any interference or even the appearance of any interference with a criminal prosecution or an investigation that has been recommended for criminal prosecution. A similar existing exception can be found in § 601.106(a)(2)(vi) of the Statement of Procedural Rules (26 CFR part 601) (relating to the exclusion of review while a recommendation for criminal prosecution is pending).

Proposed § 301.7803-2(c)(11) provides that consideration by Appeals is not available for issues relating to the allocation among different fee payers of the branded prescription drug fee found in section 9008 of the Patient Protection and Affordable Care Act (PPACA), Public Law 111-148 (124 Stat. 119 (2010)), as amended by section 1404 of the Health Care and Education Reconciliation Act of 2010 (HCERA), Public Law 111-152 (124 Stat. 1029 (2010)), and the health insurance providers fee found in section 9010 of PPACA, as amended by section 10905 of PPACA, and as further amended by section 1406 of HCERA. The Further Consolidated Appropriations Act, 2020, Division N, Subtitle E, section 502, Public Law 116-94 (133 Stat. 2534 (2019)), repealed the section 9010 fee for calendar years beginning after December 31, 2020 (fee years after the 2020 fee year). Thus, Appeals will not consider issues involving the branded prescription drug fee and the section 9010 fee because these disputes do not involve tax issues with respect to a particular taxpayer, but issues concerning how a statutory fee is allocated amongst multiple fee payers.

Each allocated fee in sections 9008 and 9010 (when it was in effect) has a built-in corrections process that allows fee payers an opportunity to address errors and other problems before the final fee is determined. Allowing the regular Appeals process to be available with respect to one fee payer would be inconsistent with the process of calculating the allocated fees, under which adjusting one fee payer's fee affects the fees payable by all other fee payers. Comparatively, the built-in corrections process allows for each fee payer's liability to be determined in a relatively short time. Appeals consideration therefore is not appropriate given the nature of the allocated fee process and the impracticality of, and lack of time for, Appeals consideration. Furthermore, the regulations provide that all fee determinations by the IRS are final. See 26 CFR 51.7(d) (relating to the finality of the branded prescription drug fee calculation process) and 26 CFR 57.6(c) (relating to the finality of the health insurance providers fee calculation process). Proposed § 301.7803-2(c)(11) promotes efficient and fair tax administration and enforcement of the internal revenue laws, leading to the consistent resolution of issues and conserving IRS and taxpayer resources.

Proposed § 301.7803-2(c)(12) provides that consideration by Appeals is not available for the certification or issuance of a notice of certification of a seriously delinquent Federal tax debt of a particular taxpayer to the Department of State (State Department) under section 7345 of the Code (relating to the revocation or denial of a taxpayer's passport in the case of serious tax delinquencies). The IRS relies on automated systems to identify every electronic taxpayer record on an individual's account with an unpaid assessed tax liability that is not statutorily excepted from the definition of seriously delinquent tax debt or otherwise in a category excluded from certification. Once all eligible unpaid liabilities have been identified, the systems aggregate the amount of unpaid liabilities. If the total is more than the statutory threshold, the taxpayer is identified as having a seriously delinquent tax debt, and the relevant transaction code is posted to the electronic taxpayer records. The Commissioner of the IRS's Small Business/Self-Employed Division then certifies that the identified individuals each have a seriously delinquent tax debt, and the IRS sends a list of all certified individuals to the State Department. The taxpayer receives Notice CP508C, “Notice of certification of your seriously delinquent Federal tax debt to the State Department,” informing the taxpayer to contact the IRS at the phone number in that notice to request reversal of the certification if the taxpayer believes the certification is erroneous.

The sole remedy of a taxpayer who believes that a certification is erroneous or that the IRS incorrectly failed to reverse a certification because the tax debt is either fully satisfied or ceases to be a seriously delinquent tax debt is to file a civil action in court under section 7345(e). Although a taxpayer can challenge the certification in a Federal district court or the Tax Court, the taxpayer cannot challenge the underlying liabilities because the amounts of the liabilities that constitute a seriously delinquent tax debt are not at issue in the certification process. See Ruesch v. Commissioner, 154 T.C. 289 (2020). In a docketed case, Appeals consideration is not appropriate given the automated nature of the IRS's process for identifying and certifying individuals with seriously delinquent tax debts and because the certification of a taxpayer will have been verified by the assigned Counsel attorney in answering the docketed case. Consequently, there are no issues for Appeals to consider. An existing exception similar to this proposed rule can be found in Notice 2018-01 (2018-2 I.R.B. 299 (January 16, 2018)) (relating to revocation, limitation, or denial of a passport in the case of certain tax delinquencies).

Proposed § 301.7803-2(c)(13) provides that consideration by Appeals is not available for any issue that is statutorily prohibited from being considered during a CDP hearing in accordance with section 6320 regarding notice and opportunity for a hearing upon the filing of a notice of lien, section 6330 regarding notice and opportunity for a hearing before levy, the corresponding regulations, or any other administrative guidance related to CDP hearings. For example, in a CDP case a taxpayer is precluded from requesting relief under section 66 relating to community property and section 6015 relating to relief from joint and several liability on a joint return if the Commissioner has already made a final determination as to spousal defenses in a statutory notice of deficiency or final determination letter. See §§ 301.6320-1(e)(2), 301.6330-1(e)(2); §§ 301.6320-1(e)(3) Q&A-E4, 301.6330-1(e)(3) Q&A-E4. In this example, a taxpayer may request relief, and receive a second final determination, only if one of the exceptions provided in § 1.6015-5(c) (relating to effect of a final administrative determination) or IRM 25.15.17.7 (03-05-2019) (relating to issuing second preliminary and final determinations for the same relief request) apply. In another example, if a taxpayer received a prior CDP notice under section 6320 or 6330 for the same tax liability and taxable period, the taxpayer has had an opportunity to dispute the existence and amount of that liability and may not challenge it in a subsequent CDP hearing, regardless of whether the taxpayer requested a CDP hearing in response to the prior notice. See §§ 301.6320-1(e)(3) Q&A-E7, 301.6330-1(e)(3) Q&A-E7. The Procedure and Administration Regulations (26 CFR part 301) provide that a taxpayer whose CDP hearing request is untimely is not entitled to a CDP hearing under section 6320 or section 6330 but may receive an “equivalent hearing.” See §§ 301.6320-1(i)(1), 301.6330-1(i)(1). Proposed § 301.7803-2(c)(13) also applies to equivalent hearing requests.

Proposed § 301.7803-2(c)(14) provides that consideration by Appeals is not available for any case, determination, matter, decision, request, or issue with respect to a particular taxpayer that Appeals lacks the authority to settle. There is no reason for Appeals to expend resources considering a Federal tax controversy that it cannot ultimately resolve.

Proposed § 301.7803-2(c)(14)(i) through (v) provides a non-exclusive list of examples illustrating this rule. Appeals does not have authority to resolve an issue with respect to a particular taxpayer in a docketed case after a referral has been made to the Department of Justice. For instance, Appeals lacks the authority to settle a tax claim in a bankruptcy court where the taxpayer has filed a petition in the bankruptcy court and objected to the Government's proof of claim and requested that the court determine tax liability. Section 7122(a) provides that settlement authority resides with the Department of Justice after a referral is made.

Appeals also lacks authority over decisions that are delegated exclusively to other offices within the IRS. For example, Appeals cannot consider a competent authority case under a United States tax treaty that is within the exclusive authority of the United States Competent Authority. The term Competent Authority is defined in U.S. tax treaties as the Secretary or her delegate. The Secretary has delegated this authority to the Commissioner, who has redelegated it to the Commissioner of the Large Business and International (LB&I) Division of the IRS, the Deputy Commissioner of LB&I, and specified officials within LB&I with respect to particular matters. See IRM 1.2.2.5.11 (06-09-2021) (Delegation Order 4-12 (Rev. 4)). The United States Competent Authority has exclusive authority over a competent authority issue it accepts for consideration or a competent authority resolution that was previously accepted by the taxpayer. Therefore, Appeals generally does not have authority to review these matters. See sec. 6.04(1) of Rev. Proc. 2015-40 (2015-35 I.R.B. 236) (regarding procedures for requesting competent authority assistance under U.S. tax treaties).

In another example, Appeals lacks authority over the discretionary decision of the Commissioner or the Commissioner's delegate whether to rescind a section 6707A penalty for a non-listed reportable transaction. See section 6707A(d) (relating to the Commissioner's authority to rescind the penalty); § 301.6707A-1(e) (relating to rescission authority); and IRM 8.11.7.6.8(2) (10-29-2013) (relating to rescission requests).

Similarly, Appeals lacks authority over an issue when a requesting spouse seeks relief under section 6015 relating to relief from joint and several liability on a joint return and a nonrequesting spouse is a party to a docketed case in the Tax Court and does not agree to granting full or partial relief under section 6015. See Chief Counsel Notice 2013-011 (June 7, 2013) (relating to litigating cases that involve claims for Innocent Spouse relief under section 6015). As explained in Chief Counsel Notice 2013-011, the IRS, which includes Appeals, is legally prohibited from providing section 6015 relief or settling with the requesting spouse if the non-requesting spouse is a joint petitioner or an intervenor in a Tax Court case and is not a party to the settlement. See Corson v. Commissioner, 114 T.C. 354 (2000). In that case, authority to resolve the issues rests solely with the Tax Court.

Appeals also lacks authority over a criminal restitution-based assessment under section 6201(a)(4) of the Code relating to certain orders of criminal restitution and restriction on challenge of assessment.

Proposed § 301.7803-2(c)(15) provides that Appeals consideration is not available for certain adverse actions related to the initial or continuing recognition of tax-exempt status, an entity's classification as a foundation, the initial or continuing determination of employee plan qualification, or a determination involving an obligation and the issuer of an obligation under section 103. The proposed exception regarding the recognition of tax-exempt status, foundation classification, plan qualification determination, or determination involving an obligation and the issuer of an obligation under section 103 applies only if the adverse action is based upon a technical advice memorandum (TAM) issued by an Associate Office before an appeal is requested. Appeals may request that the Associate Office reconsider the TAM. See sec. of 12.01 Rev. Proc. 2022-2 regarding Appeals submitting a proposed disposition of an issue contrary to a TAM as a request for a new TAM.

A TAM is advice furnished by an Associate Office in a memorandum that responds to any request for assistance on any technical or procedural legal question involving the interpretation and proper application of any legal authority that is submitted in accordance with an applicable revenue procedure. See Rev. Proc. 2022-2 (defining the term “Associate office” and explaining when and how an Associate Office provides technical advice, conveyed in technical advice memoranda). Chief Counsel has jurisdiction over legal questions. See section 7803(b)(2). If a TAM is furnished concerning an organization's exempt status or foundation classification, or concerning an employee plan's status or qualification, Chief Counsel's decision with respect to those issues is the final position of the IRS and therefore excepted from Appeals consideration. See § 601.106(a)(1)(v)(a); IRM 8.1.1.2.1(1)(c.) (02-10-2012) (relating to exceptions to Appeals authority). Accordingly, an IRS field office must process the taxpayer's case in accordance with the conclusions in the TAM. See sec. 12.01 of Rev. Proc. 2022-2. Similarly, if a TAM provides conclusions involving an obligation and the issuer of the obligation under section 103, the field office must apply the conclusions to the issuer and any holder of the obligation unless a new TAM is issued on behalf of the holder for the same issue addressed in the initial TAM. See sec. 12.01 of Rev. Proc. 2022-2. As in the guidance referenced in this paragraph, proposed § 301.7803-2(c)(15) provides that when these issues and determinations are the subject of a TAM from an Associate Office, they are excepted from Appeals consideration because Chief Counsel has exclusive authority to resolve these issues.

For the same reasons as explained in section C.15. of this Explanation of Provisions, proposed § 301.7803-2(c)(16) provides that Appeals consideration is not available for any case docketed in the Tax Court if the notice of deficiency, notice of liability, or final adverse determination letter is based upon an Associate Office TAM in that case involving an adverse action described in § 301.7803-2(c)(15). Like the exception in proposed § 301.7803-2(c)(15), the exception in proposed § 301.7803-2(c)(16) relates to the initial or continuing recognition of tax-exempt status, an entity's classification as a foundation, the initial or continuing determination of employee plan qualification, or a determination involving an obligation and the issuer of an obligation under section 103. When these issues and determinations are the subject of a TAM from an Associate Office, they are final and excepted from Appeals consideration. See § 601.106(a)(2)(iii) (relating to an exception if a notice of deficiency, notice of liability, or final adverse determination letter is based upon specified ruling or technical advice); sec. 12.01 of Rev. Proc. 2022-2.

Proposed § 301.7803-2(c)(17) provides that Appeals consideration is not available for a decision by an Associate Office whether to issue a letter ruling or the content of a letter ruling. A taxpayer requests a letter ruling by submitting a request that meets the requirements of the revenue procedure that describes the letter ruling process, which is updated annually. The most recent update is Rev. Proc. 2022-1.

As explained in section 2.01 of Rev. Proc. 2022-1, a letter ruling is a written determination issued to a taxpayer by an Associate Office in response to the taxpayer's inquiry, filed prior to the filing of returns or reports that are required by the tax laws, about its status for tax purposes or the tax effects of its acts or transactions. A letter ruling interprets the tax laws and applies them to the taxpayer's specific set of facts. An Associate Office issues a letter ruling when appropriate and in the interest of sound tax administration. A voluntary request for a letter ruling is not an administrative determination that is part of the IRS's compliance function. The taxpayer is not required to file a return consistent with the letter ruling. The letter ruling program is not designed to present a position of the IRS for Appeals to consider. The program is designed instead to provide taxpayers with information regarding whether the IRS will accept a position to be taken on the taxpayer's return. An exception similar to the exception in proposed § 301.7803-2(c)(17) already exists in section 10.02 of Rev. Proc. 2022-1.

However, proposed § 301.7803-2(c)(17) provides that the subject of the letter ruling may be considered by Appeals if all other requirements in proposed § 301.7803-2 are met. For example, assume that a taxpayer submits a letter ruling request pursuant to Rev. Proc. 2022-1 and an Associate Office issues a letter ruling adverse to the taxpayer's request. If the taxpayer files a tax return contrary to the adverse letter ruling and a Federal tax controversy arises that involves the subject of the adverse letter ruling, Appeals could consider the subject of the letter ruling in the dispute if all other requirements in proposed § 301.7803-2 are met.

Proposed § 301.7803-2(c)(18) provides that Appeals consideration is not available for any issue based on a taxpayer's argument that a statute violates the United States Constitution unless there is an unreviewable decision from a Federal court holding that the cited statute is unconstitutional. An argument that a statute violates the United States Constitution includes an argument that a statute is unconstitutional on its face or as applied to a specific person. For purposes of the proposed regulations, an unreviewable decision is a decision that can no longer be appealed to any Federal court because all appeals in a case have been exhausted or the time to appeal has expired and no appeal was filed, such as a final determination under section 7481 of the Code. Once there is an unreviewable decision, no further action can be taken in the case by any court. In fulfilling its function of considering hazards of litigation based upon the possibility that an administrative determination made by the IRS with respect to a particular taxpayer would be reversed in a court proceeding, Appeals may consider such an unreviewable decision. Proposed § 301.7803-2(c)(18) further provides that this exception does not preclude Appeals from considering a Federal tax controversy based on arguments other than the constitutionality of the statute, such as whether the statute applies to the taxpayer's facts and circumstances, and settling the Federal tax controversy weighing the likelihood a court would agree with the position of the taxpayer or the Government.

Appeals is not an appropriate forum to consider constitutional challenges to Federal tax statutes. Whether the actions taken to enact a Federal tax statute comport with the Constitution is initially determined by Congress and the President. Questions regarding the constitutionality of a duly enacted statute are determinations of general applicability resolved at the highest levels of the Treasury Department and the IRS, in consultation with the Office of Legal Counsel of the Department of Justice. Such a determination is not appropriate for Appeals to consider.

In addition, one of the statutory duties of Appeals is to resolve cases on a basis that “promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws.” See section 7803(e)(3)(B). A Federal court's unreviewable decision is a determination by the judicial branch on the merits of the constitutional challenge that may reject the determinations made by Congress, the President, the Treasury Department, or the IRS with regard to the constitutionality of a Federal tax statute, thereby providing a basis for Appeals to consider constitutional challenges to the Federal tax statute that is the subject of the taxpayer's dispute. Unlike a Federal court's unreviewable decision, which is publicly available to all taxpayers, an Appeals resolution relates only to a single Federal tax controversy and, by law, the outcome generally can only be communicated by the IRS to the taxpayer. Any constitutional determination with respect to a Federal tax law should be communicated and applied consistently to all taxpayers. Accordingly, the Treasury Department and the IRS believe that it would be inappropriate for Appeals to consider challenges to the constitutionality of a statute in the absence of an unreviewable decision from a Federal court holding the statute to be unconstitutional.

The Treasury Department and the IRS request comments on this proposed exception.

Proposed § 301.7803-2(c)(19) provides that Appeals consideration is not available for any issue based on a taxpayer's argument that a Treasury regulation is invalid unless there is an unreviewable decision from a Federal court invalidating the regulation as a whole or the provision in the regulation that the taxpayer is challenging. As explained previously, an unreviewable decision is a decision that can no longer be appealed to any Federal court. As with the exception for constitutional challenges, this exception does not preclude Appeals from considering a Federal tax controversy based on other arguments. For example, Appeals may consider whether the Treasury regulation applies to a taxpayer's facts and circumstances and resolve the Federal tax controversy by weighing the likelihood a court would agree with the position of the taxpayer or the Government.

Questions regarding the validity of a Treasury regulation are determinations of general applicability resolved at the highest levels of the Treasury Department and the IRS. Sections 7801 through 7805 of the Code vest with the Secretary, the Commissioner, and other Treasury Department officials the authority to administer the internal revenue laws, including the power to promulgate regulations. Pursuant to these provisions of the Code and 31 U.S.C. 321(b), the delegated authority to prescribe Treasury regulations is held by the Assistant Secretary of the Treasury for Tax Policy (Assistant Secretary for Tax Policy) and the General Counsel for the Department of the Treasury (Treasury Department General Counsel). See Treasury Directive 18-02 (9-4-1986) and Treasury Order 107-03 (01-30-1978). The process of reviewing and approving Treasury regulations before they are published is extensive and involves senior officials in numerous offices within the Treasury Department, the IRS, and sometimes other Federal agencies. See IRM Part 32.1 (Chief Counsel Regulation Handbook) for a description of the process for drafting regulations. Before a regulation is published in the Federal Register it must be approved by the Associate Chief Counsel responsible for drafting the regulation; a Deputy Chief Counsel; the Deputy Commissioner for Services and Enforcement; multiple individuals in the Treasury Department's Office of Tax Policy, including the Assistant Secretary for Tax Policy; the Treasury Department's Office of General Counsel; the Office of the Executive Secretary; and, in some cases, the Secretary of the Treasury.

In light of the extensive review and approval procedures at senior levels in both the Treasury Department and the IRS, we believe that it would be inappropriate for Appeals to consider arguments regarding the validity of Treasury regulations in the absence of an unreviewable Federal judicial decision holding the regulation invalid. In the absence of an unreviewable Federal judicial decision holding a Treasury regulation invalid, Appeals consideration of such arguments would also be inconsistent with the delegation of the Secretary's authority to prescribe regulations to the Assistant Secretary for Tax Policy and to the Treasury Department General Counsel. Furthermore, unlike the authority to apply the tax laws to a specific set of facts, which, for example, is redelegated to the examination function within the IRS to facilitate examination of a particular taxpayer, the authority and function to promulgate regulations rests with the Assistant Secretary for Tax Policy and the Treasury Department General Counsel. Such a determination would not be appropriate for Appeals to consider until there is an unreviewable decision from a Federal court invalidating the regulation as a whole or the provision in the regulation that the taxpayer is challenging.

Treasury regulations are generally submitted for notice and comment under the Administrative Procedure Act and have the force and effect of law once a Treasury decision containing such regulations is published in the Federal Register . Consequently, Treasury regulations are binding on the Treasury Department, the IRS and the public, including all Treasury Department and IRS employees. This means that Treasury Department and IRS employees must follow the regulations until they are revised, removed through the notice and comment process, or invalidated by subsequent legislation or an unreviewable decision of a Federal court. As an office within the Treasury Department and the IRS, these requirements apply to Appeals and its employees.

In addition, as with constitutional challenges to a statute, a determination with respect to the validity of a regulation should be communicated and applied consistently to all taxpayers. Unlike a non-public Appeals settlement, an unreviewable decision by a Federal court is available to all taxpayers and the IRS regarding the validity of a Treasury regulation. A settlement before Appeals is specific to a taxpayer and cannot be disclosed by the IRS unless an exception to section 6103 of the Code applies. Furthermore, unlike most Appeals analysis, which weigh litigation hazards in applying the law to specific facts, considering the validity of a regulation does not involve taxpayer specific facts. A Federal court's unreviewable decision is a determination by the judicial branch on the merits of the validity challenge that may reject the determinations made by other levels of the Treasury Department or the IRS with regard to the validity of a Treasury regulation, thereby providing a basis for Appeals to consider a regulation's validity. Accordingly, the Treasury Department and the IRS believe that it would be inappropriate for Appeals to consider challenges to the validity of a Treasury regulation unless a Federal court has rendered an unreviewable decision holding that the regulation is invalid.

The Treasury Department and the IRS request comments on this proposed exception.

Proposed § 301.7803-2(c)(20) provides that Appeals consideration is not available for any issue based on a taxpayer's argument that an IRS notice or revenue procedure published in the Internal Revenue Bulletin is procedurally invalid unless there is an unreviewable decision from a Federal court invalidating the notice or revenue procedure. An unreviewable decision is a decision that can no longer be appealed to any Federal court, as explained previously. However, this proposed rule would not prevent Appeals from considering the likelihood that a court would agree or disagree with the interpretation of the tax law asserted by the taxpayer, even though it may differ from the interpretation described in a notice or revenue procedure. Additionally, the proposed rule would not prevent Appeals from considering a Federal tax controversy based on arguments other than the validity of a notice or revenue procedure. For example, Appeals may consider whether the notice or the revenue procedure applies to the taxpayer's facts and circumstances and resolve the Federal tax controversy weighing the likelihood a court would agree with the position(s) of the taxpayer or the Government.

Similar to Treasury regulations, the process for drafting and publishing notices and revenue procedures is extensive. See IRM Part 32.2 (Chief Counsel Publication Handbook) for a description of the process for drafting published guidance, including notices and revenue procedures. Notices and revenue procedures are approved within the Treasury Department's Office of Tax Policy, involve numerous policy and implementation determinations, and involve the coordination and agreement of many offices within the Treasury Department, the IRS, and sometimes other Federal agencies. The approval process includes consideration of administrative law requirements applicable to such guidance. Furthermore, unlike the application of the tax law to a specific set of facts and circumstances during, for example, an examination, procedural determinations regarding notices and revenue procedures must be approved at high levels within the Treasury Department and are not specific to the facts of a particular case. Ultimately, whether an IRS notice or revenue procedure is invalid is a determination of general applicability resolved at the highest levels of the Treasury Department and the IRS. Such a determination thus would not be appropriate for Appeals to consider. Furthermore, any determination regarding whether a notice or revenue procedure failed to comply with administrative law requirements, such as notice and comment under 5 U.S.C. 553, should be communicated and applied consistently. As with constitutional and regulation validity challenges, an unreviewable decision of a Federal court is the appropriate means of making information accessible to all taxpayers and the IRS regarding whether a notice or revenue procedure was prescribed in accordance with applicable Federal law. A settlement before Appeals is specific to a taxpayer and cannot be made available to other taxpayers. A Federal court's unreviewable decision is a determination by the judicial branch on the merits of the validity challenge that may reject the determinations made by other levels of the Treasury Department or the IRS with regard to the validity of an IRS notice or revenue procedure, thereby providing a basis for Appeals to consider the validity of an IRS notice or revenue procedure. Accordingly, the Treasury Department and the IRS believe that it would be inappropriate for Appeals to consider challenges alleging that a notice or revenue procedure is procedurally invalid unless a Federal court has rendered an unreviewable decision holding the notice or revenue procedure to be invalid.

The Treasury Department and the IRS request comments on this proposed exception.

Proposed § 301.7803-2(c)(21) provides that Appeals consideration is not available for any case or issue designated for litigation, or withheld from Appeals consideration in a Tax Court case, in accordance with guidance regarding designating or withholding a case or issue. Designation for litigation means that the Federal tax controversy, comprising an issue or issues in a case, will not be resolved without a full concession by the taxpayer or by decision of the court. The ability to designate a case for litigation or withhold a Tax Court case from Appeals existed long before section 7803(e) was added to the Code. See, e.g., sec. 3.03 of Rev. Proc. 2016-22 and IRM 33.3.6 (12-10-2010) (relating to designating a case for litigation). See also NHQ-04-0521-0003 (5-24-2021) (interim guidance on designation of cases for litigation). Chief Counsel will not refer to Appeals any case or issue that has been designated for litigation.

Also, Chief Counsel will withhold from Appeals a Tax Court case or one or more issues in a Tax Court case if Chief Counsel determines referral is not in the interest of sound tax administration. For example, Chief Counsel may decide not to refer a Tax Court case to Appeals when the Tax Court case involves a significant issue common to other cases in litigation for which it is important that the IRS maintains a consistent position or when the Tax Court case is related to a case over which the Department of Justice has jurisdiction after referral to the Department of Justice for prosecution or defense.

While the role of Appeals has been to review the IRS's and the taxpayer's positions and consider issues based on the likelihood that the IRS's or the taxpayer's position would prevail if it were resolved by a court, the processes described earlier allow Chief Counsel to strategically manage its cases, fulfilling Chief Counsel's role of ensuring a consistent application and interpretation of the internal revenue laws and aiding in the development of the tax law. See section 7803(b)(2)(E). These processes are intended to serve the tax administration interests of the IRS and taxpayers by improving taxpayers' understanding of and voluntary compliance with the internal revenue laws, leading to more effective and fair IRS enforcement. Unlike an Appeals resolution, a judicial decision in designated or withheld cases will provide notice to all taxpayers of any development in the law, leading to the early resolution of issues and conserving IRS and taxpayer resources.

Proposed § 301.7803-2(c)(22) provides that except as provided in proposed § 301.7803-2(f)(1) (regarding when the Tax Court remands a CDP case for reconsideration), Appeals consideration is not available for any case docketed in the Tax Court if the notice of deficiency, notice of liability, or other determination was issued by Appeals officials. Examples of the cases subject to proposed § 301.7803-2(c)(22) include a case under sections 6320 or 6330, section 6404 (relating to abatement of interest), section 7428 (relating to declaratory judgment on the classification of specified organizations), section 7476 (relating to declaratory judgment on qualification of certain retirement plans), section 7477 (relating to declaratory judgment on the value of certain gifts), or section 7479 (relating to declaratory judgment on the eligibility of an estate with respect to installment payments under section 6166 (regarding the extension of time for payment of estate tax where the estate consists largely of an interest in a closely held business)). This proposed rule is reflected in Rev. Proc. 2016-22. See secs. 3.01 and 4 of Rev. Proc. 2016-22. Under the proposed rule, Chief Counsel will not refer a docketed case to Appeals if Appeals previously reviewed the case and issued the correspondence stating its determination. A taxpayer whose case has been reviewed by Appeals cannot request a duplicative or second opportunity to have the same case reviewed by Appeals. It would be a redundant exercise and a significant mismanagement of time and resources for the IRS and Appeals to allow a taxpayer to request consideration by Appeals if Appeals already has considered the same matter.

Proposed § 301.7803-2(c)(23) provides that subsequent Appeals consideration is not available when timely Appeals consideration itself is a prerequisite to Tax Court jurisdiction over an issue. To meet the statutory jurisdictional requirements in cases in which exhaustion of administrative review is a prerequisite to the Tax Court's jurisdiction, and such administrative review includes consideration by Appeals, Appeals consideration must be requested before a petition is filed in the Tax Court. Such a case is excluded from Appeals at the docketed stage because the taxpayer failed to take advantage of the earlier administrative opportunity to request Appeals review. Failure to request prior Appeals consideration will constitute a failure to exhaust available administrative remedies and the failure cannot be cured while the case is docketed.

Proposed § 301.7803-2(c)(23) lists some examples of such cases. Appeals consideration must be requested before a petition is filed in the Tax Court regarding a declaratory judgment request under section 7428 relating to declaratory judgments on the classification of specified organizations. See section 7428(b)(2) (regarding exhaustion of administrative remedies prior to seeking declaratory judgment pursuant to section 7428); sec. 10.05 of Rev. Proc. 2022-5 (regarding the same). Other examples are cases to which section 7476(b)(3) applies regarding exhausting administrative remedies prior to seeking declaratory judgment pursuant to section 7476 relating to declaratory judgment on qualification of certain retirement plans. See § 601.201(o)(6)(i) of the Statement of Procedural Rules (26 CFR part 601) (regarding the same); section 7477(b)(2) (regarding exhausting administrative remedies prior to seeking declaratory judgment pursuant to section 7477 relating to declaratory judgment on the value of certain gifts); see § 301.7477-1(d)(4)(ii) (regarding the same).

Proposed § 301.7803-2(c)(24) provides that Appeals consideration of an administrative determination made by the IRS to deny or revoke a Certified Professional Employer Organization (CPEO) certification is not available because the IRS has established another independent review process to review the determination. It is excepted from Appeals consideration because review by Appeals would be duplicative when a non-Appeals office has an established process to independently review the matter. The CPEO certification procedures established the IRS Office of Professional Responsibility (OPR) as the independent reviewer of the IRS's decision to deny or revoke a CPEO certification. The CPEO program under sections 3511 (relating to the rules for CPEOs) and 7705 (relating to the definition of CPEOs) of the Code involves the certification of a Professional Employer Organization as having met certain tax status, background, experience, business location, financial reporting, bonding, and other requirements described in statutes and regulations. An applicant for certification that received a notice of proposed denial of certification can request review by OPR. Current procedures are in Rev. Proc. 2016-33 (2016-25 I.R.B. 1034). A CPEO that received a notice of suspension and proposed revocation of certification can also request review by OPR. Current procedures are in Rev. Proc. 2017-14 (2017-3 I.R.B. 426).

The list of exclusions in proposed § 301.7803-2(c) does not include certain exclusions from Appeals review currently provided in the IRM. The Treasury Department and the IRS are evaluating whether these items, which relate to requests for relief under §§ 301.9100-1 through 301.9100-22 of the Procedure and Administration Regulations (9100 relief) and requests for a change in accounting method, should be included on the list.

The IRM currently provides that Appeals consideration is not available for a decision issued by an Associate Office regarding 9100 relief relating to a request for an extension of time for making an election or other application for relief where the decision is reviewable by a court under an abuse of discretion standard. See IRM 8.6.3.11(4) (10-06-2016) (relating to procedures if Appeals conclusion is contrary an IRS position) and IRM 8.6.3.11(4) (10-06-2016) (relating to extension of time for making certain elections). Under this rule, Appeals will not settle any case or matter contrary to the Associate Office's decision to deny the extension request, nor will Appeals consider any hazards of litigation based upon the possibility that Chief Counsel's denial of the 9100 relief would be reversed in a court proceeding. The 9100 relief regulations provide that the decision to grant taxpayers an extension to make a regulatory election is left to the Commissioner's discretion. See § 301.9100-1(c) (regarding Commissioner's discretion to grant an extension to make a regulatory election). The Commissioner has delegated this authority to Chief Counsel.

Section 1.446-1(a)(2) of the Income Tax Regulations provides that no method of accounting is acceptable unless, in the opinion of the Commissioner, it clearly reflects income. See section 446(b). Rev. Proc. 2015-13 (2015-5 I.R.B. 419) provides the automatic and non-automatic procedures to obtain the consent of the Commissioner to change a method of accounting. Section 11.02 of Rev. Proc. 2015-13 states that the Associate Office will deny a request to make a change in method of accounting if the requested change would not clearly reflect income or would otherwise not be in the interest of sound tax administration.

The IRM currently provides that Appeals consideration is not available for a decision issued by an Associate Office regarding a change of accounting method where the decision is reviewable by a court under an abuse of discretion standard. See IRM 8.6.3.3(2) (10-06-2016) (relating to procedures if Appeals conclusion is contrary to Service position) and IRM 8.6.3.10(3) (10-06-2016) (relating to change in accounting practice or method). Thus, Appeals will not settle any case or matter contrary to the Associate Office's decision to deny the method change, nor will Appeals consider any hazards of litigation based upon the possibility that a court would reverse Chief Counsel's denial of the request for a change in accounting method.

When a taxpayer receives a letter ruling approving a change in method of accounting, the IRS and the taxpayer typically enter into a consent agreement regarding the change. The terms of the consent agreement are binding on the IRS and the taxpayer and are not subject to Appeals consideration. See IRM 8.1.1.2.1(1)(d.) (02-10-2012) (relating to some exceptions to Appeals authority).

The Treasury Department and the IRS request comments on whether items relating to requests for changes in methods of accounting and requests for 9100 relief should continue to be excluded from Appeals review. In addition to general comments, comments are specifically requested on the following:

A. whether the binary nature of decisions regarding 9100 relief and changes in method of accounting make these decisions unsuitable for Appeals review,

B. whether a different review standard should apply if Appeals considers 9100 relief or changes of accounting method, and

C. what impact would Appeals review of 9100 relief and changes in accounting method have on later years that are not before Appeals?

Proposed § 301.7803-2(d)(1) provides a prerequisite requirement that a taxpayer must meet before Appeals may consider the taxpayer's Federal tax controversy. Appeals consideration of a matter or issue is appropriate only after the originating IRS office has completed its action on the Federal tax controversy and issued a final administrative determination or a proposed administrative determination that is accompanied by an offer for Appeals consideration. This requirement is necessary because a case or issue is not ready for Appeals consideration until the originating IRS office has completed its factfinding and developed a position. If the originating office has not set out its position, there is no administrative determination made by the IRS with respect to the particular taxpayer for Appeals to consider. If the originating office has not set out its position regarding the Federal tax controversy, the request for Appeals consideration is premature and the taxpayer may request Appeals consideration after the originating office has set out its position if the other requirements in proposed § 301.7803-2 are met.

Circumstances in which Appeals consideration is premature arise in many contexts. For example, Appeals consideration is premature if a taxpayer petitions the Tax Court in a deficiency case under section 6213(a) and raises for the first time a claim for relief under section 6015. Because the issue was first raised in litigation, the IRS does yet not have a position regarding the taxpayer's eligibility for relief under section 6015. In another example, a taxpayer files a claim with the IRS for abatement of interest under section 6404 and after 180 days pass without a determination, the taxpayer files a petition with the Tax Court. Appeals consideration would be premature before the IRS has considered the merits. Another example is a relevant new issue raised during Appeals consideration for which the originating office has not set out its position. Similarly, Appeals consideration is premature if during an examination a decision is made to return an OIC that was submitted by the taxpayer. In yet another example, as part of an examination the IRS requests documents that the taxpayer does not provide, and the IRS refers the matter to the Department of Justice to bring a summons enforcement action. An administrative determination regarding the taxpayer's liability has not been made by the IRS. The decision to bring a summons enforcement action is part of the process that leads to an administrative determination that will be made by the IRS, and Appeals consideration would be premature because the position of the originating office has not been set out.

Proposed § 301.7803-2(d)(2) provides that the requirement that the originating office must have completed its review will be treated as satisfied when the person requests to participate in an Appeals early consideration program and such request is granted. Where administrative guidance permits the originating office to engage Appeals prior to completing its action on the case, Appeals may consider the controversy under the terms of that administrative guidance. For example, Appeals may consider the Federal tax controversy in mediation under a fast track settlement program or early consideration of some issues under an early referral program. These programs existed prior to the TFA. See, e.g., Rev. Proc. 2003-40 (2003-25 I.R.B. 1044) (relating to mediation under the LB&I Division Fast Track Settlement Program), as modified by Rev. Proc. 2015-40 (regarding procedures for requesting competent authority assistance under U.S. tax treaties); Rev. Proc. 99-28 (1999-29 I.R.B. 109) (relating to early consideration of some, but not all, issues in case under Early Referral Program). These programs promote a more efficient disposition of a taxpayer's case by leading to the early resolution of issues or developing or narrowing the issues in dispute.

Proposed § 301.7803-2(e) provides the procedural and timing requirements that a taxpayer must meet before Appeals may consider the taxpayer's Federal tax controversy. Specifically, proposed § 301.7803-2(e) provides that a request for Appeals consideration must be submitted in the time and manner prescribed in applicable forms, instructions, or other administrative guidance and that all procedural requirements must be complied with for Appeals to consider a Federal tax controversy. These proposed requirements existed prior to the enactment of the TFA. An example of specific procedural requirements are the special claim procedures for penalties under sections 6694(b), 6700, and 6701. For instance, a CP 15 Notice and Demand letter is sent to a promoter upon assessment of the penalties advising the promoter of the special claim procedures pursuant to section 6703(c). Section 6703(c)(1) allows the promoter to pay at least 15 percent of the amount of the penalty within 30 days and file a claim for refund of the amount paid. If the claim for refund is disallowed and a written request for Appeals consideration is received timely, Appeals may consider the claim for refund in the same manner as any other claim for refund. The special claim procedures, including the requirement to pay at least 15 percent, are part of the required claims process. Appeals review is unavailable to a claimant unless the claimant follows the special claim procedures.

Another example of procedural requirements is the refund procedures under section 6402. Appeals review is unavailable to a claimant that submits a claim for refund under section 6402 unless the claimant follows the required claims procedures in section 7422(a) regarding the requirement to file an administrative claim according to IRS procedures before filing suit and §§ 301.6402-2 and 301.6402-3 regarding general procedures for making a claim for a refund of income tax. To promote compliance and an orderly process, the proposed rule would ensure that the taxpayer complies with statutory and regulatory requirements and Appeals has sufficient information to consider the taxpayer's claim.

In addition, proposed § 301.7803-2(e) provides that there must be sufficient time remaining on the appropriate limitations period for Appeals to consider the matter, as provided in administrative guidance. Consideration of a case by Appeals can take a significant amount of time. Appeals needs to correspond with the taxpayer and in some cases the IRS office that made the administrative determination or proposed administrative determination, understand and evaluate both parties' legal arguments, in some cases negotiate with the taxpayer, and make a determination. This all must be completed with sufficient time for an assessment to be made if a settlement cannot be reached. If there is insufficient time remaining on the assessment limitations period, Appeals will not have time to conduct an independent review before the period expires. This requirement was in place well before the TFA was enacted and is necessary for tax administration. See, e.g., IRM 8.20.5.3.1.3(1) (03-01-2016) (relating to cases not accepted by Appeals); IRM 8.21.2.3(2)b (10-15-2014) (same). Similarly, proposed § 301.7803-2(e) also provides that in a case docketed in Tax Court, if Chief Counsel has recalled the case from Appeals or, if not recalled, Appeals has returned the case to Chief Counsel so that it is received by Chief Counsel prior to the date of the calendar call for the trial session, further consideration by Appeals will not be available if there is insufficient time for such consideration. See sec. 3.07 of Rev. Proc. 2016-22.

Proposed § 301.7803-2(f)(1) provides that if a Federal tax controversy is eligible for consideration by Appeals and the procedural and timing requirements are followed, a taxpayer generally has one opportunity for Appeals to consider such matter or issue in the same case for the same period or in any type of future case for the same period. According to proposed § 301.7803-2(f)(1), Appeals has considered a Federal tax controversy if the Federal tax controversy was before Appeals for consideration and Appeals issued a determination or made a settlement offer, decided the Federal tax controversy was not susceptible to settlement, or the person who requested consideration failed to respond to Appeals' communications and as a result of that failure Appeals issued or made a determination. Appeals also has considered a Federal tax controversy if the taxpayer notifies Chief Counsel or the IRS that the taxpayer wants to discontinue settlement consideration by Appeals or requests to transfer settlement consideration of a Federal tax controversy that is currently before the Tax Court from Appeals to Chief Counsel. Additionally, a taxpayer with a Federal tax controversy who previously failed to respond to Appeals' communications with respect to that Federal tax controversy is treated as having had a prior opportunity for Appeals consideration. This proposed rule is intended to deter and not reward nonresponsive taxpayers and to avoid wasting Appeals resources.

Appeals therefore generally will consider a Federal tax controversy only once. A taxpayer whose Federal tax controversy has been reviewed by Appeals cannot request a duplicative or second opportunity to have it reviewed by Appeals. Neither section 7803(e) nor its legislative history indicates that Congress intended for a taxpayer whose case already has been considered by Appeals to have multiple opportunities for Appeals consideration. It would be duplicative to allow a taxpayer to request consideration by Appeals if Appeals already has considered the same matter. This one-bite-at-the-apple rule is a practical, longstanding rule that existed prior to the TFA. See secs. 3.01 and 4 of Rev. Proc. 2016-22.

There are several exceptions to this proposed rule. Proposed § 301.7803- 2(f)(1) provides an exception to the proposed general rule where the Tax Court remands a CDP case for reconsideration. This exception to the general rule accounts for the Tax Court's ability to remand CDP cases for further Appeals consideration. Proposed § 301.7803-2(f)(2) provides an exception for a taxpayer that participated in an Appeals early consideration program but did not reach an agreement with Appeals. See, e.g., Rev. Proc. 99-28 (1999-29 I.R.B. 109) (relating to early consideration of some, but not all, issues in case under Early Referral program); Rev. Proc. 2003-40 (2003-25 I.R.B. 1044) (relating to the Large Business and International Division Fast Track Settlement (FTS) program), as modified by Rev. Proc. 2015-40 (2015-35 I.R.B. 236) (regarding procedures for requesting competent authority assistance under U.S. tax treaties); Rev. Proc. 2017-25 (2017-14 I.R.B. 1) (relating to the Small Business/Self-Employed Division FTS program); Rev. Proc. 2016-57 (2016-49 I.R.B. 707) (relating to the FTS program for certain collection cases and issues); and Announcement 2012-34 (2012-36 I.R.B. 334) (relating to the Tax-Exempt and Government Entities Division FTS program). It also provides an exception for a taxpayer that may be able to request post-Appeals mediation under the terms of administrative guidance after a traditional appeal if no agreement was reached between the taxpayer and Appeals. See, e.g., Rev. Proc. 2014-63 (2014-53 I.R.B. 1014) (relating to Appeals mediation).

The exception to the general rule in proposed § 301.7803-2(f)(2) that carves out early consideration programs is a critical part of these programs. As previously mentioned, these fast track and early consideration programs promote a more efficient disposition of a taxpayer's case by leading to the early resolution of issues or developing or narrowing the issues in dispute. If a taxpayer who unsuccessfully participated in one of these programs was unable later to have Appeals consider the taxpayer's case, it is unlikely the taxpayer would take advantage of these programs. Similarly, post-Appeals mediation promotes a more efficient disposition of a taxpayer's case.

Proposed § 301.7803-2(f)(2) also provides an exception to the general rule in proposed § 301.7803-2(f)(1) for taxpayers who provide new information to the IRS and who meet the conditions and requirements for audit reconsideration or for reconsideration of liability issues previously considered by Appeals. Appeals may consider the new information. See IRM 8.7.7.17 (12-17-2019) (relating to audit reconsideration cases); IRM 8.7.7.16 (12-17-2019) (relating to reconsideration of claims for liabilities previously considered by Appeals).

The following are proposed special rules.

Proposed § 301.7803-2(g)(1) provides a special rule that notwithstanding the exception in proposed § 301.7803-2(c)(22), if Appeals issued a notice of deficiency, notice of liability, or other determination, without having fully considered one or more issues because of an impending expiration of the statute of limitations on assessment, Appeals may choose to have Chief Counsel return the case to Appeals for full consideration of the issue or issues once the case is docketed in the Tax Court. This is a longstanding rule that existed prior to the enactment of the TFA and can be found in section 3.02 of Rev. Proc. 2016-22. The proposed rule promotes the efficient disposition of cases by leading to the early resolution of issues and developing or narrowing the issues in dispute.

Proposed § 301.7803-2(g)(2) provides a special rule that Appeals and Chief Counsel may determine how settlement authority in a Federal tax controversy that is before the Tax Court will be transferred between the two offices. For example, to promote a more efficient disposition of a case in the Tax Court, the case may be transferred from Chief Counsel to Appeals or from Appeals to Chief Counsel by agreement between them. This is a longstanding practice that has been used to efficiently manage resources and respond to developments in litigation. Details regarding this practice are most recently described in Rev. Proc. 2016-22. In another example, if Chief Counsel determines that the case is needed for trial preparation, Chief Counsel may request that Appeals return the case (including settlement authority) to Chief Counsel before Appeals has completed its consideration of the case. See sec. 3.08 of Rev. Proc. 2016-22. Ensuring adequate time to prepare for trial is pragmatic and beneficial to taxpayers and Chief Counsel attorneys. Chief Counsel also may delay forwarding a case to Appeals when Chief Counsel anticipates filing a dispositive motion (for example, a motion for summary or partial summary judgment, or a motion to dismiss for lack of jurisdiction), in which case Chief Counsel will retain the case until the Tax Court rules on the motion. See sec. 3.04 of Rev. Proc. 2016-22. Allowing Chief Counsel and Appeals the flexibility to respond to the needs of specific Federal tax controversies promotes the efficient disposition of a taxpayer's case, including developing or narrowing the issues in dispute.

These regulations are proposed to apply to all requests for consideration by Appeals that are received on or after the date 30 days after a Treasury Decision finalizing these rules is published in the Federal Register . The Treasury Department and the IRS request comments on the proposed applicability date.

If a taxpayer received a notice of deficiency authorized under section 6212, section 7803(e)(5) requires the Commissioner to explain the basis for denying an Appeals referral request and provide procedures to protest the denial. Proposed § 301.7803-3(a) implements section 7803(e)(5) and provides that if any taxpayer requests Appeals consideration of a matter or issue and the request is denied, the Commissioner or the Commissioner's delegate must provide the taxpayer a written notice that provides a detailed description of the facts involved, the basis for the decision to deny the request, a detailed explanation of how the basis for the decision applies to such facts, and the procedures for protesting the decision to deny the request if the requirements of proposed § 301.7803-3(a) are met. These requirements are listed in proposed § 301.7803-3(a)(1) through (5).

Proposed § 301.7803-3(a)(1) provides that the taxpayer must have received a notice of deficiency authorized under section 6212 for the notice and protest procedures to apply.

Proposed § 301.7803-3(a)(2) requires that, for the notice and protest procedures to apply, the taxpayer's issue must not involve a frivolous position. This proposed requirement follows from the restriction on Appeals access in proposed § 301.7803-2(c)(1), which makes Appeals review unavailable for frivolous positions. Also, pursuant to section 7803(e)(5)(D), the protest procedures under section 7803(e)(5) do not apply to an Appeals referral request if the issue is frivolous. Like the exception in proposed § 301.7803-2(c)(1), this proposed rule prevents taxpayers from continuing to propose frivolous arguments. Allowing a taxpayer to protest the IRS's decision to deny the taxpayer's request for Appeals consideration of frivolous positions would result in wasted IRS time and resources.

Proposed § 301.7803-3(a)(3) requires that the taxpayer must not have previously requested Appeals consideration for the same matter or issue in a taxable year or period for the notice and protest procedures to apply. Thus, when a taxpayer already has requested Appeals consideration and filed a valid protest under section 7803(e)(5), the notice and protest procedures in proposed § 301.7803-3(a) do not apply if the taxpayer submits another Appeals referral request concerning the same matter or issue in a taxable year or period. It would be redundant to allow the taxpayer to submit multiple referral requests and protests under section 7803(e)(5), including when the taxpayer's prior protest was either rejected or allowed in a final decision by the Commissioner or the Commissioner's delegate.

Except as provided in proposed § 301.7803-2(f)(2), proposed § 301.7803-3(a)(4) provides that for the notice and protest procedures to apply, Appeals must not have previously considered the matter or issue in a taxable year or period that is the subject of the request and determined that it could not be settled. This requirement follows from the prerequisite in proposed § 301.7803-2(f), which provides that Appeals will consider a Federal tax controversy only once. Since a taxpayer receives only one opportunity for Appeals review, it would be redundant to allow a taxpayer to submit a protest under section 7803(e)(5) if Appeals already has considered the same matter or issue in a taxable year or period and decided that it could not be settled or a settlement offer was rejected.

Proposed § 301.7803-3(a)(5) requires that if the notice of deficiency for which the taxpayer requests Appeals consideration includes more than one matter or issue in a taxable year or period, the taxpayer must request referral and submit all matters or issues sought for Appeals consideration at the same time. This proposed rule will ensure the efficient use of Appeals' time and resources and help to prevent unnecessary delays and potential abuse. For example, without this proposed rule, a taxpayer in a case with three issues could potentially seek sequential Appeals consideration for each issue separately, thereby wasting Appeals' time and resources, creating unnecessary delay, and abusing the referral process. Such a piecemeal approach, if allowed, also would undermine the one-bite-at-the-apple rule in proposed § 301.7803-2(f)(1).

The regulations in this section are proposed to apply to all relevant requests for consideration by Appeals that are received on or after a Treasury Decision finalizing these rules is published in the Federal Register .

For copies of recently issued revenue procedures, revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin, please visit the IRS website at http://www.irs.gov.

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 Treasury Department and the Office of Management and Budget regarding review of tax regulations.

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) it is hereby certified that these proposed rules will not have a significant economic impact on a substantial number of small entities.

The proposed rules affect any person who would like to have a Federal tax controversy considered by Appeals, including any small entity. Because any small entity could potentially request consideration by Appeals, these proposed regulations are expected to affect a substantial number of small entities. However, the IRS has determined that the economic impact on small entities affected by the proposed rules would not be significant.

The proposed rules provide procedural and timing requirements for consideration by Appeals. The proposed rules also establish the general availability of consideration by Appeals and exceptions to that consideration. The procedural requirements, timing requirements, and the vast majority of the exceptions to consideration by Appeals already exist in previously established guidance regarding Appeals. The proposed regulations also provide rules regarding certain circumstances in which a written explanation will be provided regarding why Appeals consideration was not provided. None of the proposed rules affect entities' substantive tax liability nor do they affect the process that Appeals follows when it considers an eligible Federal tax controversy. Any significant economic impact on small entities will result from the application of the substantive tax provisions and will not be as a result of the proposed regulations. Accordingly, the Secretary hereby certifies that the proposed rules will not have a significant economic impact on a substantial number of small entities. The Treasury Department and the IRS invite comment from members of the public about potential impacts on small entities.

Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in the preamble under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations, particularly circumstances where Appeals consideration is not available. Any electronic comments submitted, and to the extent practicable any paper comments submitted, will be made available at www.regulations.gov or upon request.

The public hearing is being held by teleconference on November 29, 2022, beginning at 10 a.m. EST. Requests to speak and outlines of topics to be discussed at the public hearing must be received by November 14, 2022. If no outlines are received by November 14, 2022, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5:00 p.m. EST on November 22, 2022. The telephonic hearing will be made accessible to people with disabilities. Requests for special assistance during the telephonic hearing must be received by November 22, 2022. Announcement 2020-4, 2020-17 I.R.B. 1, provides that until further notice, public hearings conducted by the IRS will be held telephonically. Any telephonic hearing will be made accessible to people with disabilities.

The principal author of these proposed regulations is Keith L. Brau of the Office of the Associate Chief Counsel (Procedure and Administration). Other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 301 as follows:

The legal authority for this proposed form revision is set forth in sections 203 and 208 of the Labor-Management Reporting and Disclosure Act of 1959, as amended (LMRDA), 29 U.S.C. 433, 438. Section 208 of the LMRDA provides that the Secretary of Labor shall have authority to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under Title II of the Act and such other reasonable rules and regulations as the Secretary may find necessary to prevent the circumvention or evasion of the reporting requirements. 29 U.S.C. 438. The Secretary has delegated this authority under the LMRDA to the Director of the Office of Labor-Management Standards (OLMS) and permits re-delegation of such authority. See Secretary's Order 03-2012—Delegation of Authorities and Assignment of Responsibilities to the Director, Office of Labor-Management Standards, 77 FR 69375 November 16, 2012.

The Secretary of Labor administers and enforces the Labor-Management Reporting and Disclosure Act of 1959, as amended (LMRDA), Public Law 86-257, 73 Stat. 519-546, codified at 29 U.S.C. 401-531. The LMRDA, in part, establishes labor-management transparency through reporting and disclosure requirements for labor organizations and their officials, employers and their labor relations consultants, and surety companies.

In enacting the LMRDA in 1959, a bipartisan Congress expressed the conclusion, as it relates to this proposed form revision, that in the labor and management fields there had been a number of examples of breach of trust, corruption, and disregard of employee rights. Congress determined that legislation was needed to protect the rights of employees and the public as they relate to employers, labor relations consultants, and others. See 29 U.S.C. 401(b).

The LMRDA is the direct outgrowth of an investigation conducted by the Senate Select Committee on Improper Activities in the Labor or Management Field, commonly known as the McClellan Committee, which convened in 1958. Enacted in 1959 in response to the report of the McClellan Committee, the LMRDA addresses various ills identified by the Committee through a set of integrated provisions aimed, among other things, at shedding light on labor-management relations, governance, and management. These provisions include financial reporting and disclosure requirements for employers and labor relations consultants. See 29 U.S.C. 431-36, 441.

Among the abuses that prompted Congress to enact the LMRDA was questionable conduct by some employers and their labor relations consultants that interfered with the right of employees to organize labor unions and to bargain collectively under the National Labor Relations Act (NLRA), 29 U.S.C. 151 et. seq. See, e.g., S. Rep. NO. 86-187 (“S. Rep. 187”) at 6, 10-12 (1959), reprinted in 1 NLRB, Legislative History of the Labor-Management Reporting and Disclosure Act of 1959 (“LMRDA Leg. Hist.”), at 397, 402, 406-408. Congress was concerned that labor consultants, acting on behalf of management, worked directly or indirectly to discourage legitimate employee organizing drives and engage in “union-busting” activities. S. Rep. 187 at 10, LMRDA Leg. Hist. at 406. Congress concluded that such consultant activities “should be exposed to public view,” id., S. Rep. at 11, because they are “disruptive of harmonious labor relations and fall into a gray area,” id. at 12, even if the consultant's conduct was not unlawful or did not otherwise constitute an unfair labor practice under the NLRA.

As a result, Congress imposed reporting requirements on employers and their consultants under LMRDA section 203. 29 U.S.C. 433. Under LMRDA section 208, the Secretary of Labor is authorized to issue, amend, and rescind rules and regulations prescribing the form and publication of required reports, as well as “such other reasonable rules and regulations . . . as he may find necessary to prevent the circumvention or evasion of such reporting requirements.” 29 U.S.C. 438. The Secretary is also authorized to bring civil actions to enforce the LMRDA's reporting requirements. 29 U.S.C. 440. Willful violations of the reporting requirements, knowing false statements made in a report, and knowing failures to disclose a material fact in a report are subject to criminal penalties. 29 U.S.C. 439.

Section 203(a) of the LMRDA, 29 U.S.C. 433(a), requires employers to file a report, subject to certain exemptions, covering the following payments and arrangements made in a fiscal year: certain payments to, or other financial arrangements with, a labor organization or its officers, agents, or employees; payments to employees for the purpose of causing them to persuade other employees with respect to their bargaining and representation rights; payments for the purpose of interfering with employees in the exercise of their bargaining and representation rights or for obtaining information on employee or labor organization activities in connection with labor disputes involving their company; and arrangements (including related payments) with a labor relations consultant for the purpose of persuading employees with respect to their bargaining and representation rights, or for obtaining information concerning employee activities in connection with a labor dispute involving their company. 29 U.S.C. 433.

If an employer has engaged in reportable activity, the employer must file a report, signed by its president and treasurer showing in detail the date and amount of each payment, loan, promise, agreement, or arrangement and the name, address, and position, if any, in any firm or labor organization of the person to whom it was made and a full explanation of the circumstances of all such payments, including the terms of any agreement or understanding pursuant to which they were made. See 29 U.S.C. 433. The Department of Labor's implementing regulations require employers to file a Form LM-10 Employer Report (“Form LM-10”) that contains this information. See 29 CFR part 405.

The Form LM-10 Employer Report must be filed by any employer who has engaged in certain financial transactions or arrangements, of the type described in LMRDA section 203(a), with any labor organization, union official, employee, or labor relations consultant, or who has made expenditures for certain objects relating to activities of employees or a union. Employers are required to file only one Form LM-10 each fiscal year that covers all instances of reportable activity even if activity occurs at multiple locations.

In its current iteration, the Form LM-10 is divided into two parts: Part A and Part B. Part A consists of pages 1 and 2 of the Form LM-10. In Part A, Items 1-7 request basic identifying information about the employer, namely file number, fiscal year, address of the employer, address of the president or corresponding officer, any other address where records needed to verify the report can be made available for examination, a checklist of each location where records needed to verify the report can be made available for examination, and what type of legal entity is filing the report (“Corporation, Partnership, Individual, Other (specify)”). Item 13 and Item 14 are also featured on page 1 of Part A and are the signature boxes for the president and treasurer of the employer, respectively. Page 2 consists entirely of Part A, Item 8, which contains six “Yes or No” questions pertaining to reportable employer activities. If the employer-filer can answer “No” to every question in Item 8, then no LM-10 Report needs to be filed. With each question answered “Yes,” the filer must complete a separate Part B for every person or organization with whom a reportable agreement was made or to whom a reportable payment was made as to that “Yes” answer. The form also asks for the total number of Part Bs filed for each question in Item 8.

Part B comprises page 3, and requires the name of the reporting employer and the file number again to ensure it is matched with Part A. Similarly, the next field is a checkbox indicating the questions in Item 8 (labeled a through f) to which this Part B applies. Items 9-12 require various details regarding the agreement or payments the employer-filer made.

Item 9 consists of four parts, 9.a.-9.d. Item 9.a. asks whether this Part B concerns itself with an “Agreement,” a “Payment,” or “Both.” Item 9.b. requires the name and address of the person with whom or through whom a separate agreement was made or to whom payments were made. Item 9.c. requires the position of any persons mentioned in 9.b. Item 9.d. requires the name and address of the labor organization or firm any person mentioned in 9.b. is a part of.

Item 10 consists of two parts, 10.a. and 10.b. Item 10.a. requires the date of the promise, agreement, or arrangement pursuant to which payments or expenditures were agreed to or made. Item 10.b. consists of three checkboxes and filers are required to mark whether the promise, agreement, or arrangement was “Oral,” “Written,” or “Both.” If the agreement is written and entered into during the fiscal year, it must be attached to the report.

Item 11 consists of three parts, 11.a.-11.c. Item 11.a. requires the date of each payment or expenditure referred to in Item 9. Item 11.b. requires the amount of each of those payments. Item 11.c. requires the filer to indicate the kind of each payment or expenditure, specifying whether it was a payment or a loan and whether it was made in cash or property.

Item 12 requires a narrative response from the filers with a full explanation identifying the purpose and circumstances of the payments, promises, agreements, or arrangements included in the report. The explanation must contain a detailed account of services rendered or promised in exchange for promises or payments the filer has either already made or agreed to make. The explanation must also fully outline the conditions and terms of any oral agreement or understanding pursuant to which they were made. Lastly, the filer must indicate whether the payments or promises reported specifically benefited the person or persons listed in Item 9.b., or the firm, group, or labor organization named in Item 9.d. If the employer-filer made payments, promises, or agreements through a person or persons not shown above, they must provide the full name and address of such person or persons. The explanation must clearly indicate why the filer must report the payment, promise, or agreement. Any incomplete responses or unclear explanations render a report deficient.

In this document, the Department proposes a revision to the Form LM-10 Employer Report to supplement the identifying information that OLMS already collects from employers required to file, such as the employer's name, address, and status as a corporation, partnership, or individual. The proposed revision would not change which employers are required to file Form LM-10; it would require filers to provide an additional item of identifying information—whether the employer is a Federal contractor or subcontractor—and, if so, a short entry indicating the Federal contracting agency(ies) and the contractor's Unique Entity Identifier (UEI), if the contractor has one. If providing the name of a contracting agency would reveal classified information, the filer should omit the name of the agency. All Federal prime contractors, and, in some cases, subcontractors performing on Federal prime contracts, must have a UEI in order to do business with the Federal Government or to meet reporting requirements per the Federal Acquisition Regulation (FAR). For example, FAR regulations at 48 CFR 52.204-6 requires prime contractors to obtain a UEI in order to register to obtain contracts with the Federal Government (as of April 2022, the Unique Entity Identifier replaced the Data Universal Numbering System (DUNS) number). 1

In order to collect this information quickly and efficiently, the Department proposes adding one “Yes,” “No,” or “N/A” checkbox at the end of the form regarding Federal contractor status. Not all filers will be required to complete Item 12.b. Filers who answer “Yes” to Item 8.a., but “No” to Items 8.b.-8.f., would not be required to complete Item 12.b., and the electronic form would automatically check the “N/A” box and grey out the remaining portions of Item 12.b. for those filers so that no entry can be made. 2 Additionally, the Department proposes to add two lines where filers who are Federal contractors would enter their Unique Entity Identifier and the Federal contracting agency(ies) involved.

The instructions would also make explicit that filers would enter information that the Form LM-10 already requires—the unit or division of employees that is the subject of the report. See Item 12 (“Provide a full explanation identifying the purpose and circumstances of the payments, promises, agreements, or arrangements included in the report. Your explanation must contain a detailed account of services rendered or promised in exchange for promises or payments you have already made or agreed to make.”). This necessarily includes identifying certain payments, expenditures, agreements, and arrangements regarding employees. Filers must therefore currently identify the employees that are the subject of the report in Item 12. The Department proposes to renumber Item 12 as Item 12.a., and to add Item 12.b. thereafter with the “Yes,” “No,” or “N/A” checkbox and the two lines.

The new Item 12.a. would consist of a narrative section that mirrors the existing Item 12. In both the existing Item 12 and the revised Item 12.a., filers must explain fully the circumstances of all payments, including the terms of any oral agreement or understanding pursuant to which they were made. As the instructions indicate for Item 12 and would indicate for Item 12.a., filers must provide “a full explanation identifying the purpose and circumstances of the payments, promises, agreements, or arrangements included in the report.” The instructions would also make explicit that a “full explanation” requires that filers must identify the subject group of employees ( e.g., the particular unit or division in which those employees work).

Filers who checked “Yes” for any item in Items 8.b.-8.f. would be required to complete Item 12.b. regarding their status as a Federal contractor or subcontractor. Regarding such status, the Department proposes to adopt the following definitions from the regulations implementing Executive Order 13496, Notification of Employee Rights Under Federal Labor Laws: (a) “contract,” (b) “contracting agency,” (c) “contractor,” (d) “government contract,” (e) “modification of a contract,” (f) “prime contractor,” (g) “subcontract,” and (h) “subcontractor.” 29 CFR 471.1. Therefore, filers would be required to answer Item 12.b. in accordance with those eight definitions. 3 Id.

The Department expects that Federal contractors and subcontractors are already familiar with these definitions because they are, with minimal changes, the same definitions that already govern Federal contractors and subcontractors under Executive Order 11246, Equal Employment Opportunity, and its implementing regulations. See 41 CFR 60-1.3 (definitions regarding obligations of Federal contractors and subcontractors). Federal contractors and subcontractors are also currently required to comply with Executive Order 13496. Executive Order 13496 applies to Federal contractors and subcontractors subject to the National Labor Relations Act (NLRA). The Department expects that most filers are subject to the NLRA, as the National Labor Relations Board (NLRB) has conducted over 1,000 representation elections per year over the past decade, while the National Mediation Board (NMB) has handled significantly fewer, with less than 50 representation election cases per year over the same period. 4 Pursuant to Executive Order 13496, employers covered by the NLRA are already required to know whether they are Federal contractors or subcontractors under the definitions proposed here and, if they are, to post the notice required by Executive Order 13496 “in conspicuous places” including “areas in which the contractor posts notices to employees about the employees' terms and conditions of employment” and “where employees covered by the National Labor Relations Act engage in activities relating to the performance of the contract.” 29 CFR 471.2(d).

The Department notes that employers covered by the Railway Labor Act (RLA) are not covered by Executive Order 13496, however, both NLRA and RLA employers are subject to the reporting requirements of the LMRDA. Thus, RLA employers may need more time to identify which employees who are the subject of the LM-10 report have duties relating to the performance of the Federal contract or subcontract. As explained above, the Department expects that only a small number of filers will be Federal contractors or subcontractors subject to the RLA. Therefore, the Department expects that all filers who are Federal contractors and subcontractors will already know their status as such under Executive Order 11246 and its implementing regulations, see 41 CFR 60-1.3, and that most filers will be able to easily identify the information required for Item 12.b.

For those required to complete Item 12.b., it would consist of two parts. First, filers would be required to complete the “Yes,” “No,” or “N/A” checkbox in response to the following question: “If your Part B applies to Items 8.b.-8.f., did the expenditures, payments, arrangements or agreements concern employees performing work pursuant to a Federal contract or subcontract?” Second, if the filer answers “Yes,” they would be required to enter, on the two lines provided, their Unique Entity Identifier and the Federal contracting agency(ies) involved. If a subcontractor does not have a Unique Entity Identifier, then the subcontractor should so state in Item 12.b If providing the name of a contracting agency would reveal classified information, the filer should omit the name of the agency. When filers answer “Yes,” in the checkbox portion of Item 12.b., failure to complete the entry on the two lines provided, or an unclear explanation in that entry, would render the report deficient.

Both the public and the employees whose rights are at issue have an interest in understanding the full scope of activities undertaken by employers to surveil employees, to commit unfair labor practices, or to persuade employees not to exercise their rights to organize or bargain collectively. See S. Rep. 187 at 10-11, LMRDA Leg. Hist. at 406-07.

The Form LM-10 reporting requirement is based on Congress's dissatisfaction with the “large sums of money [that] are spent in organized campaigns on behalf of some employers” on persuader activities that “may or may not be technically permissible” and Congress's determination that the appropriate response to such persuader campaigns is to disclose them in the public interest and for the preservation of “the rights of employees.” See S. Rep. 187 at 10-12, LMRDA Leg. Hist. at 406-07.

As set forth in Section I, Statutory Authority, above, LMRDA Section 208 authorizes the Secretary to “issue . . . regulations prescribing the form and publication of reports required to be filed under this title.” 29 U.S.C. 438. The statutory provision authorizing the issuance of the Form LM-10 describes the data and information to be reported in the Secretary's form. 29 U.S.C. 433.

The statutory intent to require employers to provide a “full explanation” of payments was reflected in the Form LM-10 the Secretary established. Employers are told: “Explain fully the circumstances of all payments, including the terms of any oral agreement or understanding pursuant to which they were made.”

The proposal here clarifies that one of the circumstances that must be explained is whether the payments concerned employees performing work pursuant to a Federal contract or subcontract and, if so, the filer would provide its Unique Entity Identifier, if it has one, and the relevant Federal contracting agency(ies). If providing the name of a contracting agency would reveal classified information, the filer should omit the name of the agency. Disclosing contractor status is consistent with Congress's intent in enacting the LMRDA: “[I]t continues to be the responsibility of the Federal Government to protect employees' rights to organize, choose their own representatives, bargain collectively, and otherwise engage in concerted activities for their mutual aid or protection.” 29 U.S.C. 401(a).

The Department proposes this change in response to the increased prevalence of, and public interest in, persuader activities in recent years. The media, academics, and non-governmental organizations (NGOs) have taken note of persuader activity in a number of industries, including multiple high-profile instances of companies investing substantial resources in persuader activity. Over the decades, employer efforts to defeat unions have become more prevalent, with more employers turning to union avoidance consultants. 5 Further, members of Congress have noted recently that Federal contractors have engaged in such agreements and activities. 6 As the Agency responsible for promoting transparency around management attempts to influence employees' collective bargaining rights, OLMS closely monitors developments in the ways management interacts with union organizing efforts. The noted prevalence of persuader activity accordingly increases the interest of Government in obtaining information on persuader efforts which Congress found to be “disruptive of harmonious labor relations” even if lawful. S. Rep. 187 at 12, LMRDA Leg. Hist. at 406. This Government interest is especially acute when the Federal Government itself is paying for goods and services from those who would disrupt the harmonious labor relations that the Federal government is bound to protect. See 29 U.S.C. 401(a).

In other words, greater transparency is even more important when persuader activities are undertaken by employers that receive Federal funds through contracting relationships. See Executive Order (E.O.) 13494 (reiterating “the policy of the United States to remain impartial concerning any labor-management dispute involving Government contractors.”). Such Federal contractors are not permitted to receive reimbursement for the costs of engaging in those activities under the contract. E.O. 13494, 74 FR 6101; 48 CFR 31.205-21. 7 But these Federal contractors still engage in those activities; they simply do not seek or obtain reimbursement from the government for the costs of the activities.

The proposed revision to Form LM-10 would increase transparency regarding which Federal contractors and subcontractors are engaging in persuader activities. Confirming a filer's status as a Federal contractor, as well as its Unique Entity Identifier, as part of a full explanation of persuader activities will provide a method for the public, procurement agencies and employees to quickly identify which persuaders are Federal contractors.

This increased transparency benefits the employees subject to the employer's persuader activity by giving them relevant information about the source of communications that seek to influence their rights—as intended by Congress in enacting the LMRDA. Generally, the transparency created by the persuader reporting requirements is designed to better inform workers in making determinations regarding the exercise of their rights to organize and bargain collectively. For example, with the knowledge that the source of the information received is an anti-union campaign managed by an outsider, workers will be better able to assess the merits of the arguments directed at them and make an informed choice about how to exercise their rights. Here, employees have a particular interest in knowing whether their employers are Federal contractors because, as taxpayers themselves, those employees should know whether they are indirectly financing persuasion campaigns regarding their own rights to organize and bargain collectively. Persuader campaigns are not themselves reimbursable under the Federal contract or subcontract. Nevertheless Federal contractors receive Federal dollars—often in significant amounts—for goods and services. Such funds support directly or indirectly contractors' businesses and additional activities, which may include the decision to hire the outsider to persuade the employees.

Additionally, by learning of the previously unknown Federal contractor status their employer enjoys, those employees would have the information that would allow them to meaningfully exercise their right to choose whether to contact their representatives in Congress to inquire about the amount of Federal appropriations underlying the contracts with their employers, or the contractors' activities undertaken directly or indirectly pursuant to such contracts, or allow the employees to work more effectively with advocacy groups or the media to disseminate their views as employees to a wider audience. This is consistent with Congress' expectations when enacting the LMRDA—that in the public interest, and consistent with First Amendment rights to speak out on these issues, citizens would have the benefit of public reports regarding employer conduct that falls in a “gray area.” S. Rep. 187 at 11, LMRDA Leg. Hist. at 407 (persuader activities “should be exposed to public view, for if the public has an interest in preserving the rights of employees then it has a concomitant obligation to insure the free exercise” of those rights).

The requirement that an employer provide its Unique Entity Identifier, if it has one, will prevent confusion. Two or more employers may have a similar name. Individual employers often use multiple names, including trade, business, assumed or fictitious names, such as a DBA (“doing business as”) designation. All Federal contractors have their own individual identifier to seek and secure Federal contracts. 8 By requiring employers to provide this identifier, members of the public and employees will be able to confirm the true identity of the employer. As stated, if a subcontractor does not have a Unique Entity Identifier, then it should so state in Item 12.b. If providing the name of a contracting agency would reveal classified information, the filer should omit the name of the agency.

Given the potential for disruption, the public, like employees, has an interest in knowing whether the government is indirectly funding persuader activity by engaging in business with these companies, even if these activities are not unlawful. The required disclosure of such information is consistent with and fully authorized by sections 203 and 208 of the LMRDA and their broad grant of authority to prescribe the form of the required reports. 29 U.S.C. 433, 438.

Knowledge of such information would also enable members of the public to understand which Federal agencies are contracting with employers who are engaging in persuader activity. The public and employees would benefit from knowing whether a specific Federal agency is choosing to do business with an employer that is attempting to influence the exercise of workers' rights to choose whether to organize and bargain collectively. This public exposure would allow for an open public discussion and debate about the prevalence of persuader activity and the extent to which specific Federal agencies might be indirectly supporting such activities by doing business with employers that engage in persuader activities.

Under Executive Order (E.O.) 12866, the Office of Management and Budget (OMB)'s Office of Information and Regulatory Affairs determines whether a regulatory action is significant and, therefore, subject to the requirements of the E.O. and review by OMB. 58 FR 51735. Section 3(f) of E.O. 12866 defines a “significant regulatory action” as an action that is likely to result in a rule that (1) has an annual effect on the economy of $100 million or more, or adversely affects in a material way a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities (also referred to as economically significant); (2) creates serious inconsistency or otherwise interferes with an action taken or planned by another agency; (3) materially alters the budgetary impacts of entitlement grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or (4) raises novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the E.O. Id. OMB has determined that this proposed form revision is a significant regulatory action under section 3(f)(4) of E.O. 12866.

E.O. 13563 directs agencies to propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; the regulation is tailored to impose the least burden on society, consistent with achieving the regulatory objectives; and in choosing among alternative regulatory approaches, the agency has selected those approaches that maximize net benefits. E.O. 13563 recognizes that some benefits are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitative values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.

The Form LM-10 is filed by private business entities that engage in certain financial transactions or arrangements, and these employer entities only have reporting obligations during fiscal years in which the entity makes such transactions or enters in such arrangements. As such, the Form LM-10 is not an annually mandatory form, so not all employers must file the Form LM-10 in a given year. Further, as has been discussed, the modification to the Form LM-10 discussed in this NPRM does not add a new form or remove any forms, nor does it expand or contract the circumstances under which it is necessary for an employer to file an LM-10. This modification only slightly changes the structure of Item 12 by adding two items for certain filers. However, the Department will account for the potentially minimal costs of the slight changes to the structure of Item 12.

Based upon estimates for the existing Form LM-10 and other LM forms, the Department estimates that the new Item 12.b. will take a minimum of approximately 5 minutes to complete, thus adding approximately 5 minutes of reporting burden to the existing Form LM-10 (which the current existing instructions estimate to take approximately 35 minutes to complete, including the current Item 12). This 5 minutes is an average that takes into account that not all filers will be Federal contractors or subcontractors and not all Federal contractors or subcontractors that file will be required to complete the two lines in Item 12.b. While the Department does not expect that employers required to complete Item 12.b. will have difficulty in determining which employees work on which Federal contract, the Department also acknowledges uncertainty in this area. Thus, the Department also seeks comment on whether it should raise the burden increase estimate from 5 minutes to 15 minutes or some other number.

The Department does not estimate any additional recordkeeping burden for the following reasons. Some filers will spend zero minutes on Item 12.b. because, after only checking “Yes” to Item 8.a., the form will automatically check “N/A” and grey out the rest of Item 12.b. as no answer will be required. Many filers will need less than the 5-15 minutes to address Item 12.b. because they will only need to check “No,” that they are not a Federal contractor or subcontractor.

The large majority of Federal contractors and subcontractors will need no more than 5-15 minutes to complete Item 12.b. Checking “Yes” regarding their status as a Federal contractor or subcontractor will only take a few minutes because all Federal contractors and subcontractors are already required to be familiar with the definitions proposed here regarding that status, which are based on Executive Orders 11246 and 13496 and their implementing regulations. See 41 CFR 60-1.3 (definitions regarding obligations of Federal contractors and subcontractors); 29 CFR part 471 and note 3, supra (including eight definitions OLMS proposes to adopt).

Similarly, most Federal contractors and subcontractors should be able to easily enter their Unique Entity Identifier. See note 1, supra. If a filer does not have a Unique Entity Identifier, the filer should so state in Item 12.b. Along with their Unique Entity Identifier, Federal contractors and subcontractors would enter the name of the Federal contracting agency(ies) on the two lines in Item 12.b. If providing the name of a contracting agency would reveal classified information, the filer should omit the name of the agency.

While some RLA-covered employers may need more than 5-15 minutes because they may not be immediately familiar with which employees who are the subject of the Form LM-10 report have duties relating to the performance of the Federal contract or subcontract (and thus which agencies to enter into Item 12.b.), the Department does not expect RLA-covered filers to be as numerous as NLRA-covered filers, although the Department is aware that there are RLA-covered Federal contractors and subcontractors. The Department presumes that the large majority of employers that constitute Federal contractors or subcontractors would need no more than 5-15 minutes for Item 12.b., because they will be covered by the NLRA and therefore they will already be required to retain information relevant to Item 12.b., including which units of employees perform work under such contracts, pursuant to Executive Order 13496 (Notification of Employee Rights Under Federal Labor Law).

While a few filers may have a slightly higher time burden, and some will have a time burden that is lower than 5-15 minutes, the Department has accounted for this in determining the average time burden of 5-15 minutes. The Department asks for comment on this point.

The Department estimates that the 5-15-minute estimate, just as the existing 35-minute total estimate, represents an average of affected filers. Indeed, not all Form LM-10 filers will need to complete the new Item 12.b. 9 More specifically, filers need not fill out Item 12.b if they have only checked “Yes” to Item 8.a. Rather, only if a filer answers “Yes” to any of Items 8.b.-8.f. would they need to answer Item 12.b. Additionally, filers who check “No” on item 12.b. will not have to enter any further information in Item 12.b., further decreasing the average time burden. Further, because the Form LM-10 represents a situationally occurring reporting requirement rather than an annual reporting requirement, it would be imprudent to try to estimate differing burden levels associated with first-year exposure and subsequent exposures to the new questions.

To determine the cost increase per Form LM-10 filer associated with the new Item 12, the Department utilized an approach consistent with the information collection request (ICR) filed with the Office of Management and Budget pursuant to the Paperwork Reduction Act (PRA). In the existing ICR, the Department assumed that employers will hire a lawyer to complete the form, and it derived the average hourly salary for lawyers ($71.17) from the Occupational Employment and Wages Survey, May 2021 survey (released in March 2022), Table 1, from the Bureau of Labor Statistics (BLS), Occupational Employment Statistics (OES) Program. See: https://www.bls.gov/oes/current/oes231011.htm. Further, the Department determined the total compensation (salary plus fringe benefits) by increasing the hourly wage rate by approximately 45.0%, which is the percentage total of the average hourly benefits compensation figure ($12.52 in December 2021) over the average hourly wage figure ($27.83 in December 2021). See Employer Costs for Employee Compensation Summary, September 2021 (released in December 2021), from the BLS at http://www.bls.gov/news.release/ecec.nr0.htm. Thus, the Department increased the totally hourly compensation for lawyers to $103.20 ($71.17 × 1.450).

As such, the average individual employer filing the LM-10 as modified under this proposal can expect to incur an increased cost per year of, approximately, between $8.60 ($103.20 × 5/60 = $8.60) and $25.80 ($103.20 × 15/60 + $25.80).

Although not all Form LM-10 filers will need to complete Item 12.b., the Department nevertheless estimates that each of the approximately 647 annual Form LM-10 filers (based upon a 5-year average of submitted reports) will incur the additional 5-15 minutes of annual reporting burden. See: https://www.dol.gov/agencies/olms/data. As such, the overall cost of this proposed modification for all entities filing a Form LM-10 per year is between $5,564.20 ($8.60 × 647 reporting entities = $5,564.20) and $16,692.60 ($25.80 × 647 reporting entities = $16,692.60). The Department asks comment on this approach and where within this range the estimate should fall.

In sum, this proposed amendment to the Form LM-10 has an approximated 10-year cost of between $55,642.00 and $166,926.00 spread across 647 separate yearly Form LM-10 filers. OLMS does not believe that the cost of this proposed amendment to the Form LM-10 will cause a significant burden on reporting entities.

The proposed amendment to the Form LM-10 will benefit employers in the filing of complete and accurate forms. By updating the form and instructions to clearly and accurately describe the information employers must disclose, the proposed form revision will facilitate filers' understanding and compliance, thereby reducing incidents of noncompliance and associated costs incurred when noncompliant.

The proposed amendment will also benefit filers' employees and the public. As has been discussed in Section IV above, the Department believes that its proposed amendment to the Form LM-10 will also bridge important information gaps that have appeared in Form LM-10 reporting. Primarily, the reporting requirements associated with the Form LM-10 already call for the reporting of an employer's contact and identifying information, as well as a “a detailed account of services rendered or promised . . .,” which the Department interprets as including the particular division or unit of employees subject to the persuader-related activity in question. The Department is acting because a purpose of the LMRDA, which the Department administers, is to satisfy “in the public interest, . . . the responsibility of the Federal Government to protect employees' rights to organize, choose their own representatives, bargain collectively, and otherwise engage in concerted activities for their mutual aid or protection.” 29 U.S.C. 401(a). Congress found that to accomplish this objective, “it is essential that labor organizations, employers, and their officials adhere to the highest standards of responsibility and ethical conduct in administering the affairs of their organizations, particularly as they affect labor-management relations.” Id. Congress simultaneously found that public reporting by employers was one way to accomplish this, given that the substance of employer persuader activities was often “unethical.” S. Rep. 187 at 11, LMRDA Leg. Hist. at 407.

The proposed revision to Form LM-10 would increase transparency regarding which Federal contractors and subcontractors are engaging in persuader activities. Confirming a filer's status as a Federal contractor, as well as its Unique Entity Identifier, as part of a full explanation of persuader activities will provide a method for the public, enforcement agencies and employees to quickly identify which Federal contractors are reporting persuader activities in a given year.

This increased transparency benefits the employees subject to the employer's persuader activity by giving them relevant information about the source of communications that seek to influence their rights—as intended by Congress in enacting the LMRDA. For example, employees have a particular interest in knowing whether their employers are Federal contractors because, as taxpayers themselves, those employees may not wish to be indirectly financing persuasion campaigns regarding their own rights to organize and bargain collectively. Although the persuader campaigns are not themselves reimbursable under the Federal contract or subcontract, the government is paying Federal dollars for goods and services, sometimes in large amounts, which supports such contractors' businesses. Additionally, by learning of the previously unknown Federal contractor status their employer enjoys, those employees would have the information that would allow them to meaningfully exercise their right to choose whether to contact their representatives in Congress about Federal appropriations underlying the contracts with their employers or work with advocacy groups or the media to disseminate their views as employees to a wider audience. This is consistent with Congress' expectations when enacting the LMRDA—that in the public interest, and consistent with First Amendment rights to speak out on these issues, citizens would have the benefit of public reports regarding employer conduct that falls in a “gray area.” S. Rep. NO. 86-187 at 11 (1959), reprinted in 1 NLRB, Legislative History of the Labor-Management Reporting and Disclosure Act of 1959, at 407 (persuader activities “should be exposed to public view, for if the public has an interest in preserving the rights of employees then it has a concommitant obligation to insure the free exercise” of those rights).

The requirement that an employer provide its Unique Entity Identifier, if it has one, will prevent confusion. Two or more employers may have a similar name. Individual employers often use multiple names, including trade, business, assumed or fictitious names, such as a DBA (“doing business as”) designation. All Federal contractors have their own individual identifiers to seek and secure Federal contracts. 10 By requiring employers to provide this identifier, members of the public and employees will be able to confirm the true identity of the employer.

Increased transparency also allows procurement agencies to ensure that the employer is not charging the Government for, and receiving reimbursement for, these costs. This, in turn, informs the public of how Federal monies are spent and the safeguards in place to prevent taxpayer dollars from funding disruptions to harmonious labor relations, even if these activities are not unlawful. See S. Rep. 187 at 10-12, LMRDA Leg. Hist. at 406. Given the potential for disruption, the public, like employees, has an interest in knowing whether the government is indirectly funding persuader activity by engaging in business with these companies. The required disclosure of such information is consistent with and fully authorized by sections 203 and 208 of the LMRDA and their broad grant of authority to prescribe the form of the required reports. 29 U.S.C. 433, 438.

Knowledge of such information would also enable members of the public to understand which Federal agencies are contracting with employers who are engaging in persuader activity. The public and employees would benefit from knowing whether a specific Federal agency is choosing to do business with an employer that is attempting to influence the exercise of workers' rights to choose whether to organize and bargain collectively. This public exposure would allow for an open public discussion and debate about the prevalence of persuader activity and the extent to which specific Federal agencies might be indirectly supporting such activities by doing business with employers that engage in persuader activities.

Both the public and employees would benefit from knowing whether the government is choosing to do business with an employer that is frustrating, or influencing the exercise of, workers' rights to choose whether to organize and bargain collectively. It would help the public and employees to have access to full and transparent reports of such persuader expenses and activities.

There are three significant possible alternatives to the one checkbox and two lines that the Department is considering in drafting this proposed Form LM-10 modification: (1) no modification of Item 12, (2) only utilizing the checkbox modification, and (3) only utilizing the two lines. The first alternative, no modification to Item 12 at all, leaves the same reporting gaps described above and the Department believes that the public and employees are clearly served by the increased reporting. Moreover, the cost of the proposed modification is so small, especially as compared to the benefit of bridging the previously discussed information gaps, that the Department did not propose leaving the Form LM-10 as it was before the modification. The second alternative, only creating a new checkbox, would provide the public with some knowledge of which Federal contractors hired a persuader but without an easy method to identify the contractor through its Unique Entity Identifier and without a full explanation of the Federal contracting agency(ies) involved. Finally, the third alternative of adding the two lines—for entry of the Unique Entity Identifier and the Federal contracting agency(ies) involved—but not adding the checkbox would remove the clear benefit to the public and employees of ease of access involving the checkbox—as was discussed in Subsection C above, part of the benefit of the proposed modification is the ease of access to information about contractor status for the public. Without the proposed checkbox, there would be no easy way for the viewing public to search and identify relevant Form LM-10 filings. As such, the Department proposes that the full modification of Item 12 as outlined in this proposed form revision is necessary to fulfil the purpose of the Form LM-10.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et seq., requires agencies to prepare regulatory flexibility analyses, and to develop alternatives wherever possible, in drafting regulations that will have a significant impact on a substantial number of small entities. The Department has determined that this proposed form revision will not have a significant economic impact on a substantial number of small entities. The Department has estimated an increased cost per reporting entity of only $8.60 per employer. A five-year average of the number of employer filers for the LM-10 is 647. The Small Business Administration (SBA) standard average yearly receipts for a small business total $7.5 million. 11 Assuming all 647 entities are small entities of less than $7.5 million in revenue, the total cost of $8.60 for all 647 entities would be $5,564.20 for the resulting changes from the proposed modification of Item 12 of the Form LM-10. Further using that figure of $7.5 million, the estimated increased cost per reporting entity—a minimum of $8.60 and a maximum of $25.80, as mentioned above—represents only between 1.15 ten thousandth and 3.4 ten thousandth of a percent of the $7.5 million in yearly receipts for the average small business. Even if each were a particularly small entity of only $100,000 in revenue size and each experienced the maximum cost of $25.80, that would constitute .0258% of entity revenue, which falls far below 3%, the significant impact threshold used in other OLMS rulemakings. 12 Therefore, a regulatory flexibility analysis under the Regulatory Flexibility Act is not required. The Secretary has certified this conclusion to the Chief Counsel for Advocacy of the Small Business Administration.

This statement is prepared in accordance with the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501.

The following is a summary of the need for and objectives of the proposed form revision. A more complete discussion of various aspects of the proposal is found in the preamble.

The Department proposes to add to the Form LM-10 report a checkbox requiring certain reporting entities to indicate whether they are Federal contractors or subcontractors, as well as related information.

The LMRDA was enacted to protect the rights and interests of employees, labor organizations and the public generally as they relate to the activities of labor organizations, employers, labor relations consultants, and labor organization officers, employees, and representatives. Specifically, employers are required to file to disclose the following in Form LM-10 filings, pursuant to LMRDA section 203 and subject to certain exemptions: payments and loans made to any union or union official; payments to any of their employees for the purpose of causing them to persuade other employees with respect to their bargaining and representation rights, unless the other employees are told about these payments before or at the same time they are made; payments for the purpose of interfering with employees in the exercise of their bargaining and representation rights, or obtaining information on employee or union activities in connection with labor disputes involving their company, except information obtained solely for use in a judicial, administrative or arbitral proceeding; and arrangements (and payments made under these arrangements) with a labor relations consultant or other person for the purpose of persuading employees with respect to their bargaining and representation rights, or obtaining information on employee or union activities in connection with labor disputes involving their company, except information obtained solely for use in a judicial, administrative, or arbitral proceeding.

The Department, pursuant to the LMRDA, seeks to fill in clear and present information gaps occurring in Form LM-10 reporting, regarding filers' Federal contractor status. As has been stated above, the Department is acting because it has a clear interest in understanding the full scope of activities undertaken by employers that enter into agreements to persuade employees not to exercise these rights, including whether they benefit from Federal contracts. In addition, separately reporting the contractor information will allow filers to quickly fill out the form with a higher level of specificity, which will allow for increased transparency, allowing the public and employees to understand whether employers engaging in the activities that require Form LM-10 reporting are party to a contract with the Federal Government.

For purposes of the PRA, the cost burden of the modification to the Form LM-10 proposed in this document has been calculated above and is as follows. Based upon the existing LM form estimates, the Department proposes that the modification to Item 12 will take no longer than 5 minutes to complete on average for approximately 647 filers in any given year, thus adding approximately 5 minutes of reporting burden to the existing Form LM-10 (which the current existing instructions estimate to take approximately 35 minutes to complete, including the current Item 12). The Form LM-10 is not an annually mandatory form for employers; rather, it is only necessary in fiscal years during which the employer engages in certain transactions or agreements. Further, the modification to Item 12 does not impact all Form LM-10 filers, just those that engage in persuader-related transactions—and only a subset of those filers would need to complete all of Item 12.b. In addition, only one Form LM-10 report must be filed per filing entity per necessary fiscal year. Thus, the proposed form revision does not impact the total number of Form LM-10 reports that the Department expects to receive, nor does it affect the recordkeeping burden, as the Department estimates that most employers that file and are Federal contractors or subcontractors must already retain records relevant to that status pursuant to Executive Order 13496 (Notification of Employee Rights Under Federal Labor Law). See 29 CFR part 471, in particular § 471.2(d), which states that employers must post the notice where employees covered by the National Labor Relations Act engage in activities relating to the performance of the contract. Instead, the proposed form revision would result only in an increase in reporting burden of 5 minutes per Form LM-10 and an overall increase of 3,235 burden minutes, or 53.9 burden hours, for Form LM-10 filers. However, as explained in the E.O. 12866 regulatory impact section, the Department seeks comment on whether the contractor status determination would require further review time, such as an additional 10 minutes to check with those on the employer's staff who conducted the E.O. 13496 review. If the form took an additional 15 minutes to complete the new Item 12, rather than the 5-minute estimate, then Form LM-10 filers would see an overall increase of 9,705 burden minutes, or 161.75 hours.

The proposed form revision will have no impact on the other 11 information collections approved under ICR #1245-0003. The summary of the burden below accounts for the burden for all ICs (reports) in ICR 1245-0003.

As this proposed form revision requires a revision to an existing information collection, the Department is submitting, contemporaneous with the publication of this document, an ICR to amend the burden estimates under OMB Control Number 1245-0003 and revise the PRA clearance to address the clearance term. A copy of this ICR, with applicable supporting documentation, including among other items a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the RegInfo.gov website at: https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=1245-0003 (this link will be updated following publication of this proposal) or from the Department by contacting OLMS at 202-693-0123 (this is not a toll-free number)/email: OLMSPublic@dol.gov .

Agency: Department of Labor, Office of Labor-Management Standards.

Type of Review: Revision of a currently approved collection.

OMB Number: 1245-0003.

Title of Collection: Labor Organization and Auxiliary Reports.

Forms: LM-1—Labor Organization Information Report, LM-2, LM-3, LM-4—Labor Organization Annual Report, LM-10, Employer Report, LM-15—Trusteeship Report, LM-15A—Report on Selection of Delegates and Officers, LM-16—Terminal Trusteeship Report, LM-20—Agreement and Activities Report, LM-21—Receipts and Disbursements Report, LM-30—Labor Organization Officer and Employee Report, S-1—Surety Company Annual Report.

Affected Public: Private Sector—Business or other for-profits and not-for-profit institutions.

Estimated Number of Annual Respondents: 32,791.

Estimated Number of Responses: 35,067.

Frequency of Response: Varies.

Estimated Total Annual Burden Hours: 4,644,785.

Estimated Total Annual Other Burden Cost: $0.

The Department invites comments on all aspects of the PRA analysis. The Department is particularly interested in comments that:

• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

• The accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used, and the agency's estimates evaluate associated with the annual burden cost incurred by respondents and the government cost associated with this collection of information;

• enhance the quality, utility, and clarity of the information to be collected; and

• minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.

Comments submitted in response to this document will be considered, summarized and/or included in the ICR the Department will submit to OMB for approval; they will also become a matter of public record. Commenters are encouraged not to submit sensitive information ( e.g., confidential business information or personally identifiable information such as a social security number).

This proposed form revision will not include any Federal mandate that may result in increased expenditures by State, local, and tribal governments, in the aggregate, of $100 million or more, or in increased expenditures by the private sector of $100 million or more.

This proposed form revision is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This proposal will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of the United States-based companies to compete with foreign- based companies in domestic and export markets.

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, Purpose, and Legal Basis

On November 15, 2022, the Coast Guard will be working in conjunction with the California Department of Fish and Wildlife and local Oil Spill Response Organization to conduct boom deployment exercises from 9 a.m. to 12 p.m. Contractors will bring up to 12000-feet of floating oil boom aboard a workboat and deploy Area Contingency Plan (ACP)-6 Geographic Response Strategies (GRS). The Captain of the Port San Diego (COTP) has determined that potential hazards associated with the boom deployment exercise would be a safety concern for anyone within a 100-yard radius of the boom. The COTP is proposing to establish a safety zone from 9 a.m. to noon on November 15, 2022.

The purpose of this rulemaking is to ensure the safety of vessels and the navigable waters within a 100-yard radius of the boom before, during, and after the scheduled event. The Coast Guard is proposing this rulemaking under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231).

The COTP is proposing to establish a safety zone from 9 a.m. until noon on November 15, 2022. The safety zone would cover all navigable waters within 100 yards of a boom in Mission Bay located across the entrance channel from the shoreline north of Mariners Cove inlet to a point south of Mission Bay Drive bridge on the Quivira Basin shoreline. The duration of the zone is intended to ensure the safety of vessels and these navigable waters before, during, and after the scheduled 9 a.m. until noon boom deployment exercise. 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 we are proposing appears at the end of this document.

We developed this proposed 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. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on safety zone being of a limited three hour duration, limited to a relatively small geographic area, and the presence of safety hazards in the area encompassing the Mission Bay Entrance.

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 proposed rule would 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 IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

This proposed rule would 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 proposed 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 proposed rule does not have tribal implications under Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments) because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed 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 proposed rule would not result in such an expenditure, we do discuss the potential effects of this proposed rule elsewhere in this preamble.

We have analyzed this proposed 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 made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves a safety zone lasting 3 hours that would prohibit entry within 100 yards of the boom. Normally such actions are categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

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.

We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

Submitting comments. We encourage you to submit comments through the Federal Decision Making Portal at https://www.regulations.gov. To do so, go to https://www.regulations.gov, type USCG-2022-0731 in the search box and click “Search.” Next, look for this document in the Search Results column, and click on it. Then click on the Comment option. If you cannot submit your material by using https://www.regulations.gov, call or email the person in the FOR FURTHER INFORMATION CONTACT section of this proposed rule for alternate instructions.

Viewing material in docket. To view documents mentioned in this proposed rule as being available in the docket, find the docket as described in the previous paragraph, and then select “Supporting & Related Material” in the Document Type column. Public comments will also be placed in our online docket and can be viewed by following instructions on the https://www.regulations.gov Frequently Asked Questions web page. We review all comments received, but we will only post comments that address the topic of the proposed rule. We may choose not to post off-topic, inappropriate, or duplicate comments that we receive.

Personal information. We accept anonymous comments. Comments we post to https://www.regulations.gov will include any personal information you have provided. For more about privacy and submissions to the docket in response to this document, see DHS's eRulemaking System of Records notice (85 FR 14226, March 11, 2020).

For the reasons discussed in the preamble, the Coast Guard is proposing to amend 33 CFR part 165 as follows:

In the Final Rules section of this issue of the Federal Register , EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to this action, no further activity is contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment.

For additional information, see the direct final rule which is located in the Rules section of this issue of the Federal Register .

The Privacy Act of 1974, as amended, 5 U.S.C. 552a (hereafter abbreviated “Privacy Act” or “Act”), governs how the U.S. Government collects, maintains, uses, and disseminates records about individuals that are maintained in a “system of records.” A system of records is a group of any records under the control of an agency from which information about an individual is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual. See 5 U.S.C. 552a(a)(4) and (5).

Under the Privacy Act, individuals have access and amendment rights with respect to records about them in a federal agency system of records, and the right to seek an accounting of certain disclosures made of the records about them, but the Act permits certain types of systems of records (identified in subsections (j) and (k) of the Act) to be exempted from those, and other, requirements of the Act. Subsection (k)(2) permits the head of an agency to promulgate rules to exempt investigatory material compiled for law enforcement purposes from requirements including those listed in 5 U.S.C. 552a(c)(3) and (d)(1) through (4)—subject to a limitation stated in 5 U.S.C. 552a(k)(2). The limitation is that if, as a result of the agency's maintenance of the material, the subject individual is denied any right, privilege, or benefit that the individual would otherwise be entitled by federal law or for which the individual would otherwise be eligible, the exemptions will apply only to confidential source identifying material ( i.e., material that would reveal the identity of a source who furnished information to the Government under an express promise that the identity of the source would be held in confidence).

The system proposed for exemption, OCSE Federal Case Registry of Child Support Orders, HHS/ACF/OCSE, System No. 09-80-0385 (hereafter abbreviated “FCR”), is a Privacy Act system containing investigatory material compiled for law enforcement purposes. The system of records was established August 24, 1998 (see 63 FR 45080) and was last modified in full on April 2, 2015 (see 80 FR 17912) and partially updated on February 14, 2018 (see 83 FR 6591). FCR records are compiled to assist states in administering programs under 42 U.S.C. 651 to 669b (title IV-D of the Social Security Act) to improve states' abilities to locate parents and collect child support. OCSE is required to compare records transmitted to or maintained within the FCR to records maintained within HHS/ACF's National Directory of New Hires and other federal agencies' databases and to disclose information about the individuals within the records to state child support agencies or other authorized persons. The information in the FCR assists state child support agencies or other authorized persons to locate individuals who are involved in child support cases and their employment and asset information. The FCR also conducts FCR-to-FCR comparisons to locate information about individuals who are involved in child support cases in more than one state and provides the information to those states. Additional purposes of the FCR are specified in sections 453 and 463 of the Social Security Act (42 U.S.C. 653, 663) and include assisting states in administering programs under 42 U.S.C. 601 to 619 (title IV-A of the Social Security Act); assisting states in carrying out their responsibilities under child and family services programs operated under 42 U.S.C. 621 through 629m (title IV-B of the Social Security Act); assisting Foster Care and Adoption Assistance programs operated under 42 U.S.C. 670 through 679c (title IV-E of the Social Security Act); providing individuals' states of residence sought pursuant to the Convention on the Civil Aspects of International Child Abduction to authorized persons in a Central Authority; assisting the Attorney General of the United States in locating any parent or child for the purpose of enforcing state or federal law with respect to the unlawful taking or restraint of a child, or making or enforcing a child custody or visitation determination; and assisting the Secretary of the Treasury in administering the sections of the Internal Revenue Code that grant tax benefits based on support or residence of children. FCR records, without personal identifiers, are also available for research purposes likely to contribute to achieving the purposes of the Temporary Assistance for Needy Families (TANF) or the federal/state child support program.

A disclosure prohibition in section 453(b)(2) of the Social Security Act

NMFS and the Pacific Fisheries Management Council (Council) manage the groundfish fisheries in the exclusive economic zone seaward of California, Oregon, and Washington under the Pacific Coast Groundfish Fishery Management Plan (FMP). The Council prepared the FMP under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (MSA), 16 U.S.C. 1801 et seq. Regulations governing U.S. fisheries and implementing the FMP appear at 50 CFR parts 660.

This proposed rule would revise regulations that may be unnecessarily constraining, in order to provide increased operational flexibility in the Pacific whiting fishery and increase the Mothership (MS) sector's ability to utilize its Pacific whiting allocation, while maintaining fair and equitable access to Pacific whiting by all sectors of the program. Specifically, this rule proposes to adjust the primary Pacific whiting season start date for all sectors of the Pacific whiting fishery from May 15 to May 1, remove from regulation the catcher vessel (MSCV) processor obligation deadline of November 30, remove from regulation the MS processor cap of 45 percent, and provide the ability for vessels to operate as a Catcher/Processor (CP) and an MS in the same year. The following sections of this preamble provide (1) a description of the non-tribal Pacific whiting fishery; (2) the need for action; and (3) the proposed regulations.

In January 2011, NMFS implemented a trawl rationalization program, a catch share system, for the Pacific coast groundfish fishery's trawl fleet. The program was adopted through Amendment 20 to the Pacific Coast Groundfish Fishery Management Plan (FMP) (75 FR 78344; December 15, 2010) and is a type of limited access privilege program under the MSA. The trawl rationalization program is intended to increase net economic benefits, create individual economic stability, provide full utilization of the trawl sector allocation, consider environmental impacts, and achieve individual accountability of catch and bycatch. The program consists of cooperatives for the at-sea MS and CP fleets that target and process Pacific whiting (or the at-sea trawl fleet), and an individual fishing quota (IFQ) program for the shorebased trawl fleet that targets both Pacific whiting and a wide range of other groundfish species (or the Shorebased IFQ Program).

The at-sea trawl fleet consists of fishery participants harvesting and processing Pacific whiting and is further divided as follows: (1) The Pacific whiting CP sector, which has been operating under the Pacific Whiting Conservation Cooperative (PWCC) since 1997 and was formalized for management with the implementation of Amendment 20 (the CP Co-op Program); and (2) the Pacific whiting MS sector (MS Co-op Program). The MS sector is made up of mothership catcher vessels (MSCVs), which harvest fish, and motherships, which process the fish at-sea. The MS sector program may include multiple co-ops where vessels pool their harvest together to form fishing cooperatives, as well as vessels not associated with a co-op ( i.e., the “non-co-op” segment of the MS fishery). In March of 2011, the owners of all 37 MSCV permits formed a co-op called the “Whiting Mothership Cooperative (WMC)”. Every year since then, all participants in the sector have operated in the co-op. One of the primary purposes of the WMC is to minimize the bycatch of constraining rockfish species and Chinook salmon.

The shoreside Pacific whiting sector was grouped into the Shorebased IFQ Program during the development of Amendment 20. Vessels in this fishery target Pacific whiting with midwater trawl gear. Fishery participants must have quota pounds to harvest Pacific whiting catch and associated bycatch. About half of the shoreside Pacific whiting vessels also cross-participate in the MS fishery ( i.e., MSCV). Within the shoreside Pacific whiting fishery, there is the Shoreside Whiting Cooperative, which is voluntarily made up of participating vessels, and is not formally recognized in the groundfish regulations. Historically, approximately two-thirds of shoreside Pacific whiting vessels have participated in the coop between 2012-2018.

Catch allocations for these subsectors are based on formulas set in Amendment 21 to the FMP, or are determined during the biennial management process. The total allowable catch (TAC) for Pacific whiting is set annually outside of the Council's harvest specifications process. The TAC is set through a bilateral process with Canada, consistent with the Agreement Between the Government of the United States of America and the Government of Canada on Pacific Hake/Whiting of 2003 (commonly known as the Pacific Hake/Whiting Treaty) where 73.88 percent of the TAC is allocated to U.S. fisheries, of which 17.5 percent is allocated to the Tribal sector. In the fall of each fishing year, an unused portion of the Tribal allocation may be reapportioned to the non-Tribal sectors. This often results in an initial allocation to the non-tribal sectors and then a post-reapportionment allocation. Species in the Groundfish FMP are managed differently between the at-sea sectors and the shoreside fishery. For the shoreside Pacific whiting fishery, participants must have quota pounds (QPs) to cover all catch of any IFQ species and some non-IFQ species are managed with trip limits. For the at-sea fisheries, set asides are established for select groundfish species within the biennial harvest specifications process. Set asides are managed on an annual basis unless there is a risk of exceeding a harvest specification, an unforeseen impact on other fisheries, or a conservation concern.

In order to encourage more informed public comment, this proposed rule includes a general description of the program requirements that are proposed to change under this action.

The primary Pacific whiting season for all three non-tribal Pacific whiting sectors North of 40°30′ N lat. begins on May 15th but historically has varied since the conversion of the fishery from foreign to domestic, when the start date was set at January 1. In 1992, the start date was moved to April 15 to align with when aggregations of Pacific whiting were available to harvest. To minimize bycatch of Chinook salmon, which was unusually high in 1995, the season was moved back to May 15 in 1996 for some areas. The season start dates are, in part, meant to limit targeting on Pacific whiting fishing when listed Chinook salmon are most likely to be taken incidentally. The dates have fluctuated between April and June in the shorebased fishery to accommodate participation in the shoreside, at-sea, and Alaska pollock fisheries. The June 15 start date for shoreside Pacific whiting (North of 40°30′ N lat.) was moved to be consistent with the May 15 start date in the at-sea sectors in 2016. Fishing south of 40°30′ N lat. can start April 15 (80 FR 19034, April 9, 2015). The primary season remains open for that sector until the sector allocation of whiting or non-whiting groundfish (with allocations) is reached or projected to be reached and the primary season for that sector is closed by NMFS (section 2.0 of the Analysis) (see ADDRESSES ).

Each year by November 30th, a MSCV must declare to NMFS whether they will be participating in the co-op or non-co-op fishery and to which processor they are obligating their catch history assignment (CHA). CHAs cannot be divided or separated from the initial permit it was issued under during Amendment 20. A MSCV can be released from a processor obligation through a mutual agreement exception (MAE) and commit to a new MS permit.

This management measure was intended to provide for some short-term certainty for MS companies in business planning for the upcoming fishing season. It also avoided some of the penalty components associated with the linkage provision ( i.e., having to go into the non-co-op fishery for a year before committing to a new processor) (section 3.0.1 of the Analysis).

Under Amendment 20, accumulation limits were imposed to prevent excessive concentration of catch allocations within sectors (there is no cumulative cap across sectors). The MS sector is the only sector with a processing limit. The Council set the processing cap for the MS sector at 45 percent (described at 50 CFR 660.150(f)(3)(i)), which was intended to inhibit consolidation by ensuring that at least three MS companies would participate in the fishery. There are also two additional accumulation limits in the MS fishery as MSCVs are held to a 20 percent accumulation limit of the Pacific whiting CHA and a catch limit of 30 percent of the allocation (section 3.1.1 of the Analysis). A processing limit was considered for the CP sector as a part of the follow-on catch share actions; however, it was rejected in favor of an ownership limit (84 FR 68799; December 17, 2019). For the Shorebased IFQ Program, first receivers are not restricted on the amount of IFQ fish they can process, although they are subject to the same quota share (QS) ownership restrictions as other IFQ participants (10 percent for Pacific whiting). Shoreside vessels are also restricted to annual vessel limits, which is 15 percent for Pacific whiting.

Regulations prohibit processing vessels in the at-sea Pacific whiting fishery from operating as both a MS and CP during the same calendar year (50 CFR 660.112(d)(3) and (e)(3)). The origin of this prohibition dates to the implementation of the Pacific whiting sector allocations in 1997. At that time, specific limitations were placed on CP vessels to prevent these higher capacity vessels from harvesting other sector's allocations. During the development of Amendment 20, there was extensive consideration of permitting a processor to operate as a CP and an MS in the same fishing year. The Council ultimately decided to maintain the original prohibition within Amendment 20. To help ensure market stability in the separate sectors, the regulations do not allow processing platforms to switch between the MS and CP sectors in a single calendar year. Restricting CPs from also engaging in MS activity also was intended to protect existing MS processors in the sector and help ensure that they benefit from rationalization in addition to MSCVs (section 3.2.1 of the Analysis).

Additionally, as described in 50 CFR 660.25, CP or MS endorsed permits are only allowed two transfers within their respective sectors in a calendar year, and the second transfer can only be back to the original vessel. Under Amendment 20, the Council considered having zero or only one transfer allowed (Appendix B to the Amendment 20 Final Environmental Impact Statement (FEIS)). The Council ultimately chose a two-transfer allowance to provide flexibility if a MS were unable to process catch ( e.g., due to fire or a breakdown) or if unexpected opportunities arose in other fisheries (such as pollock) and another MS would be able to fill that role. For the CP sector, a limit of two transfers was also recommended as part of the Council's final action in November 2008, which was a change from the single transfer recommended by the Council in June 2008 (section 3.2.1 of the Analysis).

In April of 2020, NMFS implemented an emergency rule suspending the prohibition on an at-sea Pacific whiting processing vessel from operating as a MS and CP in the same calendar year after one company that owned a MS permit was not able to process as a MS in the 2020 season due to unforeseen health, economic, and safety risks and instead was operating only as a CP (85 FR 37027, June 19, 2020). This left three MSCVs who had previously committed to this MS without a platform to deliver their catch (section 3.2.1 of the Analysis). Under this emergency rule, a processor could be simultaneously registered to a MS and a CP-endorsed permit within the calendar year and would declare into one of the fisheries prior to leaving port. A second emergency rule was implemented in May 2021 which again suspended the prohibition on dual registration (86 FR 26439, May 14, 2021).

The MS sector has experienced lower than average attainment than the other non-tribal commercial Pacific whiting sectors since the start of the trawl catch share program, particularly since 2017. Causes of under-attainment have been attributed to the limited availability of motherships for delivery of catch due to seasonal overlap with the Alaskan Eastern Bering Sea walleye pollock fishery. In addition, existing regulations have been identified as hindering some catcher vessels' opportunity to harvest or deliver fish to MS processors, by limiting the ability for available processors to accept fish from catcher vessels. These obstacles to harvesting and processing in the MS sector have led to reduced economic opportunity for participants.

Section 2.2.1 of the Analysis found that from 2017-2019, the shoreside sector averaged attainment of 92 percent of the initial Pacific whiting allocations while the MS sector averaged 71 percent and the CP sector 100 percent (83, 64, and 90 percent of the post-tribal reapportionment allocation, respectively). Additionally, from 2017-2019, the MS sector is estimated to have not achieved potential economic opportunity of $14.5-$27.3 million in production value from unharvested Pacific whiting from the initial allocations and $21.5 to $31.8 million compared to the post-reapportionment allocations (section 5.4.1.0 of the Analysis).

This issue was first brought to the Council's attention in 2016 during public meetings to discuss the Council's 5-year Review of the Trawl Rationalization Program. The Council later received a public comment letter in September 2018 from a member of industry proposing to increase the processing cap of 45 percent within the follow-on actions package. The letter suggested that increasing the processing cap would be a positive step towards increasing efficiency and achieving optimum yield by allowing platforms with capacity in a given year to take additional deliveries and get more quota out of the water.

During the March 2019 meeting, the Council heard from the industry regarding MS sector utilization proposals and discussed the supplemental reports from the Council's advisory bodies. The Council prioritized the MS utilization issues and, in November 2019, directed industry to develop the scope of action and draft purpose and need statement for the MS sector utilization action.

In an informational report submitted by the Council's Groundfish Advisory Subpanel (GAP), the GAP reported during the previous five seasons, more than 350 million pounds of Pacific whiting worth more than $28 million in ex-vessel revenue had been left unharvested in the MS sector. Some catcher vessels had been unable to harvest and deliver their full MS sector allocations and, in certain cases, catcher vessels had been stranded without a MS processor to deliver to in a season or year. The GAP also reported that many MS sector participants, including all six MS processor vessels and several MS catcher vessels, participate in the Alaska pollock fishery where record high catch limits in recent years had limited the availability of processor vessels and some catcher vessels to participate in the Pacific whiting fishery during the primary Pacific whiting season, between May 15 and December 31.

In September 2020, based on the GAP's informational report, Council and NMFS staff submitted a scoping paper in the advanced briefing book outlining some questions for consideration. The Council's Groundfish Management Team (GMT) provided a preliminary look at the data, thoughts on potential causes of under-attainment, and regulatory issues. After considering the information provided, the Council adopted a purpose and need statement for public review and continued to scope the following issues: (1) Primary whiting season start date (which could apply to other Pacific whiting sectors); (2) Processor obligation deadline; (3) MS processor cap; and (4) MS/CP permit transfers.

The Council considered a request to allow processing south of 42° N lat. in the at-sea sectors as a part of this action; however, due to potential interactions with salmon, the Council decided to consider the action at a later time and encouraged the industry to test the idea through future exempted fishing permit experiments.

Finally, at the March 2022 meeting, the Council adopted the following as the final preferred alternatives: (1) Move the season start date for the primary Pacific whiting season start date north of 40 degrees 30 minutes north latitude from May 15th to May 1st, and move all administrative deadlines associated with the season start date to 45 days prior to May 1; (2) Remove the mothership processor obligation deadline from regulation; (3) Remove the mothership processor cap from regulation; and (4) Allow a vessel to be registered to a mothership and catcher-processor endorsed permit in the same year, with unlimited transfers.

The proposed action would revise existing regulations that apply to the Pacific Coast Groundfish Trawl Rationalization Program participants while operating in the non-tribal Pacific whiting fishery in order to provide increased operational flexibility and harvesting capabilities in the Pacific whiting fishery and increase the MS sector's ability to utilize its Pacific whiting allocation. The proposed revisions include: (1) adjusting the primary Pacific whiting season start date for all sectors of the Pacific whiting fishery North of 40°30′ N. lat. from May 15 to May 1, and adjusting administrative dates associated with the start of the season; (2) removing from regulation the MSCV processor obligation deadline of November 30; (3) removing from regulation the MS processor cap of 45 percent; and (4) removing restrictions prohibiting an at-sea Pacific whiting processing vessel from operating as a MS or CP in the same calendar year.

The Council recommended and NMFS proposes these changes based on information in the Analysis indicating that these measures would: (1) increase utilization of available MS quota that has previously been unrealized (2) increase opportunities in the MS sector by providing participants with an additional 15 days to participate in the Pacific whiting fishery, providing up to a month of Pacific whiting harvest opportunities between the Alaska pollock seasons; (3) increase overall attainment leading to economic benefits for all sectors.

This proposed action would amend regulations at 50 CFR 660.131(b)(2)(iii) to allow all sectors of the Pacific whiting fishery North of 40°30′ N lat. to begin operating May 1. Currently, there are reporting requirements due 45 days prior to the current season start date of May 15. This proposed action would align all of these administrative dates to 45 days prior to the new season start date of May 1, which would be March 17. Specifically, these proposed date changes would apply to the annual MS co-op and CP co-op reports (50 CFR 660.113(c)(3) and (d)(3), respectively), the deadline for proposed salmon mitigation plans (SMPs) (50 CFR 660.113(e)(3)), the submission deadline for post season SMP reports (50 CFR 660.113(e)(6)(i)), the deadline for declaring into the MS co-op or non-co-op fishery (50 CFR 660.150(g)(2)(i)), and the MS co-op and CP co-op permit annual registration deadlines (50 CFR 660.150(d)(1)(ii) and 660.160(d)(1)(ii), respectively). Additionally, this proposed action would move up an Electronic Monitoring (EM) application due date (50 CFR 660.604(e)) and an EM renewal date (50 CFR 660.604(i)) from February 15 to February 1 to align with the new season start date of May 1.

The Council recommended and NMFS proposes this earlier season start date to provide vessels with an additional 15 days to participate in the Pacific whiting fishery and provide even more opportunity to harvest the Pacific whiting quota. The proposed season start date would apply to all non-tribal sectors participating in the Pacific whiting fishery. As noted in section 2.2.1 of the Analysis, many vessels that fish in the Pacific whiting fishery earn the majority of their revenue in the Alaska fisheries and are likely incentivized to prioritize higher price of pollock above Pacific whiting. Therefore, this proposed action would provide vessels with an additional 15 days to participate in the Pacific whiting fishery providing up to a month of Pacific whiting harvest opportunities between the Alaskan Eastern Bering Sea walleye pollock seasons.

This proposed action is expected to considerably increase attainment for the MS sector, leading to economic benefits for all participants. According to section 2.2.1 of the Analysis, the potential additional catch that could have occurred in the additional two weeks of fishing in the 2016-2020 period could have been associated with $8.4 to $20.3 million in production revenue for the MS sector (assuming market conditions, weather, and other factors). The additional catch would have resulted in an estimated $10.5-$22.8 million in income impacts and 159 to 345 associated jobs.

There would be no additional biological impacts to Pacific whiting under the proposed action, because participants in the fishery will continue to be limited to allocations set as part of the annual whiting harvest specifications process. Allocation amounts would have been or will be analyzed as part of annual whiting management actions. Additionally, impacts to non-whiting groundfish species are expected to be within those analyzed during the biennial harvest specification process where mechanisms to control catch ( e.g., IFQs, co-ops, set asides) would still be in effect, preventing exceedances of allocations and ACLs. Section 2.2.2 of the Analysis shows that bycatch of non-whiting groundfish species is typically higher in the fall; therefore, overall bycatch would likely decrease if vessels were able to shift effort into May 1-14, as explained in the Analysis, and exhibit the same lower bycatch patterns as May 15-31.

Appendices A-C of the Analysis present a comprehensive analysis of potential effects of moving the season start date on overall salmon take and evolutionarily significant unit (ESU) level impact. The Analysis shows that even if the bycatch from May 1-14 were additive to the bycatch for the entire Pacific whiting fishery (tribal and non-tribal) during the May 15-end of season time period, the overall estimates of total bycatch are conservative and are still within the estimates analyzed in the 2017 Endangered Species Act (ESA) Section 7(a)(2) Biological Opinion (F/WCR-2017-7552) regarding the effects of the Council's Groundfish FMP on listed salmonids (2017 Biological Opinion). Additionally, the Analysis shows that impacts likely would not be additive as effort may shift to earlier in the season where bycatch rates are lower.

This proposed action would remove regulations at 50 CFR 660.150(c)(7) that require MSCVs to obligate their CHA to a MS permit by November 30 during the limited entry permit (LEP) renewal process (50 CFR 660.25(b)(4)(i)(A)). Under this proposed rule, there would also no longer be a requirement for MSCV-endorsed permit owners to notify NMFS of a mutual agreement exception (MAE) nor require NMFS to track the obligations (50 CFR 660.150(c)(7)(iv)). Additionally, the requirement for notification of a MS permit withdrawal at 50 CFR 660.150(c)(7)(v) would no longer be required. MSCVs would still be required to renew their limited entry permits each year, which includes the co-op declaration for the following year (50 CFR 660.150(g)(2)(i)); and co-op(s) would also still be required to submit their annual application per 50 CFR 660.150(d)(1)(iii).

The Council recommended and NMFS proposes the removal of the MS obligation requirement from regulations to provide MSCVs additional flexibility to change processors inseason without regulatory delay. Removal of the obligation deadline would provide a more flexible management regime whereby participants could continue to balance individual needs of each entity to optimally harvest fish through private contracts and still provide consistent revenue. This proposed action is expected to reduce administrative costs due to MSCVs not needing to notify NMFS of MAEs inseason and is expected to remove a regulatory and administrative burden to NMFS and members of the MS sector. Current enforcement costs, the capability to monitor fishing activity ( i.e., area closures, gear requirements, safety standards) and monitoring of the fishery through electronic monitoring or observers, including catch and discard accounting, would not change.

This proposed action would remove the MS usage limit ( i.e. processor cap) of 45 percent from regulation (§ 660.150(f)(3)(i)) and there would be no restrictions on the amount of the MS sector allocation that an entity could process. MS permit holders would no longer be required to submit to NMFS a trawl identification of ownership interest (OI) form in order to verify compliance of the MS processor cap, as per § 660.150(f)(3)(iv). MSCVs would still be held to a 20 percent accumulation limit of the Pacific whiting CHA (50 CFR 660.150(g)(3)(i)) and a catch limit of 30 percent of the allocation (50 CFR 660.150(g)(3)(ii)).

The Council recommended and NMFS proposes the removal of the MS processor cap to provide MS permit holders additional flexibility and to prevent occurrences of MSCVs not being able to deliver to a MS processor that had exceeded or was close to exceeding the 45 percent processing cap. Removal of the MS processor cap would provide positive benefits to the MS sector through increased harvesting capabilities and increased flexibility in management of the MS sector. This in turn would provide an increase in revenue for the fishery as a whole and for fishing communities.

Additionally, this proposed action would eliminate the need for the industry or NMFS to monitor compliance with the accumulation limit and would provide the industry with the ability to harvest more fish when fish are present on the grounds and optimize the efficiencies built into the fishery ( i.e., available crew, scheduled landings to motherships and processing capacity).

As mentioned above, the Council set the processing cap for the MS sector at 45 percent (described at 50 CFR 660.150(f)(3)(i)) to inhibit consolidation. Section 3.1.4 of The Analysis, however, shows it is likely that more than one MS would continue to participate in the fishery under the proposed action. Several factors, including Alaska pollock fishery opportunities and actual capacity of a single MS vessel, suggest that it would be unlikely and probably not feasible for one vessel to process the entire allocation. In addition, the Analysis shows even if an entity was able to process the entirety of the MS allocation under the proposed action, there would still be competition from other owners across the other whiting sectors and other fisheries that produce whitefish.

This proposed action would remove restrictions prohibiting an at-sea Pacific whiting processing vessel from operating as a MS or CP in the same calendar year (50 CFR 660.112(d)(3) and (e)(3)). This action would allow a processing vessel to operate as both an MS and CP in the same calendar year, but not on the same trip. Owners of processing vessels that intend to operate as both an MS and a CP during the Pacific whiting season would be required to register the processing vessel under valid MS and CP permits per regulations at 50 CFR 660.25(b). The vessel may be registered under both an MS permit and a CP endorsed permit simultaneously. Additionally, this proposed rule includes some administrative changes to allow additional transfers of limited entry MS permits and limited entry permits with a CP endorsement so that these permits may be transferred more than twice within a calendar year.

Current requirements for operating as a MS or CP would continue to apply. To operate in the MS fishery ( i.e., receive deliveries of catch from MS catcher vessel and process MS sector allocations at-sea) the vessel must be included in the MS co-op agreement. To operate in the CP fishery ( i.e., catch and process CP sector allocations at-sea) the vessel must be included in the CP co-op agreement. Including a new vessel in either the MS or CP co-op agreement constitutes a material change to the co-op agreement. Within 7 calendar days of the new processing vessel operating for the first time in either the MS co-op fishery or the CP co-op fishery, the respective co-op manager must notify NMFS in writing of such change to the co-op agreement as required in regulations at 50 CFR 660.150(d)(1)(iii)(B)( 4 ) and 660.160(d)(1)(iii)(B)( 4 ).

Consistent with current regulations at 50 CFR 660.150(d)(1)(iii)(B)( 4 ) and 660.160(d)(1)(iii)(B)( 4 ), within 30 days of a new vessel participating in a co-op fishery, the MS or CP co-op manager must submit a revised co-op agreement to NMFS that lists all vessels and/or processing vessels operating in the respective co-op and include the new processing vessel, along with a letter describing the change to the co-op agreement.

For each trip, the vessel would still be required to update its vessel monitoring system (VMS) declaration to reflect its activity for that trip prior to departure as specified in existing groundfish regulations at 50 CFR 660.13(d)(4)(iv)(A).

A separate economic data collection (EDC) form is required for the owner, lessee, charterer of a mothership vessel registered to an MS permit as well as owner, lessee, charterer of a catcher processor vessel registered to a CP-endorsed limited entry permit. If a vessel holds both types of permit in one calendar year, two EDC forms must be submitted as specified at 50 CFR 660.114. Additionally, separate cost recovery requirements apply to each sector, as described at 50 CFR 660.115.

The Council recommended and NMFS proposes lifting the restriction on MS and CP permit transfers to increase the likelihood that MSCVs have markets to which to deliver catch throughout the fishing season. The operational flexibility provided in this action would provide significant additional economic opportunity to at-sea Pacific whiting fishery participants and fishing communities. These measures would allow catcher vessels to harvest MS sector allocations and provide catch revenue to the respective vessel crews. In the event that additional processing vessels cannot commit to taking deliveries from catcher vessels (due to changes in business plans, for example) this action would provide additional harvesting and processing opportunities for at-sea Pacific whiting fishery participants.

Overall, this proposed action is expected to increase attainment across all three non-tribal Pacific whiting sectors, with the largest change expected in the MS sector. While the movement of the primary season start date would likely provide the most benefit in terms of harvest opportunities when both MS and MSCVs can be on the fishing grounds, the increased flexibility to have more processors (via the unlimited permit transfer) or have processors accept and potentially process higher amounts of catch (removal of the processor cap) would, in combination, provide the most opportunity to increase attainment and economic benefits for all sectors. Increased attainment of the Pacific whiting allocation, through additional fishing opportunity, processing capacity, and flexibility, would result in positive benefits to the fleet and the communities in which participants reside. There are expected to be no biological impacts outside of those previously disclosed in harvest specifications processes for both groundfish and Pacific whiting or those in the 2017 Biological Opinion for salmonids.

NMFS is also proposing additional administrative changes in this rule. This proposed action would adjust cost recovery regulation language to state that the value of “Pacific whiting” instead of “all groundfish” will be used in the annual cost recovery fee calculations for the at-sea sectors to reflect the current practice of using Pacific whiting only in the cost recovery fee calculations. While the cost recovery regulations state that all groundfish harvested should be used to calculate ex-vessel value, it is current practice to use Pacific whiting only when calculating the ex-vessel value of the MS and CP sectors. Only Pacific whiting is used because there is insufficient data available on the value of non-whiting species encountered by the MS and CP sectors. This would reflect the original intention of the Council in their 2011 cost recovery recommendations. The Council recommended this change to NMFS at the April 2021 meeting.

This proposed action would make some technical, non-substantive changes to improve comprehensibility of the regulations by removing outdated regulations.

Pursuant to section 304(b)(1)(A) and 305(d) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined this rule is consistent with the FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.

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

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. After accounting for cross participation, multiple Quota Share account holders, and affiliation through ownership, NMFS estimates that there are 103 non-tribal entities directly affected by this action, 89 of which are considered “small” businesses.

NMFS considers two criteria in determining the significance of adverse regulatory effects, namely, disproportionality and profitability. Disproportionality compares the effect of the regulatory action between small and large entities. This action is expected to increase utilization and flexibility for all entities participating in the Pacific whiting fishery, and is not expected to place any of the small entities at a significant competitive disadvantage to large entities. Moving the primary season start date two weeks earlier (May 1) would provide additional opportunities and incentives to increase the harvest of the MS sector's allocation and provide a substantial increase in revenue for the fishery as a whole and for fishing communities. Removal of the obligation deadline provides a more flexible management regime whereby participants can continue to balance individual needs of each entity to optimally harvest fish through private contracts and still provide consistent revenue. Removal of the MS processor cap would provide positive benefits to the MS sector through increased harvesting capabilities and increased flexibility in management of the MS sector. And, allowing processing vessels to operate as an MS and CP in the same year without any permit transfer limits would provide additional processing capacity to harvest Pacific whiting in the at-sea sectors. Therefore, we do not expect significant or disproportionate adverse economic effects from this action.

As a result, an initial regulatory flexibility analysis is not required and none has been prepared.

This proposed rule contains a collection-of-information requirement subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). This rule revises the existing requirements for the Pacific Coast Groundfish Trawl Rationalization Program Permit and License Information Collection OMB Control Number 0648-0620 by removing the requirement for the owner of the MSCV-endorsed permit to submit a copy of a MAE to NMFS that includes the MS permit owner's acknowledgement of termination of the catcher vessel's obligation to the permitted MS vessel. If a MS permit withdraws from the fishery before Pacific whiting has been allocated to the MS sector, this rule removes the requirement of the MS permit owner withdrawing from the fishery to provide written notification to NMFS and all owners of MSCV-endorsed permits with CHA obligated to the MS permit withdrawing. Additionally, this rule removes the requirement for a MS to submit an ownership interest (OI) form. This rule would remove three hours and 18 burden minutes per year for the fishery. Public reporting burden for removing the requirements of submitting a MAE, a MS permit withdrawal and removing the requirement of a MS submitting an OI form is estimated to result in a reduced average cost of $5.34 per year for participants of the fishery.

The existing collection of information requirements would continue to apply under the following OMB Control Number 0648-0573: Expanded Vessel Monitoring System (VMS) Requirements for the Pacific Groundfish Fishery.

Public comment is sought regarding: whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Submit comments on these or any other aspects of the collection of information at https://www.reginfo.gov/public/do/PRAMain.

Notwithstanding any other provisions of the law, no person is required to respond or, nor shall any person by subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.

For the reasons set out in the preamble, NOAA proposes to amend 50 CFR part 660 as follows:

The revisions read as follows:

The revisions read as follows:

The revisions read as follows:

The revisions read as follows: