I. Background and Purpose

Under the Federal Register Act (44 U.S.C. chapter 15), the Administrative Committee of the Federal Register (“Administrative Committee” or “ACFR”) is responsible for issuing regulations governing Federal Register publications. The Administrative Committee has general authority under 44 U.S.C. 1506 to determine the manner and form for publishing the Federal Register and its special editions. The Administrative Committee is also responsible for regulations governing the Code of Federal Regulations (“CFR”). 44 U.S.C. 1510. Regulations promulgated by the ACFR under sections 1506 and 1510 are subject to approval by the President, who has delegated approval authority to the Attorney General and the Archivist of the United States. E.O. 10530, sec. 6(b), 3 CFR part 189 (1954); see also 3 U.S.C 301 note. The Administrative Committee, with the approval of the Acting Archivist and the Attorney General, is amending its regulations in 1 CFR parts 2, 5, 8, 10, 11, and 12 to discontinue one of the Federal Register special edition publications, the Public Papers of the Presidents of the United States (“ Public Papers ”) series, and to remove microfiche as an official format of the Federal Register and CFR. This rule also updates the physical address of the Office of the Federal Register (“OFR”).

The Public Papers is a special edition of the Federal Register , see 1 CFR 10.10, that is compiled and issued by the OFR. The publication started in 1957 in response to a recommendation of the National Historical Publications Commission. 1 The Public Papers initially contained the compilation of the weekly series of Presidential documents, the Weekly Compilation of Presidential Documents (“ Weekly Compilation ”). In 2009, the Administrative Committee discontinued the Weekly Compilation, replacing it with the Daily Compilation of Presidential Documents (“ Daily Compilation ”). See Availability and Official Status of the Compilation of Presidential Documents, 74 FR 3950, 3952 (Jan. 21, 2009). The Daily Compilation is a daily, online-only collection of the official publication of materials released by the White House Press Secretary. See 1 CFR 10.2, 10.3. It is available free of charge to the public. During the Carter Administration, the Public Papers became a compilation of the already compiled Weekly Compilation documents instead of a set of individually selected and curated papers. With the January 2009 change from the Weekly Compilation to the Daily Compilation, the Public Papers switched from compiling the Weekly Compilations from a particular time period to compiling the Daily Compilations from the same time period. 74 FR at 3950; see also 1 CFR 10.11, 10.12. Volumes of the Public Papers are generally published twice a year as physical, hard-bound books, with each volume spanning approximately a six-month period; the National Archives and Records Administration's Office of Presidential Libraries, in partnership with the OFR, created electronic copies of the published volumes for online access. 2

Currently, the Public Papers have limited reach; most of the materials are accessed online through the Daily Compilation. As of 2022, the Government Publishing Office (“GPO”) sells only approximately 13 to 20 copies of each volume. Discontinuing the Public Papers will not change the nature or quantity of presidential materials that are published; instead, it will change only the format of those materials. The materials will remain available to any person or entity that is interested in them because all presidential documents, including transcripts of speeches and other spoken remarks and photographs contained in the Public Papers, are already published elsewhere—including in the Daily Compilation —in readily accessible formats. The Daily Compilation is also more timely; it is usually available within a few days of an event featuring the President, whereas the Public Papers, as a result of their lengthy production process, are available, at the soonest, months after the fact.

The discontinuation of the printed volumes would save government resources in production and publication, and the Daily Compilation would continue to provide public access to the same material. Therefore, this change will have no significant impact on the material that itself is included in the Public Papers. For these reasons, the Administrative Committee is discontinuing production of the Public Papers.

Currently, the Administrative Committee regulations require that GPO produce the Federal Register and CFR in three formats: in paper, in microfiche, and in Portable Document Format (“PDF”) through GPO's GovInfo website ( www.govinfo.gov ). 1 CFR 5.10, 8.6. 3 Microfiche is a format consisting of a flat sheet of film on which writing or other information is stored and which can be accessed using a microfiche reader. Material stored in microfiche cannot be searched by keyword unless the material is separately digitized after the production of the microfiche itself. Because of (1) the widespread availability of more easily searchable online editions of the Federal Register and the CFR via GovInfo, (2) the ready availability of endorsed but unofficial internet formats of these publications on FederalRegister.gov ( www.federalregister.gov ) and eCFR ( www.ecfr.gov ), and (3) the limited availability of microfiche readers, microfiche is now a little-used alternative format for accessing those publications. Currently, there are no non-Government subscribers to microfiche, compared to the millions of users of the online formats of the Federal Register and eCFR.

On October 28, 2014, the Administrative Committee issued a Notice of Proposed Rulemaking (“omnibus NPRM”), which proposed to remove the list of official formats from the CFR and replace the list with regulations that describe in detail the factors the ACFR uses to determine which formats will be official. Revision of Regulations, 79 FR 64133, 64134. In response to the proposed rule, two commenters expressed concern that removing the explicit identification of certain formats as official will impact the public by leading to discontinuation of the formats on which the public relies. These commenters believed that it is important that the ACFR learn about users' needs before removing microfiche as an official format. The Administrative Committee understands these commenters' concerns and asked GPO to provide the subscription numbers for microfiche formats of the Federal Register and CFR. As of September 6, 2022, there were no agencies receiving microfiche Federal Register subscriptions and only five agencies receiving five copies of the CFR in the microfiche format. Also, although some Federal depository libraries (“FDLs”) received microfiche subscriptions in past years, all FDLs, by September 6, 2022, had discontinued their subscriptions to microfiche. Thus, the only microfiche subscribers at present are five Federal Government agencies for five copies of the CFR.

Additionally, of the more than 9,000 contractors that GPO works with, there is only one contractor that submitted bids for the creation of microfiche products in recent years. GPO therefore has difficulty finding multiple bidders when it attempts to contract for the publication of the microfiche formats of the Federal Register and CFR.

The limited number of subscribers, the scarcity of contractors continuing to produce microfiche, and the inability to actively search within this format (in contrast to online formats), demonstrate that the microfiche format is obsolete. Given the lack of microfiche use and the widespread availability of the Federal Register and CFR in other formats, removing microfiche as an official format will have no significant impact on the availability of material published in the Federal Register and CFR, and retaining that format would offer no benefit. The costs and administrative burden of maintaining the microfiche format are accordingly unjustified, and the Administrative Committee is removing microfiche as an official format of the Federal Register and the CFR.

The ACFR welcomes comments related to any of the changes finalized in this rule and will consider these comments in making any future regulatory changes regarding the topics being currently addressed. If relevant, substantive adverse comments are received, the Administrative Committee may respond by publishing a supplemental final rule, addressing the comments in the final rule stemming from the omnibus NPRM, or initiating a new rulemaking.

The Administrative Committee developed this rule after considering numerous statutes and executive orders related to rulemaking. Below is a summary of the Administrative Committee's determinations after analysis of these statutes and executive orders.

The Administrative Committee has determined that notice and comment and a delay in the effective date of this rule are unnecessary under the exceptions to these requirements for “good cause.” The APA provides that notice and comment are unnecessary “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. 553(b)(B). Similarly, a delay in the effective date is not required when the agency finds “good cause” for dispensing with the delay and publishes that finding with the rule. 5 U.S.C. 553(d)(3).

The “unnecessary” prong of the good cause exception applies “when an administrative rule is a routine determination, insignificant in nature and impact, and inconsequential to the industry and to the public.” N. Carolina Growers' Ass'n, Inc. v. United Farm Workers, 702 F.3d 755, 766 (4th Cir. 2012) (quotation marks omitted). “Congress intended that rule making be exempted as unnecessary when amendments are minor or merely technical, and of little public interest.” Id. (quotation marks omitted). Rules qualify for the good cause exception under the “unnecessary” prong when the agency is issuing “a minor rule or amendment in which the public is not particularly interested.” Id. at 466-67 (quotation marks omitted); see also Util. Solid Waste Activities Grp. v. E.P.A., 236 F.3d 749, 755 (D.C. Cir. 2001) (similar).

The “unnecessary” prong of the good cause exception applies to the discontinuation of the Public Papers because that discontinuation is inconsequential to any potentially affected industry and to the public at large. Discontinuing the Public Papers will not change the nature or quantity of presidential documents that are published; instead, it will simply change the format of those documents. The documents will remain available to any person or entity that is interested in them because all documents contained in the Public Papers are already published elsewhere in readily accessible formats. The discontinuation accordingly will have an “insignificant . . . impact” on any member of the public. See N. Carolina Growers' Ass'n, 702 F.3d at 766.

For similar reasons, the “unnecessary” prong of the good cause exception applies to the removal of microfiche as an official format of the Federal Register and CFR; this removal is inconsequential to any potentially affected industry and to the public at large. All documents currently published in microfiche will remain available in other, easily accessible formats, such as the online and hard-copy formats of the Federal Register and CFR. The only subscribers to the microfiche format are a handful of Federal agencies. No individuals or institutions (whether part of the FDL network or otherwise) are receiving microfiche for their personal use or for library collections. The ACFR acknowledges that, in 2014, two comments on the omnibus NPRM suggested that members of the public still use microfiche, but now, eight years later, 4 zero individual members of the public subscribe to that format. Moreover, to the extent that members of the public might have once relied on microfiche formats accessible through FDLs, the fact that all FDLs have discontinued their microfiche subscriptions indicates that microfiche is no longer relevant to the public. Indeed, any member of the public who relied on an FDL to access the Federal Register or CFR through microfiche could use that same FDL's computer resources to access these publications' online formats. Finally, the scarcity of contractors available to create the microfiche format underscores the extent to which the public and members of the printing industry have moved beyond microfiche. The ACFR accordingly believes that the good cause exception applies to this rule because the rule is “inconsequential to the industry and to the public.” N. Carolina Growers' Ass'n, Inc., 702 F.3d at 766.

The Administrative Committee also believes that good cause exists for making this rule effective without a 30-day delay from the date of publication in the Federal Register . The 30-day waiting period “is intended to give affected parties time to adjust their behavior before the final rule takes effect.” Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479, 1485 (9th Cir. 1992). Here, members of the public will not need time to adjust their behavior because all of the information and documents contained in the Public Papers, the Federal Register , and the CFR are either already available online or are published online almost immediately after their production. Thus, even in the absence of a delay in the date of this rule, members of the public will experience no interruption in their access to government information and documents.

Although the good cause exception applies to this rule, the ACFR welcomes comments from interested persons on all matters related to the final rule. The ACFR will consider these comments in making any future regulatory changes regarding the topics addressed in this rulemaking.

The final rule has been drafted in accordance with the principles of section 1(b) of Executive Order 12866 (Principles of Regulation), and Executive Order 13563 (Improving Regulation and Regulatory Review). The Administrative Committee has determined that this final rule is not a significant regulatory action, as defined under section 3(f) of Executive Order 12866. Because the Office of Management and Budget did not review this rule under section 6(b) of Executive Order 12866, the ACFR need not publish any information under section 6(a)(3)(E) of that order.

The Administrative Committee certifies that this rule will not have a significant economic impact on a substantial number of small entities. This rule imposes no requirements on small entities. Also, as described above, only a single contractor submitted bids for the production of microfiche products to GPO in recent years. Thus, even assuming the contractor in question qualifies as a small entity, and even assuming that removing microfiche as an official format would affect that entity, the rule will not have a significant economic impact on a “substantial number” of small entities. See 5 U.S.C. 605(b). Finally, any member of the public, including persons employed by or representing small entities, can continue to access Federal Register publications for free through GPO's website, www.govinfo.gov.

This rule has no federalism implications under Executive Order 13132 (Federalism). It does not impose compliance costs on State or local governments or preempt State law.

This rule is not a major rule as defined by 5 U.S.C. 804(2). The Administrative Committee will submit a rule report, including a copy of this final rule, to each House of the Congress and to the Comptroller General of the United States as required under the congressional review provisions of the Small Business Regulatory Enforcement Fairness Act of 1986.

Background

Under the Plant Protection Act (PPA, 7 U.S.C 7701 et seq. ), the Secretary of Agriculture is authorized to restrict the interstate movement of plants, plants products, and other articles to prevent the dissemination of plant pests and noxious weeds within the United States, and to issue regulations and orders regarding such restrictions. The Secretary has delegated this authority to the Animal and Plant Health Inspection Service (APHIS).

Pursuant to the PPA, APHIS issued the regulations in 7 CFR part 301, “Domestic Quarantine Notices” (referred to below as the regulations), in order to prevent the interstate spread of plant pests within the United States. Accordingly, part 301 includes 18 subparts in the regulations, each addressing a specific plant pest, and each designating certain areas of the United States as quarantined  1 areas for a plant pest, designating certain articles that may present a risk of spread of the plant pest in question as regulated articles, and placing conditions on the interstate movement of regulated articles from quarantined areas.

On June 14, 2022, we published in the Federal Register (87 FR 35904-35923, Docket No. APHIS-2019-0035) a proposal  2 to revise the regulations that govern domestic quarantines for various plant pests by removing lists of quarantined areas and regulated articles from the regulations in order to maintain these lists on the Agency's web pages. As a result of this proposed revision, lists of quarantined areas and regulated articles would be moved from the regulations to websites for various plant pests that APHIS' Plant Protection and Quarantine (PPQ) program maintains. We also proposed to issue yearly notices in the Federal Register in order to communicate changes to the lists of quarantined areas, and issue notices as needed in order to make changes to the lists of regulated articles.

We solicited comments concerning our proposal for 60 days, ending August 15, 2022. We received no comments by that date. Therefore, for the reasons given in the proposed rule, we are adopting the proposed rule as a final rule, without change.

This final rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

In accordance with the Regulatory Flexibility Act, we have analyzed the potential economic effects of this action on small entities.

APHIS is removing from the regulations lists of areas and articles associated with various plant pests and placing the lists on the PPQ website. Specifically, the PPQ website ( https://www.aphis.usda.gov/aphis/ourfocus/planthealth/plant-pest-and-disease-programs/pests-and-diseases ) will house lists of quarantined, protected, suppressive, and generally infested areas; and lists of regulated articles, exempted articles, restricted articles, associated articles, and host articles. Changes to these lists will no longer require rulemaking. Rather, changes will be made using a notice-based regulatory process. This web-listing process will only be for certain programs that are already listed in the regulations.

Potential cost savings are not quantified. The benefits of this rule to our stakeholders will be timelier and more easily accessible notification of changing phytosanitary information. The cost savings to the Agency will come from a more simplified process ( i.e., using fewer resources) when taking emergency action to prevent the dissemination of plant pests and diseases. The notice-based approach will require less time and fewer steps than publishing a rule.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 2 CFR chapter IV.)

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.

This rule contains no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Accordingly, we are amending 7 CFR part 301 as follows:

The Federal Civil Penalties Inflation Adjustment Act of 1990 (the “Inflation Adjustment Act”), 1 as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the “2015 Act”), 2 requires federal agencies, including the Commission, to adjust for inflation the civil monetary penalties within their jurisdiction according to prescribed formulas. A civil monetary penalty is “any penalty, fine, or other sanction” that (1) “is for a specific monetary amount” or “has a maximum amount” under federal law; and (2) that a federal agency assesses or enforces “pursuant to an administrative proceeding or a civil action” in federal court. 3 Under the Federal Election Campaign Act, 52 U.S.C. 30101-45 (“FECA”), the Commission may seek and assess civil monetary penalties for violations of FECA, the Presidential Election Campaign Fund Act, 26 U.S.C. 9001-13, and the Presidential Primary Matching Payment Account Act, 26 U.S.C. 9031-42.

The Inflation Adjustment Act requires federal agencies to adjust their civil penalties annually, and the adjustments must take effect no later than January 15 of every year. 4 Pursuant to guidance issued by the Office of Management and Budget, 5 the Commission is now adjusting its civil monetary penalties for 2023. 6

The Commission must adjust for inflation its civil monetary penalties “notwithstanding Section 553” of the Administrative Procedures Act (“APA”). 7 Thus, the APA's notice-and-comment and delayed effective date requirements in 5 U.S.C. 553(b)-(d) do not apply because Congress has specifically exempted agencies from these requirements. 8

Furthermore, because the inflation adjustments made through these final rules are required by Congress and involve no Commission discretion or policy judgments, these rules do not need to be submitted to the Speaker of the United States House of Representatives or the President of the United States Senate under the Congressional Review Act, 5 U.S.C. 801 et seq. Moreover, because the APA's notice-and-comment procedures do not apply to these final rules, the Commission is not required to conduct a regulatory flexibility analysis under 5 U.S.C. 603 or 604. See 5 U.S.C. 601(2), 604(a). Nor is the Commission required to submit these revisions for congressional review under FECA. See 5 U.S.C. 30111(d)(1), (4) (providing for congressional review when Commission “prescribe[s]” a “rule of law”).

The new penalty amounts will apply to civil monetary penalties that are assessed after the date the increase takes effect, even if the associated violation predated the increase. 9

The Inflation Adjustment Act requires the Commission to annually adjust its civil monetary penalties for inflation by applying a cost-of-living-adjustment (“COLA”) ratio. 10 The COLA ratio is the percentage that the Consumer Price Index (“CPI”)  11 “for the month of October preceding the date of the adjustment” exceeds the CPI for October of the previous year. 12 To calculate the adjusted penalty, the Commission must increase the most recent civil monetary penalty amount by the COLA ratio. 13 According to the Office of Management and Budget, the COLA ratio for 2023 is 0.017745, or 1.7745%; thus, to calculate the new penalties, the Commission must multiply the most recent civil monetary penalties in force by 1.07745. 14

The Commission assesses two types of civil monetary penalties that must be adjusted for inflation. First are penalties that are either negotiated by the Commission or imposed by a court for violations of FECA, the Presidential Election Campaign Fund Act, or the Presidential Primary Matching Payment Account Act. These civil monetary penalties are set forth at 11 CFR 111.24. Second are the civil monetary penalties assessed through the Commission's Administrative Fines Program for late filing or non-filing of certain reports required by FECA. See 52 U.S.C. 30109(a)(4)(C) (authorizing Administrative Fines Program), 30104(a) (requiring political committee treasurers to report receipts and disbursements within certain time periods). The penalty schedules for these civil monetary penalties are set out at 11 CFR 111.43 and 111.44.

FECA establishes the civil monetary penalties for violations of FECA and the other statutes within the Commission's jurisdiction. See 52 U.S.C. 30109(a)(5), (6), (12). Commission regulations in 11 CFR 111.24 provide the current inflation-adjusted amount for each such civil monetary penalty. To calculate the adjusted civil monetary penalty, the Commission multiplies the most recent penalty amount by the COLA ratio and rounds that figure to the nearest dollar.

The actual adjustment to each civil monetary penalty is shown in the chart below.

FECA authorizes the Commission to assess civil monetary penalties for violations of the reporting requirements of 52 U.S.C. 30104(a) according to the penalty schedules “established and published by the Commission.” 52 U.S.C. 30109(a)(4)(C)(i). The Commission has established two penalty schedules: The penalty schedule in 11 CFR 111.43(a) applies to reports that are not election sensitive, and the penalty schedule in 11 CFR 111.43(b) applies to reports that are election sensitive. 15 Each penalty schedule contains two columns of penalties, one for late-filed reports and one for non-filed reports, with penalties based on the level of financial activity in the report and, if late-filed, its lateness. 16 In addition, 11 CFR 111.43(c) establishes a civil monetary penalty for situations in which a committee fails to file a report and the Commission cannot calculate the relevant level of activity. Finally, 11 CFR 111.44 establishes a civil monetary penalty for failure to file timely reports of contributions received less than 20 days, but more than 48 hours, before an election. See 52 U.S.C. 30104(a)(6).

To determine the adjusted civil monetary penalty amount for each level of activity, the Commission multiplies the most recent penalty amount by the COLA ratio and rounds that figure to the nearest dollar. The new civil monetary penalties are shown in the schedules in the rule text, below.

For the reasons set out in the preamble, the Federal Election Commission amends subchapter A of chapter I of title 11 of the Code of Federal Regulations as follows:

I. Background

FHFA is an independent agency of the Federal government, and the financial safety and soundness regulator of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises), as well as the Federal Home Loan Banks (collectively, the Banks) and the Office of Finance under authority granted by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act). 1 FHFA oversees the Enterprises and Banks (collectively, the regulated entities) and the Office of Finance to ensure that they operate in a safe and sound manner and maintain liquidity in the housing finance market in accordance with applicable laws, rules and regulations. To that end, FHFA is vested with broad supervisory discretion and specific civil administrative enforcement powers, similar to such authority granted by Congress to the Federal bank regulatory agencies. 2 Section 1376 of the Safety and Soundness Act (12 U.S.C. 4636) empowers FHFA to impose civil money penalties under specific conditions. FHFA's Rules of Practice and Procedure (12 CFR part 1209) (the Enforcement regulations) govern cease and desist proceedings, civil money penalty assessment proceedings, and other administrative adjudications. 3 FHFA's Flood Insurance regulation (12 CFR part 1250) governs flood insurance responsibilities as they pertain to the Enterprises. 4 FHFA's Implementation of the Program Fraud Civil Remedies Act of 1986 regulation (12 CFR part 1217) sets forth procedures for imposing civil penalties and assessments under the Program Fraud Civil Remedies Act (31 U.S.C. 3801 et seq. ) on any person that makes a false claim for property, services or money from FHFA, or makes a false material statement to FHFA in connection with a claim, where the amount involved does not exceed $150,000. 5

The Federal Civil Penalties Inflation Adjustment Act of 1990 (Inflation Adjustment Act), as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Adjustment Improvements Act), requires FHFA, as well as other federal agencies with the authority to issue civil money penalties (CMPs), to adjust by regulation the maximum amount of each CMP authorized by law that the agency has jurisdiction to administer. 6 The Adjustment Improvements Act required agencies to make an initial “catch-up” adjustment of their CMPs upon the statute's enactment, 7 and further requires agencies to make additional adjustments on an annual basis following the initial adjustment. 8

The Adjustment Improvements Act sets forth the formula that agencies must apply when making annual adjustments, based on the percent change between the October Consumer Price Index for All Urban Consumers (the CPI-U) preceding the date of the last adjustment and the October CPI-U for the year before that.

This final rule adjusts the maximum penalty amount within each of the three tiers specified in 12 U.S.C. 4636 by amending the table contained in 12 CFR 1209.80 of the Enforcement regulations to reflect the new adjusted maximum penalty amount that FHFA may impose upon a regulated entity or any entity-affiliated party within each tier. The increases in maximum penalty amounts contained in this final rule may not necessarily affect the amount of any CMP that FHFA may seek for a particular violation, which may not be the maximum that the law allows; FHFA would calculate each CMP on a case-by-case basis in light of a variety of factors. 9 This rule also adjusts the maximum penalty amounts for violations under the FHFA Flood Insurance regulation by amending the text of 12 CFR 1250.3 to reflect the new adjusted maximum penalty amount that FHFA may impose for violations under that regulation. This rule also adjusts the maximum amounts for civil money penalties under the Program Fraud Civil Remedies Act by amending the text of 12 CFR 1217.3 to reflect the new adjusted maximum penalty amount that FHFA may impose for violations under that regulation.

The Adjustment Improvements Act directs federal agencies to calculate each annual CMP adjustment as the percent change between the CPI-U for the previous October and the CPI-U for October of the calendar year before. 10 The maximum CMP amounts for FHFA penalties were last adjusted in 2022. 11 Since FHFA is making this round of adjustments in calendar year 2023, and the maximum CMP amounts were last set in calendar year 2022, the inflation adjustment amount for each maximum CMP amount was calculated by comparing the CPI-U for October 2021 with the CPI-U for October 2022, resulting in an inflation factor of 1.07745. For each maximum CMP calculation, the product of this inflation adjustment and the previous maximum penalty amount was then rounded to the nearest whole dollar as required by the Adjustment Improvements Act, and was then summed with the previous maximum penalty amount to determine the new adjusted maximum penalty amount. 12 The tables below set out these items accordingly.

When promulgating any regulation that may have future effect relating to the Banks, the Director is required by section 1313(f) of the Safety and Soundness Act to consider the differences between the Banks and the Enterprises with respect to the Banks' cooperative ownership structure, mission of providing liquidity to members, affordable housing and community development mission, capital structure, and joint and several liability (12 U.S.C. 4513(f)). 13 The Director considered the differences between the Banks and the Enterprises, as they relate to the above factors, and determined that this final rule is appropriate. The inflation adjustments effected by the final rule are mandated by law, and the special features of the Banks identified in section 1313(f) of the Safety and Soundness Act can be accommodated, if appropriate, along with any other relevant factors, when determining any actual penalties.

FHFA finds good cause that notice and an opportunity to comment on this final rule are unnecessary under section 553(b) of the Administrative Procedure Act (APA), 5 U.S.C. 553(b). The Adjustment Improvements Act states that the annual civil money penalty adjustments shall be made notwithstanding the rulemaking provisions of 5 U.S.C. 553. 14 Furthermore, this rulemaking conforms with and is consistent with the statutory directive set forth in the Adjustment Improvements Act. As a result, there are no issues of policy discretion about which to seek public comment. Accordingly, FHFA is adopting these amendments as a final rule.

Background

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus SAS Model A350-941 and -1041 airplanes. The NPRM published in the Federal Register on October 20, 2022 (87 FR 63709). The NPRM was prompted by AD 2022-0080, dated May 9, 2022, issued by EASA, which is the Technical Agent for the Member States of the European Union (EASA AD 2022-0080) (referred to after this as the MCAI). The MCAI states that during flight and fatigue testing it was detected that some fasteners installed in the CWB rotated inside their fastener holes. Investigation revealed there was insufficient friction for the application.

In the NPRM, the FAA proposed to require replacing affected fasteners and applying additional head nut cap protection at the front and rear spars in the CWB, as specified in EASA AD 2022-0080. The FAA is issuing this AD to address fasteners installed in the CWB rotating inside their fastener holes, which if not corrected, could lead to loss of a fastener clamping and cracking of the nut sealant cover, possibly resulting, in case of lightning strike, in a fuel tank explosion and consequent loss of the airplane.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2022-1248.

The FAA received a comment from the Air Line Pilots Association, International (ALPA) who supported the NPRM without change.

This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered the comment received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. This AD is adopted as proposed in the NPRM.

EASA AD 2022-0080 specifies procedures for replacing affected fasteners installed on the left-hand and right-hand CWB at the front and rear spar areas and for adding head nut cap protection at the front and rear spars in the CWB. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES .

The FAA estimates that this AD affects 30 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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

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

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Will not affect intrastate aviation in Alaska, and

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

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

Comments Invited

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include Docket No. FAA-2022-1657 and Project Identifier AD-2022-01475-T at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this final rule.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Samuel Dorsey, Aerospace Engineer, Propulsion Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3415; email: Samuel.j.dorsey@faa.gov. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA has received reports indicating wear-through of the motor impeller inlet adapter of the horizontal stabilizer fuel tank transfer pumps (also referred to as a transfer/jettison pump or override/jettison pump). These reports were received following troubleshooting of fuel imbalance issues involving the main wing fuel tanks, which utilize the same pump design as the horizontal stabilizer fuel tank.

Boeing investigations have found two pumps with wear sufficient to allow contact between the motor impeller inlet check valve flapper and the pump inducer. An additional 22 worn pumps have been identified. Investigations have shown that oscillations within the fuel flow around the pumps can cause the inlet check valve to vibrate as it is held spring-loaded against the inlet adapter of the pump. Undetected or unmitigated wear could allow the flapper of the inlet check valve to contact the rotating motor inducer, creating steel-on-steel contact. There is a period of operation during each flight with a fueled horizontal stabilizer fuel tank where the pump will run dry for a short period before the flightcrew is alerted to shut it down, or the pump is automatically shut off. During this dry run period, if the wear on the inlet adapter is severe enough, the steel-on-steel contact can cause a source of heat and/or sparking within the fuel tank. This condition, in combination with flammable fuel vapors, could result in a fuel tank explosion and consequent loss of the airplane. The FAA is issuing this AD to address the unsafe condition on these products.

The FAA is issuing this AD because the agency has determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

The FAA reviewed Boeing Multiple Operator Message MOM-MOM-22-0549-01B(R1), dated November 29, 2022. This service information specifies procedures for one-time detailed visual inspections for wear (hinge pin protrusion, gouging, missing material, corrosion, burrs, and raised material) of the motor impeller inlet adapters and inlet check valves of the horizontal stabilizer fuel tank transfer pumps. This service information also specifies replacing certain inlet check valves and inlet adapters with serviceable parts and reporting inspection results to Boeing. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This AD requires accomplishing the actions specified in the service information already described. This AD also limits the installation of affected parts.

This AD is considered to be interim action. The inspection reports that are required by this AD will enable the manufacturer to obtain better insight into the nature, cause, and extent of the wear-through, and eventually to develop final action to address the unsafe condition. Further, the main and center wing tanks utilize the same pump design but are currently not subject to the same unsafe condition due to the shutoff logic of the transfer pumps. However, if that should change or once final action has been identified, the FAA might consider further rulemaking.

Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause.

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice and comment prior to adoption of this rule because wear-through of the motor impeller inlet adapter of a transfer pump for the horizontal stabilizer fuel tank may allow the pump's inlet check valve to contact the rotating pump inducer. During the 15-second dry run period experienced every flight with a fueled horizontal stabilizer tank, the steel-on-steel contact can cause a source of heat and/or sparking (an ignition source) within the fuel tank. This contact in combination with flammable fuel vapors, if not addressed, could result in an explosion in the fuel tank and consequent loss of the airplane. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b)(3)(B).

In addition, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days, for the same reasons the FAA found good cause to forgo notice and comment.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 28 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA estimates the following costs to do any necessary replacements that would be required based on the results of the inspection. The FAA has no way of determining the number of aircraft that might need these replacements:

Background

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all MHI RJ Aviation ULC Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes. The NPRM published in the Federal Register on February 25, 2022 (87 FR 10752). The NPRM was prompted by AD CF-2021-32, dated September 17, 2021, issued by Transport Canada, which is the aviation authority for Canada (Transport Canada AD CF-2021-32). Transport Canada AD CF-2021-32 states that an oxygen-fed ground fire event was potentially caused by electrical arcing from a faulty surround light wire on the third crew member's (observer) oxygen mask. An investigation determined that the oxygen supply hose connecting to the rear of the observer oxygen mask box assembly could be subject to chafing damage.

In the NPRM, the FAA proposed to require an inspection for discrepancies of the observer's oxygen mask stowage box and storage compartment, oxygen hose connections and routing, and the associated electrical harness, and corrective actions if necessary; and modifying the oxygen mask flexible lamp harness, mounting plate, and compartment panel, including rerouting the electrical harness and applying protective sealant.

The FAA issued a supplemental notice of proposed rulemaking (SNPRM) to amend 14 CFR part 39 by adding an AD that would apply to all MHI RJ Aviation ULC Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes. The SNPRM published in the Federal Register on October 21, 2022 (87 FR 63970). The SNPRM was prompted by Transport Canada AD CF-2021-32R1, dated July 25, 2022 (also referred to as the MCAI). The MCAI states that since Transport Canada AD CF-2021-32 was issued, an operator reporting a fouling condition between the power feed wires for the stowage box light strip and an existing aluminum bracket in the entrance monument mask stowage compartment. The SNPRM was also prompted by the determination that additional inspections and a bracket trim are needed to address the unsafe condition. In the SNPRM, the FAA again proposed to require an inspection for discrepancies of the observer's oxygen mask stowage box and storage compartment, oxygen hose connections and routing, and the associated electrical harness, and corrective actions if necessary; and modifying the oxygen mask flexible lamp harness, mounting plate, and compartment panel, including rerouting the electrical harness and applying protective sealant. In the SNPRM, the FAA further proposed to require an inspection for correct installation of the flexible lamp assembly; trimming and reidentifying a bracket; and for certain airplanes, an inspection for damage of the wire harness assembly; and applicable corrective actions. The FAA is issuing this AD to address possible damage to the observer oxygen mask supply hoses and a potential for an oxygen-fed fire in the vicinity of the observer oxygen mask storage compartment.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2022-0141.

The FAA received a comment from The Air Line Pilots Association, International (ALPA), who supported the SNPRM without change.

This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered the comment received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the SNPRM. None of the changes will increase the economic burden on any operator.

The FAA reviewed MHI RJ Service Bulletin 601R-35-022, Revision B, dated April 21, 2022. This service information specifies procedures for doing a general visual inspection for discrepancies, including elbow fitting clocking (rotation), sealing tape installed in a certain location, wire damage ( e.g., cuts, nicks, kinks, insulation damage) of the observer's oxygen mask stowage box and storage compartment, the observer's mask oxygen hose connections, the hose routing, and the associated electrical harness, and applicable corrective actions; and modifying the oxygen mask flexible lamp harness, mounting plate, and compartment panel, including rerouting the electrical harness and applying protective sealant. Corrective actions include re-positioning the elbow fitting, removing sealing tape, and repairing wiring. This service information also specifies procedures for an inspection for correct installation of the flexible lamp assembly; trimming and reidentifying a bracket; and for certain airplanes, an inspection for damage of the wire harness assembly; and applicable corrective actions. Corrective actions include correcting flexible lamp assembly installations and repair.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 407 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

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

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

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Will not affect intrastate aviation in Alaska, and

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

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

Background

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus Canada Limited Partnership Model BD-500-1A10 and BD-500-1A11 airplanes. The NPRM published in the Federal Register on July 29, 2022 (87 FR 45709). The NPRM was prompted by AD CF-2022-01, dated January 7, 2022, issued by Transport Canada, which is the aviation authority for Canada (referred to after this as the MCAI). The MCAI states that flight control decals have been degrading and peeling, operators have been painting over these decals, and procedures to replace these decals were inaccurate, potentially causing incorrect positioning of replacement decals. An investigation determined that the degradation and peeling of the flight control decals were caused by an incorrect clear protective coating being applied during production, and that flight control decals were being painted over because of unclear in-service procedures. The in-service procedures were revised to clearly state that the flight control decals are to be masked prior to painting, and to ensure the flight control decals are properly placed. Flight control decals that are damaged or incorrectly positioned could introduce rigging offset of flight control surfaces, which, when combined with other failures or severe maneuvers, could result in loss of flight control surface effectiveness or structural loading that exceeds the airframe's capability. See the MCAI for additional background information.

In the NPRM, the FAA proposed to require inspecting the left and right horizontal stabilizer decals for visibility and damage; inspecting the rudder and left and right elevator decals for visibility and damage for certain airplanes; and doing applicable corrective actions.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2022-0981.

The FAA received two comments from one commenter, Delta Air Lines (Delta). The following presents the comments received on the NPRM and the FAA's response to each comment.

Delta requested the final rule include a statement that clearly defines “refer to” and “in accordance with” to give operators a concise understanding of what steps must be complied with and what steps are recommended, done as part of other actions, or done with accepted methods different from those given in the listed instructions.

The FAA agrees to clarify the actions that are required for compliance in the service information referenced in the MCAI. In Parts A, B, C, and D of the service information referenced in the MCAI, some steps are required for compliance—or “RC”—and must be done following the instructions in the service information; other steps may be done using other approved methods chosen by the operator. The service information states that the Procedure section of the Accomplishment Instructions is RC and must be done to comply with the MCAI (and this AD), but the job set-up and job close-up sections, with the exception of the return-to-service tests, are recommended only. Therefore, the actions in the Procedure section are RC, but the job set-up and close-up sections are not. The FAA has not changed this AD as a result of this comment.

Delta requested that the proposed AD be revised to include a statement that allows operators to perform the maintenance review tasks prior to accomplishing the inspection and replacement of the decals. The service information specified in the MCAI has the operator perform an inspection of the decals and then a maintenance record review to determine which actions to perform.

The FAA agrees with the request, provided all required corrective actions based on the results of the records review are accomplished as specified in the service information referenced in the MCAI. Operators may not need to repeat the inspections if the tasks in the maintenance record review accomplished the same task. The FAA has added paragraph (h)(3) of this AD to define this exception to the service information specified in the MCAI.

This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered the comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, and any other changes described previously, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.

Transport Canada CF-2022-01 specifies procedures for inspecting the left and right horizontal stabilizer decals for visibility and damage, and corrective actions. For certain airplanes, Transport Canada CF-2022-01 specifies procedures for inspecting the rudder and left and right elevator decals for visibility and damage. The corrective actions include replacing, restoring, and preserving the condition and placement of the flight control decals, and re-rigging the rudder and elevator control surfaces. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 56 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA estimates the following costs to do any necessary on-condition actions that would be required based on the results of any required actions. The FAA has no way of determining the number of airplanes that might need these on-condition actions:

The FAA has received no definitive data on which to base the cost estimates for the on-condition re-rigging actions specified in this AD.

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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

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

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Will not affect intrastate aviation in Alaska, and

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

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

History

The FAA published a final rule in the Federal Register (87 FR 75925; December 12, 2022) amending three RNAV T-routes and establishing five T-routes. Subsequent to publication, the FAA determined that the HITMN, TN, WP was misspelled in the discussion of route T-439. In addition, the TMPSN, TN, WP was misspelled, and the PENCE, TN point was misidentified as a WP instead of a Fix in the regulatory text description of T-424. Also, the TROPP, SC, WP was misspelled in the regulatory text description of T-441. Similarly, the PENCE, TN point in the regulatory text of route T-441 was misidentified as a WP instead of a Fix. This rule corrects the above errors.

These are editorial changes only to match the information in the FAA NASR database and do not alter the alignment of the affected T-routes.

United States RNAV T-routes are published in paragraph 6011 of FAA Order JO 7400.11G, dated August 19, 2022, and effective September 15, 2022, which is incorporated by reference in 14 CFR 71.1. The RNAV routes listed in this document will be subsequently published in FAA Order JO 7400.11.

The references to RNAV routes T-439, T-424, and T-441 published in the Federal Register of December 12, 2022 (87 FR 75925), FR Doc. 2022-26735, are corrected as follows:

I. Background

Upon request, FDA has classified the extracorporeal system for carbon dioxide removal as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness. In addition, we believe this action will enhance patients' access to beneficial innovation, in part by placing the device into a lower device class than the automatic class III assignment.

The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).

FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).

FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act. Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification.

Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).

Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.

Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device.

When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see section 513(i) of the FD&C Act, defining “substantial equivalence”). Instead, sponsors can use the less-burdensome 510(k) process, when necessary, to market their device.

On August 30, 2021, FDA received ALung Technologies, Inc.'s request for De Novo classification of the Hemolung Respiratory Assist System. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.

We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device

Therefore, on November 13, 2021, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 870.4150. 1 We have named the generic type of device extracorporeal system for carbon dioxide removal, and it is identified as a system of devices and accessories that provides assisted extracorporeal carbon dioxide removal from the patient's blood in patients with acute respiratory failure, where other available treatment options have failed, and continued clinical deterioration is expected or the risk of death is imminent. The main devices and accessories of the system include, but are not limited to, the console (hardware), software, and disposables, including, but not limited to, a gas exchanger, blood pump, cannulae, tubing, filters, and other accessories ( e.g., monitors, detectors, sensors, connectors).

FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1.

FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. We encourage sponsors to consult with us if they wish to use a non-animal testing method they believe is suitable, adequate, validated, and feasible. We will consider if such an alternative method could be assessed for equivalency to an animal test method. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in 21 CFR part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR parts 801, regarding labeling, have been approved under OMB control number 0910-0485.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 870 is amended as follows:

I. Background

Upon request, FDA has classified the resorbable implant for ACL injuries as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness. In addition, we believe this action will enhance patients' access to beneficial innovation, in part by placing the device into a lower device class than the automatic class III assignment.

The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).

FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).

FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (21 U.S.C. 360c(f)(2)). Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification.

Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).

Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.

Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device.

When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application in order to market a substantially equivalent device (see 21 U.S.C. 360c(i), defining “substantial equivalence”). Instead, sponsors can use the less-burdensome 510(k) process, when necessary, to market their device.

On June 4, 2020, FDA received Miach Orthopaedics, Inc.'s request for De Novo classification of the BEAR® (Bridge-Enhanced ACL Repair) Implant. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.

We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device.

Therefore, on December 16, 2020, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 888.3044. 1 We have named the generic type of device resorbable implant for ACL repair, and it is identified as a degradable material that allows for healing of a torn ACL that is biomechanically stabilized by traditional suturing procedures. The device is intended to protect the biological healing process from the surrounding intraarticular environment and not intended to replace biomechanical fixation via suturing. This classification includes devices that bridge or surround the torn ends of a ruptured ACL.

FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1.

FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. In order for a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. We encourage sponsors to consult with us if they wish to use a non-animal testing method they believe is suitable, adequate, validated, and feasible. We will consider if such an alternative method could be assessed for equivalency to an animal test method. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in 21 CFR part 860, subpart D regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 888 is amended as follows:

Background

Section 897(l) was added to the Internal Revenue Code (the “Code”) by section 323(a) of the Protecting Americans from Tax Hikes Act of 2015, Public Law 114-113, div. Q (the “PATH Act”), and amended by section 101(q) of the Tax Technical Corrections Act of 2018, Pub. L. 115-141, div. U. In the preamble to the updated section 1445 regulations that were published in the Federal Register (81 FR 8398-01, as corrected at 81 FR 24484-01) on February 19, 2016, the Department of the Treasury (the “Treasury Department”) and the IRS requested comments regarding what regulations, if any, should be issued pursuant to section 897(l)(3). The Treasury Department and the IRS considered all of the comments received in response to this request and, on June 7, 2019, published proposed regulations under sections 897(l), 1441, 1445 and 1446 in the Federal Register (84 FR 26605) (the “proposed regulations”). The proposed regulations contained rules relating to the qualification for the exemption under section 897(l), as well as rules relating to withholding requirements under sections 1441, 1445 and 1446, for dispositions of United States real property interests (“USRPIs”) by foreign pension funds and their subsidiaries and distributions described in section 897(h).

This Treasury decision finalizes the proposed regulations, after taking into account and addressing comments received by the Treasury Department and the IRS with respect to the proposed regulations. Terms used but not defined in this preamble have the meaning provided in the final regulations.

Comments outside the scope of this rulemaking are generally not addressed but may be considered in connection with future regulations. All written comments received in response to the proposed regulations are available at www.regulations.gov or upon request.

The final regulations retain the general approach and structure of the proposed regulations, with certain revisions. This Summary of Comments and Explanation of Revisions section discusses the revisions as well as comments received in response to the solicitation of comments in the proposed regulations.

Under the proposed regulations, and consistent with section 897(l), gain or loss of a qualified foreign pension fund (“QFPF”) or a qualified controlled entity (“QCE”) (under the proposed regulations, each generally a “qualified holder”) from the disposition of a USRPI is not subject to section 897(a). Prop. § 1.897(l)-1(b)(1). The proposed regulations defined a QCE as a trust or corporation organized under the laws of a foreign country, 1 all of the interests of which are held directly by one or more QFPFs or indirectly through one or more QCEs or partnerships. Prop. § 1.897(l)-1(d)(9).

Several comments received in response to the proposed regulations addressed the ownership requirement with respect to QCEs. The proposed regulations did not permit ownership of a QCE by a person other than a QFPF or another QCE, declining to adopt a comment received before the publication of the proposed regulations requesting that de minimis ownership of a QCE by other persons be disregarded under certain circumstances, such as when de minimis ownership by managers or directors is required by corporate law in certain jurisdictions. The Treasury Department and the IRS determined that permitting a person other than a QFPF or another QCE to own an interest in a QCE would impermissibly expand the scope of the exception in section 897(l) by allowing investors other than QFPFs to avoid tax under section 897(a). However, under the proposed regulations, a QFPF could invest in USRPIs with non-QFPFs through a partnership and still qualify for the exemption under section 897(l).

Comments received in response to the proposed regulations similarly requested that the final regulations allow a de minimis exception for the ownership of a QCE by other persons. One comment reiterated that de minimis ownership, including by managers or directors, may be required by corporate law in certain jurisdictions and suggested that the final regulations include a rule that would permit an entity to be treated as a QCE if a small amount (for example, five percent) of the entity is held by a non-QFPF. The comment also suggested that, in order to prevent non-QFPF entities from inappropriately accessing the exemption under section 897(l), a non-QFPF de minimis owner of a QCE could be required to recognize gain or loss on any disposition of a USRPI held through the QCE under section 897(a). The comment asserted that there is no policy reason to differentiate between entities with QFPF and non-QFPF owners/beneficiaries because the entity is a corporation or trust rather than a partnership, and that permitting de minimis non-QFPF ownership of a QCE would allow QFPFs flexibility with regard to the form of entity chosen for investment purposes.

Another comment asserted that a de minimis exception should be allowed because certain jurisdictions may require or otherwise allow investment arrangements in which foreign pension funds pool investments with non-QFPFs. The comment argued that such investment arrangements should not be precluded from qualifying for the exception under section 897(l), especially if those arrangements are allowed or required by local law and are consistent with generally accepted investment practice. The comment suggested that the final regulations permit a non-QFPF to have a de minimis level of ownership (for example, five percent) in a QCE. If a de minimis exception were not adopted, the comment suggested several alternatives to prevent minority investors from tainting the QFPF status for the majority QFPF investors, including that the final regulations allow QFPFs to qualify for the exception under section 897(l) on their share of income or gains distributed by an investment vehicle, provided the investment vehicle is majority owned by QFPFs. The comment also suggested that the QCE ownership requirement be modified to permit an eligible fund that is a non-QFPF solely because it has a single qualified recipient with a right to more than five percent of the assets or income of the eligible fund to be an owner of a QCE. The comment requested that, in that circumstance, the final regulations look through to the owners of the non-QFPF and apply the prohibition on a single five-percent beneficiary or participant by reference to the would-be QCE rather than the non-QFPF.

An additional comment suggested that a QFPF should be able to claim the section 897(l) exemption with respect to gains derived by an entity in which the QFPF is an investor where the entity is not a partnership and also is not a QCE because it is not wholly owned by QFPFs. The comment noted that, in certain foreign government facilitated arrangements involving a partnership formed under local law through which multiple foreign government entities jointly invest, the investment entity may be a per se corporation under § 301.7701-2(b)(6) that would not qualify as a QCE if not all of the government investors were QFPFs. The comment asserted that, in such circumstance, investors would be forced to include a non-government partner so that the investment entity could be treated as a partnership for U.S. federal tax purposes. To address this concern, the comment recommended that the final regulations provide that, if an entity is treated as a partnership under the law of the country in which the QFPF is formed, the QFPF should be able to treat its distributive share of partnership Foreign Investment in Real Property Tax Act (“FIRPTA”) gains as exempt under section 897(l).

The Treasury Department and the IRS continue to believe that allowing any exception with respect to the ownership of a QCE would impermissibly expand the scope of the exception in section 897(l) by allowing investors other than QFPFs to avoid tax under section 897. Section 897(l)(1) expressly provides that an entity must be wholly owned by a QFPF to constitute a QCE and qualify for the exception under section 897(l). Accordingly, the final regulations do not provide a de minimis exception to the ownership of a QCE. For the same reasons, the final regulations do not adopt other suggested approaches that would permit an entity to be a QCE despite limited non-QFPF ownership, such as a tracing approach that would require non-QFPF owners of an entity to be subject to section 897(a) and allow only QFPF owners to benefit from the section 897(l) exemption, or a look-through approach that would allow a non-QFPF that cannot qualify as a QFPF because it violates the rule against having a single five-percent beneficiary or participant to own an interest in a QCE.

The final regulations also do not adopt the recommendation to permit a QFPF to benefit from the section 897(l) exemption with respect to interests in an entity that is classified as a corporation for U.S. federal tax purposes but that does not qualify as a QCE due to ownership by non-QFPFs by treating the entity as a partnership in accordance with its treatment under applicable foreign law. In addition to expanding the definition of a QCE to permit ownership by non-QFPFs, such a rule would contradict the classification of the entity for U.S. federal tax purposes.

The proposed regulations permitted multiple QFPFs to wholly own a QCE, either directly or indirectly through one or more other QCEs, in recognition that it is common for QFPFs to pool their investments.

One comment discussed the interaction between the requirement that QCEs must be wholly owned by QFPFs and the various requirements that an eligible fund must meet to maintain its status as a QFPF. The comment stated that a QFPF that invests with other QFPFs in a QCE might fail to qualify for the section 897(l) exemption solely because one of its co-investors fails to qualify as a QFPF in any given year. The comment noted that QFPFs would be required to negotiate complex protections to shield against another co-investor from tainting the QCE's status. The comment further noted that investing through a partnership (which would allow the QFPF to invest with other non-QFPFs) may not be feasible because a foreign jurisdiction may have regulatory restrictions regarding the types of legal entities in which pension funds may invest or the entity may be wholly owned by QFPFs that form part of a single government (and thus may be a per se corporation under § 301.7701-2(b)(6)). The comment therefore recommended that the final regulations provide a rule that a QCE that inadvertently fails to constitute a qualified holder because one of its owners ceases to be treated as a QFPF be permitted, for a limited time, to partially benefit from section 897(l) to the extent that it continues to be owned by QFPFs.

The final regulations do not provide an exception to the requirement that a QCE be wholly owned by a QFPF to insulate QFPF investors from the risk of losing QCE status in investment arrangements with other QFPFs. As with a de minimis exception to the ownership of a QCE, the Treasury Department and the IRS believe that any such rule would impermissibly expand the scope of the section 897(l) exception to allow investors other than QFPFs to avoid tax under section 897. The Treasury Department and the IRS also believe that the changes to the final regulations described in Parts II.A.2 and II.A.3 of this Summary of Comments and Explanation of Revisions will appropriately alleviate concerns with respect to the risk that a QFPF may inadvertently fail to satisfy the requirements to constitute a QFPF.

As referenced in the preamble to the proposed regulations, given the absence of an express provision to the contrary, the definition of an “interest” for purposes of determining whether an entity is a QCE is determined in accordance with § 1.897-1(d)(5), which provides that an interest in an entity means an interest in such entity other than an interest solely as a creditor. Section 1.897-1(d)(3) provides that an interest in an entity other than solely as a creditor is: (A) stock of a corporation; (B) an interest in a partnership as a partner within the meaning of section 761(b) and the regulations thereunder; (C) an interest in a trust or estate as a beneficiary within the meaning of section 643(c) and the regulations thereunder or an ownership interest in any portion of a trust as provided in sections 671 through 679 and the regulations thereunder; (D) an interest which is, in whole or in part, a direct or indirect right to share in the appreciation in value of an interest in an entity described in subdivision (A), (B), or (C) of § 1.897-1(d)(3)(i) or a direct or indirect right to share in the appreciation in value of assets of, or gross or net proceeds or profits derived by, the entity; or (E) a right (whether or not presently exercisable) directly or indirectly to acquire, by purchase, conversion, exchange, or in any other manner, an interest described in subdivision (A), (B), (C), or (D) of § 1.897-1(d)(3)(i).

One comment requested that the final regulations clarify that non-economic interests in an entity are not taken into account in determining whether an entity is a QCE. The comment noted that such a situation might arise when a foreign partnership that elects to be treated as a corporation for U.S. federal income tax purposes has a general partner that holds no economic interest in the entity. The comment recommended that the final regulations provide that interests in a QCE that do not entitle the holders to share in the income or assets of the QCE should be ignored in determining whether the QCE is a qualified holder, noting that such fully non-economic interests do not present potential for abuse and that disregarding those interests would be consistent with congressional intent to accommodate a variety of foreign pension fund structures under section 897(l).

The Treasury Department and the IRS do not believe that additional guidance is necessary regarding the ownership interests taken into account in determining whether an entity constitutes a QCE. Thus, an “interest” for purposes of determining whether an entity is a QCE is determined under § 1.897-1(d)(3). Whether an interest in an entity constitutes one of the interests listed under § 1.897-1(d)(3) or is instead disregarded is determined based on the facts, taking into account general tax principles.

The proposed regulations provided that a qualified holder does not include any entity or governmental unit that, at any time during the testing period, determined without regard to this limitation, was not a QFPF, a part of a QFPF, or a QCE (the “qualified holder rule”). See Prop. § 1.897(l)-1(d)(11)(ii). For this purpose, the proposed regulations provided that the testing period is the shortest of (i) the period beginning on the date that section 897(l) became effective (December 18, 2015), and ending on the date of a disposition described in section 897(a) or a distribution described in section 897(h); (ii) the ten-year period ending on the date of the disposition or the distribution; or (iii) the period during which the entity (or its predecessor) was in existence. See Prop. § 1.897(l)-1(d)(14). Under the proposed regulations, the qualified holder rule does not apply to an entity or governmental unit that did not own a USRPI as of the date it became a QCE, a QFPF, or part of a QFPF. The preamble to the proposed regulations explained that the qualified holder rule is necessary to prevent the inappropriate avoidance of section 897(a) through QFPFs indirectly acquiring USRPIs held by foreign corporations that would not have otherwise qualified for the exception under section 897(l).

Comments recommended that the final regulations either modify the qualified holder rule or implement one of several alternatives. Comments agreed that the QFPF exception should not apply to exempt gain that would otherwise have been subject to tax under section 897. However, the comments argued that the qualified holder rule in the proposed regulations was overbroad because it could apply to any failure to qualify as a QFPF or QCE in the testing period, even if the failure was unintentional or had no potential for abuse.

One comment requested that the final regulations provide a tolling period if there is an inadvertent failure to qualify as a QFPF and that failure is remedied in the following year. Another comment requested that the final regulations provide an exception to the qualified holder rule to exclude the situation in which a QFPF does not qualify solely because it fails to meet the requirements in proposed § 1.897(l)-1(c)(2) (relating to the requirements an eligible fund must satisfy to be treated as a QFPF). The comment further recommended allowing a mark-to-market approach, whereby an election to recognize any net built-in gain at the time a QFPF acquires a non-QFPF that owns a USRPI could be made so that the non-QFPF could then be treated as a QCE with respect to any future disposition of its USRPI (similar to § 1.337(d)-7(a) for the conversion of certain corporations to regulated investment companies (“RIC”) or real estate investment trusts (“REIT”)). In addition, the comment requested that the qualified holder rule be limited to apply only to USRPIs held by non-QFPFs when such non-QFPFs are acquired by a QFPF, resulting in a tracing approach that would prevent section 897(l) from applying only to a disposition of those specific USRPIs. The comment also recommended that the final regulations shorten the maximum testing period from ten to five years, which is consistent with the five-year maximum testing period for a RIC or REIT to be a domestically controlled qualified investment entity under section 897(h)(4).

As alternatives to the qualified holder rule, one comment requested that the Treasury Department and the IRS either allow a mark-to-market approach at the taxpayer's election (similar to that suggested by other comments), under which the entity acquired by the QFPF would account for the gain when the entity is acquired by the QFPF, or require tracing the unrealized gain when the entity is acquired by a QFPF or QCE so that section 897(a) can apply to the pre-acquisition gain upon a subsequent sale or exchange.

Under the final regulations, the substance of the qualified holder rule is the same as it was in the proposed regulations; however, for greater clarity, the final regulations identify the qualified holder rule as a separate requirement to qualify for the section 897(l) exemption rather than as part of the definitions. § 1.897(l)-1(d). To be a qualified holder, a QFPF or a QCE must satisfy one of two alternative tests at the time of the disposition of the USRPI or the distribution described in section 897(h). § 1.897(l)-1(d)(1). Under the first test, a QFPF or a QCE is a qualified holder if it owned no USRPIs as of the earliest date during an uninterrupted period ending on the date of the disposition or distribution during which it qualified as a QFPF or a QCE. § 1.897(l)-1(d)(2). Alternatively, if a QFPF or a QCE held USRPIs as of the earliest date during the period described in the preceding sentence, it can be a qualified holder only if it satisfies the applicable testing period requirement, which is unchanged from the proposed regulations. § 1.897(l)-1(d)(3).

The final regulations also include two transition rules. First, with respect to any period from December 18, 2015, to the date when the requirements of section 1.897(l)-1(c)(2) or (e)(9) first apply to a QFPF or QCE, as applicable (but in any event no later than December 29, 2022, in the case of section 1.897(l)-1(c)(2), and no later than June 6, 2019, in the case of section 1.897(l)-1(e)(9)), the QFPF or QCE is deemed to satisfy the requirements of section 1.897(l)-1(c)(2) and (e)(9), as applicable, for purposes of section 1.897(l)-1(d)(2) and (3) if the QFPF or QCE satisfies the requirements of section 897(l)(2) based on a reasonable interpretation of those requirements (including determining any applicable valuations using a consistent method). Second, in determining whether a QCE is a qualified holder, solely with respect to the two tests in section 1.897(l)-1(d)(2) and (3), the final regulations allow the QCE to disregard a de minimis interest owned by any person that provides services to the QCE from December 18, 2015 to February 27, 2023 (the “transition period”). § 1.897(l)-1(d)(4)(ii). This second transition rule does not apply for purposes of determining QCE status under section 1.897(l)-1(e)(9) at the time of any disposition or distribution involving a USRPI. Thus, its application is limited to cases in which a trust or corporation failed to qualify as a QCE (and, therefore, as a qualified holder) during the transition period solely because of a de minimis interest owned by any person that provides services to the QCE (such as a manager or director). In that case, the transition rule allows the trust or corporation to eliminate the service provider's ownership within the transition period and thereby avoid having to apply the tests for qualified holder status under section 1.897(l)-1(d)(2) or (3) by reference to the date that the service provider's interest is eliminated. This may, for example, prevent the restarting of a ten-year testing period on the date that the service provider's interest is eliminated. Any disposition of USRPIs during the period when the trust or corporation had the service provider as an interest holder still would not qualify for the section 897(l) exemption.

The Treasury Department and the IRS agree that the application of the qualified holder rule to an inadvertent failure to qualify as a QFPF could produce inappropriate results, particularly in the case where an eligible fund fails to meet the requirements in § 1.897(l)-1(c)(2)(ii)(B)( 2 ) because it unexpectedly projects that it will provide less than 85 percent retirement and pension benefits. Although the final regulations ultimately adopt the qualified holder rule without the changes recommended by the comments, the final regulations provide relief in the following ways:

• adding an alternative calculation to the requirements in § 1.897(l)-1(c)(2)(ii)(B)( 2 ) and ( 3 ) based on the average of the present values of the future benefits expected to be provided, as determined in the 48 months preceding (and including) the most recent valuation (the “48-month alternative calculation,” described further in Part II.A.2 of this Summary of Comments and Explanation of Revisions);

• adding a definition of retirement and pension benefits;

• clarifying the scope of ancillary benefits; and

• allowing an eligible fund to provide a de minimis amount of non-ancillary benefits (described further in Part II.A.3 of this Summary of Comments and Explanation of Revisions).

Together, these changes provide relief to eligible funds that would otherwise unexpectedly fail to qualify as a QFPF in any given year and alleviate the underlying concerns regarding the breadth of the qualified holder rule.

In light of the changes described in the preceding paragraph, the final regulations do not adopt the recommendation to allow a tolling period to remedy the loss of QFPF status. For the same reasons, the final regulations also do not adopt the recommendation to provide an exception to the qualified holder rule for any failure to meet the requirements in § 1.897(l)-1(c)(2) or to have the qualified holder rule apply only to USRPIs owned by non-QFPFs when such non-QFPFs are acquired by a QFPF. The section 897(l) exception provides a substantial benefit to investors, and it is appropriate to require an eligible fund to meet the requirements in the final regulations for a ten-year maximum testing period before obtaining tax-free treatment to ensure the exception is not claimed inappropriately. Cf. section 877 (requiring taxpayer to be subject to potential additional U.S. taxation for ten years after relinquishing U.S. citizenship); §§ 1400Z-2 (allowing taxpayer to receive a step-up in basis of property equal to its fair market value if held for ten years); 1.937-2(f) (requiring individual to be bona fide resident of a territory for 10 years before sale of property is sourced to territory and receives beneficial tax rate). Accordingly, the final regulations also do not adopt a maximum testing period that is shorter than ten years.

With respect to the suggested alternatives to the qualified holder rule, the preamble to the proposed regulations explained that the mark-to-market and tracing approaches both imposed greater compliance and administrative costs relative to the testing-period approach without providing any accompanying general economic benefit. Even if the investor is given the option to elect a mark-to-market approach, it would still present compliance and administrative barriers because fair market valuations of real property are not readily available. The tracing approach would similarly impose compliance and administrative burdens, as such an approach would require obtaining a fair market valuation of real property when an entity became a QCE, as well as tracking the USRPIs that were acquired before the entity became a QCE so that the pre-acquisition built-in gain could be recognized upon a later disposition. Accordingly, the final regulations do not adopt the mark-to-market or tracing alternatives.

The proposed regulations provided that a qualified holder is exempt from section 897(a) only with respect to gain or loss that is attributable to one or more qualified segregated accounts maintained by the qualified holder. Prop. § 1.897(l)-1(b)(2). The proposed regulations defined a qualified segregated account as an identifiable pool of assets maintained for the sole purpose of funding qualified benefits (that is, retirement, pension, or ancillary benefits) to qualified recipients (generally, plan participants and beneficiaries). See Prop. § 1.897(l)- 1(d)(13)(i). The proposed regulations provided separate standards for determining whether an identifiable pool of assets is maintained for the sole purpose of funding qualified benefits depending on whether the pool of assets is maintained by an eligible fund (including an eligible fund that satisfies the requirements to be treated as a QFPF) or a QCE. See Prop. § 1.897(l)-1(d)(13)(ii); Prop. § 1.897(l)-1(d)(13)(iii).

Comments requested that the final regulations clarify the standards that apply for determining whether an identifiable pool of assets is maintained for the sole purpose of funding qualified benefits, and one comment recommended removing the standards altogether. Specifically, comments identified several situations in which qualified segregated accounts are maintained for the sole purpose of funding qualified benefits to qualified recipients, but where the funds could nevertheless be disbursed for other purposes or to non-qualified recipients. For example, one comment noted that an eligible fund could rebate an overfunded amount by a foreign defined benefit pension fund to an employer. Another comment noted that assets might not be disbursed to qualified recipients or used to pay reasonable plan expenses if a potential change in foreign law impacts how fund assets can be used. One comment highlighted that assets might revert to sponsoring employers if employees cease participating in the plan before their benefits have vested. Another comment cited the possibility that upon a dissolution of the eligible fund, assets could revert to the employer after satisfying its obligations to qualified recipients and creditors. In each such situation, the comments recommended that the final regulations clarify that a pool of assets would not fail to qualify as a qualified segregated account. One comment further recommended that the final regulations eliminate the requirement that all income and assets maintained in a qualified segregated account of an eligible fund be used to fund the provision of qualified benefits to qualified recipients because such a provision is unnecessary to ensure that income and assets of an eligible fund do not inure to inappropriate recipients.

The Treasury Department and the IRS agree that in certain situations the reversion of funds to a governmental unit or an employer, after satisfaction of liabilities to creditors and qualified recipients, should not disqualify the account from being treated as maintained for the sole purpose of funding qualified benefits to be provided to qualified recipients. Accordingly, the final regulations clarify that a qualified segregated account that is held by an eligible fund is treated as maintained for the sole purpose of funding qualified benefits to be provided to qualified recipients notwithstanding that funds may revert (such as upon dissolution or the benefits failing to vest) to the governmental unit or employer in accordance with applicable foreign law so long as contributions to the plan are not more than what is reasonably necessary to fund the qualified benefits to be provided to qualified recipients. § 1.897(l)-1(e)(13)(i). This requirement ensures that a governmental unit or employer does not qualify for benefits under section 897(l) to the extent it inappropriately overfunds the plan.

One comment further recommended that the final regulations treat an eligible fund's interest in a corporation as a qualified segregated account. This recommendation was made to resolve the issue, described in Part I.A.1 of this Summary of Comments and Explanation of Revisions, that arises when multiple foreign government entities, some of which are QFPFs and some of which are not, jointly invest in USRPIs through a foreign partnership that is treated as a per se corporation for U.S. federal tax purposes (pursuant to § 301.7701-2(b)(6)), but cannot qualify as a QCE because not all of the investors are QFPFs.

The final regulations do not adopt this recommendation for several reasons. First, the suggestion contemplates a situation that is contrary to the requirement in section 897(l)(1) that requires an entity to be wholly owned by a QFPF in order to qualify for the exception under section 897(l). Thus, the recommendation potentially allows the exemption from taxation under section 897(a) to inure to non-QFPFs. Second, the issue described in the comment ultimately arises because of the rule under § 301.7701-2(b)(6) rather than the final regulations, and therefore a modification to the final regulations is not the appropriate resolution. Third, the recommendation does not ensure that the assets or income of the corporation are used only for the purpose of providing benefits to qualified recipients, a key purpose of the qualified segregated account rules.

The proposed regulations allowed pension funds established by one or more employers and government-sponsored public pension funds to be considered QFPFs. Specifically, the proposed regulations provided that an eligible fund must be established by either (i) the foreign country in which it is created or organized to provide retirement or pension benefits to participants or beneficiaries that are current or former employees or persons designated by such employees as a result of services rendered by such employees to their employers (“government-established fund”), or (ii) one or more employers to provide retirement or pension benefits to participants or beneficiaries that are current or former employees or persons designated by such employees in consideration for services rendered by such employees to such employers (“employer fund”). Prop. § 1.897(l)-1(c)(2)(ii)(A). The language in proposed § 1.897(l)-1(c)(2)(ii)(A) generally reflected the statutory language in section 897(l)(2)(B).

One comment requested that the final regulations clarify the requirement that an eligible fund be “established by” a foreign government in the case of a government-established fund. The comment expressed concern that the “established by” requirement in the proposed regulations could exclude the national pension systems of certain countries under which accounts in the names of individual participants are maintained by private entities. The comment explained that some foreign countries have pension systems in which all employees (or employees working in a certain sector of the economy) are required by law to establish a pension account held and managed by a private pension administrator. Although the arrangement is created by government mandate and subject to government regulation, the private pension administrators form the investment vehicles, select the investment advisors, and receive, invest, and disburse the funds. The extent of additional government involvement varies, but could include the government being the conduit through which contributions by employers and employees are funneled into the plans or benefits are disbursed. The comment asserted that such an arrangement should be treated as “established by” the foreign government for purposes of qualifying as a government-established fund and that each private pension administrator, the investment vehicles that it establishes, and any government office that is within the flow of funds should be treated as part of an “arrangement” that maintains qualified segregated accounts. According to the comment, if participation in the pension system is mandatory, a foreign government should meet the “established by” requirement for a government-established fund even if the government does not actually receive contributions and disburse benefits or hold or invest the funds. The comment recommended that the final regulations clarify that an arrangement created pursuant to a foreign government mandate, but in which private investment managers hold and invest contributions, should be treated as “established by” the foreign government.

The Treasury Department and the IRS recognize that eligible funds in foreign countries may be established and administered in numerous ways. The Treasury Department and the IRS also continue to believe that the purpose of section 897(l) is best served by permitting a broad range of structures to be treated as a QFPF. Accordingly, the final regulations clarify that an eligible fund may be established by, or at the direction of, a foreign jurisdiction for purposes of qualifying as a government-established fund. § 1.897(l)-1(c)(2)(ii)(A)( 1 )( i ). If an eligible fund is established at the direction of a foreign jurisdiction to provide benefits to the establishing entity's employees in consideration for services rendered to the establishing entity, the final regulations clarify that the fund will be considered an employer fund only. § 1.897(l)-1(c)(2)(ii)(A)( 2 ). Finally, the final regulations clarify that an eligible fund is treated as being established by a foreign jurisdiction or an employer notwithstanding that one or more persons that are not the foreign jurisdiction or employer administers the eligible fund. § 1.897(l)-1(c)(2)(ii)(A)( 3 ). Thus, an arrangement created pursuant to a foreign government mandate in which private investment managers hold and invest contributions is treated as “established by” the foreign government.

One comment indicated that, under the proposed regulations, it was not clear that a QFPF could include pension arrangements established by governmental units in their function as employers, while also noting that such funds could potentially qualify as both a government-established fund and an employer fund. The comment recommended clarifying that an otherwise qualifying pension fund can be established by government employers.

The final regulations clarify that an eligible fund can be established by a governmental unit acting in its capacity as an employer, and specify that such a fund constitutes an employer fund. § 1.897(l)-1(c)(2)(ii)(A).

Proposed § 1.897(l)-1(c)(2)(ii)(B) required that all of the benefits that an eligible fund provides are qualified benefits to qualified recipients (the “100 percent threshold”), and that at least 85 percent of the present value of the qualified benefits that the eligible fund reasonably expects to provide in the future are retirement or pension benefits (the “85 percent threshold”). For this purpose, qualified benefits were defined as retirement, pension, or ancillary benefits. Prop. § 1.897(l)-1(d)(8). As discussed in the preamble to the proposed regulations, the Treasury Department and the IRS adopted the 85 percent threshold because it was more administrable and provided more certainty to taxpayers than a subjective standard. The preamble to the proposed regulations indicated that the calculation of the 85 percent threshold would be made on an annual basis, but the proposed regulations did not explicitly identify a period for making this determination.

Several comments stated that a strict numerical threshold created a cliff effect and caused uncertainty as to whether an eligible fund would qualify as a QFPF on a consistent basis over several years. Particular concern was expressed by one comment that an annual test may cause disqualification as a QFPF for reasons not entirely within the eligible fund's control, such as when the population of qualified recipients changes. Other comments stated that the present value calculation in the proposed regulations was vague, and one comment stated that the proposed regulations did not clearly identify the frequency with which the reasonable expectation of present value should be calculated.

Based on these observations, several comments suggested that the objective 85 percent threshold should be replaced with a subjective test assessing the fund's purpose. These comments suggested that instead of the 85 percent threshold, a fund's purpose should be determined, considering all the facts and circumstances, by assessing whether the fund was established to provide retirement and pension benefits. Comments also suggested that the 85 percent threshold could be used as a safe harbor; a fund that does not meet that requirement would then have to show that it was established to provide retirement and pension benefits given all the facts and circumstances. One comment suggested another safe harbor whereby any fund that did not meet the 85 percent threshold could still qualify as a QFPF on a proportionate basis by comparing the present value of the retirement and pension benefits the fund reasonably expects to pay to the present value of all benefits it reasonably expects to pay.

Several comments stated that if the 85 percent threshold were retained, the final regulations should provide guidance on the assumptions that may be made in making the present value calculation, including the frequency of the calculation. One comment suggested that forecasts of anticipated future benefits that are already prepared by the eligible fund should be considered reasonable if they are based on data that the fund prepares for general business purposes in accordance with internal procedures. Another comment suggested that reasonable actuarial standards applied in good faith could be a basis for this calculation.

In addition, several comments requested that the final regulations provide relief if a fund does not qualify as a QFPF in a particular year. These comments suggested that a look-back rule allow eligible funds to calculate compliance with the 85 percent threshold over a multi-year period, such as three years, rather than on an annual basis. One comment suggested other alternatives, such as providing a grace period during which a fund could regain compliance as a QFPF without losing its exempt status or the granting of proportionate eligibility as a QFPF.

The Treasury Department and the IRS continue to believe that the 85 percent threshold is more administrable and provides more certainty than a subjective standard for determining whether an eligible fund is established to provide retirement and pension benefits. The Treasury Department and the IRS also continue to believe that this threshold allows an appropriate margin for nonconforming benefits. Accordingly, the final regulations retain the 100 percent threshold and 85 percent threshold, and do not adopt a subjective standard. § 1.897(l)-1(c)(2)(ii)(B). However, several other comments suggesting further clarity or relief with respect to the 85 percent threshold are incorporated in the final regulations, as described in paragraphs II.A.2.c. and II.A.2.d. of this Summary of Comments and Explanation of Revisions.

The Treasury Department and the IRS believe that further guidance with respect to determining the present value of benefits that an eligible fund reasonably expects to provide is appropriate. To clarify what this calculation is intended to value, the final regulations state that the eligible fund must measure the present value of benefits to be provided during the entire period during which the fund is expected to be in existence. § 1.897(l)-1(c)(2)(ii)(C)( 1 ). Comments articulated different, though potentially overlapping, benchmarks for determining what valuation methods would be considered reasonable—for example, making the determination based on data prepared for general business purposes in accordance with internal procedures or based on actuarial standards applied in good faith. As a result, the Treasury Department and the IRS have decided to use a broad standard that would accommodate all such suggestions by providing that an eligible fund may utilize any reasonable method for determining present value. Id. Although the final regulations are intended to provide flexibility as to the method used for determining present value, the Commissioner may determine that the present valuation requirement is not satisfied if the relevant facts and circumstances indicate that the method used was unreasonable (for example, it may be relevant that the method used results in a percentage calculation of retirement and pension benefits that differs materially from the actual percentage of the retirement and pension benefits provided before the most recent present valuation date). See also § 1.897(l)-1(c)(3)(iii) for the requirement that an eligible fund maintain records to show it meets the requirements of § 1.897(l)-1(c)(2), which is discussed in Part III.B. of this Summary of Comments and Explanation of Revisions.

The Treasury Department and the IRS believe that further guidance is also appropriate with respect to the frequency with which the valuation needs to be made. The final regulations state that such a determination must be made on at least an annual basis. § 1.897(l)-1(c)(2)(ii)(C)( 1 ). Thus, for example, if an eligible fund changes its taxable year and has a short taxable year, the eligible fund may make its present value determination for the short taxable year provided that it makes another present value determination within one year. Consistent with the above, the final regulations clarify that an eligible fund must use its most recent present value determination (or its most recent 48-month alternative calculation, described in Part II. A.2.d. of this Summary of Comments and Explanation of Revisions) with respect to dispositions of USRPIs or distributions described in section 897(h) that occur during the twelve months that succeed such present value determination (or 48-month alternative calculation), or until a new present value determination is made, whichever occurs first. § 1.897(l)-1(c)(2)(ii)(C)( 3 ).

Finally, the Treasury Department and the IRS agree that because unanticipated events may cause a fund to fail the 85 percent threshold in any one year, the fund should still qualify as a QFPF if it shows that is has consistently qualified as such over an extended period. The final regulations therefore adopt a 48-month alternative calculation test as another means to satisfy the 85 percent threshold. § 1.897(l)-1(c)(2)(ii)(C)( 2 ). The 48-month alternative calculation test is satisfied if the average of the present values of the retirement and pension benefits the eligible fund reasonably expected to provide over its life, as determined by the valuations performed over the 48 months preceding (and including) the most recent present valuation, satisfies the 85 percent threshold. 2 The determination of such average is based on the values (not percentages) of the qualified benefits the eligible fund reasonably expected to provide. In addition, the 48-month alternative calculation must be determined using a weighted average whereby values are adjusted, if necessary, when the length of valuation periods differs. 3 If an eligible fund has been in existence for less than 48 months, the 48-month alternative calculation is applied to the period the eligible fund has been in existence. The 48-month alternative calculation may be satisfied based on any reasonable determination of the present valuation for any period that starts before the date that the valuation requirements first apply to an organization or arrangement and ends on or before December 29, 2022.

While the comments and related changes to the final regulations described above apply to the 85 percent threshold, similar rules have also been added for consistency with respect to the new category of non-ancillary benefits added to the final regulations and further described in Part II.A.3.b of this Summary of Comments and Explanation of Revisions.

The proposed regulations did not provide a definition of retirement and pension benefits. Rather, in the preamble to the proposed regulations, the Treasury Department and the IRS requested comments on whether the regulations should define retirement and pension benefits (for example, with reference to whether there are penalties for early withdrawals).

Although one comment suggested that the term retirement and pension benefits was clear and did not require a definition, most comments requested that the final regulations provide a definition of retirement and pension benefits. Comments recommended several sources that the final regulations might refer to in defining retirement and pension benefits, including the Employee Retirement Income Security Act of 1974 (“ERISA”), U.S. federal income tax law principles (for example, Chapter 1, Subchapter D of the Code and corresponding Treasury Regulations), and income tax treaties. One comment suggested that the final regulations provide separate definitions of retirement and pension benefits based in part on these sources of U.S. tax law. This comment generally proposed defining retirement benefits as those benefits that are paid after reaching a predetermined retirement age that are provided in return for services rendered or contributions made. The comment generally proposed defining pension benefits as those benefits paid after the participant retires due to a proven disability before having reached a predetermined retirement age or paid to surviving beneficiaries if the participant dies before reaching the predetermined retirement age and that are provided in return for services rendered or contributions made.

In response to these comments and to provide greater clarity, the final regulations provide a definition of retirement and pension benefits. Furthermore, the final regulations adopt a broad definition of retirement and pension benefits to ensure that a wide variety of pension funds and foreign laws are accommodated. Thus, the final regulations provide that retirement and pension benefits mean benefits payable to qualified recipients after reaching retirement age under the terms of the eligible fund, or after an event in which the eligible fund recognizes that a qualified recipient is permanently unable to work, and including any such distribution made to a surviving beneficiary of the qualified recipient. § 1.897(l)-1(e)(14). The inclusion of payments of accrued benefits after a specified event that results in a permanent disability (such that the qualified recipient is unable to work) or survivor benefits in the definition of retirement and pension benefits is intended to resolve concerns expressed in comments regarding the potential overlap of such benefits with the benefits listed in the definition of ancillary benefits in proposed § 1.897(l)-1(d)(1) (for example, the proposed definition of ancillary benefits included death and disability benefits). To provide additional clarity regarding the factors that would indicate whether a benefit is a retirement and pension benefit, as well as the distinction between retirement and pension benefits and ancillary benefits, the final regulations also provide that retirement and pension benefits are generally based on contributions and investment performance, as well as factors such as years of service with an employer and compensation received by the qualified recipient. Id. The final regulations do not require retirement and pension benefits to be paid in a particular manner (that is, an annuity versus a lump-sum).

The proposed regulations defined ancillary benefits to mean benefits payable upon the diagnosis of a terminal illness, death benefits, disability benefits, medical benefits, unemployment benefits, or similar benefits. Prop. § 1.897(l)-1(d)(1).

As discussed in Part II.A.2 of this Summary of Comments and Explanation of Revisions, numerous comments requested that the final regulations provide clarifications and incorporate flexibility into the definition of ancillary benefits in light of the cliff effect caused by the use of the 100 percent and 85 percent thresholds to determine whether an eligible fund qualifies as a QFPF. Comments highlighted that the funds may be allowed, or required, to provide certain benefits to its participants or beneficiaries that are not enumerated in the definition of ancillary benefits, such as limited withdrawals to fund a first home. Comments expressed concern that the provision of such a benefit would disqualify the plan from the exemption under section 897(l) because such a benefit is not listed in the definition of ancillary benefits, it is not certain whether such benefit is a “similar benefit,” and the numerical thresholds do not allow for the provision of any benefits other than retirement and pension or ancillary benefits. The comments argued that the provision of such benefits should not disqualify the plan from the exemption under section 897(l) because, generally, the provision of such benefits is not the main purpose of the plan and represents only a small portion of the benefits paid out by the plan.

Comments suggested clarifying the scope of the term “similar benefits” in the definition of ancillary benefits and expanding the definition of ancillary benefits to include any benefits that are allowed or required to be paid under the laws of the foreign jurisdiction in which the fund is created or organized. Comments also argued that a broad category of ancillary or other benefits tied to the benefits allowed under foreign law is needed to accommodate potential changes to the type of benefits allowed under foreign pension regimes. One comment recommended that such a rule also apply where pension plans and non-qualifying plans providing for other types of benefits are required by foreign law to be pooled into one fund or arrangement, which might otherwise preclude an eligible entity from being a QFPF even though it is predominantly a pension fund.

Several comments recommended that the final regulations allow for a fund to provide a de minimis amount of benefits that are neither retirement and pension benefits nor any of the benefits listed under the definition of ancillary benefits in the proposed regulations. One comment recommended permitting a de minimis percentage of the total benefits provided by a fund (for example, up to five percent) to be any benefits that are not retirement and pension benefits or specifically listed in the definition of ancillary benefits, provided the benefits are required or allowed to be paid under the laws of the foreign jurisdiction where the fund is created or organized. Another comment, citing the broad range of foreign pension arrangements and the lack of clear guidance in certain jurisdictions regarding the potential benefits that can be provided by pension arrangements, suggested a de minimis amount (for example, three percent) of total benefits be allowed for non-ordinary benefits that fall outside the scope of the definition of ancillary benefits.

Several comments also noted that certain of the benefits enumerated in the definition of ancillary benefits in the proposed regulations may be more closely related to the payment of retirement and pension benefits. For example, one comment noted that a participant or beneficiary may be eligible to make withdrawals of their retirement and pension benefits before reaching retirement age upon permanent disability or diagnosis of a terminal illness. These and other types of similar benefits, such as survivor benefits (that is, payments of the beneficiary or participant's retirement and pension benefits to a surviving designee upon the death of the beneficiary or participant), are paid in recognition of past service or because the plan participant is unable to continue working or care for their dependents. In such cases, the benefit is effectively being paid as a retirement and pension benefit, but such benefit could improperly be considered an ancillary benefit under the definition in proposed § 1.897(l)-1(d)(1). Another comment similarly noted that ancillary benefits should not refer to annuities payable to surviving beneficiaries or on early retirement because of a disability and suggested that the definition of ancillary benefits be modified to refer only to certain one-time payments made in connection with disability, terminal illness, or death. One comment noted that many benefits that otherwise might be ancillary benefits, such as medical and disability benefits, are often available principally to retirees. Thus, comments recommended that the definition of ancillary benefits be clarified such that benefits that are more appropriately characterized as retirement and pension benefits are not inappropriately treated as ancillary benefits.

In response to the comments, the final regulations provide additional clarity with respect to the types of benefits permitted to be provided by a QFPF.

First, as discussed in Part II.A.3.a of this Summary of Comments and Explanation of Revisions, the final regulations provide a definition of retirement and pension benefits, which is intended to clarify that certain benefits that may have potentially been categorized as ancillary benefits under the proposed regulations are retirement and pension benefits. This definition should assist in distinguishing retirement and pension benefits from ancillary benefits and, because more benefits should be characterized as retirement and pension benefits, should lessen the concern that the provision of ancillary benefits will jeopardize qualification as a QFPF.

Second, the final regulations modify the definition of ancillary benefits by providing a more detailed list of specific types of benefits that meet the ancillary benefits definition. § 1.897(l)-1(e)(1). The revised definition clarifies that, in addition to benefits payable upon the diagnosis of a terminal illness, medical benefits, or unemployment benefits, ancillary benefits also include incidental death benefits (for example, funeral expenses), short-term disability benefits, life insurance benefits, and shutdown or layoff benefits. To distinguish between unemployment, shutdown, or layoff benefits that might also be considered retirement and pension benefits, the final regulations state that those types of benefits will be considered ancillary benefits only if they do not continue past retirement age and do not affect the payment of accrued retirement and pension benefits. § 1.897(l)-1(e)(1)(i)(B). In addition, the final regulations clarify what benefits are considered similar to the specifically identified ancillary benefits by indicating that such similar benefits should also be either health-related or unemployment benefits. § 1.897(l)-1(e)(1)(i)(C). Lastly, for the avoidance of doubt, the final regulations resolve any potential overlap between the definitions of retirement and pension benefits and ancillary benefits by providing that if any benefits fall within both definitions, they are only considered to be retirement and pension benefits. § 1.897(l)-1(e)(1)(ii). The Treasury Department and the IRS intend for this rule to have limited application given the definitions of retirement and pension benefits and ancillary benefits provided in the final regulations.

Third, the Treasury Department and the IRS have determined that it is appropriate to permit a limited amount of benefits that are outside the scope of retirement and pension benefits and ancillary benefits. The final regulations therefore allow an eligible fund to provide a limited amount of non-ancillary benefits, which the final regulations define as any benefits provided by the eligible fund as permitted or required under the laws of the foreign jurisdiction in which the fund is established or operates that do not otherwise fall within the definition of retirement and pension benefits or ancillary benefits. § 1.897(l)-1(e)(6). The final regulations provide that no more than five percent of the present value of the qualified benefits the eligible fund reasonably expects to provide to qualified recipients during the entire period during which the eligible fund is expected to be in existence can be non-ancillary benefits. § 1.897(l)-1(c)(2)(ii)(B)( 3 ). This measurement of non-ancillary benefits is determined under the same rules that apply to the present valuation of retirement and pension benefits for purposes of the 85 percent threshold, which are described in Part II.A.2 of this Summary of Comments and Explanation of Revisions.

The final regulations incorporate the allowance for non-ancillary benefits into the 100 percent threshold by revising the definition of “qualified benefits” in the proposed regulations. Specifically, non-ancillary benefits and ancillary benefits, together with the new definition of retirement and pension benefits, comprise the “qualified benefits” that an eligible fund must provide to meet the 100 percent threshold. § 1.897(l)-1(e)(8).

The proposed regulations did not explicitly address how early withdrawals from a QFPF should be treated for purposes of determining the amount of retirement or other benefits paid by the QFPF. Specifically, the proposed regulations did not discuss how to treat withdrawals made from one retirement plan and rolled over into a different retirement plan, early withdrawals that certain plans may permit in accordance with country-specific laws, or loans made by an eligible fund. One comment suggested that rollover distributions should not be considered as benefits paid by a plan and thus should be excluded when determining an eligible fund's eligibility as a QFPF. The comment also recommended that in-service plan withdrawals or loans should not be taken into account in calculating the benefits paid by an eligible fund provided that in-service withdrawals before retirement age are permissible under the plan terms or relevant law.

The Treasury Department and the IRS have considered these recommendations and generally agree that the types of withdrawals described above should not be taken into account when calculating the 100 percent threshold, the 85 percent threshold, or the limitation on non-ancillary benefits. As a result, the final regulations add three categories of distributions that are excluded when making these determinations. § 1.897(l)-1(c)(2)(ii)(D).

The first category is a loan to a qualified recipient pursuant to terms set by the eligible fund. Because there is an expectation of repayment, these types of loans should not be included when making threshold benefit determinations. This category, however, excludes a loan that a qualified recipient is not required to repay, in full or in part, upon default (which would generally constitute the provision of a non-ancillary benefit), unless such a default is subject to tax and penalty in a foreign jurisdiction.

The second category is a distribution permitted under the laws of the foreign jurisdiction in which the eligible fund is established or operates and made before the participant or beneficiary reaches the retirement age as determined under relevant foreign laws, but only if the distribution is to a qualified holder or other retirement or pension arrangement subject to similar distribution or tax rules under the laws of the foreign jurisdiction. Such rollover distributions are simply shifting funds between one eligible fund and another similar fund (even if such fund does not qualify as a QFPF) and thus should also be excluded when making the 100 percent and 85 percent threshold determinations.

The third category is a withdrawal of funds before the participant or beneficiary reaches retirement age to satisfy a financial need under principles similar to the U.S. hardship distribution rules permitted under the laws of the foreign jurisdiction in which the eligible fund is established or operates, provided the distribution (or at least the portion of the distribution exceeding basis) is subject to tax and penalty in such foreign jurisdiction. Because the qualified recipient bears some or all of the financial burden with regard to such hardship withdrawals, they are excluded when making threshold benefit determinations.

Proposed § 1.897(l)-1(c)(2)(ii)(B)( 1 ) required that all the benefits that an eligible fund provides be qualified benefits to qualified recipients. With respect to a government-established fund, proposed § 1.897(l)-1(d)(12)(i)(A) defined a qualified recipient as any person eligible to be treated as a participant or beneficiary of such eligible fund and any person designated by such person to receive qualified benefits. Thus, the determination of whether a person was a qualified recipient of a government-established fund was made without regard to an individual's status as a current or former employee. With respect to an employer fund, proposed § 1.897(l)-1(d)(12)(i)(B) defined a qualified recipient as a current or former employee or any person designated by such current or former employee to receive qualified benefits.

Several comments stated that the proposed regulations were too restrictive because they did not allow for the possible participation of individuals in an employer fund if they were neither current nor former employees, as allowed in some countries. The comments noted, however, that individuals who have never been employees represent only a minority of members in any fund. One comment suggested that the definition of qualified recipient be expanded accordingly to include any individual allowed to participate in an eligible fund under the laws of the foreign jurisdiction in which the fund is created or organized. Another comment requested that the definition of qualified recipient include a de minimis threshold for members of an eligible fund that are neither current nor former employees. For example, an eligible fund could qualify for the section 897(l) exemption (assuming all other requirements were met) if more than 70 percent of its members were current or former employees measured annually. The comment also recommended that spouses of eligible participants or beneficiaries should be explicitly identified as qualified recipients as defined in proposed § 1.897(l)-1(d)(12).

Another comment stated that, as to government-established funds, the term qualified recipient could potentially be read as encompassing a broad group of participants in other types of government programs beyond just pension funds. The comment requested that the final regulations make explicit that a recipient (or person designating the recipient) must both have been employed and be receiving benefits by reason of his or her employment. Finally, one comment noted that the proposed regulations appropriately treated a self-employed individual as both an employer and an employee. Prop. § 1.897(l)-1(c)(2)(ii)(C). The comment requested that proposed § 1.897(l)-1(e), example 1, be altered to clarify that the retirement benefits provided under the facts of the example were provided as a result of citizens' services as employed or self-employed individuals.

The Treasury Department and the IRS agree that the proposed regulations may unnecessarily restrict arrangements, permitted in certain countries, that allow for the participation of individuals who were never employees in an employer fund. Further, the Treasury Department and the IRS understand that such individuals represent only a minority of members in any fund. The Treasury Department and the IRS believe that unlimited or significant participation by individuals who were never employees or their designees would be inappropriate. The final regulations therefore allow individuals who were never employees to constitute up to five percent of participants in plans established by employers (and therefore to be treated as qualified recipients). § 1.897(l)-1(e)(12)(i)(C). The final regulations also include spouses of current or former employees in the definition of qualified recipients. § 1.897(l)-1(e)(12)(i)(B).

The Treasury Department and the IRS do not believe that further changes are necessary to (1) make explicit that a qualified recipient (or person designating the recipient) with respect to a government-established fund must both have been employed and be receiving benefits by reason of his or her employment, or (2) to modify proposed § 1.897(l)-1(e), example 1, to state that the retirement and pension benefits provided by the government-established fund were provided as a result of citizens' services as employed or self-employed individuals. As provided in the proposed regulations, a government-established fund must be established to provide retirement or pension benefits to participants or beneficiaries that are current or former employees or persons designated by such employees as a result of services rendered by such employees to their employers, but may include participants on a basis broader than an employee relationship. The comments seeking to narrow the scope of qualified recipients for government-established funds are inconsistent with the request to broaden the definition of a qualified recipient with respect to an employer fund to include (within limits) individuals who were never employees. At the same time, the Treasury Department and the IRS believe that an explicit connection between the work of an employee and the qualified benefits provided by an eligible fund is reflected in the final regulations through the definition of a government-established fund, as well as the requirement that all eligible funds must reasonably expect to provide 85 percent retirement and pension benefits, which are defined in the final regulations at § 1.897(l)-1(e)(14). These requirements provide an appropriate safeguard to ensure that government programs other than retirement and pension programs do not form the basis for exemption from tax under section 897(l). Finally, the Treasury Department and the IRS believe that the rule reflected in § 1.897(l)-1(c)(2)(ii)(E)( 1 ) (previously at proposed § 1.897(l)-1(c)(2)(ii)(C)( 1 )), which explicitly states that a self-employed individual is considered both an employer and employee, makes adding a reference to self-employed individuals in proposed § 1.897(l)-1(e), example 1, unnecessary.

The proposed regulations provided that an eligible fund satisfies the information reporting requirement in section 897(l)(2)(D) only if the eligible fund annually provides to the relevant tax authorities in the foreign country in which the fund is established or operates the amount of qualified benefits provided to each qualified recipient by the eligible fund (if any), or such information is otherwise available to those authorities. Prop. § 1.897(l)-1(c)(iv)(B). An eligible fund is not treated as failing to satisfy such requirement if the eligible fund is not required to provide information to the relevant tax authorities in a year in which no qualified benefits are provided to qualified recipients. Id. An eligible fund is also treated as satisfying the information reporting requirement in section 897(l)(2)(D) only if the eligible fund is required to provide the information required by proposed § 1.897(l)-1(c)(iv)(B), or such information is otherwise available, to one or more governmental units. Prop. § 1.897(l)-1(c)(iv)(C).

One comment highlighted that the rules in the proposed regulations are inadvertently inconsistent when an eligible fund is required by foreign law to provide information to a governmental unit (satisfying proposed § 1.897(l)-1(c)(iv)(C)), but does not actually provide such information (not fulfilling proposed § 1.897(l)-1(c)(iv)(B)), and requested that the final regulations clarify how these provisions are intended to work.

Proposed § 1.897(l)-1(c)(iv)(B) and proposed § 1.897(l)-1(c)(iv)(C) were not intended to function as two separate conditions that were required to be met. Rather, the provisions were intended to provide flexibility to eligible funds that provided the relevant information to tax authorities or other governmental units. To clarify this intent, the final regulations combine the two separate provisions into a single provision (§ 1.897(l)-1(c)(iv)(A)). Thus, the information reporting requirement in section 897(l)(2)(D) is satisfied if a fund annually provides information about the amount of qualified benefits provided to qualified recipients to the relevant tax authorities or other relevant governmental units, or such information is otherwise available to the relevant tax authorities or other relevant governmental units. § 1.897(l)-1(c)(iv)(A). A fund will not fail to satisfy such requirement if it is not required to provide information to the relevant tax authorities or other relevant governmental units in a year in which no qualified benefits are provided to qualified recipients. Id.

For purposes of the requirement that a QFPF be subject to preferential tax treatment, the proposed regulations provided that, for purposes of section 897(l)(2)(E), references to a foreign country do not include references to a state, province, or political subdivision of a foreign country. The preamble to the proposed regulations explained that subnational taxes generally constitute a minor component of an entity's overall tax burden in a foreign jurisdiction and therefore should not satisfy the requirement of section 897(l)(2)(E) when such preference had only a minimal impact on reducing the fund's overall tax burden.

Upon further consideration, the Treasury Department and the IRS have determined that, to the extent the subnational tax law is covered under an income tax treaty with the United States, it should constitute a sufficient component of the foreign jurisdiction's taxation regime to be able to satisfy the requirement of section 897(l)(2)(E). Accordingly, the final regulations maintain the approach that subnational taxes generally do not satisfy the requirement of section 897(l)(2)(E), but provide that those taxes can satisfy the requirement of section 897(l)(2)(E) if they are covered taxes under an income tax treaty between that foreign jurisdiction and the United States. See § 1.897(l)-1(c)(2)(v)(E).

Comments requested that the final regulations allow QFPFs that hold interests in USRPIs through foreign partnerships, which are not qualified holders under proposed § 1.897(l)-1(d)(11) because they cannot be QCEs, to avoid withholding by providing a certification of non-foreign status (including on a Form W-8EXP). The comments highlighted the difference in withholding when a QFPF invests through a foreign partnership, which would result in withholding (even if the foreign partnership was wholly owned by QFPFs), as opposed to through a foreign corporation that constitutes a QCE or a domestic partnership, neither of which would result in withholding under section 1445. One comment recommended that, for purposes of withholding under section 1445, the final regulations should implement rules similar to the regulations that implement the withholding regime under section 1446(f), which includes a form of look-through rule. Another comment recommended that the final regulations provide that a foreign partnership that is wholly owned by QFPFs either be treated as a QCE, and therefore a qualified holder, or otherwise be excluded from the definition of a foreign person under section 1445 such that a foreign partnership could certify its non-foreign status to a transferee.

The Treasury Department and the IRS agree that a foreign partnership that is held entirely by qualified holders should not be subject to withholding under section 1445 because the ultimate owners should qualify in full for the exemption under section 897(l). Accordingly, the final regulations provide that a qualified holder (under § 1.897(l)-1(d)) and a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships, may certify its status as a withholding qualified holder that is not treated as a foreign person for purposes of withholding under section 1445 (and section 1446, as relevant). § 1.1445-1(g)(11). To the extent any non-qualified holders hold interests in a foreign partnership, such foreign partnership does not qualify as a withholding qualified holder. However, qualified holders who hold interests in USRPIs through a foreign partnership that is not a withholding qualified holder would still be eligible for the section 897(l) exemption on their distributive share of FIRPTA gains. Under the existing regulations in § 1.1445-3, a transferor may, in appropriate cases, reduce withholding by obtaining a withholding certificate from the IRS.

The proposed regulations permitted a qualified holder to certify that it is exempt from withholding under section 1445 by providing a certification of non-foreign status. The proposed regulations also stated that the IRS intended to revise Form W-8EXP, “Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding or Reporting,” to permit qualified holders to be exempt from withholding under section 1445 by establishing their status under section 897(l). Prop. §§ 1.1445-2(b)(2), 1.1445-2(b)(v), 1.1445-5(b)(3)(ii), and 1.1445-8(e).

Under the final regulations, a withholding qualified holder may submit a certification of non-foreign status to establish withholding qualified holder status for purposes of section 1445(a) pursuant to § 1.1445-2(b)(2)(i), with certain modifications. Specifically, the requirements under § 1.1445-2(b)(2)(i) are modified to require the transferor to state that it is not treated as a foreign person because it is a withholding qualified holder, and to permit the transferor to provide its foreign taxpayer identification number if it does not have a U.S. taxpayer identification number. The final regulations also clarify that a Form W-8EXP is a type of certification of non-foreign status within the meaning of § 1.1445-2(b)(2)(i). Accordingly, the Form W-8EXP is subject to the general rules pertaining to certifications of non-foreign status, such as the period for retaining the certification in § 1.1445-2(b)(3) and the rules pertaining to liability of agents in § 1.1445-4. Because the final regulations require a transferor to represent its status as a withholding qualified holder on the certification of non-foreign status, the final regulations do not permit a transferor to submit a Form W-9, “Request for Taxpayer Identification Number and Certification,” to establish its status as a withholding qualified holder. See § 1.1445-2(b)(2)(vi). Before the release of revised Form W-8EXP, a certification of non-foreign status described in § 1.1445-2(b)(2)(i) (but not a Form W-9) should be used by a transferor to establish its status as a withholding qualified holder for purposes of section 1445. Once revised, a withholding qualified holder may certify its non-foreign status with either a certification of non-foreign status described in § 1.1445-2(b)(2)(i) (but not a Form W-9) or a Form W-8EXP.

The final regulations provide similar rules for certifications of non-foreign status that establish withholding qualified holder status for purposes of section 1445(e) withholding. See §§ 1.1445-5(b)(3)(ii) and 1.1445-8(e).

The proposed regulations provided that distributions made by a United States real property holding company (“USRPHC”) or qualified investment entity (“QIE”) to a qualified holder are not subject to the coordination rules under § 1.1441-3(c)(4) and are instead subject only to the requirements of section 1441. Prop. § 1.1441-3(c)(4)(iii). Because a qualified holder is treated as a foreign person for purposes of section 1441, but not for purposes of 1445, the proposed rule was intended to subject a distribution to a qualified holder exclusively to the rules in section 1441 to determine if withholding applies.

The Treasury Department and the IRS have determined that, for greater clarity, certain changes should be made to proposed § 1.1441-3(c)(4) to reach the result intended by the proposed regulations. Rather than provide that the coordination rules under § 1.1441-3(c)(4) do not apply to qualified holders, the final regulations amend the coordination rules to provide that withholding qualified holders are not subject to section 1445 on distributions from USRPHCs that are not treated as dividends (for example, a distribution that is treated as gain from the sale or exchange of property under section 301(c)(3)) and on distributions from REITs or other QIEs that are capital gain dividends that are treated as gain attributable to the sale or exchange of USRPIs. § 1.1441-3(c)(4)(i)(B)( 2 ), § 1.1441-3(c)(4)(i)(C). Dividends from USRPHCs and dividends from REITs or other QIEs that are not capital gain dividends continue to be subject to withholding under section 1441. § 1.1441-3(c)(4)(i)(A), § 1.1441-3(c)(4)(i)(C). Section 1.1441-3(c)(4)(i) is also clarified to provide that a USRPHC (other than a REIT or other QIE) satisfies its obligations under sections 1441 and 1445 by following either § 1.1441-3(c)(4)(i)(A) or § 1.1441-3(c)(4)(i)(B), but a USRPHC that is a REIT or other QIE must follow the coordination provision in § 1.1441-3(c)(4)(i)(C). The final regulations also clarify that, to the extent a capital gain dividend from a REIT or other QIE is excluded from withholding under section 1445 because it is made with respect to stock that is regularly traded on an established securities market in the United States to an individual or corporation that did not own more than 5 percent of the stock (see the second sentence of section 897(h)(1)), withholding will apply under section 1441. See sections 852(b)(3)(E) and 857(b)(3)(E); § 1.1441-3(c)(4)(i)(C).

Comments recommended that the Treasury Department and the IRS allow foreign entities that believe they are QFPFs or QCEs to apply for letter rulings on their qualifications under section 897(l). While the comment acknowledged the need for administrable standards, it noted that, in light of the wide range of possible arrangements under foreign law, certain funds that a “reasonable observer” would consider a QFPF could be excluded. Another comment recommended that the Treasury Department and the IRS adopt a “white list” regime (similar to the United Kingdom's Qualifying Recognized Overseas Pension Scheme) whereby pension plan regimes regulated in a list of countries could automatically be treated as QFPFs or be subject to a reduced set of qualifying requirements.

The final regulations do not adopt either of these recommendations. The Treasury Department and the IRS do not believe that a private letter ruling program specific to QFPF qualification or a “white list” regime is necessary, as the final regulations provide flexible standards such that a wide variety of funds can constitute eligible funds.

Another comment requested that the final regulations provide that, to the extent life insurance companies or other investment companies hold and invest assets of one or more QFPFs, those life insurance companies or investment companies themselves should qualify as QFPFs. To qualify as a QFPF, an eligible fund must satisfy all of the requirements in § 1.897(l)-1(c)(2), and the final regulations do not adopt any special rule for life insurance companies or investment companies, including whether such assets are held as part of an arrangement comprising a QFPF.

In addition, the final regulations require an eligible fund to maintain records consistent with section 6001 to show that it is eligible for the exemption under section 897(l) and which the Commissioner may request upon examination. The recordkeeping requirement is consistent with general recordkeeping requirements for U.S. taxpayers and is appropriate in light of the flexible standards provided in the final regulations.

These regulations reflect the particular policies and objectives underlying section 897(l) (as opposed to other areas of tax law that relate to pension funds). To clarify this, § 1.897(l)-1(a) provides that the definitions and requirements in § 1.897(l)-1 apply only for purposes of the regulations themselves, including applicable cross-references from other sections, and that no inference is to be drawn with respect to the definitions and requirements in § 1.897(l)-1, including with respect to the meaning of a pension fund, for any other purpose.

The final regulations apply with respect to dispositions of USRPIs and distributions described in section 897(h) occurring on or after December 29, 2022. However, in accordance with the applicability date incorporated in § 1.897(l)-1(g)(2), the rule in § 1.897(l)-1(b)(1), the qualified holder rule in § 1.897(l)-1(d) (previously proposed § 1.897(l)-1(d)(11)), as well as the definitions of governmental unit (§ 1.897(l)-1(e)(5)) and QCE (§ 1.897(l)-1(e)(9)) apply with respect to dispositions of USRPIs and distributions described in section 897(h) occurring on or after June 6, 2019, the date the proposed regulations were filed with the Federal Register . See section 7805(b)(1)(B). An eligible fund may choose to apply the final regulations with respect to dispositions and distributions occurring on or after December 18, 2015, and before the applicability date of the final regulations, if the eligible fund, and all persons bearing a relationship to the eligible fund described in section 267(b) or 707(b), consistently apply the rules in the final regulations in their entirety for all relevant years. An eligible fund that chooses to apply the final regulations before their applicability date must apply the principles of § 1.897(l)-1(d)(4)(i) to any valuation requirements with respect to dates preceding December 18, 2015.

These regulations are 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 Paperwork Reduction Act, 44 U.S.C. 3501 et seq. (“PRA”), information collection requirements contained in these final regulations are in §§ 1.1441-3, 1.1445-2, 1.1445-5, 1.1445-8, and 1.1446-1. These collections of information retain the collections of information in the proposed regulations, with a refinement to § 1.1441-3(c)(4) to clarify that the portions of distributions made by a USRPHC or QIE to a withholding qualified holder (as defined in § 1.1445-1(g)(11)) that are attributable to the disposition of USRPIs are not subject to section 1445 and that the portions of distributions made by a USRPHC or QIE to a withholding qualified holder that are not attributable to the disposition of a USRPI are subject to section 1441. No written comments regarding the information collection requirements were received in response to the solicitation of comments in the proposed regulations.

The final regulations provide that dividends from a USRPHC and dividends from REITs and other QIEs that are not capital gain dividends to a withholding qualified holder are subject only to the requirements of section 1441. § 1.1441-3(c)(4)(i), § 1.1441-3(c)(4)(i)(B)( 2 ), § 1.1441-3(c)(4)(i)(C). The final regulations further provide that withholding qualified holders are not subject to section 1445 on distributions from USRPHCs that are not treated as dividends (for example, a distribution that is treated as gain from the sale or exchange of property under section 301(c)(3)) and on distributions from REITs or QIEs that are capital gain dividends that are treated as gain attributable to the sale or exchange of USRPIs. § 1.1441-3(c)(4)(i)(B)( 2 ), § 1.1441-3(c)(4)(i)(C).

A USRPHC or QIE making a distribution to a qualified holder would be required to report the distribution on Form 1042-S, “Foreign Person's U.S. Source Income Subject to Withholding,” and file Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.” For purposes of reporting the portion of the distributions that are exempt from section 1445 withholding, the IRS revised Form 1042-S to include an exemption code designating payments that are exempt under section 897(l). No revisions are being made to Form 1042 in connection with payments that are exempt under section 897(l).

For purposes of the PRA, the reporting burden associated with § 1.1441-3(c)(4) will be reflected in the PRA submissions for Form 1042 (OMB control numbers 1545-0123 for business filers and 1545-0096 for all other Form 1042 filers) and Form 1042-S (OMB control number 1545-0096).

Sections 1.1445-2, 1.1445-5, 1.1445-8, and 1.1446-1 would require a qualified holder wishing to claim an exemption under section 897(l) to provide a withholding agent with either a Form W-8EXP or a certificate of non-foreign status containing similar information to the Form W-8EXP. The IRS plans to revise Form W-8EXP for use by qualified holders. For purposes of the PRA, the reporting burden associated with §§ 1.1445-2, 1.1445-5, 1.1445-8, and 1.1446-1, will be reflected in the PRA submission for Form W-8EXP (OMB control number 1545-1621).

The reporting burdens associated with the information collections in the final regulations are included in the aggregate burden estimates for OMB control numbers 1545-0096 (which represents a total estimated burden time for all forms and schedules of 6.46 million hours) and 1545-1621 (which represents a total estimated burden time, including all other related forms and schedules for other filers, of 30.5 million hours). The overall burden estimates for the OMB control numbers are aggregate amounts that relate to the entire package of forms associated with the applicable OMB control number and will in the future include, but not isolate, the estimated burden of the tax forms that will be or have been revised as a result of the information collections in the final regulations. These numbers are therefore unrelated to the future calculations needed to assess the burden imposed by the final regulations. These burdens have been reported for other regulations related to the taxation of cross-border income, and the Treasury Department and the IRS urge readers to recognize that these numbers are duplicates and to guard against overcounting the burden that international tax provisions impose.

An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a valid OMB control number.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this rulemaking will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act. This certification is based on the fact that the final regulations affect foreign pension funds, including sovereign funds, which are entities that are created or organized outside of the United States, with no place of business in the United States, and which operate primarily outside of the United States. Accordingly, the entities affected by the final regulations are not considered small entities, and a regulatory flexibility analysis under the Regulatory Flexibility Act is not required.

Pursuant to section 7805(f) of the Code, the proposed regulations (REG-109826-17) preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on the impact on small businesses and no comments were received.

Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. The final regulations do not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. The final regulations do not have federalism implications, do not impose substantial direct compliance costs on state and local governments, and do not preempt state law within the meaning of the Executive order.

IRS Revenue Procedures, Revenue Rulings, Notices, and other guidance cited in this document are published in the Internal Revenue Bulletin or Cumulative Bulletin and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at www.irs.gov.

The principal authors of these final regulations are Arielle Borsos and Milton Cahn, Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

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

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because doing so would be impracticable and contrary to the public interest. The primary justification for this action is that the Coast Guard did not receive final details of the event until December 8, 2022 and the event is scheduled to begin on December 31, 2022. The event would begin before the rulemaking process would be completed. Therefore, the Coast Guard lacks sufficient time to provide a reasonable comment period and then consider those comments before issuing the rule. Because of the dangers posed by the fireworks display, a safety zone is necessary without delay. It is impracticable and contrary to the public interest to delay promulgating this rule because it is necessary to protect personnel, vessels, and the marine environment from potential hazards created by the fireworks display.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be impracticable because immediate action is needed to respond to the potential safety hazards associated with a fireworks display adjacent to a major shipping channel.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Savannah (COTP) has determined that potential hazards associated with a fireworks display on the Savannah River, near downtown Savannah, starting 11:00 p.m. on December 31, 2022, through 00:30 a.m., on January 1, 2023 will be a safety concern for anyone within the area. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone during the New Year's Eve Fireworks display.

This rule establishes a temporary safety zone from 11 p.m. on December 31, 2022, through 00:30 a.m., on January 1, 2023. The safety zone will cover all navigable waters in the Savannah River adjacent to downtown Savannah. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by fallout from the New Year's Eve Fireworks display. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative. If authorization to enter, transit through, anchor in, or remain within the safety zone is granted by the COTP or a designated representative, all persons and vessels receiving such authorization must comply with the instructions of the COTP or a designated representative.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the following reasons: (1) the safety zone only being enforced for a total of one hour and thirty minutes; (2) although persons and vessels may not enter, transit through, anchor in, or remain within the zone without authorization from the COTP or a designated representative, they may operate in the surrounding area during the enforcement period; (3) persons and vessels may still enter, transit through, anchor in, or remain within the areas during the enforcement period if authorized by the COTP or a designated representative.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

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

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves This rule involves a safety zone lasting only one hour and thirty minutes that will prohibit entry within certain navigable waters of the Savannah River. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

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

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

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

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable. We must establish this safety zone immediately to protect personnel, vessels, and the marine environment from potential hazards created by pipeline removal operations and lack sufficient time to provide a reasonable comment period and then to consider those comments before issuing the rule.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be contrary to the public interest because immediate action is needed to respond to the potential safety hazards associated with pipeline removal operations in the Corpus Christi Shipping Channel.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Sector Corpus Christi (COTP) has determined that potential hazards associated with pipeline removal operations occurring from 8 p.m. on December 27, 2022 through 4 a.m. on December 30, 2022 will be a safety concern for anyone within the Corpus Christi Shipping Channel in a zone defined by the following coordinates; 27°50′31.28″ N, 97°04′17.23″ W; 27°50′31.73″ N, 97°04′15.44″ W; 27°50′29.06″ N, 97°04′16.61″ W; 27°50′29.32″ N, 97°04′14.82″ W. The purpose of this rule is to ensure safety of vessels and persons on these navigable waters in the safety zone while pipelines are removed from the floor of the Corpus Christi Shipping Channel.

This rule establishes a temporary safety zone from 8 p.m. on December 27, 2022 through 4 a.m. on December 30, 2022 and will be subject to enforcement from 8 p.m. to 4 a.m. of the next day, each day. The safety zone will encompass all navigable waters of the Corpus Christi Shipping Channel in a zone defined by the following coordinates; 27°50′31.28″ N, 97°04′17.23″ W; 27°50′31.73″ N, 97°04′15.44″ W; 27°50′29.06″ N, 97°04′16.61″ W; 27°50′29.32″ N, 97°04′14.82″ W. The pipeline will be removed along the floor of the Corpus Christi Shipping Channel. No vessel or person is permitted to enter the temporary safety zone during the effective period without obtaining permission from the COTP or a designated representative, who may be contacted on Channel 16 VHF-FM (156.8 MHz) or by telephone at 361-939-0450. The Coast Guard will issue Broadcast Notices to Mariners, Local Notices to Mariners, and/or Safety Marine Information Broadcasts as appropriate.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, and duration of the safety zone. The temporary safety zone will be enforced for a short period of only 8 hours each day. The rule does not completely restrict the traffic within a waterway and allows mariners to request permission to enter the zone.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the temporary safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, and Environmental Planning, COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f),and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishment of a temporary safety zone for navigable waters of the Corpus Christi Shipping Channel in a zone defined by the following coordinates; 27°50′31.28″ N, 97°04′17.23″ W; 27°50′31.73″ N, 97°04′15.44″ W; 27°50′29.06″ N, 97°04′16.61″ W; 27°50′29.32″ N, 97°04′14.82″ W. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by pipeline that will be removed from the floor of the Corpus Christi Shipping Channel. It is categorically excluded from further review under paragraph L60(c) Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1.

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

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

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

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable. The NPRM process would delay the establishment of the safety zone until after the drone show event and compromise public safety. We must establish this temporary safety zone immediately and lack sufficient time to provide a reasonable comment period and then consider those comments before issuing the rule.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying this rule would be impracticable because we must establish this safety zone by December 30, 2022 to respond to the potential safety hazards associated with the drone show event.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 700034 (previously 33 U.S.C. 1231). The Captain of the Port (COTP) Port Arthur has determined that potential hazards associated with the drone show at this location would be a safety concern for spectator craft and vessels in the vicinity of the designated flight area location. The purpose of this rule is to ensure safety of vessels and the navigable waters in the safety zone before, during, and after the scheduled event.

This rule establishes a safety zone from 8:50 p.m. through 9:30 p.m. on December 30, 2022. The safety zone will cover all navigable waters within a 650-foot radius of a drone flight area located at 30°14′0.014″ N and 93°14′43.492″ W. The duration of the safety zone is intended to protect participants, spectators, and other persons and vessels, in the nearby navigable waters during the drone show.

No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on size, location, and duration of the safety zones. This action involves a drone flight area at 30°14′0.014″ N and 93°14′43.492″ W, in Lake Charles on December 30, 2022. This safety zone will be in effect for forty minutes in a 650-foot radius. This rule would be enforced to protect personnel, vessels, and the marine environment from hazards associated with the drone show.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

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

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone lasting only forty minutes that will prohibit entry within a 650-foot radius of a drone flight area. It is categorically excluded from further review under paragraph L60 (a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

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

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

On August 3, 2020, the USPTO published a final rule in the Federal Register that included a new fee set forth in § 1.16(u) with an effective date of January 1, 2022. See Setting and Adjusting Patent Fees in Fiscal Year 2020, 85 FR 46932. As specified in § 1.16(u), the fee is due for any application filed under 35 U.S.C. 111 for an original patent—except design, plant, or provisional applications—where the specification, claims, and/or abstract do not conform to the USPTO requirements for submission in DOCX format. Therefore, the fee is due for nonprovisional utility applications filed under 35 U.S.C. 111, including continuing applications, that are not filed in DOCX format.

The USPTO conducted two pilot programs for filing applications in DOCX format. The eMod Text Pilot Program was conducted between August 2016 and September 2017. The USPTO then expanded the ability to file patent applications in DOCX format in EFS-Web to all users in September 2017. In 2018, the USPTO launched Patent Center and conducted the Patent Center Text Pilot Program from June 2018 through April 2020. All applicants have been able to file applications in DOCX format in Patent Center since April 2020. Information about Patent Center is available at www.uspto.gov/patents/apply/patent-center. In addition, the USPTO has held and continues to hold many discussions with stakeholders to ensure a fair and reasonable transition to the DOCX format.

The USPTO is delaying the effective date of the fee set forth in § 1.16(u) until April 3, 2023. Although the USPTO published a notice on December 20, 2022 (87 FR 77812) indicating that the fee set forth in § 1.16(u) was expected to go into effect on January 1, 2023, the USPTO is now further delaying the effective date for the fee to give applicants more time to adjust to filing patent applications in DOCX format.

Applicants are strongly encouraged to begin filing patent applications in DOCX format before the new effective date of the fee. Applicants are also reminded that they can file test submissions through Patent Center training mode to practice filing in DOCX. Furthermore, applicants who have not yet taken advantage of the DOCX training sessions hosted by the USPTO are strongly encouraged to do so. Information on filing application documents in DOCX and a link to the DOCX training sessions are available at www.uspto.gov/patents/docx.

A. Administrative Procedure Act: This final rule revises the effective date of a final rule published on August 3, 2020, implementing a non-DOCX filing surcharge fee, and is a rule of agency practice and procedure pursuant to 5 U.S.C. 553(b)(A). See JEM Broad. Co. v. F.C.C., 22 F.3d 32 (D.C. Cir. 1994) (“[T]he `critical feature' of the procedural exception [in 5 U.S.C. 553(b)(A)] `is that it covers agency actions that do not themselves alter the rights or interests of parties, although [they] may alter the manner in which the parties present themselves or their viewpoints to the agency.' ” (quoting Batterton v. Marshall, 648 F.2d 694, 707 (D.C. Cir. 1980))); see also Bachow Commc'ns Inc. v. F.C.C., 237 F.3d 683, 690 (D.C. Cir. 2001) (rules governing an application process are procedural under the Administrative Procedure Act); Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals were procedural where they did not change the substantive standard for reviewing claims). Accordingly, prior notice and opportunity for public comment are not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law). See Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), do not require notice and comment rulemaking for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice” (quoting 5 U.S.C. 553(b)(A))).

Moreover, the Director of the USPTO, pursuant to authority at 5 U.S.C. 553(b)(B), finds good cause to adopt the change to the effective date of § 1.16(u) in this final rule without prior notice and an opportunity for public comment, as such procedures would be impracticable and contrary to the public interest. The change to the effective date will provide the public an opportunity to more fully comprehend the nature of, and prepare to comply with, the DOCX format before the new fee is effective. Delay of this provision to provide prior notice and comment procedures is also impracticable because it would allow § 1.16(u) to go into effect before the public is ready for the DOCX format. In addition, the Director finds good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effectiveness of this rule. Immediate implementation of the delay in effective date of the fee is in the public interest because it will provide the public an opportunity to more fully comprehend the nature of, and prepare to comply with, the DOCX format before the new fee in section 1.16(u) is effective.

B. Regulatory Flexibility Act: As prior notice and an opportunity for public comment are not required pursuant to 5 U.S.C. 553 or any other law, neither a regulatory flexibility analysis nor a certification under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) is required. See 5 U.S.C. 603.

C. Executive Order 12866 (Regulatory Planning and Review): This rulemaking has been determined to be not significant for purposes of Executive Order 12866 (Sept. 30, 1993).

D. Paperwork Reduction Act: The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that the USPTO consider the impact of paperwork and other information collection burdens imposed on the public. The USPTO has determined that there are no new requirements for information collection associated with this final rule.

For the reasons stated in the preamble, the Office amends 37 CFR part 1 as follows:

Throughout this document “we,” “us,” and “our” means the EPA.

The background for this action is discussed in detail in our September 30, 2022 proposal (87 FR 59376) and accompanying Technical Support Document (TSD). In that document we proposed to approve the Arkansas MSW landfills plan submitted by the Arkansas Department of Energy and Environment, Division of Environmental Quality (ADEQ) in accordance with the requirements of section 111(d) of the CAA and to amend 40 CFR part 62, subpart E, to codify EPA's approval. We proposed to find that the Arkansas MSW landfills plan, submitted by ADEQ on June 20, 2022, and supplemented on August 24, 2022, and August 31, 2022, is at least as protective as the Federal requirements provided under the MSW landfills EG, codified at 40 CFR part 60, subpart Cf.

We received one comment regarding our proposal. The comment and response to the comment are provided below.

Comment: This is part of an assignment to practice using the Regulations.gov website. I chose to comment on this proposed rule because I find environmental justice to be highly important. As stated in the proposed rule, the emissions from landfill waste can be hazardous and detrimental to the health of the community. For this reason, the limiting of these emissions by regulations described in the rule is of the utmost importance. Furthermore, because of the hazardous nature of these emissions, it is crucial that the locations of the landfills are properly considered, so as not to expose a densely populated area, or an area populated largely by minority groups. The figures presented in Table 1 are shocking for many reasons. The relatively high percentiles that most of the landfills noted fall into demonstrate a need for reduction, for the safety of the communities. Furthermore, the discrepancies between different areas' landfills also raises a concern for the health of each individual community, and demonstrates a need for a more equitable approach to environmental justice in Arkansas.

Response: We appreciate the commenter's statements, which provide general support for regulations that reduce landfill emissions as well as the commenter's perspectives regarding environmental justice. However, the commenter's statements regarding the siting of landfills and the need for a more equitable approach to environmental justice in Arkansas are outside the scope of this rulemaking. This final action approving the Arkansas MSW landfills plan concerns the regulation of emissions from existing MSW landfills for which construction, reconstruction, or modification was commenced on or before July 17, 2014. As discussed in the proposed rule, we believe that these requirements for existing MSW landfills and resulting emissions reductions have contributed to reduced environmental and health impacts on all populations impacted by emissions from these sources in Arkansas. Additionally, we would like to clarify that while we did provide additional analysis of environmental justice associated with this action in the proposed rule, this analysis was done for the purpose of providing additional context and information about this rulemaking to the public, not as a basis of the action. As stated in this final rule and the associated proposed rule, this rule finds that the Arkansas MSW landfills plan is at least as protective as the Federal requirements provided under the MSW landfills EG. EPA is statutorily required to approve CAA section 111(d) plans that meet the Federal criteria for approval. For more information, please see the proposal and the accompanying TSD for the detailed basis and rationale for this action.

In this final action, the EPA is amending 40 CFR part 62, subpart E, to reflect approval of the Arkansas MSW landfills plan from ADEQ, received on June 20, 2022, and supplemented on August 24, 2022, and August 31, 2022, in accordance with section 111(d) of the CAA.

EPA provided additional analysis of environmental justice associated with this action in our September 30, 2022 proposal (87 FR 59376) for the purpose of providing additional context and information about this rulemaking to the public, not as a basis of the action. These EG requirements implemented under the MSW Landfills Federal Plan and now incorporated by Arkansas in its MSW landfills plan is designed to result in significant emissions reductions for MSW landfills. 1 As discussed in the proposed action, we believe that these requirements for existing MSW landfills and resulting emissions reductions have climate benefits and have contributed to reduced environmental and health impacts on all populations impacted by emissions from these sources in Arkansas, including people of color and low-income populations, and will continue to do so under Federal oversight. This rule will not have disproportionately high or adverse human health or environmental effects on communities with environmental justice concerns because it is not anticipated to result in or contribute to emissions increases in Arkansas.

In accordance with the requirements of 1 CFR 51.5, we are finalizing regulatory text that includes the incorporation by reference of Arkansas Pollution Control and Ecology Commission (APC&EC) Rule 19, Chapter 17, adopted January 28, 2022, which is part of the CAA section 111(d) Plan applicable to existing MSW landfills subject to the MSW Landfills Emission Guidelines, at 40 CFR part 60, subpart Cf, within ADEQ's jurisdiction in the State of Arkansas. The regulatory provisions of APC&EC Rule 19, Chapter 17 incorporate the MSW Landfills Emissions Guidelines promulgated by the EPA at 40 CFR part 60, subpart Cf, and establish emission standards and compliance times for the control of municipal solid waste landfills, as defined in subpart Cf, that commenced construction, modification, or reconstruction on or before July 17, 2014. The EPA has made and will continue to make APC&EC Rule 19, Chapter 17, generally available at the EPA Region 6 office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information). They are also available at: https://www.regulations.gov. This incorporation by reference has been approved by the Office of the Federal Register and the Plan is federally enforceable under the CAA as of the effective date of this final rulemaking.

Under the CAA, the Administrator is required to approve a CAA section 111(d) submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7411(d); 42 U.S.C. 7429; 40 CFR part 60, subparts B and Cf; and 40 CFR part 62, subpart A. Thus, in reviewing CAA section 111(d) state plan submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Act and implementing regulations. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the CAA section 111(d) plan is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

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

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 27, 2023. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

For the reasons stated in the preamble, the Environmental Protection Agency amends 40 CFR part 62 as follows:

Throughout this document, “we,” “us,” and “our” refer to the EPA.

On November 1, 2022, 1 the EPA proposed to find that the Plumas County nonattainment area (“Portola nonattainment area”) failed to attain the 2012 PM 2.5 NAAQS by the December 31, 2021 Moderate area attainment date. This proposal was based on our review of quality-assured and certified PM 2.5 air quality monitoring data from the 2019-2021 calendar years, which we compared to the 2012 annual PM 2.5 NAAQS attainment for the Portola nonattainment area. 2 Please refer to our proposal for additional information regarding our review of the monitoring data and associated documentation. As explained in our proposed rulemaking, if we finalize the determination that the area did not attain the standard by the applicable attainment date, in accordance with section 188(b)(1) of the Act, the Portola nonattainment area would be reclassified by operation of law from Moderate to Serious for the 2012 annual PM 2.5 standard. In our proposed action, we further explained that upon reclassification, California would be required to submit an additional SIP revision to satisfy the statutory requirements that apply to Serious PM 2.5 nonattainment areas, including the requirements of subpart 4 of part D, title I of the Act and 40 CFR part 51, subpart Z.

The 30-day public comment period for the proposed rule closed on December 1, 2022. During this period, the EPA received one comment, which argued that Plumas County has been affected by illegal immigration and that such immigration results in pollution from vehicles, lawn equipment, discarded clothing, and phone batteries. 3 After reviewing the comment, the EPA has determined that the comment fails to raise issues germane to the proposed finding and reclassification of the Portola nonattainment area, which is based solely upon air monitoring data. Therefore, we have determined that this comment does not necessitate a response, and the EPA will not provide a specific response to the comment in this notice.

For the reasons discussed in our proposed rule and summarized in this document, we are finalizing our finding that the Portola nonattainment area did not attain the 2012 annual PM 2.5 NAAQS by its applicable Moderate area attainment date of December 31, 2021. Pursuant to CAA section 188(b)(2), upon the effective date of this action, the Portola nonattainment area will be reclassified as a Serious PM 2.5 nonattainment area by operation of law and will be subject to all applicable Serious area requirements.

The Serious area SIP elements that California is required to submit are as follows:

1. Provisions to assure that the best available control measures, including the best available control technology for stationary sources, for the control of direct PM 2.5 and PM 2.5 precursors shall be implemented no later than four years after the area is reclassified (CAA section 189(b)(1)(B));

2. A demonstration (including air quality modeling) that the plan provides for attainment as expeditiously as practicable but not later than December 31, 2025, or where the state is seeking an extension of the attainment date under section 188(e), a demonstration that attainment by December 31, 2025 is impracticable and that the plan provides for attainment by the most expeditious alternative date practicable and not later than December 31, 2030 (CAA sections 189(b)(1)(A), 188(c)(2), and 188(e));

3. Plan provisions that require reasonable further progress (RFP) (CAA section 172(c)(2));

4. Quantitative milestones that are to be achieved every three years until the area is redesignated to attainment and that demonstrate RFP toward attainment by the applicable date (CAA section 189(c));

5. Provisions to assure that control requirements applicable to major stationary sources of PM 2.5 also apply to major stationary sources of PM 2.5 precursors, except where the state demonstrates to the EPA's satisfaction that such sources do not contribute significantly to PM 2.5 levels that exceed the standard in the area (CAA section 189(e));

6. A comprehensive, accurate, current inventory of actual emissions from all sources of PM 2.5 and PM 2.5 precursors in the area (CAA section 172(c)(3));

7. Contingency measures to be implemented if the area fails to meet any requirement concerning RFP or quantitative milestones or fails to attain by the applicable attainment date (CAA section 172(c)(9)); and

8. A revision to the nonattainment new source review program to lower the applicable “major stationary source”  4 threshold from 100 tons per year (tpy) to 70 tpy (CAA section 189(b)(3)) and to satisfy the subpart 4 requirements for major stationary sources of PM 2.5 precursors (CAA section 189(e)).

Pursuant to CAA section 189(b)(2), the SIP revision that satisfies these elements will be due 18 months from the effective date of the final reclassification to Serious. Under section 188(c)(2) of the Act, the attainment date for a Serious area “shall be as expeditiously as practicable but no later than the end of the tenth calendar year beginning after the area's designation as nonattainment. . .” The EPA designated Plumas County as nonattainment for the 2012 PM 2.5 NAAQS effective January 15, 2015. Therefore, upon reclassification to Serious, the latest permissible attainment date under section 188(c)(2) of the Act for the purposes of the 2012 PM 2.5 NAAQS in the Portola nonattainment area is December 31, 2025.

Additional information about these statutes and Executive Orders can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

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

This action does not impose an information collection burden under the provisions of the PRA because it does not contain any information collection activities.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action will not impose any requirements on small entities. This action requires the state to adopt and submit a SIP revision to satisfy CAA requirements and does not itself directly regulate any small entities.

This action does not contain any unfunded mandate of $100 million or more, as described in UMRA (2 U.S.C. 1531-1538) and does not significantly or uniquely affect small governments. This action itself imposes no enforceable duty on any state, local, or tribal governments, or the private sector. This final action is to determine that the Portola nonattainment area failed to attain the NAAQS by the applicable attainment date. As of the effective date, this determination triggers existing statutory timeframes for the state to submit a SIP revision. Such a determination in and of itself does not impose any federal intergovernmental mandate.

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

This action does not have tribal implications as specified in Executive Order 13175. As there are no federally recognized tribes within the Portola nonattainment area, 5 the finding of failure to attain the 2012 annual PM 2.5 NAAQS does not apply to tribal areas, and the rule does not impose a burden on Indian reservation lands or other areas where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction within the Portola nonattainment area. Thus, this rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because the effect of this action will trigger additional planning requirements under the CAA. This action does not establish an environmental standard intended to mitigate health or safety risks.

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

This rulemaking does not involve technical standards.

Executive Order 12898 establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. There is no information in the record indicating that this action is inconsistent with the stated goals of Executive Order 12898 of achieving environmental justice for people of color, low-income populations, and indigenous peoples.

This rule is exempt from the CRA because it is a rule of particular applicability. This rule makes factual determinations for specific entities and does not direct regulate any entities. The determination of a failure to attain by the attainment date and reclassification does not in itself create any new requirements beyond what is mandated by the CAA.

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 27, 2023. Filing a petition for reconsideration by the Administrator of this final action does not affect the finality of this action for the purposes of judicial review, nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)).

For the reasons stated in the preamble, the EPA amends chapter I, title 40 of the Code of Federal Regulations as follows:

On December 2, 2022, EPA published a direct final rule (87 FR 73965) and a proposed rule (87 FR 74066) entitled “NPDES Small MS4 Urbanized Area Clarification.” The original deadline to submit comments was January 3, 2023. This action extends the comment period for 15 days. Written comments must now be received by January 18, 2023. Related to this extension, the direct final rule will become effective on March 2, 2023 without further notice, unless EPA receives adverse comment by January 18, 2023. If EPA receives adverse comment by January 18, 2023, the Agency will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect.

The proposed rule was published at 87 FR 16157 on March 22, 2022. The Petitioner filed comments in support of the petition reaffirming its commitment to apply for channel 22. No other comments were filed.

The Report and Order substitutes channel 22 for channel 7 at Great Falls, Montana. According to the Petitioner, it has received many complaints from viewers unable to receive a reliable signal on VHF channel 7, and the Commission has recognized that VHF channels have certain characteristics that pose challenges for their use in providing digital television service. The Engineering Statement provided with the Petition confirmed that the proposed channel 22 contour would continue to reach virtually all of the population within the Station's current service area and fully cover the city of Great Falls. An analysis using the Commission's TVStudy software tool indicates that KRTV's move from channel 7 to channel 22 is predicted to create a small area where 554 persons are predicted to lose service. The loss area, however, is partially overlapped by the noise limited contour of other Scripps owned CBS affiliated stations. Once those other sources of CBS programming are factored into the loss analysis, the new loss area that would be created by the proposed channel substitution would contain only 255 persons, which is a level of service loss the Commission considers to be de minimis. Concurrence from the Canadian government was required and has been obtained.

This is a synopsis of the Commission's Report and Order, MB Docket No. 22-117; RM-11923; DA 22-1231, adopted November 29, 2022, and released November 29, 2022. The full text of this document is available for download at https://www.fcc.gov/edocs. To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

This document does not contain information collection requirements subject to the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, therefore, it does not contain any proposed information collection burden “for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4). Provisions of the Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, do not apply to this proceeding.

The Commission will send a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 73 as follows:

Background

Under section 4(b)(3)(B) of the Act (16 U.S.C. 1531 et seq. ), we are required to make a finding on whether or not a petitioned action is warranted within 12 months after receiving any petition that we have determined contains substantial scientific or commercial information indicating that the petitioned action may be warranted (known as a “12-month finding”). We must make a finding that the petitioned action is: (1) Not warranted; (2) warranted; or (3) warranted but precluded by other listing activity. We must publish a notification of these 12-month findings in the Federal Register .

Section 4 of the Act (16 U.S.C. 1533) and the implementing regulations at part 424 of title 50 of the Code of Federal Regulations (50 CFR part 424) set forth procedures for adding species to, removing species from, or reclassifying species on the Lists of Endangered and Threatened Wildlife and Plants (Lists). The Act defines “species” as including any subspecies of fish or wildlife or plants, and any distinct population segment of any species of vertebrate fish or wildlife which interbreeds when mature (16 U.S.C. 1532(16)). The Act defines “endangered species” as any species that is in danger of extinction throughout all or a significant portion of its range (16 U.S.C. 1532(6)), and “threatened species” as any species that is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range (16 U.S.C. 1532(20)). Under section 4(a)(1) of the Act, a species may be determined to be an endangered species or a threatened species because of any of the following five factors:

(A) The present or threatened destruction, modification, or curtailment of its habitat or range;

(B) Overutilization for commercial, recreational, scientific, or educational purposes;

(C) Disease or predation;

(D) The inadequacy of existing regulatory mechanisms; or

(E) Other natural or manmade factors affecting its continued existence.

These factors represent broad categories of natural or human-caused actions or conditions that could have an effect on a species' continued existence. In evaluating these actions and conditions, we look for those that may have a negative effect on individuals of the species, as well as other actions or conditions that may ameliorate any negative effects or may have positive effects.

We use the term “threat” to refer in general to actions or conditions that are known to or are reasonably likely to negatively affect individuals of a species. The term “threat” includes actions or conditions that have a direct impact on individuals (direct impacts), as well as those that affect individuals through alteration of their habitat or required resources (stressors). The term “threat” may encompass—either together or separately—the source of the action or condition or the action or condition itself. However, the mere identification of any threat(s) does not necessarily mean that the species meets the statutory definition of an “endangered species” or a “threatened species.” In determining whether a species meets either definition, we must evaluate all identified threats by considering the expected response by the species, and the effects of the threats—in light of those actions and conditions that will ameliorate the threats—on an individual, population, and species level. We evaluate each threat and its expected effects on the species, then analyze the cumulative effect of all of the threats on the species as a whole. We also consider the cumulative effect of the threats in light of those actions and conditions that will have positive effects on the species, such as any existing regulatory mechanisms or conservation efforts. The Secretary determines whether the species meets the Act's definition of an “endangered species” or a “threatened species” only after conducting this cumulative analysis and describing the expected effect on the species now and in the foreseeable future.

The Act does not define the term “foreseeable future,” which appears in the statutory definition of “threatened species.” The regulatory language that is applicable to determinations of the foreseeable future is contained in the regulations at 50 CFR 424.11(d) promulgated in 2019 ( In re: Washington Cattlemen's Ass'n, No. 22-70194 (9th Cir. Sept. 21, 2022) (staying the district court's vacatur of the 2019 regulations pending resolution of the motion for reconsideration) ( Washington Cattlemen's )). However, those regulations remain the subject of ongoing litigation, and their continued applicability is therefore uncertain. If the litigation results in vacatur of the 2019 regulations, the regulations that were in effect before those 2019 regulations (the pre-2019 regulations) would again become the governing law for listing decisions. Because of the uncertainty surrounding the legal status of the regulations, we undertook two analyses of the foreseeable future for each species identified in this notification of findings: one under the 2019 regulations and one under the pre- 2019 regulations, which may be reviewed in the 2018 edition of the Code of Federal Regulations at 50 CFR 424.11(d). Those pre-2019 regulations did not include provisions clarifying the meaning of “foreseeable future,” so we applied a 2009 Department of the Interior Solicitor's opinion (M-37021, “The Meaning of `Foreseeable Future' in Section 3(2) of the Endangered Species Act,” Jan. 16, 2009).

The analyses under both the 2019 regulations and the pre-2019 regulations are included in the decision file for these findings and are posted on https://www.regulations.gov under the appropriate docket numbers for each species under ADDRESSES , above. Based on those analyses, we concluded that our determination of the foreseeable future would be the same under the pre-2019 regulations as under the 2019 regulations for each species included in this notification of findings and that our determination that delisting one species is not warranted would be the same under the pre-2019 regulations as under the 2019 regulations.

It is not always possible or necessary to define foreseeable future as a particular number of years. Analysis of the foreseeable future uses the best scientific and commercial data available and should consider the timeframes applicable to the relevant threats and to the species' responses to those threats in view of its life-history characteristics. Data that are typically relevant to assessing the species' biological response include species-specific factors such as lifespan, reproductive rates or productivity, certain behaviors, and other demographic factors.

In conducting our evaluation of the five factors provided in section 4(a)(1) of the Act to determine whether the Bone Cave harvestman ( Texella reyesi; formerly listed as endangered as the Bee Creek Cave harvestman, Texella reddelli ), Brandegee's buckwheat ( Eriogonum brandegeei Rydberg), Chowanoke crayfish ( Faxonius virginiensis ), Cisco milkvetch ( Astragalus sabulosus ), stage station milkvetch ( A. vehiculus ), Isely's milkvetch ( A. iselyi ), Columbia Oregonian ( Cryptomastix hendersoni ), and Rye Cove cave isopod ( Lirceus culveri ) meet the Act's definition of “endangered species” or “threatened species,” we considered and thoroughly evaluated the best scientific and commercial information available regarding the past, present, and future stressors and threats. We reviewed the petitions, information available in our files, and other available published and unpublished information for all these species. Our evaluation may include information from recognized experts; Federal, State, and Tribal governments; academic institutions; foreign governments; private entities; and other members of the public.

In accordance with the regulations at 50 CFR 424.14(h)(2)(i), this document announces the not-warranted findings for eight species (on a petition to delist one species and petitions to list seven species), in accordance with the regulations at 50 CFR 424.14(h)(2)(i). We have also elected to include brief summaries of the analyses on which these findings are based. We provide the full analyses, including the reasons and data on which the findings are based, in the decisional file for each of the eight actions included in this document. The following is a description of the documents containing these analyses:

The species assessment form for the Bone Cave harvestman contains more detailed biological information, a thorough analysis of the listing factors, a list of literature cited, and an explanation of why we determined that the species meets the Act's definition of an “endangered species.” The species assessment forms for Brandegee's buckwheat, Chowanoke crayfish, Cisco milkvetch, stage station milkvetch, Isely's milkvetch, Columbia Oregonian, and Rye Cove cave isopod contain more detailed biological information, a thorough analysis of the listing factors, a list of literature cited, and an explanation of why we determined that each species does not meet the Act's definition of an “endangered species” or a “threatened species.” To inform our status reviews, we completed species status assessment (SSA) reports for the Bone Cave harvestman (Service 2021, entire), Brandegee's buckwheat (Service 2022a, entire), Chowanoke crayfish (Service 2022b, entire), Cisco milkvetch, stage station milkvetch, and Isely's milkvetch (Service 2022c, entire), Columbia Oregonian (Service 2022d, entire), and Rye Cove cave isopod (Service 2022e, entire). Each SSA contains a thorough review of the taxonomy, life history, ecology, current status, and projected future status for each species. This supporting information can be found on the internet at https://www.regulations.gov under the appropriate docket number (see ADDRESSES , above).

The Bone Cave harvestman was originally listed as endangered as the Bee Creek Cave harvestman ( Texella reddelli ) on September 16, 1988 (53 FR 36029). The species was subsequently reclassified into two species, and on August 18, 1993, we listed the Bone Cave harvestman ( Texella reyesi ) as a separate species under the Act (58 FR 43818). This 1993 technical correction ensured that the Bone Cave harvestman continued to be listed under the Act. On December 4, 2009, we completed a 5-year review of the Bone Cave harvestman, which recommended that the species remain listed as endangered (Service 2009).

On June 2, 2014, we received a petition dated June 2, 2014, from John Yearwood, Kathryn Heidemann, Charles and Cheryl Shell, the Walter Sidney Shell Management Trust, the American Stewards of Liberty, and Steven W. Carothers requesting that the endangered Bone Cave harvestman be delisted due to recovery and error in information. The petition clearly identified itself as a petition and included the requisite identification information for the petitioners, as required at that time by 50 CFR 424.14(a). We evaluated this petition under the 50 CFR 424.14 requirements that were in effect at the time we received the petition, and on June 1, 2015 (80 FR 30990), we published an initial 90-day finding that the petition did not present substantial scientific or commercial information indicating that the petitioned action may be warranted.

Following litigation in 2016 and 2017, we published a 90-day finding in the Federal Register on October 10, 2019 (84 FR 54542), that the petition presented substantial scientific or commercial information indicating that delisting the Bone Cave harvestman may be warranted. Previous Federal actions and the history of relevant lawsuits and court decisions can be found in the 2019 90-day finding (84 FR 54542; October 10, 2019). The regulations at 50 CFR 424.14(h)(2)(i) require that we publish not-warranted 12-month findings in the Federal Register , and this document constitutes our 12-month finding for Bone Cave harvestman in response to the 2014 petition and 2019 90-day finding.

NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council (Council) under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The final 2022 and 2023 harvest specifications for groundfish in the GOA (87 FR 11599, March 2, 2022) set the 2023 pollock TAC at 139,977 metric tons (mt) in the GOA. In December 2022, the Council recommended a 2023 pollock TAC of 156,578 mt for the GOA, which is greater than the 139,977 mt established by the final 2022 and 2023 harvest specifications for groundfish in the GOA. The Council's recommended 2023 TAC, and the area and seasonal apportionments, is based on the Stock Assessment and Fishery Evaluation report (SAFE), dated November 2022.

The final 2022 and 2023 harvest specifications for groundfish in the GOA (87 FR 11599, March 2, 2022) set the 2023 Pacific cod TAC at 21,096 mt in the GOA. In December 2022, the Council recommended a 2023 Pacific cod TAC of 18,103 mt for the GOA, which is less than the 21,096 mt established by the final 2022 and 2023 harvest specifications for groundfish in the GOA. The Council's recommended 2023 TAC, and the area and seasonal apportionments, is based on the SAFE, dated November 2022.

Steller sea lions occur in the same location as the pollock and Pacific cod fisheries and are listed as endangered under the Endangered Species Act. Pollock and Pacific cod are principal prey species for Steller sea lions in the GOA. The seasonal apportionment of pollock and Pacific cod harvests are necessary to ensure the groundfish fisheries are not likely to cause jeopardy of extinction or adverse modification of critical habitat for Steller sea lions. The regulations at § 679.20(a)(5)(iv) specify how the pollock TAC will be apportioned and the regulations at § 679.20(a)(6)(ii) and (a)(12)(i) specify how the Pacific cod TAC will be apportioned.

In accordance with § 679.25(a)(1)(iii), (a)(2)(i)(B), and (a)(2)(iv) the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that, based on the best available scientific information for this fishery, the current GOA pollock and Pacific cod TACs are incorrectly specified. Consequently, pursuant to § 679.25(a)(1)(iii), the Regional Administrator is adjusting the 2023 GOA pollock TAC to 156,578 mt and the 2023 Pacific cod TAC to 18,103 mt. Therefore, Tables 4 and 6 of the final 2022 and 2023 harvest specifications for groundfish in the GOA (87 FR 11599, March 2, 2022) are revised consistent with this adjustment.

Pursuant to § 679.20(a)(5)(iv), Table 4 of the final 2022 and 2023 harvest specifications for groundfish in the GOA (87 FR 11599, March 2, 2022) is revised for the 2023 TACs of pollock in the Central and Western Regulatory Area of the GOA.

NMFS manages the groundfish fishery in the BSAI exclusive economic zone according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council (Council) under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The final 2022 and 2023 harvest specifications for groundfish in the BSAI (87 FR 11626, March 2, 2022) set the 2023 Aleutian Islands (AI) pollock TAC at 19,000 metric tons (mt), the 2023 Bering Sea (BS) pollock TAC at 1,289,000 mt, the 2023 BSAI Atka mackerel TAC at 60,958 mt, the 2023 BS Pacific cod TAC at 133,459 mt, and the 2023 AI Pacific cod TAC at 13,796 mt. In December 2022, the Council recommended a 2023 BS pollock TAC of 1,300,000 mt, which is more than the 1,289,000 mt TAC established by the final 2022 and 2023 harvest specifications for groundfish in the BSAI. The Council also recommended a 2023 BSAI Atka mackerel TAC of 69,282 mt, which is more than the 60,958 mt TAC established by the final 2022 and 2023 harvest specifications for groundfish in the BSAI. Furthermore, the Council recommended a 2023 BS Pacific cod TAC of 127,409 mt, and an AI Pacific cod TAC of 8,425 mt, which is less than the BS Pacific cod TAC of 133,459 mt, and less than the AI Pacific cod TAC of 13,796 mt established by the final 2022 and 2023 harvest specifications for groundfish in the BSAI. The Council's recommended 2023 TACs, and the area and seasonal apportionments, are based on the Stock Assessment and Fishery Evaluation report (SAFE), dated November 2022, which NMFS has determined is the best available scientific information for these fisheries.

Steller sea lions occur in the same location as the pollock, Atka mackerel, and Pacific cod fisheries and are listed as endangered under the Endangered Species Act (ESA). Pollock, Atka mackerel, and Pacific cod are a principal prey species for Steller sea lions in the BSAI. The seasonal apportionment of pollock, Atka mackerel, and Pacific cod harvest is necessary to ensure the groundfish fisheries are not likely to cause jeopardy of extinction or adverse modification of critical habitat for Steller sea lions. NMFS published regulations and the revised harvest limit amounts for pollock, Atka mackerel, and Pacific cod fisheries to implement Steller sea lion protection measures to insure that groundfish fisheries of the BSAI are not likely to jeopardize the continued existence of the western distinct population segment of Steller sea lions or destroy or adversely modify their designated critical habitat (79 FR 70286, November 25, 2014).

In accordance with § 679.25(a)(1)(iii), (a)(2)(i)(B), and (a)(2)(iv), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that, based on the November 2022 SAFE report for this fishery, the current BSAI pollock, Atka mackerel, and Pacific cod TACs are incorrectly specified. Pursuant to § 679.25(a)(1)(iii), the Regional Administrator is adjusting the 2023 BS pollock TAC to 1,300,000 mt, the 2023 BSAI Atka mackerel TAC to 69,282 mt, the 2023 BS Pacific cod TAC to 127,409 mt, and the 2023 AI Pacific cod TAC to 8,425 mt. Therefore, Table 2 of the final 2022 and 2023 harvest specifications for groundfish in the BSAI (87 FR 11626, March 2, 2022) is revised consistent with this adjustment.

Pursuant to § 679.20(a)(5)(i) and (iii), Table 5 of the final 2022 and 2023 harvest specifications for groundfish in the BSAI (87 FR 11626, March 2, 2022) is revised for the 2023 BS and AI allocations of pollock TAC to the directed pollock fisheries and to the Community Development Quota (CDQ) directed fishing allowances consistent with this adjustment.

Pursuant to § 679.20(a)(8), Table 7 of the final 2022 and 2023 harvest specifications for groundfish in the BSAI (87 FR 11626, March 2, 2022) is revised for the 2023 seasonal and spatial allowances, gear shares, CDQ reserve, incidental catch allowance, jig, BSAI trawl limited access, and Amendment 80 allocations of the BSAI Atka mackerel TAC consistent with this adjustment.

Pursuant to § 679.20(a)(7), Table 9 of the final 2022 and 2023 harvest specifications for groundfish in the BSAI (87 FR 11626, March 2, 2022) is revised for the 2023 gear shares and seasonal allowances of the BSAI Pacific cod TAC consistent with this adjustment.

NMFS issues this action pursuant to section 305(d) of the Magnuson-Stevens Act. This action is required by 50 CFR part 679, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866.

Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be impracticable and contrary to the public interest, as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion, and would allow for harvests that exceed the appropriate allocations for pollock, Atka mackerel, and Pacific cod in the BSAI based on the best scientific information available. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of December 21, 2022.

Without this inseason adjustment, NMFS could not allow the fishery for pollock, Atka mackerel, and Pacific cod in the BSAI to be harvested in an expedient manner and in accordance with the regulatory schedule. Under § 679.25(c)(2), interested persons are invited to submit written comments on this action to the above address until January 13, 2023.