We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.

We will consider all comments we receive by the closing date for comments. We may change these special conditions based on the comments we receive.

On February 20, 2019, TTF Aerospace applied for a supplemental type certificate for a LD-MCR installed in the aft cargo compartment of Airbus Model A330-300 and Model A330-900 series airplanes. The Airbus Model A330-300 and Model A330-900 series airplanes are twin-engine, transport category airplanes with maximum takeoff weights of 405,650 and 533,518 pounds, respectively, and seating for 440 passengers.

The LD-MCR compartment will be located under the passenger cabin floor in the aft cargo compartment of Airbus Model A330-300 and Model A330-900 airplanes. It will be removable from the cargo compartment. The LD-MCR compartment will be occupied in flight but not during taxi, takeoff, or landing. No more than ten crewmembers at a time will be permitted to occupy it. The LD-MCR compartment will have a smoke detection system, a fire suppression system, and an oxygen system.

The LD-MCR compartment will be accessed from the main deck via a “stairhouse.” The floor within the stairhouse has a hatch that leads to stairs that occupants use to descend into the LD-MCR compartment. An interface will keep this hatch open when the stairhouse door is open. In addition, there will be an emergency hatch that opens directly into the main passenger cabin. The LD-MCR compartment has a maintenance door. This door is intended to be used to allow maintenance personnel and cargo handlers to enter the LD-MCR from the cargo compartment when the airplane is not in flight.

Under the provisions of title 14, Code of Federal Regulations (14 CFR) 21.101, TTF Aerospace must show that the Airbus Model A330-300 and Model A330-900 series airplanes, as changed, continue to meet the applicable provisions of the regulations listed in Type Certificate No. A46NM or the applicable regulations in effect on the date of application for the change, except for earlier amendments as agreed upon by the FAA.

If the Administrator finds that the applicable airworthiness regulations ( i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for the Airbus Model A330-300 and Model A330-900 series airplanes because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate to incorporate the same novel or unusual design feature, these special conditions would also apply to the other model under § 21.101.

In addition to the applicable airworthiness regulations and special conditions, the Airbus Model A330-300 and Model A330-900 series airplanes must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36.

The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.101.

The Airbus Model A330-300 and Model A330-900 series airplanes will incorporate the following novel or unusual design features:

This design feature is a LD-MCR installed in the aft cargo compartment of Model A330-300 and Model A330-900 series airplanes.

While the installation of the crew rest compartment is not a new concept for large transport category airplanes, each crew rest compartment has unique features based on design, location, and use on the airplane. The LD-MCR compartment is novel in terms of part 25 of title 14 of the CFR in that it will be located under the passenger cabin floor in the aft cargo compartment of Airbus Model A330-300 and Model A330-900 series airplanes, which is not contemplated by § 25.819 regarding lower deck service compartments (including galleys). Due to the novel or unusual features associated with the installation of a LD-MCR compartment, special conditions are considered necessary to provide a level of safety equal to that established by the airworthiness regulations incorporated by reference in the type certificates of these airplanes as applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature.

Most of these special conditions come from § 25.819 but they require more stringent standards for fire protection and emergency egress, because of design features and location of the LD-MCR. The applicant should note that the FAA considers smoke or fire detection and fire suppression systems (including airflow management features that prevent hazardous quantities of smoke or fire extinguishing agent from entering any other compartment occupied by crewmembers or passengers) for crew rest compartments complex in terms of paragraph 6d of Advisory Circular (AC) 25.1309-1A, “System Design and Analysis,” dated June 21, 1988. In addition, the FAA considers failure of the crew rest compartment fire protection system ( i.e., smoke or fire detection and fire suppression systems) in conjunction with a crew rest fire to be a catastrophic event. Based on the “Depth of Analysis Flowchart” shown in Figure 2 of AC 25.1309-1A, the depth of analysis should include both qualitative and quantitative assessments. Refer to paragraphs 8d, 9, and 10 of AC 25.1309-1A. In addition, it should be noted that flammable fluids, explosives, or other dangerous cargo are prohibited from being carried in the crew rest areas.

The requirements to enable crewmembers' quick entry to the crew rest compartment and to locate a fire source inherently places limits on the amount of baggage that may be carried and the size of the crew rest area. The FAA considers that the crew rest area must be limited to the stowage of crew personal luggage and must not be used for the stowage of cargo or passenger baggage. The design of such a system to include cargo or passenger baggage would require additional requirements to ensure safe operation.

Furthermore, the addition of galley equipment or a kitchenette incorporating a heat source ( e.g., cook tops, microwaves, coffee pots, etc.), other than a conventional lavatory or kitchenette hot water heater, within the LD-MCR compartment defined in the “Novel or Unusual Design Features” section, may require additional special conditions to be considered. A hot water heater is acceptable without further special conditions consideration.

Finally, amendment 25-38 modified the requirements of § 25.1439(a) by adding, “In addition, protective breathing equipment must be installed in each isolated separate compartment in the airplane, including upper and lower lobe galleys, in which crewmember occupancy is permitted during flight for the maximum number of crewmembers expected to be in the area during any operation.” The LD-MCR compartment is an isolated separate compartment, so § 25.1439(a) is applicable. However, the § 25.1439(a) protective breathing equipment (PBE) requirements for isolated separate compartments are not appropriate because the LD-MCR is novel or unusual in terms of the number of occupants.

In 1976, when amendment 25-38 was adopted, small galleys were the only isolated compartments that had been certificated. Two crewmembers were the maximum expected to occupy those galleys.

This crew rest compartment can accommodate up to ten crewmembers. This large number of occupants in an isolated compartment was not envisioned at the time amendment 25-38 was adopted. It is not appropriate for all occupants to don PBEs in the event of a fire because the first action should be to leave the confined space unless the occupant is fighting the fire. Taking the time to don the PBE would prolong the time for the emergency evacuation of the occupants and possibly interfere with efforts to extinguish the fire. These special conditions therefore provide procedures that establish a level of safety equivalent to the PBE requirements.

These special conditions outline requirements for flightcrew and cabin crew rest compartment design approvals ( e.g., type design change or supplemental type certificate) administered by the FAA's Aircraft Certification Service. Prior to operational use of a flight (cabin) crew rest compartment, the FAA's Flight Standards Service must evaluate for operational suitability the flight (cabin) crew sleeping quarters and rest facilities. Refer to §§ 91.1061(b)(1), 121.485(a), 121.523(b), and 135.269(b)(5).

Compliance with these special conditions does not ensure that the applicant has demonstrated compliance with the requirements of 14 CFR parts 91, 121, or 135.

To obtain an operational evaluation, the type design holder must contact the appropriate Aircraft Evaluation Group (AEG) in the Flight Standards Service and request an evaluation for operational suitability of the flightcrew sleeping quarters in their crew rest facility. Results of these evaluations should be documented and appended to the applicable Flight Standardization Board (FSB) Report. Individual operators may reference these standardized evaluations in discussions with their FAA Principal Operating Inspector (POI) as the basis for an operational approval, in lieu of an on-site operational evaluation.

Any changes to the approved flight (cabin) crew rest compartment configuration that affect crewmember emergency egress or any other procedures affecting the safety of the occupying crewmembers and/or related training shall require a re-evaluation and approval. In the event of any design change that affects egress, safety procedures, or training, the applicant is responsible for notifying the FAA's AEG that a new crew rest facility evaluation is required.

All instructions for continued airworthiness (ICAs) will be submitted to the Seattle AEG for approval acceptance, including service bulletins, before issuance of the FAA modification approval.

These proposed special conditions are the same as Special Condition 25-281-SC, except the maximum occupancy is ten rather than seven occupants and a change to the table in Special Condition 20. The proposed conditions provide an appropriate level of safety for the proposed occupancy limit as only the size of the compartment will increase to accommodate the additional occupants but all other requirements for safety, fire suppression, and emergency evacuation will remain the same. In addition, the change to the table in Special Condition 20 is related to the location of the crew rest and specifics of the crew rest design. Stowage compartments located in the vicinity of critical equipment or located in an overhead area would typically be listed as conditional. However, this LD-MCR is located in the Class C cargo compartment with all of its features that provide fire protection ( e.g., the use of liner material that meets appendix F to part 25, part III; control of ventilation; active fire suppression; active fire detection; etc.). These features remain when the crew rest is installed.

The proposed special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.

As discussed above, these special conditions are applicable to the Airbus Model A330-300 and Model A330-900 airplanes. Should TTF Aerospace apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A46NM to incorporate the same novel or unusual design feature, these special conditions would apply to that model as well.

Certification of the Airbus Model A330-300 and Model A330-900 airplanes with the LD-MCR is currently scheduled for June 2019. The substance of these special conditions has been subject to the notice and public comment procedure in several prior instances. Therefore, because a delay would significantly affect the applicant's installation of the system and the certification of the airplane, we are shortening the public comment period to 20 days.

This action affects only a certain novel or unusual design feature on Airbus Model A330-300 and Model A330-900 of airplanes. It is not a rule of general applicability and affects only the applicant who applied to the FAA for approval of these features on the airplane.

The authority citation for these special conditions is as follows:

Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for Airbus Model A330-300 and Model A330-900 airplanes, as modified by TTF Aerospace.

1. Occupancy of the LD-MCR compartment is limited to the total number of installed bunks and seats in each compartment. For each occupant permitted in the LD-MCR compartment, there must be an approved seat or berth able to withstand the maximum flight loads when occupied. The maximum occupancy in the LD-MCR compartment is ten.

a. There must be appropriate placards displayed in a conspicuous place at each entrance to the LD-MCR compartment indicating the following information:

(1) The maximum number of occupants allowed;

(2) That occupancy is restricted to crewmembers trained in the evacuation procedures for the LD-MCR compartment;

(3) That occupancy is prohibited during taxi, takeoff and landing;

(4) That smoking is prohibited in the LD-MCR compartment; and

(5) That the LD-MCR compartment is limited to the stowage of personal luggage of crewmembers and must not be used for the stowage of cargo or passenger baggage.

b. There must be at least one ashtray located conspicuously on or near the entry side of any entrance to the LD-MCR compartment.

c. There must be a means to prevent passengers from entering the LD-MCR compartment in an emergency or when no flight attendant is present.

d. There must be a means for any door installed between the LD-MCR compartment and the passenger cabin to be capable of being quickly opened from inside the LD-MCR compartment, even when crowding occurs at each side of the door.

e. For all doors installed in the evacuation routes, there must be a means to preclude anyone from being trapped inside a compartment. If a locking mechanism is installed, it must be capable of being unlocked from the outside without the aid of special tools. The lock must not prevent opening from the inside of a compartment at any time.

2. There must be at least two emergency evacuation routes, which could be used by each occupant of the LD-MCR compartment to rapidly evacuate to the main cabin and could be closed from the main passenger cabin after evacuation.

a. The routes must be located with one at each end of the LD-MCR compartment or with two having sufficient separation within the LD-MCR compartment and between the routes to minimize the possibility of an event (either inside or outside of the LD-MCR compartment) rendering both routes inoperative.

b. The routes must be designed to minimize the possibility of blockage, which might result from fire, mechanical or structural failure, or from persons standing on top of or against the escape route. If an evacuation route utilizes an area where normal movement of passengers occurs, it must be demonstrated that passengers would not impede egress to the main deck. If a hatch is installed in an evacuation route, the point at which the evacuation route terminates in the passenger cabin should not be located where normal movement by passengers or crew occur, such as in a main aisle, cross aisle, passageway or galley complex.

If such a location cannot be avoided, special consideration must be taken to ensure that the hatch or door can be opened when a person who is the weight of a ninety-fifth percentile male is standing on the hatch or door.

The use of evacuation routes must not be dependent on any powered device. If there is low headroom at or near an evacuation route, provision must be made to prevent or to protect occupants of the LD-MCR compartment from head injury.

c. Emergency evacuation procedures, including the emergency evacuation of an incapacitated crewmember from the LD-MCR compartment, must be established. All of these procedures must be transmitted to the operator for incorporation into its training programs and appropriate operational manuals.

d. There must be a limitation in the Airplane Flight Manual or other suitable means requiring that crewmembers be trained in the use of evacuation routes.

3. There must be a means for the evacuation of an incapacitated crewmember who is representative of a 95th percentile male from the LD-MCR compartment to the passenger cabin floor. The evacuation must be demonstrated for all evacuation routes. A flight attendant or other crewmember (a total of one assistant within the LD-MCR compartment) may provide assistance in the evacuation. Additional assistance may be provided by up to three persons in the main passenger compartment. For evacuation routes having stairways, the additional assistants may descend down to one half the elevation change from the main deck to the LD-MCR compartment or to the first landing, whichever is higher.

4. The following signs and placards must be provided in the LD-MCR compartment:

a. At least one exit sign that meets the requirements of § 25.812(b)(1)(i) at amendment 25-58 must be located near each exit. However, a sign with reduced background area of no less than 5.3 square inches (excluding the letters) may be utilized, provided that it is installed such that the material surrounding the exit sign is light in color ( e.g., white, cream, light beige). If the material surrounding the exit sign is not light in color, a sign with a minimum of a one-inch wide background border around the letters would also be acceptable;

b. An appropriate placard that defines the location and the operating instructions for each evacuation route must be located near each exit;

c. Placards must be readable from a distance of 30 inches under emergency lighting conditions; and

d. The exit handles and the placards with the evacuation path operating instructions must be illuminated to at least 160 microlamberts under emergency lighting conditions.

5. There must be a means for emergency illumination to be automatically provided for the LD-MCR compartment in the event of failure of the main power system of the airplane or of the normal lighting system of the LD-MCR compartment.

a. This emergency illumination must be independent of the main lighting system.

b. The sources of general cabin illumination may be common to both the emergency and the main lighting systems, if the power supply to the emergency lighting system is independent of the power supply to the main lighting system.

c. The illumination level must be sufficient for the occupants of the LD-MCR compartment to locate and transfer to the main passenger cabin floor by means of each evacuation route.

d. The illumination level must be sufficient to locate a deployed oxygen mask with the privacy curtains in the closed position for each occupant of the LD-MCR compartment.

6. There must be means for two-way voice communications between crewmembers on the flightdeck and crewmembers in the LD-MCR compartment. Section 25.785(h) at amendment 25-51 requires flight attendant seats near required floor level emergency exits. Each such exit seat on the aircraft must have a public address system microphone that allows two-way voice communications between flight attendants and crewmembers in the LD-MCR compartment. One microphone may serve more than one such exit seat, provided the proximity of the exits allows unassisted verbal communications between seated flight attendants.

7. There must be a means for manual activation of an aural emergency alarm system, audible during normal and emergency conditions, to enable crewmembers on the flightdeck and at each pair of required floor-level emergency exits to alert crewmembers in the LD-MCR compartment of an emergency. Use of a public address or crew interphone system will be acceptable, provided an adequate means of differentiating between normal and emergency communications is incorporated. The system must be powered in flight for at least ten minutes after the shutdown or failure of all engines and auxiliary power units (APU) or the disconnection or failure of all power sources that are dependent on the continued operation of the engines and APUs.

8. There must be a means, readily detectable by seated or standing occupants of the LD-MCR compartment, which indicates when seat belts should be fastened. If there are no seats, at least one means, such as sufficient handholds, must be provided to cover anticipated turbulence. Seat belt-type restraints must be provided for berths and must be compatible with the sleeping attitude during cruise conditions. There must be a placard on each berth indicating that seat belts must be fastened when the berth is occupied. If compliance with any of the other requirements of these special conditions is predicated on specific head location, there must be a placard specifying the head position.

9. To provide a level of safety equivalent to that provided to occupants of a small isolated galley, in lieu of the requirements of § 25.1439(a) at amendment 25-38 that pertain to isolated compartments, the following equipment must be provided in the LD-MCR compartment:

a. At least one approved hand-held fire extinguisher appropriate for the kinds of fires likely to occur;

b. Two portable Protective Breathing Equipment (PBE) units approved to Technical Standard Order (TSO)-C116 or equivalent, which are suitable for fire-fighting, or one PBE for each hand-held fire extinguisher, whichever is greater; and

c. One flashlight.

10. A smoke or fire detection system or systems must be provided to monitor each occupiable area within the LD-MCR compartment, including those areas partitioned by curtains. Flight tests must be conducted to show compliance with this requirement. Each smoke or fire detection system must provide the following:

a. A visual indication to the flightdeck within one minute after the start of a fire;

b. An aural warning in the LD-MCR compartment; and

c. A warning in the main passenger cabin. This warning must be readily detectable by a flight attendant, taking into consideration the positioning of flight attendants throughout the main-passenger compartment during various phases of flight.

11. The LD-MCR compartment must be designed such that fires within it can be controlled without a crewmember having to enter the compartment or be designed such that crewmembers equipped for fire-fighting have unrestricted access to the compartment. The time for a crewmember on the main deck to react to the fire alarm, don the fire-fighting equipment, and gain access must not exceed the time for the compartment to become smoke-filled, making it difficult to locate the source of the fire.

12. There must be a means provided to exclude hazardous quantities of smoke or extinguishing agent originating in the LD-MCR compartment from entering any other compartment occupied by crewmembers or passengers. This means must include the time periods during the evacuation of the LD-MCR compartment and, if applicable, when accessing the LD-MCR compartment to manually fight a fire. Smoke entering any other compartment occupied by crewmembers or passengers when the LD-MCR compartment is opened during an emergency evacuation must dissipate within five minutes after the LD-MCR compartment is closed.

Hazardous quantities of smoke may not enter any other compartment occupied by crewmembers or passengers during subsequent access to manually fight a fire in the LD-MCR compartment. (The amount of smoke entrained by a firefighter exiting the LD-MCR compartment through the access is not considered hazardous.)

During the one-minute smoke detection time, penetration of a small quantity of smoke from the LD-MCR compartment into an occupied area is acceptable. Flight tests must be conducted to show compliance with this requirement.

If a built-in fire suppression system is used in lieu of manual fire-fighting, the fire suppression system must be designed so that no hazardous quantities of extinguishing agent will enter other compartments occupied by passengers or crewmembers. The system must have adequate capacity to suppress any likely fire occurring in the LD-MCR compartment, considering the fire threat, the volume of the compartment and the ventilation rate.

13. For each seat and berth in the LD-MCR compartment, there must be a supplemental oxygen system equivalent to that provided for main deck passengers. The system must provide an aural and visual warning to alert the occupants of the LD-MCR compartment of the need to don oxygen masks in the event of decompression. The warning must activate before the cabin pressure altitude exceeds 15,000 feet. The aural warning must sound continuously for a minimum of five minutes or until a reset push button in the LD-MCR compartment is depressed. Procedures for crewmembers in the LD-MCR compartment to follow in the event of decompression must be established. These procedures must be transmitted to the operator for incorporation into their training programs and appropriate operational manuals.

14. The following requirements apply to LD-MCR compartments that are divided into several sections by the installation of curtains or doors:

a. To warn crewmembers who may be sleeping, there must be an aural alert that accompanies automatic presentation of supplemental oxygen masks. The alert must be able to be heard in each section of the LD-MCR compartment. A visual indicator that occupants must don an oxygen mask is required in each section where seats or berths are not installed. A minimum of two supplemental oxygen masks is required for each seat or berth. There must also be a means to manually deploy the oxygen masks from the flightdeck.

b. A placard is required adjacent to each curtain that visually divides or separates the LD-MCR compartment into small sections for privacy purposes. The placard must indicate that the curtain is to remain open when the private section it creates is unoccupied.

c. For each section created by the installation of a curtain, the following requirements of these special conditions must be met both with the curtain open and with the curtain closed:

(1) Emergency illumination (Special Condition No. 5);

(2) Aural emergency alarm (Special Condition No. 7);

(3) Fasten seat belt signal or return to seat signal as applicable (Special Condition No. 8); and

(4) Smoke or fire detection (Special Condition No. 10).

d. Crew rest compartments visually divided to the extent that evacuation could be affected must have exit signs that direct occupants to the primary stairway exit. The exit signs must be provided in each separate section of the LD-MCR compartment and must meet the requirements of § 25.812(b)(1)(i) at amendment 25-58. An exit sign with reduced background area, as described in Special Condition No. 4(a), may be used to meet this requirement.

e. For sections within a LD-MCR compartment that are created by the installation of a partition with a door separating the sections, the following requirements of these special conditions must be met with the door open and with the door closed:

(1) There must be a secondary evacuation route from each section to the main deck, or it must be shown that any door between the sections has been designed to preclude anyone from being trapped inside the compartment. Removal of an incapacitated crewmember from this area must be considered. A secondary evacuation route from a small room designed for only one occupant for a short period of time, such as a changing area or lavatory, is not required. However, removal of an incapacitated occupant from this area must be considered.

(2) Any door between the sections must be shown to be openable when crowded against, even when crowding occurs at each side of the door.

(3) There may be no more than one door between any seat or berth and the primary stairway exit.

(4) There must be exit signs in each section that meet the requirements of § 25.812(b)(1)(i) at amendment 25-58 that direct occupants to the primary stairway exit. An exit sign with reduced background area, as described in Special Condition No. 4(a), may be used to meet this requirement.

(5) Special Conditions No. 5 (emergency illumination), No. 7 (aural emergency alarm), No. 8 (fasten seat belt signal or return to seat signal as applicable) and No. 10 (smoke and fire detection) must be met both with the door open and the door closed.

(6) Special Conditions No. 6 (two-way voice communication) and No. 9 (PBE and other equipment) must be met independently for each separate section, except in lavatories or other small areas that are not intended to be occupied for extended periods of time.

15. Where a waste disposal receptacle is fitted, it must be equipped with a built-in fire extinguisher designed to discharge automatically upon occurrence of a fire in the receptacle.

16. Materials, including finishes or decorative surfaces applied to the materials, must comply with the flammability standards of § 25.853 at amendment 25-66. Mattresses must comply with the flammability standards of § 25.853(b) and (c) at amendment 25-66.

17. A lavatory within the LD-MCR compartment must meet the same requirements as a lavatory installed on the main deck, except with regard to Special Condition No. 10 for smoke detection.

18. When a LD-MCR compartment is installed or enclosed as a removable module in part of a cargo compartment or is located directly adjacent to a cargo compartment without an intervening cargo compartment wall, the following conditions apply:

a. Any wall of the LD-MCR compartment, which forms part of the boundary of the reduced cargo compartment and is subject to direct flame impingement from a fire in the cargo compartment, and any interface item between the LD-MCR compartment and the airplane structure or systems must meet the applicable requirements of § 25.855 at amendment 25-60.

b. Means must be provided to ensure that the fire protection level of the cargo compartment meets the applicable requirements of §§ 25.855 at amendment 25-60; 25.857 at amendment 25-60; and 25.858 at amendment 25-54 when the LD-MCR compartment is not installed.

c. Use of each emergency evacuation route must not require occupants of the LD-MCR compartment to enter the cargo compartment in order to return to the passenger compartment.

d. The aural emergency alarm specified in Special Condition No. 7 must sound in the LD-MCR compartment in the event of a fire in the cargo compartment.

19. Means must be provided to prevent access into the Class C cargo compartment, whether or not the LD-MCR is installed, during all airplane flight operations and to ensure that the maintenance door is closed and secured during all airplane flight operations.

20. All enclosed stowage compartments within the LD-MCR compartment that are not limited to stowage of emergency equipment or airplane supplied equipment ( i.e., bedding), must meet the design criteria given in the table below. As indicated in the table, enclosed stowage compartments larger than 200 ft 3 in interior volume are not addressed by this Special Condition. The in-flight accessibility of very large enclosed stowage compartments and the subsequent impact on the crewmembers' ability to effectively reach any part of the compartment with the contents of a hand fire extinguisher will require additional fire protection considerations similar to those required for inaccessible compartments such as Class C cargo compartments.

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2019-0400; Product Identifier 2019-NM-022-AD” at the beginning of your comments. The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. The agency will consider all comments received by the closing date and may amend this NPRM based on those comments.

The FAA will post all comments, without change, to http://www.regulations.gov, including any personal information you provide. The FAA will also post a report summarizing each substantive verbal contact the agency receives about this NPRM.

The EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2019-0012, dated January 24, 2019 (“EASA AD 2019-0012”) (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus SAS Model A321-111, A321-112, A321-131, A321-211, A321-212, A321-213, A321-231 and A321-232 airplanes. The MCAI states:

EASA AD 2019-0012 describes procedures for a one-time eddy current conductivity measurement of certain structural parts on the outer flaps to determine if an incorrect aluminum alloy was used, and replacement of any affected part with a serviceable part. 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.

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 the State of Design Authority, the FAA has been notified of the unsafe condition described in the MCAI referenced above. The FAA is proposing this AD because the agency evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2019-0012, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this AD. This proposed AD also would require sending the inspection results to Airbus SAS.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA worked with Airbus and EASA to develop a process to use certain EASA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. As a result, the FAA expects that EASA AD 2019-0012 will be incorporated by reference in the FAA's final rule. This proposed AD would, therefore, require compliance with the provisions specified in EASA AD 2019-0012, except for any differences identified as exceptions in the regulatory text of this proposed AD. Service information specified in EASA AD 2019-0012 that is required for compliance with EASA AD 2019-0012 will be available on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2019-0400 after the FAA final rule is published.

The FAA estimates that this proposed AD would affect 29 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

The FAA estimates that it would take about one work-hour per product to comply with the proposed reporting requirement in this proposed AD. The average labor rate is $85 per hour. Based on these figures, the FAA estimates the cost of reporting the inspection results on U.S. operators to be $2,465, or $85 per product.

The FAA has received no definitive data that would enable the agency to provide cost estimates for the on-condition actions specified in this proposed AD.

According to the manufacturer, some or all of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. The FAA does not control warranty coverage for affected individuals. As a result, the agency has included all known costs in the cost estimate.

A federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a current valid OMB control number. The control number for the collection of information proposed by this NPRM is 2120-0056. The paperwork cost associated with this NPRM has been detailed in the Costs of Compliance section of this document and includes time for reviewing instructions, as well as completing and reviewing the collection of information. Therefore, all reporting associated with this NPRM would be mandatory. Comments concerning the accuracy of this burden and suggestions for reducing the burden should be directed to the FAA at 800 Independence Ave. SW, Washington, DC 20591, ATTN: Information Collection Clearance Officer, AES-200.

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 proposed AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes and associated appliances to the Director of the System Oversight Division.

The FAA has determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

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

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

2. 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 proposes to amend 14 CFR part 39 as follows:

Comments Invited

We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2018-0453; Product Identifier 2018-NM-028-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this SNPRM. We will consider all comments received by the closing date and may amend this SNPRM based on those comments.

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

We issued an NPRM to amend 14 CFR part 39 by adding an AD that would apply to certain Bombardier, Inc., Model DHC-8-400 series airplanes. The NPRM published in the Federal Register on May 30, 2018 (83 FR 24694). The NPRM was prompted by reports of the NLG locking in a partially extended position due to loose bushings on a lock link of the NLG locking mechanism. The NPRM proposed to require repetitive inspections of the bushings and the lower lock link of the NLG for discrepancies, and corrective actions if necessary. We are issuing this AD to address excessive free play at the lock link of the NLG locking mechanism, and consequent inability to fully retract or deploy the NLG, which could result in collapse of the NLG and affect the safe landing of the airplane.

Since we issued the NPRM, we have determined that to adequately address the unsafe condition, it is necessary to require replacement of the NLG lower lock link with a new lower lock link having a new configuration.

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian AD CF-2018-01R1, dated February 4, 2018 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc., Model DHC-8-400 series airplanes. The MCAI states:

Discrepancies include any signs of migration of the bushings, broken or missing edge sealant, diagonal paint cracks on the sealant, and paint stripe misalignment. You may examine the MCAI in the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-0453.

We gave the public the opportunity to participate in developing this proposed AD. We considered the comments received.

Horizon Air asked that Bombardier Service Bulletin 84-32-153, Revision A, dated February 27, 2018, be incorporated into the proposed AD (in the NPRM). Horizon Air added that a credit paragraph should also be included for the original issue of the referenced service information.

We partially agree with the commenter's request. We have revised this proposed AD to identify Bombardier Service Bulletin 84-32-153, Revision A, dated February 27, 2018, as the appropriate source of service information for the inspection specified in paragraph (g) of this proposed AD. Revision A merely clarifies certain actions and corrects a certain task number, and adds no new work. We have added paragraph (j) to this proposed AD to provide credit for actions done before the effective date of this AD using the original issue of the referenced service information. However, for clarification, we have included the correct task number for greasing all drag strut joints, which is AMM Task 12-20-01-640-802. Bombardier Service Bulletin 84-32-153, dated September 22, 2017, specifies AMM Task 12-20-01-640-803, which is incorrect. We have redesignated subsequent paragraphs accordingly.

Horizon Air asked that we include an option for terminating action for the repetitive inspections required by paragraph (g) of the proposed AD (in the NPRM). Horizon Air stated that Bombardier Service Bulletin 84-32-154, Revision A, dated November 21, 2018, includes a modification that involves reconfiguration of the lower lock link of the NLG by adding new bushings with improved retention and greasing provisions.

We partially agree with the commenter's request. We agree to include terminating action for the repetitive inspections, but to adequately address the unsafe condition, we have determined that it is necessary to mandate this action instead of providing it as an option. We have added paragraph (k) of this proposed AD to require the modification, which would terminate the repetitive inspections specified by paragraph (g) of this proposed AD. We have redesignated subsequent paragraphs accordingly.

Horizon Air asked that we incorporate Global AMOC AARDG-2018/A02 to Canadian AD CF-2018-01 into the FAA proposed AD (in the NPRM). Horizon Air stated that this global AMOC provides the initial compliance time for lower lock links of the NLG that have been repaired based on flight cycles accumulated since repair, instead of total flight cycles accumulated. Horizon Air added that justification for this AMOC was that repair of the lower lock link in accordance with the applicable component maintenance manual yields the same bushing retention properties as a new part.

We agree with the commenter's request. Canadian AD CF-2018-01R1 added compliance times for a repaired or replaced NLG lower lock link. Therefore, we have included paragraph (h) in this proposed AD to allow the compliance times to be measured from the time of repair or replacement of the existing lower lock link for a repair or replacement that was done using a specified method.

Horizon Air asked that the job setup and closeout actions specified in Bombardier Service Bulletin 84-32-153, Revision A, dated February 27, 2018, be excluded from the requirements of paragraph (g) of the proposed AD (in the NPRM). Horizon Air stated that these actions do not directly correct the unsafe condition. Horizon Air added that incorporating these actions restricts an operator's ability to perform other maintenance in conjunction with incorporation of the referenced service information.

We partially agree with the commenter's request. We agree to remove the closeout actions, but to adequately perform the corrective actions the job setup actions specified in Bombardier Service Bulletin 84-32-153, Revision A, dated February 27, 2018, must be included. Paragraph 3.A., “Job Set-Up,” of Bombardier Service Bulletin 84-32-153, Revision A, dated February 27, 2018, includes specific airplane maintenance manual tasks and instructions that properly establish a baseline needed to evaluate excessive play at the lower lock link of the NLG locking mechanism, and correctly address the unsafe condition. In addition, the operator is directed to paragraph 3.A.(5) of the Job Setup section in the Accomplishment Instructions of Bombardier Service Bulletin 84-32-153, Revision A, dated February 27, 2018, for the applicable corrective action. Therefore, we have revised the requirements of paragraph (g) accordingly.

Bombardier has issued the following service information:

• Service Bulletin 84-32-153, Revision A, dated February 27, 2018, which describes procedures for an inspection of the bushings and the lower lock link of the NLG for discrepancies. The service information also describes procedures for repair or replacement of a discrepant lock link.

• Service Bulletin 84-32-154, Revision A, dated November 21, 2018, which describes procedures for replacement of the existing lower lock link with a new configuration lock link.

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

Certain changes described above expand the scope of the NPRM. As a result, we have determined that it is necessary to reopen the comment period to provide additional opportunity for the public to comment on this SNPRM.

We estimate that this proposed AD affects 64 airplanes of U.S. registry.

We estimate the following costs to comply with this proposed AD:

We have received no definitive data that enables us to provide cost estimates for the on-condition actions specified in this proposed 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.

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

This proposed AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes and associated appliances to the Director of the System Oversight Division.

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

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

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

2. 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 proposes to amend 14 CFR part 39 as follows:

Background I. In General

This document contains proposed amendments to 26 CFR part 1 under sections 897, 1445, and 1446 (the “proposed regulations”). Section 323(a) of the Protecting Americans from Tax Hikes Act of 2015, Public Law 114-113, div. Q (the “PATH Act”), added section 897(l) to the Code, and Section 101(q) of the Tax Technical Corrections Act of 2018, Public Law 115-141, div. U (the “Technical Corrections Act”) amended certain aspects of section 897(l). Section 897(l) provides an exemption to the application of section 897(a) on gain or loss on certain dispositions of, and distributions with respect to, United States real property interests (“USRPIs”) for certain foreign pension funds and their subsidiaries. The proposed regulations contain rules relating to the qualification for the exemption under section 897(l), as well as rules relating to withholding requirements under sections 1445 and 1446 for dispositions of USRPIs by foreign pension funds and their subsidiaries.

Section 897(a)(1) provides that gain or loss of a nonresident alien individual or foreign corporation from the disposition of a USRPI is taken into account under section 871(b)(1) or 882(a)(1), as applicable, as if the nonresident alien individual or foreign corporation were engaged in a trade or business within the United States during the taxable year and such gain or loss were effectively connected with that trade or business.

Section 897(c)(1)(A) defines a USRPI as an interest in real property (including an interest in a mine, well, or other natural deposit) located in the United States or the Virgin Islands, and any interest (other than solely as a creditor) in any domestic corporation unless the taxpayer establishes that such corporation was at no time a United States real property holding corporation (“USRPHC”) during the applicable testing period (generally, the five-year period ending on the date of the disposition of the interest). Under section 897(c)(2), a USRPHC means any corporation if the fair market value of its USRPIs equals or exceeds 50 percent of the total fair market value of its USRPIs, its interests in real property located outside the United States, plus any other assets that are used or held for use in a trade or business. However, section 897(c)(1)(B) generally provides that an interest in a corporation is not a USRPI if the corporation does not hold any USRPIs as of the date its stock is sold and the corporation disposed of all of the USRPIs that it held during the applicable testing period in transactions in which the full amount of gain, if any, was recognized.

Section 897(h)(1) provides that any distribution by a qualified investment entity (QIE) to a nonresident alien individual, a foreign corporation, or other QIE is, to the extent attributable to gain from sales or exchanges by the QIE of USRPIs, treated as gain recognized by such nonresident alien individual, foreign corporation, or other QIE from the sale or exchange of a USRPI, subject to certain exceptions. Under section 897(h)(4)(A), a QIE includes any real estate investment trust (REIT) and certain regulated investment companies.

Section 897(l)(1) provides that a qualified pension fund is not treated as a nonresident alien individual or foreign corporation for purposes of section 897. Cf. section 897(a) (subjecting nonresident alien individuals and foreign corporations to tax on gain or loss from the disposition of a USRPI). For this purpose, an entity all the interests of which are held by a qualified foreign pension fund (referred to in this Preamble and the proposed regulations as a “qualified controlled entity”) is also treated as a qualified foreign pension fund.

Under section 897(l)(2), a qualified foreign pension fund is defined as any trust, corporation, or other organization or arrangement (any one of which is referred to in this Preamble and the proposed regulations as an “eligible fund”) that satisfies five separate requirements. Specifically, a qualified foreign pension fund is an eligible fund (A) that is created or organized under the law of a country other than the United States, (B) that is established (i) by such country (or one or more political subdivisions thereof) to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees, as a result of services rendered by such employees to their employers, or (ii) by one or more employers to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees in consideration for services rendered by such employees to such employers, (C) that does not have a single participant or beneficiary with a right to more than five percent of its assets or income, (D) that is subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to the relevant tax authorities in the country in which it is established or operates, and (E) with respect to which, under the laws of the country in which it is established or operates (i) contributions to such eligible fund that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or arrangement or taxed at a reduced rate, or (ii) taxation of any investment income of such eligible fund is deferred or such income is excluded from gross income of such entity or arrangement or is taxed at a reduced rate.

Section 897(l)(3) provides that the Secretary of the Treasury (Secretary) shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of section 897(l).

Section 1445(a) generally imposes a withholding tax obligation on the transferee when a foreign person disposes of a USRPI. Section 1445(e)(6) provides that, if any portion of a distribution from a QIE to a nonresident alien individual or a foreign corporation is treated under section 897(h)(1) as gain realized by such individual or corporation from the sale or exchange of a USRPI, the QIE must deduct and withhold tax under section 1445(a) on the amount so treated.

A transferee of a USRPI is not required to withhold under section 1445(a) if the transferor furnishes to the transferee a certification that, among other things, states that the transferor is not a foreign person. § 1.1445-2(b)(2)(i). Generally, upon a distribution and other transactions subject to withholding, certain entities may treat a holder of an interest in the entity as a U.S. person if that interest holder furnishes to the entity or fiduciary a certification stating that the interest holder is not a foreign person. § 1.1445-5(b)(3)(ii)(A). Upon the distribution of any amount attributable to the disposition of a USRPI, a QIE may rely on the same certification, a Form W-9, Request for Taxpayer Identification Number and Certification, or a form that is substantially similar to the Form W-9 to determine whether an interest holder is a U.S. person. § 1.1445-8(e).

Section 323(b) of the PATH Act amended section 1445(f)(3) to provide that, for purposes of section 1445, the term “foreign person” means any person other than (A) a United States person, and (B) except as otherwise provided by the Secretary, an entity with respect to which section 897 does not apply by reason of section 897(l). On February 19, 2016, the Department of the Treasury (the “Treasury Department”) and the IRS published final regulations under section 1445 of the Code (“updated section 1445 regulations”) in the Federal Register (81 FR 8398-01) to reflect the PATH Act's amendments to section 1445(f)(3). A correcting amendment to the updated section 1445 regulations was published on April 26, 2016 in the Federal Register (81 FR 24484-01). As corrected, the updated section 1445 regulations provide that neither a qualified foreign pension fund nor an entity all of the interests of which are held by a qualified foreign pension fund is treated as a foreign person, and thus may provide a certification to a transferee. See §§ 1.1445-2(b)(2)(i) (flush language) and 1.1445-5(b)(3)(ii)(A).

A partnership generally must pay a withholding tax under section 1446 on effectively connected taxable income (“ECTI”) allocable under section 704 to a foreign partner. Section 1446(c) provides that ECTI includes the taxable income of a partnership that is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States, subject to certain adjustments. For this purpose, ECTI includes any partnership income treated as effectively connected with the conduct of a trade or business in the United States pursuant to section 897. § 1.1446-2(b)(2)(ii).

A foreign partner's allocable share of partnership ECTI does not include income or gain exempt from U.S. tax by reason of a provision of the Code or by operation of any U.S. income tax treaty or reciprocal agreement. § 1.1446-2(b)(2)(iii). In the case of income excluded by reason of a treaty provision, such income must be derived by a resident of an applicable treaty jurisdiction, the resident must be the beneficial owner of the item, and all other requirements for benefits under the treaty must be satisfied. To exclude income or gain from ECTI, the partnership must receive from the partner a valid withholding certificate (that is, Form W-8BEN-E, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)) containing the information necessary to support the claim for treaty benefits required in the forms and instructions. Id.

A domestic partnership required to withhold under both sections 1445 and 1446 with respect to income treated as ECTI pursuant to section 897 is deemed to satisfy the withholding requirements of section 1445 if it complies with the requirements of section 1446. § 1.1446-3(c)(2)(i).

In the Preamble to the updated section 1445 regulations that were published on February 19, 2016, the Treasury Department and the IRS requested comments regarding what regulations, if any, should be issued pursuant to section 897(l)(3). Twenty-one comments were received, requesting, in particular, guidance on issues related to qualification as a “qualified foreign pension fund” under section 897(l)(2). The comments will be included in the administrative record for this notice of proposed rulemaking. The Treasury Department and the IRS considered all of the comments, and in response to the comments have issued the proposed regulations to provide clarification on the application of section 897(l). Each significant comment, other than any comment rendered moot by the Technical Corrections Act, is discussed in the relevant part of the Explanation of Provisions section of this preamble.

The proposed regulations provide guidance regarding the scope of the exception described in section 897(l)(1), the application of the requirements described in section 897(l)(2) that an eligible fund must satisfy to be treated as a qualified foreign pension fund, and rules regarding exemptions from withholding under section 1445 or section 1446.

As described in the Background section of this Preamble, section 897(a) applies to gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a USRPI. Similarly, section 897(h) generally treats any distribution from a QIE to a nonresident alien individual, a foreign corporation, or other QIE, to the extent attributable to gain from sales or exchanges by the QIE of USRPIs, as gain recognized by such nonresident alien individual, foreign corporation, or other QIE from the sale or exchange of a USRPI for purposes of section 897(a). Section 897(l)(1) provides that, for purposes of section 897, a qualified foreign pension fund is not treated as a nonresident alien individual or a foreign corporation. For this purpose, a qualified controlled entity is treated as a qualified foreign pension fund. Accordingly, section 897(l) excepts from section 897(a) gain or loss of a qualified foreign pension fund or a qualified controlled entity from the disposition of a USRPI, including gain from a distribution described in section 897(h).

Consistent with section 897(l), the proposed regulations provide that gain or loss of a qualified foreign pension fund or a qualified controlled entity (under the proposed regulations, each a “qualified holder”) from the disposition of a USRPI, including gain from a distribution described in section 897(h), is not subject to section 897(a). This exception from section 897(a) applies solely with respect to gain or loss recognized by a qualified holder that is attributable to one or more qualified segregated accounts maintained by the qualified holder. The proposed regulations define a qualified segregated account as an identifiable pool of assets maintained for the sole purpose of funding qualified benefits (generally, retirement, pension, and certain ancillary benefits) to qualified recipients (generally, plan participants and beneficiaries). See Section II.B of this Explanation of Provisions for a detailed discussion of qualified benefits and qualified recipients.

The proposed regulations provide separate standards for determining whether an identifiable pool of assets constitutes a qualified segregated account 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 qualified foreign pension fund) or a qualified controlled entity. An identifiable pool of assets of an eligible fund is a qualified segregated account if the assets in the pool and the income earned with respect to those assets are subject to legal or contractual requirements requiring that all such income and assets are used exclusively to fund the provision of qualified benefits to qualified recipients or to satisfy necessary reasonable expenses of the eligible fund. A qualified controlled entity is treated as maintaining a qualified segregated account if all of the net earnings of the qualified controlled entity are credited to its own account or to the qualified segregated account of a qualified foreign pension fund or another qualified controlled entity, and all of the assets of the qualified controlled entity, after satisfaction of liabilities to persons having interests in the entity solely as creditors, vest in the qualified segregated account of a qualified foreign pension fund or another qualified controlled entity upon dissolution. In either case, a pool of assets will not be treated as a qualified segregated account if the assets or income associated with such assets may inure to the benefit of a person other than a qualified recipient. For this purpose, the fact that assets or income may inure to the benefit of a governmental unit by operation of escheat or similar laws is ignored.

Several comments submitted in response to the updated section 1445 regulations requested clarification concerning the exception under section 897(l) for an entity all the interests of which are held by a qualified foreign pension fund. The proposed regulations define a qualified controlled entity as a trust or corporation organized under the laws of a foreign country all of the interests of which are held directly by one or more qualified foreign pension funds or indirectly through one or more qualified controlled entities or partnerships. The Treasury Department and the IRS have determined that it is unnecessary to treat partnerships as qualified controlled entities because the proposed regulations' exemption from section 897(a) applies to gain or loss earned indirectly through one or more partnerships. Accordingly, the proposed regulations provide that only corporations and trusts may be treated as qualified controlled entities.

Comments requested that the proposed regulations provide that an entity held indirectly through one or more corporations or partnerships by a qualified foreign pension fund may be treated as a qualified controlled entity. Thus, for example, if a qualified foreign pension fund owned all of the interests of Entity A, and Entity A owned all of the interests of Entity B, the comments indicated that Entity B should be eligible to be treated as a qualified controlled entity. The Treasury Department and the IRS agree that there is no policy reason to distinguish between direct and indirect ownership for purposes of determining whether an entity is a qualified controlled entity. Accordingly, the proposed regulations provide that a qualified controlled entity may be owned directly or indirectly through one or more qualified controlled entities.

Comments requested that the proposed regulations provide that an entity may qualify as a qualified controlled entity when all of its interests are owned by multiple qualified foreign pension funds. Comments noted that qualified foreign pension funds frequently pool their investments, such that permitting qualified controlled entities to be held by multiple qualified foreign pension funds would be consistent with current investment practices. Further, comments argued that there is no policy rationale for providing the exception of section 897(l) to an investment that benefited one qualified foreign pension fund but not to an investment that benefited multiple qualified foreign pension funds. The Treasury Department and the IRS agree with these comments. Accordingly, the proposed regulations provide that the interests in a qualified controlled entity may be held by one or more qualified foreign pension funds directly or indirectly through one or more qualified controlled entities.

One comment recommended that, for purposes of determining whether an entity is a qualified controlled entity, only equity interests should be taken into account. Cf. section 897(c)(1)(A) (defining a USRPI as including any interest (other than solely as a creditor) in any domestic corporation unless the taxpayer establishes that such corporation was at no time a USRPHC during the applicable testing period). The comment noted that requiring a qualified foreign pension fund to hold all of the creditor's interests issued by a qualified controlled entity would prevent the use of external leverage by a qualified controlled entity, even though there is no such restriction on direct leveraged investments by a qualified foreign pension fund. The Treasury Department and the IRS agree that a creditor's interest in an entity should not be an interest taken into account for purposes of determining whether the entity is treated as a qualified controlled entity if the interest does not share in the earnings or growth of the entity. Section 1.897-1(d)(5) provides that, unless otherwise stated, the term “interest” as used with regard to an entity in the regulations under sections 897, 1445, and 6039C, means an interest other than an interest solely as a creditor. Given the absence of an express provision to the contrary in the proposed regulations, the application of § 1.897-1(d)(5) results in an interest in an entity solely as a creditor not being taken into account for purposes of determining whether the entity is a qualified controlled entity.

Comments requested clarification that an entity may constitute a qualified controlled entity whether or not the entity constitutes a controlled entity as defined in § 1.892-2T(a)(3). The Treasury Department and the IRS have determined that the definition of “qualified controlled entity” in the proposed regulations plainly does not limit qualified controlled entity status to only those entities that would qualify as a “controlled entity” within the meaning of § 1.892-2T(a)(3). It is, therefore, unnecessary for these proposed regulations to provide an express rule.

A comment requested that the proposed regulations provide that de minimis ownership of a qualified controlled entity be disregarded under certain circumstances. For instance, the comment indicated that de minimis ownership, including by managers or directors, may be required by corporate law in certain jurisdictions. The Treasury Department and the IRS have determined that permitting a person other than a qualified foreign pension fund to own an interest in a qualified controlled entity would impermissibly expand the scope of the exception in section 897(l) by allowing taxpayers other than qualified foreign pension funds to avoid tax under section 897. Accordingly, the proposed regulations do not permit ownership of a qualified controlled entity by a person other than a qualified foreign pension fund or another qualified controlled entity.

One comment recommended that the Treasury Department and the IRS consider rules to prevent a qualified foreign pension fund from indirectly acquiring a USRPI held by a foreign corporation, which would permit the acquired corporation to avoid tax on gain that would otherwise be subject to tax under section 897. For example, assume that FP, a foreign corporation that is not a qualified holder, owns 100 percent of the stock of FS, a foreign corporation, and that FS owns a USRPI with a basis of $80x and a fair market value of $200x. Assume that FP sells the stock of FS to a qualified foreign pension fund. If FS were treated as a qualified controlled entity and FS later sold the USRPI for $200x, neither FP nor FS would be subject to tax under section 897 on the $120x gain attributable to its investment in the USRPI, even though the gain accrued while FS was owned by FP. Similar issues could arise with entities treated as part of an organization or arrangement that is a qualified foreign pension fund.

To address the inappropriate avoidance of section 897, the proposed regulations provide 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 qualified foreign pension fund, a part of a qualified foreign pension fund, or a qualified controlled entity. For this purpose, the testing period generally means 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. This limitation does not apply to an entity or governmental unit that did not own a USRPI as of the date it became a qualified controlled entity, a qualified foreign pension fund, or part of a qualified foreign pension fund.

Section 897(l)(2) provides that a qualified foreign pension fund may include any “trust, corporation, or other organization or arrangement” that satisfies certain requirements. Congress intended the term “arrangement” to be a flexible term that accommodates a broad range of structures. See STAFF OF THE JOINT COMM. ON TAX'N, General Explanation of Tax Legislation Enacted in 2015 (JCS-1-16) (General Explanation) 283, n. 967 (2016) (“Foreign pension funds may be structured in a variety of ways, and may comprise one or more separate entities. The word `arrangement' encompasses such alternative structures.”).

Several comments submitted in response to the updated section 1445 regulations described the multiple ways that foreign retirement and pension systems—particularly those that are administered entirely or in part by a foreign government—could be organized. The comments described structures involving multiple entities, one or more accounts on government balance sheets, foreign legal structures, and a combination of the foregoing. Although such pension and retirement plans are often not organized as a single trust or corporation, the organizations or arrangements, when viewed as a whole, may satisfy the requirements set forth in section 897(l)(2). Based on the General Explanation's indication that foreign pension funds may be structured in a variety of ways, and may be comprised of separate entities, the comments recommended that the proposed regulations permit a broad range of alternative structures to be treated as a qualified foreign pension fund.

The Treasury Department and the IRS have determined that the purpose of section 897(l) is best served by permitting a broad range of structures to be eligible to be treated as a qualified foreign pension fund. Accordingly, the proposed regulations provide that, for purposes of section 897(l), the term “organization or arrangement” means one or more trusts, corporations, governmental units, or employers. The proposed regulations provide that the term “governmental unit” means any foreign government or part thereof, including any person, body, group of persons, organization, agency, bureau, fund, instrumentality, however designated, of a foreign government. The proposed regulations include several examples illustrating the application of the requirements of section 897(l) and the proposed regulations to different types of organizations and arrangements, including organizations and arrangements that include governmental units.

The proposed regulations permit an employer to be part of an organization or arrangement to address cases in which an employer is organized as an entity other than a trust or corporation but operates as part of an organization or arrangement to provide pension or retirement benefits.

Section 897(l)(2)(A) and the proposed regulations require that a qualified foreign pension fund must be created or organized under the law of a country other than the United States. Comments indicated that many foreign pension funds are created or organized under the laws of states or political subdivisions of a foreign country and requested that the proposed regulations clarify that those pension funds would satisfy section 897(l)(2)(A). The Treasury Department and the IRS agree that it is appropriate to allow such foreign pension funds to be considered qualified foreign pension funds. Accordingly, the proposed regulations provide that references to a foreign country include references to a state, province, or political subdivision of a foreign country, subject to an exception described in part II.E.4 of this Explanation of Provisions.

Section 897(l)(2)(B) requires that an eligible fund be established either (i) by the country in which it is created or organized (or one or more political subdivisions thereof) to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals), or persons designated by such employees, as a result of services rendered by such employees to their employers; or (ii) by one or more employers to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees in consideration for services rendered by such employees to such employers.

Several comments requested that the regulations clarify that multi-employer pension funds and government-sponsored public pension funds that provide pension and pension-related benefits may satisfy section 897(l)(2)(B). These comments are consistent with the General Explanation, which noted that “[m]ulti-employer and government-sponsored public pension funds that provide pension and pension-related benefits may still satisfy [section 897(l)(2)(B)]. For example, such pension funds may be established for one or more companies or professions, or for the general working public of a foreign country.” General Explanation at 283, n. 968.

The Treasury Department and the IRS agree that it is appropriate to allow such multi-employer pension funds and government-sponsored public pension funds to be considered qualified foreign pension funds. Accordingly, the proposed regulations provide 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, 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.

Under the proposed regulations, qualified recipients generally include persons eligible to participate in the retirement or pension plan. Therefore, with respect to an eligible fund established by one or more employers, the term “qualified recipient” includes a current or former employee or any person designated by such current or former employee to receive qualified benefits. With respect to an eligible fund established by a foreign country to provide qualified benefits to qualified recipients as a result of services rendered by such qualified recipients to their employers, the term includes 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. In response to comments, the proposed regulations provide that a person is treated as designating another person to receive qualified benefits if such other person is entitled to receive benefits under the contractual terms applicable to the eligible fund or under the laws of the foreign country in which the eligible fund is created or organized, whether or not the first person expressly designated such person as a beneficiary.

In response to comments, the proposed regulations clarify that a retirement or pension fund that is organized by a trade union, professional association, or similar group may be treated as a qualified foreign pension fund by providing that an eligible fund is treated as established by any employer that funds, in whole or in part, the eligible fund. In addition, the proposed regulations clarify that, for purposes of the requirement in section 897(l)(2)(B), a self-employed individual is treated as both an employer and an employee.

Comments noted that many foreign pension funds provide a limited amount of other benefits, including death, disability, survivor, medical, unemployment, and similar benefits, to participants and beneficiaries. Comments requested guidance on whether a qualified foreign pension fund could provide certain benefits other than retirement and pension benefits, and whether there is any limitation on the amount of those benefits that a qualified foreign pension fund may provide to participants and beneficiaries. Some comments recommended that the proposed regulations set forth a specific limitation on the percentage of benefits other than retirement or pension benefits that a qualified foreign pension fund may provide, while other comments recommended a facts and circumstances test or another subjective standard.

The Treasury Department and the IRS have determined that section 897(l) was not intended to exclude common foreign pension arrangements that provide a relatively small amount of ancillary benefits to participants and beneficiaries. The Treasury Department and the IRS have also determined that a specific limit on the percentage of ancillary benefits that a qualified foreign pension fund may provide to its participants and beneficiaries is more administrable and provides more certainty to taxpayers than a subjective standard. Accordingly, the proposed regulations require that all of the benefits that an eligible fund provides are qualified benefits to qualified recipients, 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. For this purpose, qualified benefits include retirement, pension, or ancillary benefits. The proposed regulations define ancillary benefits as benefits payable upon the diagnosis of a terminal illness, death benefits, disability benefits, medical benefits, unemployment benefits, or similar benefits. The Treasury Department and the IRS request comments on whether the regulations should also define retirement or pension benefits (for example, with reference to whether there are penalties for early withdrawals).

One comment requested that the proposed regulations provide that an eligible fund may be treated as a qualified foreign pension fund if it is established by a foreign government to provide qualified benefits to qualified recipients (directly or indirectly) in the event that one or more qualified foreign pension funds that are created or organized in the same foreign country are unable to satisfy their liabilities with respect to the provision of qualified benefits to their own qualified recipients. Although the proposed regulations do not expressly address such plans, the proposed regulations do not differentiate between plans that are primarily responsible for the provision of qualified benefits to qualified recipients, on the one hand, and plans that are secondarily responsible for the provision of qualified benefits to qualified recipients, on the other hand. Therefore, whether a plan is established to provide qualified benefits to qualified recipients is determined without regard to whether such plan has primary responsibility to provide qualified benefits to qualified recipients or rather is established to provide the qualified benefits to qualified recipients only in the event of the default of one or more other plans.

Consistent with section 897(l)(2)(C), the proposed regulations provide that a qualified foreign pension fund may not have a single participant or beneficiary with a right to more than five percent of its assets or income (the five-percent limitation). Comments submitted in response to the updated section 1445 regulations indicated that it would be appropriate for the proposed regulations to include attribution rules to prevent a single individual from using related parties to circumvent the five-percent limitation. The Treasury Department and the IRS agree with the comments. Accordingly, the proposed regulations provide that, for purposes of applying the five percent limitation, an individual is considered to have a right to the assets and income of an eligible fund to which any person who bears a relationship to the individual described in section 267(b) or section 707(b) has a right.

One comment requested guidance on calculating a participant or beneficiary's entitlement to the assets and income of a qualified foreign pension fund for purposes of applying the five-percent limitation. In light of the complexity that any such rule would entail and the relatively few cases in which it would be expected to apply, the proposed regulations do not provide specific rules regarding the computation of the five-percent limitation. Instead, this determination should be made based on the underlying facts and circumstances of each case.

Section 897(l)(2)(D) and the proposed regulations set forth two requirements for a qualified foreign pension fund. First, a qualified foreign pension fund must be subject to government regulation (“regulation requirement”). Second, a qualified foreign pension fund must provide annual information about its beneficiaries to the relevant tax authorities in the country in which it is established or operates, or such information must otherwise be available to those authorities (“information requirement”). Several comments requested that the proposed regulations set forth the specific information that must be provided or otherwise made available pursuant to the information requirement in section 897(l)(2)(D). The proposed regulations adopt the recommendation included in several comments by providing that an eligible fund is treated as satisfying the information requirement only if the eligible fund annually provides to the relevant tax authorities in the foreign country in which it 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. An eligible fund is not treated as failing to satisfy the information 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. The Treasury Department and the IRS request comments as to whether the final regulations should permit other types of information to satisfy the information requirement.

Several comments indicated that foreign government-sponsored retirement and pension plans frequently are not subject to substantial information reporting and regulation compared with private foreign pension or retirement plans, in part because the government administers the pension or retirement program itself. The comments recommended that the proposed regulations treat a government-sponsored retirement or pension plan as automatically satisfying both the regulation and information requirements of section 897(l)(2)(D). The Treasury Department and the IRS agree that, when a government administers a pension or retirement plan itself, the requirements of section 897(l)(2)(D) are effectively satisfied because the government has control over the program and access to the information about the program's beneficiaries. Accordingly, the proposed regulations generally provide that an eligible fund that is administered by one or more governmental units, other than in its capacity as an employer, is deemed to satisfy the requirements of section 897(l)(2)(D).

Comments noted that many foreign pension funds must provide information to one or more governmental bodies in the country in which the foreign retirement or pension fund is organized, including agencies that are specifically responsible for regulating pensions. In many cases, those governmental bodies may be distinct from the tax authority in that foreign country. In light of the wide range of foreign information reporting regimes that may apply to an eligible fund, the Treasury Department and the IRS agree that a flexible rule is necessary and appropriate to carry out the purposes of section 897(l). Accordingly, the proposed regulations provide that an eligible fund is treated as satisfying the information requirement of section 897(l)(2)(D) if the eligible fund is required, pursuant to the laws of the foreign country in which it is established or operates, to provide the required information to one or more governmental units of the foreign country in which the eligible fund is created or organized, or if such information is otherwise available to one or more governmental units of the foreign country in which the eligible fund is created or organized.

Section 897(l)(2)(E) and the proposed regulations provide that, to be a qualified foreign pension fund, the laws of the foreign country in which the eligible fund is established or operates must provide that either (i) contributions to the eligible fund that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of the eligible fund or taxed at a reduced rate, or (ii) taxation of any investment income of the eligible fund is deferred or such income is excluded from the gross income of the eligible fund or is taxed at a reduced rate.

Comments requested clarification that an eligible fund may qualify for the exemption in section 897(l) if it is created or organized in a country that does not have an income tax. The Treasury Department and the IRS have determined that the purposes of section 897(l) would not be served by limiting the availability of the exemption to eligible funds organized in jurisdictions with an income tax. Accordingly, the proposed regulations provide that an eligible fund is treated as satisfying the requirement of section 897(l)(2)(E) if the eligible fund is established and operates in a foreign country that has no income tax.

Comments noted that an eligible fund that otherwise satisfies section 897(l)(2)(E) may be subject to current income tax at ordinary rates with respect to a relatively small portion of its income or gain. The comments requested guidance on the percentage of income or contributions that must be eligible for preferential tax treatment in order for an eligible fund to satisfy section 897(l)(2)(E). Other comments requested guidance on the extent to which ordinary income tax rates must be reduced under section 897(l)(2)(E). To address these comments, the proposed regulations provide that an eligible fund is treated as satisfying the requirement of section 897(l)(2)(E) in a taxable year if, under the income tax laws of the foreign country in which the eligible fund is established or operates, at least 85 percent of the contributions to the eligible fund are deductible or excluded from the gross income or taxed at a reduced rate, or tax on at least 85 percent of the investment income of the eligible fund is deferred or taxed at a reduced rate (including by excluding such investment income from gross income). The 85 percent threshold was chosen based on the best judgment of the Treasury Department and the IRS, and is consistent with suggestions from commenters for an appropriate threshold in an analogous context in the proposed regulations (namely, for the percentage of benefits provided by an eligible fund that must be retirement or pension benefits as opposed to ancillary benefits), but is not based on any specific quantitative analysis. The Treasury Department and the IRS request additional comments regarding whether the 85 percent threshold is appropriate and especially solicit comments that provide data, other evidence, and models that can enhance the rigor of the process by which such threshold is determined.

Comments requested that the proposed regulations provide that the requirement of section 897(l)(2)(E) may be satisfied if, under the income tax law of the country in which an eligible fund is established or operates, an eligible fund is subject to a preferential tax regime that is, in substance, equivalent to the type of deductions or exclusions specifically described in section 897(l)(2)(E). For example, one comment described a preferential regime in which certain eligible funds taxable as insurance companies are entitled to reserve deductions designed to effectively exclude from gross income investment income earned by the eligible funds. The Treasury Department and the IRS agree that the purposes of section 897(l) are best served by accommodating a broad range of preferential tax regimes applicable to retirement or pension funds. Therefore, the proposed regulations provide that an eligible fund that is not specifically subject to the tax treatment described in section 897(l)(2)(E) is nonetheless treated as satisfying the requirement of section 897(l)(2)(E) if the eligible fund establishes that it is subject to a preferential tax regime due to its status as a retirement or pension fund, and that the preferential tax regime has a substantially similar effect as the specific tax treatment described in section 897(l)(2)(E).

One comment requested that the proposed regulations provide that preferential treatment with respect to a tax levied by a state, province, or political subdivision (sub-national tax) be sufficient to satisfy the requirement of section 897(l)(2)(E). The Treasury Department and the IRS have determined that the exemption in section 897(l) was not intended to benefit foreign persons that fail to benefit from an exemption from an otherwise applicable national income tax. Sub-national taxes generally constitute a minor component of an entity's overall tax burden in a foreign jurisdiction and therefore it would not be appropriate to allow preferential treatment with respect to sub-national taxes to 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. Accordingly, the proposed regulations do not adopt this recommendation, and, to the contrary, provide 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 proposed regulations provide rules on the application of the requirements described in section 897(l)(2) to an eligible fund that is an organization or arrangement.

The proposed regulations provide that an eligible fund that is an organization or arrangement is treated as a single entity to determine whether the requirements of section 897(l)(2) are satisfied. Notwithstanding the foregoing, the proposed regulations provide that each person or governmental unit that is part of an organization or arrangement must independently satisfy the requirement of section 897(l)(2)(A), such that each component of the organization or arrangement must be created or organized under the law of a country other than the United States.

As noted in several comments, an eligible fund may be organized in various ways. For example, an eligible fund may be comprised of multiple entities and governmental bodies, one or more of which may conduct activities that are unrelated to the provision of retirement or pension benefits. Applying certain requirements of section 897(l)(2) to an eligible fund requires identifying the specific assets and income of an organization or arrangement that must be tested under the proposed regulations. For instance, under the proposed regulations, an organization or arrangement may include a pension system in which a private employer provides pension benefits to its employees that are funded by the investments of a separate entity, such as a pension trust organized by a foreign government. Assets and income of the private employer that do not fund the provision of pension benefits would generally not be relevant to determining whether the organization or arrangement satisfies the requirements of section 897(l)(2) and the proposed regulations. For instance, income of the employer generally would not be subject to preferential tax treatment, and the assets of the employer not used to fund the provision of pension benefits would not be relevant for purposes of applying the five percent limitation in section 897(l)(2)(C).

Accordingly, the proposed regulations generally provide that the determination as to whether an eligible fund satisfies the requirements of section 897(l)(2) is made solely with respect to income and assets held by the eligible fund in one or more qualified segregated accounts, the qualified benefits funded by the qualified segregated accounts, the information reporting and regulation related to the qualified segregated accounts, and the qualified recipients whose benefits are funded by the qualified segregated accounts. For this purpose, all qualified segregated accounts maintained by an eligible fund are treated as a single qualified segregated account.

Comments requested that the proposed regulations provide that an entity that qualifies as a pension fund or scheme under a U.S. income tax treaty or as an exempt beneficial owner under an intergovernmental agreement (IGA) is treated as a qualified foreign pension fund under section 897(l). The statute is clear that an exemption from section 897(a) is allowed only for entities meeting the definition of a “qualified foreign pension fund.” There is no indication in the legislative history that Congress intended the Treasury Department and the IRS to expand the exemption to entities that met the definition of a pension fund under a U.S. income tax treaty or IGA. Furthermore, the definitions of pension fund under a U.S. income tax treaty or IGA were designed with policy goals that are unrelated to section 897, and therefore pension funds as defined in those agreements are not necessarily the types of entities for which an exemption from section 897(a) is appropriate. Thus, a foreign pension fund that qualifies for other benefits under an income tax treaty or IGA must make a separate determination as to whether it is a qualified foreign pension fund under section 897(l)(2).

Comments requested clarification regarding the documentation a qualified foreign pension fund should provide to a transferee or partnership to claim an exemption under section 897(l) and requested a form for this purpose. Comments suggested modifying existing forms, such as Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting, for this purpose. Comments also requested clarification regarding the reporting and withholding responsibilities of transferees and partnerships that receive documentation from a qualified foreign pension fund.

In response to comments, the IRS intends to revise Form W-8EXP to permit qualified holders to certify their status under section 897(l). Prior to the release of revised Form W-8EXP, a certificate of non-foreign status described in § 1.1445-5(b)(3) may be used for purposes of both section 1445 and section 1446. In addition to permitting withholding agents and partnerships to rely on revised Form W-8EXP, the proposed regulations also integrate the new exception for qualified holders into existing reporting regimes as described below.

Section 1445(a) requires a transferee to withhold 15 percent of the amount realized on any disposition of a USRPI by a foreign person. Section 1445(b)(2) provides that no withholding is required if the transferor furnishes to the transferee a certificate of non-foreign status. Section 1445(f)(3)(B) provides that for purposes of section 1445, the term “foreign person” generally does not include an entity described in section 897(l)(1). The proposed regulations revise the updated section 1445 regulations to utilize the definitions in proposed § 1.897(l)-1(d) and permit a qualified holder to certify that it is exempt from withholding under section 1445 by providing a certificate of non-foreign status to a withholding agent. The proposed regulations provide that a qualified holder may provide a Form W-8EXP for this purpose, but the transferee, at its option, may request a certification of non-foreign status or Form W-8EXP. Consistent with the approach of current § 1.1445-2(b)(1) (permitting a transferee to request documentation satisfactory to the transferee), the transferee may withhold under section 1445 if the requested certification is not provided and will be considered to have been required to withhold for purposes of sections 1461 through 1463.

A transferee must report transactions subject to section 1445(a) using Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests, and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests. § 1.1445-1(c). However, because a transferee may treat a qualified holder as not foreign, the transferee is not required to file Form 8288 or Form 8288-A but is subject to the retention and reliance rules generally applicable to certificates of non-foreign status. See § 1.1445-2(b)(3).

Certain distributions and other transactions involving domestic or foreign corporations, partnerships, trusts, and estates can give rise to a withholding requirement under section 1445(e). However, an entity or fiduciary is not required to withhold under section 1445(e) with respect to a distribution or transfer to an interest holder that is not a foreign person. Consistent with the changes to the documentation requirements under section 1445(a), the proposed regulations provide that a qualified holder may provide a certificate of non-foreign status or a revised Form W-8EXP to certify its status as a qualified holder. Although providing such documentation will relieve the entity or fiduciary from withholding obligations under section 1445(e), any otherwise applicable reporting requirements (for example, reporting required on Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding) remain applicable.

A partnership determines whether it must withhold tax under section 1446 by first determining whether it has any foreign partners, and, if it does have foreign partners, by determining whether it has ECTI allocable under section 704 to any of its foreign partners. § 1.1446-1(b). A partner that is treated as a U.S. person only for certain specified purposes is considered a foreign partner for purposes of section 1446. § 1.1446-1(c)(1). Accordingly, a qualified holder is treated as a foreign partner for purposes of section 1446. However, the proposed regulations generally provide that any gain from the disposition of a USRPI, or distribution received from a QIE, that is not otherwise treated as effectively connected with a trade or business in the United States will not be treated as ECTI subject to section 1446 withholding to the extent allocable to a qualified holder.

A partnership may rely on a valid Form W-8 submitted for purposes of section 1441 or section 1442 to establish a partner's foreign status. § 1.1446-1(c)(2)(ii). The proposed regulations update the description of withholding certificates applicable to each type of partner by permitting a partnership to rely on Form W-8EXP both to determine a partner's foreign status and, as appropriate, to exclude any gain from the disposition of a USRPI, including any distribution treated as gain from the disposition of a USRPI under section 897(h), from the determination of such partner's allocable share of ECTI. A partnership may also rely on a certificate of non-foreign status to treat a partner as a qualified holder.

The proposed regulations do not modify general reporting requirements applicable to partnerships. For example, a partnership required to file a partnership return for a taxable year “shall furnish to every person who was a partner” a statement of the partner's distributive share of income, gain, loss, deduction, or credit. § 1.6031(b)-1T. The requirement applies regardless of whether the partner is domestic or foreign. As a result, a partnership that is required to file Form 1065, U.S. Return of Partnership Income, and accompanying schedules must report income allocable to a qualified holder on Schedule K-1, Partner's Share of Income, Deductions, Credit, etc., notwithstanding that such income is exempt from section 897.

Sections 1441 and 1442 require withholding agents to deduct and withhold a 30 percent tax on payments of U.S. source fixed or determinable, annual or periodical income to foreign persons, including a U.S. source corporate distribution described in section 301(c)(1). A corporate distribution described in section 301(c)(2) or (c)(3) that is not subject to withholding under section 1441 or section 1442 (for example, because the distributing corporation made the election described in § 1.1441-3(c)(1)) may nonetheless be subject to withholding under section 1445 if the distributing corporation is a USRPHC or QIE. Section 1.1441-3(c)(4)(i)(A) and a similar rule in § 1.1441-3(c)(4)(i)(C) coordinate withholding under sections 1441 and 1445 with respect to distributions from USRPHCs and QIEs. Because a qualified holder is treated as foreign for purposes of section 1441 but not for purposes of section 1445, distributions that would otherwise be subject to the coordination rule should be subject exclusively to section 1441 if made to a qualified holder. Accordingly, the proposed regulations provide that distributions made by a USRPHC or QIE to a qualified holder are not subject to the coordination rules under § 1.1441-3(c)(4) and instead are subject only to the requirements of section 1441.

The proposed regulations are generally proposed to apply with respect to dispositions of USRPIs and distributions described in section 897(h) occurring on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register . However, proposed §§ 1.897(l)-1(b)(1), 1.897(l)-1(d)(5), 1.897(l)-1(d)(7), 1.897(l)-1(d)(9), 1.897(l)-1(d)(11), and 1.897(l)-1(d)(14) are proposed to apply with respect to dispositions of USRPIs and distributions described in section 897(h) occurring on or after June 6, 2019. See section 7805(b)(1)(B). These provisions contain definitions that prevent a person that would otherwise be a qualified holder from claiming the exemption under section 897(l) in situations where the exemption may inure, in whole or in part, to the benefit of a person other than a qualified recipient. See Section I.B.6 of this Explanation of Provisions. The Treasury Department and the IRS have determined that an immediate applicability date under section 7805(b)(1)(B) is appropriate for these provisions in order to address transactions that are inconsistent with the purposes of section 897(l) that may occur before these rules are adopted as final regulations.

A taxpayer may rely on the proposed regulations with respect to dispositions or distributions occurring on or after December 18, 2015, and prior to the applicability date of the final regulations, if the taxpayer consistently and accurately complies with the rules in the proposed regulations.

Executive Orders 13563 and 12866 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits, including potential economic, environmental, public health and safety effects, distributive impacts, and equity. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

These proposed regulations have been designated as a significant regulatory action by the Office of Management and Budget's Office of Information and Regulatory Affairs (“OIRA”) and subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations.

Section 897, more commonly known as the Foreign Investment in Real Property Tax Act (“FIRPTA”), was enacted in 1980 due to concerns that the Code provided foreign persons an advantage in investing in U.S. real property interests (USRPI) over U.S. taxpayers because, unlike U.S. taxpayers, foreigners were not subject to U.S. capital gains tax on dispositions of USRPI. Under FIRPTA, when a foreign person sells USRPI, any gain on the sale generally is subject to U.S. income tax.

Section 897(l), enacted in 2015 in the Protecting Americans from Tax Hikes Act (“PATH Act”), exempts qualified foreign pension funds (“QFPFs”) from tax under FIRPTA on gain from the sale of USRPI, the so-called “foreign pension fund exemption.” Such an exemption has the effect of encouraging foreign pension fund investment in the United States (through investment in real property) and, in general, provides consistent tax treatment between foreign pension funds and U.S. pension funds, which normally are not taxed at the entity level. This exemption is the subject of the proposed regulations.

The foreign pension fund exemption also affects a related withholding tax levied under section 1445 on the sale of USRPI to help enforce payment of the tax owed by reason of section 897. The rate for this withholding is 15 percent of gross sales. In cases where the gross withholding tax would exceed the tax owed on the net capital gains, foreigners typically request and receive approval for reduced rates of gross withholding tax. If withholding is excessive or insufficient relative to tax owed on the net capital gains, the difference is made up on the foreigner's U.S. tax return. Thus, guidance that governs the foreign pension fund exemption additionally necessitates guidance over the withholding tax.

IRS tax data for 2015 and 2016 show an average of approximately 160 foreign pension funds earning income from U.S. real property. Only a fraction of these funds are likely to sell or transfer USRPI in any given year.

Comments received indicate that some foreign pension funds have refrained from investment in U.S. real property, including infrastructure projects, due to ambiguities over their qualification for the foreign pension fund exemption. Affected parties have provided a number of comments requesting clarifications of the statutes. The Treasury Department and the IRS have determined that such comments warrant the issuance of further guidance. The proposed regulations do not specifically aim to increase or decrease foreign pension fund investment in the U.S. Instead, they aim to provide guidance such that investment can be made on an efficient basis consistent with the intents and purposes of the statute.

The regulations clarify and modify the conditions under which foreign pension funds are exempt from taxation under section 897. In plain language, the proposed regulations provide further clarity over (a) the entities and organizational structures that are eligible for the foreign pension fund exemption; (b) the nature of the benefits, beneficiaries, and foreign taxation of eligible funds; and (c) the documentation rules that apply to exemptions from withholding taxes otherwise required by sections 1445 (these exemptions from withholding taxes flow from the foreign pension fund exemption from tax under section 897). In addition, the proposed regulations provide rules to prevent the inappropriate avoidance of FIRPTA by imposing conditions on the sale of certain investment vehicles wholly owned by a foreign pension fund.

The Treasury Department and the IRS have assessed the benefits and costs of the proposed regulations relative to a no-action baseline reflecting anticipated Federal income tax-related behavior in the absence of these proposed regulations.

In general, a tax system that prioritizes minimization of distortions aims to treat income earned by similar economic activities similarly, subject to considerations of compliance burden and tax administrability and to the intents and purposes of Congress. The proposed guidance adheres to this principle. In plain language, section 897(l) exempts certain foreign pension funds from tax under FIRPTA, and the proposed guidance qualifies the terms of this exemption by further defining the permissible activities, ownership patterns, and other economic decisions undertaken by foreign pension funds. Such guidance helps ensure that the tax system does not favor or disfavor particular QFPF activities over economically similar QFPF activities, a requirement for an economically efficient tax system conditional on the underlying Code.

As a result of the added clarity and reduced compliance burdens relative to the baseline, the proposed regulations have the effect of providing more efficient investment incentives, relative to the baseline and in light of the intents and purposes of the statute. The Treasury Department and the IRS have not estimated the effects of the proposed regulations on the U.S. economy.

The Treasury Department and the IRS identified four provisions in the proposed regulations for which economic analysis might play a meaningful role in selecting the form of the regulations. This part I.D.2 of this Special Analyses describes this analysis. The Treasury Department and the IRS solicit comments on the economics of each of the items discussed subsequently and of any other items of the proposed regulations not discussed in this section. The Treasury Department and the IRS particularly solicit comments that provide data, other evidence, or models that could enhance the rigor of the process by which provisions might be developed for the final regulations.

Foreign pension funds often hold USRPI indirectly through intermediate entities, including entities with multiple foreign pension fund owners. While the statute contains language stating that an entity wholly owned by a QFPF is itself a QFPF, section 897(l) is silent on whether the entity must be wholly owned by a single QFPF (or, alternatively, may be wholly owned by multiple QFPFs).

Because the economic incentives faced by foreign pension funds under these various ownership structures regarding investment in USRPI are similar to the incentives faced by QFPFs with simpler structures, the Treasury Department and the IRS have determined that it would be consistent with the intents and purposes of the statute and minimize the potential for distortionary choices for them to be eligible for the foreign pension fund exemption. Thus, the proposed regulations explicitly allow indirect investments and pooled investments to qualify for the exemption. The Treasury Department and the IRS considered alternative guidance that was more restrictive than the proposed regulations but, under that alternative, foreign pension funds could avail themselves of an exemption only on a more restricted set of U.S. investment options and would be denied the exemption on economically similar investments, a situation that would generally lead to an economically inferior outcome.

A foreign person that is not a qualified foreign pension fund (“non-QFPF”) that holds USRPI directly would be taxed under FIRPTA if the non-QFPF sells the USRPI. If the non-QFPF instead holds USRPI indirectly through a foreign subsidiary, the non-QFPF can sell the foreign subsidiary without taxation under section 897, but, in that case, the unrealized gain in the USRPI would remain potentially subject to tax under FIRPTA on disposition of the USRPI. Absent a provision to the contrary in the proposed regulations, if the non-QFPF instead sells the foreign subsidiary to a QFPF, the QFPF could cause the foreign subsidiary to sell the USRPI immediately (or in the future) without incurring tax under section 897, thus eliminating the taxation (or potential for future taxation) of gain in the USRPI. As a result, subject to other provisions and judicial doctrines (for example, the step transaction doctrine and the economic substance doctrine), a QFPF could be used as a conduit for a non-QFPF to sell a USRPI to a purchaser without incurring (or preserving) tax under section 897 on the unrealized gain of the seller. The Treasury Department and the IRS project that such activity would reduce U.S. tax revenue and would not result in an accompanying economic benefit to the U.S. economy.

To curtail this tax avoidance, the proposed regulations provide a transitory restriction on exemption when a foreign subsidiary that owns USRPI is purchased by a QFPF or qualified controlled entity (“QCE”) of a QFPF from a non-QFPF or a foreign person that is not a QCE. This transitory restriction, referred to as a testing period, is described in full in part I.B.6 of the Explanation of Provisions of the Preamble. Among other criteria, under the proposed regulations the foreign pension fund exemption generally is not available for gain recognized by an entity from the disposition of a USRPI if such entity was not a QFPF or QCE at any time during the 10-year period prior to the recognition of that gain.

The Treasury Department and the IRS considered as an alternative requiring the controlled entity acquired by the foreign pension fund to account for the gain at the time the entity was acquired by the foreign pension fund (known as mark-to-market) or requiring tracking of the unrealized gain at the time of sale to a QFPF or QCE for later recognition and also considered, under the testing period approach, different lengths for that component of the testing period. The mark-to-market or tracking approaches impose greater compliance and administrative costs relative to the testing period approach without providing any accompanying general economic benefit.

The Treasury Department and the IRS aim, through this testing period approach and accompanying requirements, to minimize tax avoidance while facilitating efficient foreign pension fund investment in USRPI, consistent with the intents and purposes of the statute. The Treasury Department and IRS solicit comments on this proposal, particularly comments that provide data, other evidence, or models that could enhance the rigor of the process by which anti-abuse provisions might be developed for the final regulations.

Section 897(l) specifies, along with other qualifications, that the exemption is available to foreign entities that are “established” to provide retirement or pension benefits. However, many foreign pension funds provide ancillary benefits such as death, terminal health, disability, medical, unemployment, and survivor benefits in addition to retirement and pension benefits. These funds may be reluctant to invest in USRPI due to uncertainty over whether the fund meets this particular statutory criterion.

The Treasury Department and the IRS considered an option to deny the exemption to foreign pension funds that provide any benefits other than retirement and pension benefits. This option runs the risk of effectively eliminating foreign pension fund investment in USRPI because it would deny the exemption to foreign pension funds no matter how close to 100 percent of their benefits were retirement or pension related, or would require funds that wanted to invest in the U.S. under competitive conditions to undergo costly restructuring to eliminate or segregate those benefits, if such options were even feasible under the foreign country's laws and institutions. Both of these outcomes are economically inefficient relative to the proposed policies and the baseline because relative to these options, they incentivize socially costly tax avoidance choices and/or overly restrict incrementally improving market-driven choices.

The proposed regulations provide a bright-line test limiting the amount of ancillary benefits to 15 percent or lower. Such threshold was chosen in part based on suggestions from comments. The Treasury Department and the IRS aim, through the bright-line approach and this specific percentage test, to facilitate foreign pension fund investment in the U.S. consistent with the intents and purposes of the statute. The Treasury Department and the IRS solicit comments on this proposed standard, and particularly solicit comments that provide data, other evidence, or models that could enhance the rigor of the process by which the percentage limitation might be developed for the final regulations.

The Treasury Department and the IRS recognize that the threshold approach may result in a small number of foreign pension funds oscillating between qualifying and not qualifying on a year-to-year basis and that such approach requires measurement of ancillary benefits relative to retirement and pension benefits. Thus, the Treasury Department and the IRS further solicit comments on alternatives to the threshold approach and particularly solicit comments that provide data, other evidence, or models that could enhance the rigor of the process by which the tax treatment of foreign pension funds that provide ancillary benefits might be developed for the final regulations.

Under the statute, to qualify for exemption a foreign pension fund must be subject to tax laws in the country in which the fund is established or operates such that contributions to the fund are deductible or excluded from the gross income of the fund or taxed at a reduced rate, or tax on investment income of the fund is deferred or that income is taxed a reduced rate.

To provide further specificity over what qualifies as a preferential tax rate on contributions to or income from the fund, the Treasury Department and the IRS considered providing a substantive, analytical test for determining whether a foreign pension fund benefits from a preferential tax rate. This option would prove difficult to administer and require complex rules to determine whether a pension fund benefits from a preferential tax regime in the country in which it is established.

To reduce compliance burden and enhance administrability, the proposed regulations expand the scope of the potential preferential tax regimes and provide a bright-line test for determining preferential treatment by setting a threshold (85 percent) for the percentage of fund contributions/income that is subject to a preferential regime. The 85 percent threshold was chosen in part based on suggestions from comments. The Treasury Department and the IRS aim, through this bright-line approach and this specific percentage test, to facilitate foreign pension fund investment in USRPI consistent with the intents and purposes of the statute while minimizing the costs of tax administrability.

The Treasury Department and the IRS solicit comments on this proposal, and in particular comments that provide data, other evidence, or models that could enhance the rigor of the process by which the 897(l)(2)(E) requirements might be developed for the final regulations.

In accordance with the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. (“PRA”), information collection requirements contained in these proposed regulations are in §§ 1.1441-3(c)(4)(iii), 1.1445-2, 1.1445-4, 1.1445-5, 1.1445-8, and 1.1446-1.

In 2018, the IRS released and took comment on drafts of three forms in order to give members of the public the opportunity to benefit from certain specific revisions made to the Code. The forms were Form 1042-S, “Foreign Person's U.S. Source Income Subject to Withholding,” Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons” and Form W-8EXP, “Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding or Reporting.” The IRS received no comments on the forms during the comment period. Consequently, the IRS made the forms available for use by the public on November 30, 2018 (in the case of Form 1042-S), November 21, 2018 (in the case of Form 1042), and July 20, 2017 (in the case of Form W-8EXP). The IRS is contemplating making additional changes to those three forms in connection with these regulations.

The Treasury Department and the IRS request comments on all aspects of information collection burdens related to the proposed regulations, including estimates for how much time it would take to comply with the paperwork burdens described below for each relevant form and ways for the IRS to minimize the paperwork burden. Proposed revisions to these forms that reflect the information collections contained in these proposed regulations will be made available for public comment at www.irs.gov/draftforms and will not be finalized until after these regulations take effect and have been approved by OMB under the PRA. The Treasury Department and the IRS have not estimated the burden, including that of any new information collections, related to the requirements under the proposed regulations.

The proposed regulations provide that distributions made by a USRPHC or QIE to a qualified holder are subject only to the requirements of section 1441 and not the coordination rule under § 1.1441-3(c)(4). Proposed § 1.1441-3(c)(4)(iii). As a result, 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 this reporting, the IRS is planning to revise Form 1042-S to include an income code designating payments made to Qualified Foreign Pension Plans. No revisions are being made to Form 1042 in connection with payments made to Qualified Foreign Pension Plans.

For purposes of the PRA, the reporting burden associated with proposed § 1.1441-3(c)(4)(iii) 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). The PRA submissions for Form 1042 reflect IRS's transition to an updated statistical model that calculates burden based on the taxpayer filing experience as a whole. As such, Form 1042 is in a transition state, as the burden incurred by business filers is captured in OMB control number 1545-0123 (under the updated burden model) and the burden represented incurred by all other filers is represented in 1545-0096 (legacy model).

Proposed §§ 1.1445-2, 1.1445-4, 1.1445-5, 1.1445-8, and 1.1446-1 would require a qualified foreign pension fund wishing to claim an exemption under section 897(l) to provide a withholding agent with either a Form W-8EXP, “Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding or Reporting,” or, at a withholding agent's request and in lieu of Form W-8EXP, a certificate of non-foreign status containing the same information as Form W-8EXP. The IRS plans to revise Form W-8EXP for use by qualified foreign pension funds. For purposes of the PRA, the reporting burden associated with proposed §§ 1.1445-2, 1.1445-4, 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 proposed 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 2.70 million hours) and 1545-1621 (which represents a total estimated burden time, including all other related forms and schedules for other filers, of 25.13 million hours and total estimated monetized costs of $2.39 billion). 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 proposed regulations. These numbers are therefore unrelated to the future calculations needed to assess the burden imposed by the proposed 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 imposed prior to the PATH Act.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that the proposed rule 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 foreign entities are not considered small entities. These regulations will affect foreign pension funds and not U.S. pension funds. In addition, based on comments received, the foreign pension funds that are affected are sovereign funds, which are not small entities. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act is not required. Pursuant to section 7805(f), this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

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. In 2018, that threshold is approximately $150 million. This rule does not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.

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

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

The principal authors of these proposed regulations are Joshua Rabon, formerly with the Office of Associate Chief Counsel (International), 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 proposed to be amended as follows:

Invitation to Comment: We invite you to submit comments regarding this proposed waiver and extension. To ensure that your comments have maximum effect in developing the final waiver and extension, we urge you to identify clearly the specific grant or grants that each comment addresses.

We invite you to assist us in complying with the specific requirements of Executive Orders 12866, 13563, and 13771 and their overall requirement of reducing regulatory burden that might result from these proposed waivers and extensions. Please let us know of any further ways we could reduce potential costs or increase potential benefits while preserving the effective and efficient administration of the program.

During and after the comment period, you may inspect all public comments about this proposed waiver and extension of the project period in Room 5059, 550 12th Street SW, Washington, DC, between the hours of 8:30 a.m. and 4:00 p.m., Washington, DC time, Monday through Friday of each week, except Federal holidays.

Assistance to Individuals with Disabilities in Reviewing the Rulemaking Record: On request, we will provide an appropriate accommodation or auxiliary aid to an individual with a disability who needs assistance to review the comments or other documents in the public rulemaking record for this proposed waiver and extension. If you want to schedule an appointment for this type of aid, please contact the person listed under FOR FURTHER INFORMATION CONTACT .

We are proposing to extend 33 projects under three programs in order to align and coordinate all OSERS-funded training and technical assistance (TA) services focused on transition-age children and youth with disabilities and their families. The waivers and extensions would allow OSERS to align and coordinate, and improve the efficiency and cost-effectiveness of, direct training and technical assistance services focused on transition-age children and youth with disabilities and their families. In addition, the Department will consider approaches for improving coordination among programs that provide these services to more efficiently and effectively meet the needs of States, service providers, youth with disabilities, and families and to allow for efficient use of the funding available to support these activities.

The projects that provide transition-age TA services (and other TA services for individuals with disabilities and their families) are:

In September 2014, OSEP and RSA jointly made a 60-month award to the University of North Carolina at Charlotte to establish and operate the National Technical Assistance Center on Improving Transition to Postsecondary Education and Employment for Students with Disabilities. NTACT was funded under the TA and Dissemination Program as authorized under sections 663 and 681(d) of the Individuals with Disabilities Education Act (IDEA), 20 U.S.C. 1463 and 1481(d), and section 303(b) of the Rehabilitation Act of 1973, as amended by the Workforce Innovation and Opportunity Act (Rehabilitation Act), 29 U.S.C 793(b). The current project period ends on December 31, 2019.

The purpose of the NTACT is to provide TA to State educational agencies (SEAs), local education agencies (LEAs), State vocational rehabilitation agencies (SVRAs), and other vocational rehabilitation (VR) service providers to implement evidence-based and promising practices and strategies to ensure that students with disabilities, including those with significant disabilities, graduate from high school with the knowledge, skills, and supports needed for success in postsecondary education and employment.

Specifically, NTACT has five primary goals aligned with OSEP and RSA priorities:

1. Youth and young adults with disabilities receive and participate in evidence-based and promising practices in secondary transition services and supports.

2. SEAs and LEAs implement evidence-based and promising practices and strategies, including early warning and intervention systems to reduce dropout and increase graduation rates.

3. Students with disabilities participate in career-related curricula so they are prepared for postsecondary employment and careers.

4. Students with disabilities receive rigorous academic preparation so they are prepared for success in postsecondary education.

5. SEAs, SVRAs, LEAs, and local VR offices use data-driven decision making to develop their respective plans and reports.

In September 2014, OSEP made twenty-three 60-month awards to the following entities to operate Parent Training and Information Centers (PTIs):

In June 2016, OSEP made a 36-month award to Learning Disabilities Associates of Hawaii to operate a PTI to serve the outlying areas and freely associated States in the Pacific (American Samoa, the Federated States of Micronesia, Guam, the Republic of the Marshall Islands, the Commonwealth of the Northern Mariana Islands, and the Republic of Palau).

All 24 of the OSEP-funded PTIs are funded under the Training and Information for Parents of Children with Disabilities program as authorized under section 671 and 681(d) of IDEA, 20 U.S.C. 1463, and all current project periods end on September 30, 2019.

The purpose of the OSEP-funded PTIs is to provide services designed to meet the information and training needs of parents of children with disabilities, and transition-age youth with disabilities. The OSEP-funded PTIs were funded to help youth become effective self-advocates and provide parents with information, individual assistance, and training to enable them to: (a) Ensure that their children are included in general education classrooms and extracurricular activities with their peers; (b) help their children meet developmental and academic goals; (c) help their children meet challenging expectations established for all children, including college- and career-ready academic standards; and (d) prepare their children to achieve positive postsecondary outcomes that lead to lives that are as productive and independent as possible.

Specifically, the OSEP-funded PTIs (a) inform parents of children with disabilities and youth with disabilities of how they can benefit from the services provided by the PTI; (b) provide high-quality services that increase parents' capacity to help their children with disabilities improve their early learning, school-aged, and postsecondary outcomes and increase youth's capacity to be effective self-advocates; and (c) work in partnership with any Community Parent Resource Centers (CPRCs) and any other PTIs funded in the State under sections 672 and 671 of IDEA, respectively, and local, State, and national organizations and agencies, such as protection and advocacy agencies and VR agencies, that serve children and youth with disabilities and their families.

In September 2014, RSA made seven 60-month awards to the following entities to operate RSA-funded Parent Information and Training Centers (PTIs):

These RSA-funded PTIs are funded under the Parent Information and Training Program as authorized under section 303(c) of the Rehabilitation Act. The current project periods end on September 30, 2019.

These RSA-funded PTIs are designed to meet the unique training and information needs of those individuals who live in the areas to be served, particularly those who are members of populations that have been unserved or underserved by programs under the Rehabilitation Act. The RSA-funded PTIs are geographically distributed to the extent possible throughout the country. The RSA-funded PTIs coordinate and work closely with the OSEP-funded PTIs and with the centers for independent living.

The RSA-funded PTIs provide information and training to individuals with disabilities and their parents, family members, guardians, advocates, and other authorized representatives. Specifically, the RSA-funded PTIs help individuals with disabilities and their families to: (a) Better understand VR and independent living programs and services; (b) provide follow-up support for transition services and employment programs; (c) communicate effectively with transition and rehabilitation personnel and other relevant professionals; (d) provide support in the development of individualized plans for employment; (e) provide support and expertise in obtaining information about rehabilitation and independent living programs, services, and resources that are appropriate; and (f) understand the provisions of the Rehabilitation Act, particularly provisions relating to employment, supported employment, and independent living.

In September 2014, RSA made one 60-month award to the Statewide Parent Advocacy Network (SPAN), New Jersey to establish and operate the national PTI TA center. The center is funded under the Parent Information and Training Program as authorized by section 303(c) of the Rehabilitation Act. The current project period ends on September 30, 2019.

The purpose of the national PTI TA Center is to ensure that the seven State-level PTI centers funded by RSA are providing consistent information and training to assist individuals with disabilities and their families, including youth with disabilities who are of transition age, achieve their employment and independent living goals.

The national PTI TA Center also disseminates information on promising and evidence-based practices that lead to high-quality employment outcomes and independent living for individuals with disabilities; shares strategies for communicating effectively with individuals from culturally, ethnically, and linguistically diverse backgrounds; and coordinates the seven State-level PTI centers funded by RSA and the PTI centers funded by OSEP in disseminating information and training materials on transition services, VR, supported employment, independent living, and career development.

We do not believe that it would be in the public interest to run competitions for these programs in FY 2019, because the Department is reviewing the alignment of its training and TA services focused on transition from high school to college, careers, and adult services for children and youth with disabilities and their families. During the remainder of FY 2019 the Department will consider approaches for improving coordination among programs that provide these services to more efficiently and effectively meet the needs of States, service providers, youth with disabilities, and their families and to allow for more efficient use of the funding available to support these activities.

The Department has also concluded that it would not be in the public interest to have a lapse in the critically needed resources currently provided by these programs. Allowing funding to lapse before the Department establishes a new, coordinated strategy for training and TA services would leave youth and families without access to critical services and assistance that ensure that students with disabilities, including those with significant disabilities, transition from K-12 prepared for postsecondary success.

For these reasons, the Secretary proposes to waive the requirements in 34 CFR 75.250, which prohibit project periods exceeding five years, and the requirements in 34 CFR 75.261(a) and (c)(2), which allow the extension of a project period only if the extension does not involve the obligation of additional Federal funds. The waiver would allow the Department to issue one-time FY 2019 continuation awards to the projects originally funded in FY 2014 and 2016, estimated as follows.

Any activities carried out during the year of this continuation award must be consistent with the scope, goals, and objectives of the grantees' applications as approved in either the 2014 or 2016 competitions. The requirements for continuation awards are set forth in 34 CFR 75.253.

The Secretary certifies that the proposed waiver and extension of the project period would not have a significant economic impact on a substantial number of small entities. The only entities that would be affected by the proposed waiver and extension of the project period are the current grantees and any other potential applicants.

The Secretary certifies that the proposed waiver and extension would not have a significant economic impact on these entities because the extension of an existing project period imposes minimal compliance costs, and the activities required to support the additional year of funding would not impose additional regulatory burdens or require unnecessary Federal supervision.

This notice of proposed waiver and extension of the project period does not contain any information collection requirements.

These programs are subject to Executive Order 12372 and the regulations in 34 CFR part 79. One of the objectives of the Executive order is to foster an intergovernmental partnership and a strengthened federalism. The Executive order relies on processes developed by State and local governments for coordination and review of proposed Federal financial assistance. This document provides early notification of our specific plans and actions for this program.

Accessible Format: Individuals with disabilities can obtain this document in an accessible format ( e.g., braille, large print, audiotape, or compact disc) on request to the contact person listed under FOR FURTHER INFORMATION CONTACT .

Electronic Access to This Document: The official version of this document is the document published in the Federal Register . Free internet access to the official edition of the Federal Register and the Code of Federal Regulations is available at www.govinfo.gov . At this site you can view this document, as well as all other documents of this Department published in the Federal Register , in text or Portable Document Format (PDF). To use PDF you must have Adobe Acrobat Reader, which is available free at the site. You may also access documents of the Department published in the Federal Register by using the article search feature at www.federalregister.gov . Specifically, through the advanced search feature at this site, you can limit your search to documents published by the Department.

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

The following are abbreviations of terms used in this notice.

All documents in the docket are listed in the www.regulations.gov index, identified by Docket ID No. EPA-HQ-OAR-2019-0011. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the EPA Docket Center. Air dispersion modeling input and output files are too large to post in the docket or on the website and must be requested from the contact listed in the FOR FURTHER INFORMATION CONTACT section or from the EPA Docket Center. The EPA Docket Center can be contacted at (202) 566-1744, and is located at EPA Docket Center Reading Room, WJC West Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. The hours of operation at the EPA Docket Center are 8:30 a.m.-4:30 p.m., Monday-Friday.

In 2010, the EPA issued a notice of final rulemaking that revised the primary SO 2 NAAQS (75 FR 35520; June 22, 2010). The EPA established the revised primary SO 2 NAAQS at 75 parts per billion (ppb) which is attained when the 3-year average of the annual 99th percentile of daily maximum 1-hour average concentrations does not exceed 75 ppb. The notice for the final rulemaking provides information on the health effects of exposures to SO 2 concentrations and other information on the NAAQS.

The process for designating areas following promulgation of a new or revised NAAQS is contained in CAA section 107(d) (42 U.S.C. 7407(d)). After promulgation of a new or revised NAAQS, each governor or tribal leader is required to recommend air quality designations, including the appropriate boundaries for nonattainment areas, to the EPA. 1 The EPA considers these recommendations as part of its duty to promulgate the formal area designations and boundaries for the new or revised NAAQS. By no later than 120 days prior to promulgating designations, the EPA is required to notify states, territories, and tribes, as appropriate, of any intended modifications to an area designation or boundary recommendation that the EPA deems necessary.

The Marion Power Station, owned by SIPC, is a source of SO 2 emissions located in southern Williamson County, Illinois in a rural area adjacent to the Lake of Egypt. The EPA was required under the conditions of a May 2015 enforceable court order to designate the area around the Marion Power Station by July 2, 2016 ( see 81 FR 45039).

In 2011, following the promulgation of the revised SO 2 NAAQS, the state of Illinois initially recommended a designation of unclassifiable for Williamson County. In September 2015, Illinois updated its recommendation for Williamson County to attainment based on air quality modeling conducted by the state and submitted to the EPA. No ambient monitoring data were available for any part of the county. While formulating the EPA's intended designation, we also received air quality modeling from Sierra Club for this area that purported to demonstrate the area was not attaining the 2010 SO 2 NAAQS. In our review of the two modeling submissions, the EPA found the state's September 2015 modeling used an emission rate that was below actual 2012-2014 emission rates. The Sierra Club's modeling, in contrast, used actual 2012-2014 emission rates, consistent with the EPA's SO 2 NAAQS Designations Modeling Technical Assistance Document (TAD). Most other aspects of the Sierra Club modeling were similar to the modeling submitted by Illinois, though the Sierra Club modeled SO 2 air quality at receptors on the facility-owned “Northern Property” adjacent to the main plant (and identified nonattainment receptors on that property) and Illinois' modeling did not. The Sierra Club modeling used the same building dimensions as the Illinois modeling. Neither Illinois' nor Sierra Club's modeling suggested that the Marion Power Station (or any other sources in the county) contributed to a violation of the NAAQS in any separate nearby area. In February 2016, the EPA notified Illinois of our intended designation of nonattainment for the entirety of Williamson County based primarily on Sierra Club's modeling along with consideration of other available evidence. 3 4

During the March 2016 public comment period on the intended nonattainment designation, the EPA received three new modeling runs for the area from a consultant to SIPC that purported to demonstrate the area around the Marion Power Station was attaining the 2010 SO 2 NAAQS. 5 6 These modeling runs were all based on actual 2013-2015 emissions. The SIPC modeling runs differed from Illinois' modeling in some respects but were the same as the Illinois modeling with respect to using the same building geometries and excluding modeling receptors on the facility-owned “Northern Property” adjacent to the main plant. In its comments on the intended nonattainment designation for Williamson County, the state endorsed the new modeling from the SIPC consultant. After analyzing issues with SIPC's modeling, the EPA concluded that SIPC's modeling “was incomplete in the sense that an important receptor area [ i.e., the Northern Property] was inappropriately excluded from the analysis.”  7 In the final action signed on June 30, 2016, the EPA designated the entirety of Williamson County as nonattainment, based on consideration of all submitted modeling. Full reviews of all the modeling analyses submitted to the EPA for the designation of Williamson County can be found in the technical support document (TSD) for the intended Illinois designations and the TSD for the final Illinois designations. This designation triggered Illinois' duty to develop and submit to the EPA a state implementation plan (SIP) under CAA sections 172, 191 and 192 demonstrating attainment of the SO 2 NAAQS.

In September 2016, SIPC submitted a petition for reconsideration of the EPA's nonattainment designation for Williamson County. 8 9 SIPC included several additional modeling runs as part of the petition for reconsideration that reflected different building dimensions at the Marion Power Station than those used in Illinois' modeling, Sierra Club's modeling, and SIPC's previous March 2016 modeling. 10 Overall, SIPC's September 2016 modeling of actual emissions indicated no violations of the NAAQS in the 3-year period of 2013-2015 and did not identify any nonattainment receptors on the Northern Property. In January 2017, Administrator McCarthy denied SIPC's petition for reconsideration, explaining that the petition did not meet the criteria the EPA elected to use to evaluate whether the action warranted reconsideration. 11

In June 2017, SIPC submitted a petition to the EPA seeking error correction of the final rule designating Williamson County, Illinois as nonattainment. In this June 2017 petition, SIPC requested that the EPA correct what SIPC alleged to be particular errors in the EPA's final designation action for Williamson County.

In September 2017, EPA Administrator Pruitt responded to the letter transmitting SIPC's petition for error correction by indicating the EPA's intention to undertake an administrative action with notice and comment to revisit the nonattainment designation. 12 In its September 2016 petition for reconsideration, SIPC indicated that the revised building dimensions were based on a survey conducted in 2016. On November 6, 2018, SIPC submitted to the EPA supplemental information with regard to the specifics of and the basis for the revised building inputs used in the modeling submitted as part of its September 2016 petition for reconsideration. 13 This proposal initiates our notice and comment administrative action to reconsider the designation, based upon our review of this submitted information that characterizes SO 2 air quality at the time of this area's designation.

In September 2016, SIPC submitted to the EPA additional information and updated modeling, which included modeling receptors on the Northern Property, pertaining to the designation of Williamson County, Illinois. On November 6, 2018, SIPC submitted to the EPA supplemental information to clarify the specifics of and the basis for the revised building inputs used in the September 2016 modeling. A full review of this supplemental information is provided in the TSD for this action, which is available in the public docket. Based on this review, including consideration of this clarifying information, the EPA proposes that the September 2016 SIPC modeling is representative of the relevant calendar years (2013-2015 actual emissions) of SO 2 air quality in Williamson County at the time of the final designation on June 30, 2016. 14 The EPA also proposes to find that the modeling demonstrates that in the 2013-2015 modeling period the area was not violating the 1-hour SO 2 NAAQS or was not contributing to a violation in any nearby area at the time of the 2016 final designation.

This information includes the addition of receptors in the Northern Property and refinements of the building dimensions as processed for downwash purposes. The EPA proposes to find that this modeling, with our evaluation of the additional information submitted by SIPC documenting building dimensions and evidence that modeled predictions in the Northern Property are below the 1-hr SO 2 NAAQS, provides a credible assessment of air quality throughout the area at the time of designation. Based on this updated modeling, the EPA proposes to conclude that the entire area had no violations of the 1-hr SO 2 NAAQS in the period 2013-2015, the three most recent calendar years prior to our designations final action. Additionally, SIPC does not contribute to any nearby nonattainment area. The nearest SO 2 nonattainment area is over 160 kilometers away, beyond the distance at which Marion Power Station would likely have impact on SO 2 air quality.

Accordingly, we are proposing to change the initial designation of Williamson County, Illinois for the 2010 1-hour SO 2 NAAQS. Based on the information available to the EPA, we are proposing to finalize the Williamson County, Illinois area's initial designation as attainment/unclassifiable for that SO 2 NAAQS. If the EPA takes final action to change Williamson County, Illinois' designation, that final action would relieve Illinois of the obligation under CAA sections 172, 191, and 192 to submit a SIP that demonstrates attainment of the SO 2 NAAQS. The EPA invites public input on this proposed action regarding the Williamson County, Illinois area during the 30-day comment period provided in this notice. At this time, the EPA is not taking action or soliciting public comment on the 2010 1-hour SO 2 NAAQS designations for geographic areas beyond Williamson County, Illinois. This opportunity for public comment does not affect any rights or obligations of any state, territory, or tribe, or of the EPA, which might otherwise exist pursuant to the CAA section 107(d).

When the EPA establishes a new or revised NAAQS, the CAA requires the EPA to designate all areas of the United States as either nonattainment, attainment, or unclassifiable. This proposal is reconsidering the nonattainment designation for the Williamson County, Illinois area for the 2010 1-hour SO 2 NAAQS. Area designations address environmental justice concerns by ensuring that the public is properly informed about the air quality in an area. In locations where air quality does not meet the NAAQS, the CAA requires relevant state authorities to initiate appropriate air quality management actions to ensure that all those residing, working, attending school, or otherwise present in those areas are protected, regardless of minority and economic status.

This action is exempt from review by the Office of Management and Budget because it is a designation for the Williamson County, Illinois area for the 2010 1-hour SO 2 NAAQS.

This action is not an Executive Order 13771 regulatory action because actions such as air quality designations after promulgating a new revised NAAQS are exempt under Executive Order 12866.

This action does not impose an information collection burden under the PRA. In this action, the EPA is reconsidering the SO 2 NAAQS designation for the Williamson County, Illinois area promulgated previously on July 12, 2016, and does not contain any information collection activities.

This action under CAA section 107(d) is not subject to the RFA. The RFA applies only to rules subject to notice-and-comment rulemaking requirements under the Administrative Procedure Act (APA), 5 U.S.C. 553, or any other statute. Section 107(d)(2)(B) of the CAA explicitly provides that designations are exempt from the notice-and-comment provisions of the APA. In addition, designations under CAA section 107(d) are not among the list of actions that are subject to the notice-and-comment rulemaking requirements of CAA section 307(d).

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

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. The division of responsibility between the federal government and the states for purposes of implementing the NAAQS is established under the CAA.

This action does not have tribal implications, as specified in Executive Order 13175. This action concerns the designation of Williamson County, Illinois for the 2010 SO 2 NAAQS. This rule does not have a substantial direct effect on one or more Indian tribes. This action when final would change the initial designation for Williamson County for the 2010 1-hour SO 2 NAAQS, but no areas of Indian country are intended to be designated or to have their designation changed by this action. There are no areas of Indian country in or near Williamson County. Furthermore, this rule does not affect the relationship or distribution of power and responsibilities between the federal government and Indian tribes. The CAA and the Tribal Authority Rule establish the relationship of the federal government and tribes in developing plans to attain the NAAQS, and this rule does nothing to modify that relationship. Thus, Executive Order 13175 does not apply.

The EPA interprets Executive Order 13045 as applying 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 it does not establish an environmental standard intended to mitigate health or safety risks.

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

This rulemaking does not involve technical standards.

The EPA believes that this action does not have disproportionately high and adverse human health or environmental effects on minority populations, low-income populations, and/or indigenous peoples, as specified in Executive Order 12898 (59 FR 7629, February 16, 1994). When the EPA establishes a new or revised NAAQS, the CAA requires the EPA to designate all areas of the U.S. as either nonattainment, attainment, or unclassifiable. This action is reconsidering the nonattainment designation for the Williamson County, Illinois area for the 2010 1-hour SO 2 NAAQS. Area designations address environmental justice concerns by ensuring that the public is properly informed about the air quality in an area. In locations where air quality does not meet the NAAQS, the CAA requires relevant state authorities to initiate appropriate air quality management actions to ensure that all those residing, working, attending school, or otherwise present in those areas are protected, regardless of minority and economic status. The documentation for this determination is contained in Section IV of this preamble, “Environmental Justice Considerations.”

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

1. Submitting CBI. Do not submit this information to EPA through regulations.gov or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as CBI and then identify electronically within the disk or CD-ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

2. Tips for preparing your comments. When preparing and submitting your comments, see the commenting tips at http://www.epa.gov/dockets/comments.html.

3. Environmental justice. EPA seeks to achieve environmental justice, the fair treatment and meaningful involvement of any group, including minority and/or low-income populations, in the development, implementation, and enforcement of environmental laws, regulations, and policies. To help address potential environmental justice issues, the Agency seeks information on any groups or segments of the population who, as a result of their location, cultural practices, or other factors, may have atypical or disproportionately high and adverse human health impacts or environmental effects from exposure to the pesticides discussed in this document, compared to the general population.

EPA is announcing its receipt of several pesticide petitions filed under section 408 of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a, requesting the establishment or modification of regulations in 40 CFR part 180 for residues of pesticide chemicals in or on various food commodities. The Agency is taking public comment on the requests before responding to the petitioners. EPA is not proposing any particular action at this time. EPA has determined that the pesticide petitions described in this document contain data or information prescribed in FFDCA section 408(d)(2), 21 U.S.C. 346a(d)(2); however, EPA has not fully evaluated the sufficiency of the submitted data at this time or whether the data support granting of the pesticide petitions. After considering the public comments, EPA intends to evaluate whether and what action may be warranted. Additional data may be needed before EPA can make a final determination on these pesticide petitions.

Pursuant to 40 CFR 180.7(f), a summary of each of the petitions that are the subject of this document, prepared by the petitioner, is included in a docket EPA has created for each rulemaking. The docket for each of the petitions is available at http://www.regulations.gov.

As specified in FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), EPA is publishing notice of the petitions so that the public has an opportunity to comment on these requests for the establishment or modification of regulations for residues of pesticides in or on food commodities. Further information on the petitions may be obtained through the petition summaries referenced in this unit.

PP 8E8730. (EPA-HQ-OPP-2019-0205). Interregional Research Project No. 4 (IR-4), IR-4 Project Headquarters, Rutgers, The State University of NJ, 500 College Road East, Suite 201 W, Princeton, NJ 08540, requests to amend 40 CFR 180.697 by removing the established tolerances for residues of flutianil, (2Z)-2-[2-fluoro-5-(trifluoromethyl)phenyl]sulfanyl-2-[3-(2-methoxyphenyl)thiazolidin-2-ylidene]acetonitrile, including its metabolites and degradates, in or on the raw agricultural commodities Cantaloupe at 0.07 ppm; Cherry at 0.40 ppm; Cucumber at 0.20 ppm; Grape at 0.70 ppm; Squash at 0.05 ppm and Strawberry at 0.50 ppm. Contact: RD.

PP IN-11245. (EPA-HQ-OPP-2019-0129). Syngenta Crop Protection, LLC, P.O. Box 18300, Greensboro, NC 27419, requests to establish an exemption from the requirement of a tolerance for residues of ethylenebis(oxyethylene) bis[3-(5-tert-butyl-4-hydroxy-m-tolyl) propionate (CAS No. 36443-68-2) when used as a pesticide inert ingredient (stabilizer) in pesticide formulations under 40 CFR 180.910. The petitioner believes no analytical method is needed because it is not required for an exemption from the requirement of a tolerance. Contact: RD.

1. PP 8F8697. (EPA-HQ-OPP-2019-0266). AgBiTech Pty Ltd., 8 Rocla Ct., Glenvale, Queensland 4350, Australia (c/o V.A. Forster Consulting, Inc., P.O. Box 4097, Wilmington, DE 19807), requests to establish an exemption from the requirement of a tolerance in 40 CFR part 180 for residues of the insecticide Autographa californica MNPV strain R3 in or on all food commodities. The petitioner believes no analytical method is needed because the petition requests an exemption from the requirement of a tolerance. Further, it is expected that, when used as proposed, Autographa californica MNPV strain R3 would not result in residues that are of toxicological concern. Contact: BPPD.

2. PP 8F8726. (EPA-HQ-OPP-2019-0183). Bi-PA nv, Technologielaan 7, B-1840 Londerzeel, Belgium (c/o SciReg, Inc., 12733 Director's Loop, Woodbridge, VA 22192), requests to establish an exemption from the requirement of a tolerance in 40 CFR part 180 for residues of the fungicide Trichoderma atroviride strain SC1 in or on all food commodities. The petitioner believes no analytical method is needed because of its request for an exemption from the requirement of a tolerance for residues of Trichoderma atroviride strain SC1; therefore, the requirement to provide an analytical method for the detection of residues of Trichoderma atroviride strain SC1 in agricultural commodities or processed food is not applicable. Contact: BPPD.

1. PP 4F8338. (EPA-HQ-OPP-2018-0599). Dow AgroSciences LLC, 9330 Zionsville Road, Indianapolis, IN 46268, requests to establish a tolerance in 40 CFR part 180 for residues of the insecticide, sulfoxaflor (1-(6-trifluoromethylpyridin-3-yl)ethyl)(methyl)-oxido-λ4-sulfanylidenecyyanamide), in or on rice, grain at 5 parts per million (ppm); rice, straw at 5 ppm; rice, hulls at 14 ppm; and avocado, whole fruit at 0.15 ppm. The Analytical method 091116, “Enforcement Method for the Determination of Sulfoxaflor (XDE-208) and its Main Metabolites in Agricultural Commodities using Offline Solid-Phase Extraction and Liquid Chromatography with Tandem Mass Spectrometry Detection” was validated on a variety of plant matrices. The method was validated over the concentration range of 0.010-5.0 mg/kg with a validated limit of detection (LOD) of 0.003 mg/kg and limit of quantitation (LOQ) of 0.010 mg/kg. Contact: RD.

2. PP 8E8672. (EPA-HQ-OPP-2008-0771). Valent U.S.A. LLC, P.O. Box 8025, Walnut Creek, CA 94596, requests to establish a tolerance in 40 CFR part 180 for residues of the insecticide, clothianidin, in or on persimmon at 0.5 parts per million (ppm). The liquid chromatography/mass spectroscopy/mass spectroscopy (LC/MS/MS analysis) is used to measure and evaluate the chemical clothianidin, (E)-1-(2-chloro-1,3-thiazol-5-ylmethyl)-3-methyl-2-nitroguanidine. Contact: RD.

3. PP 8E8731. (EPA-HQ-OPP-2019-0070). Interregional Research Project No. 4 (IR-4), IR-4 Project Headquarters, Rutgers, The State University of NJ, 500 College Road East, Suite 201 W, Princeton, NJ 08540, requests to amend 40 CFR part 180.650 by establishing tolerances for residues of isoxaben, N-[3-(1-ethyl-1-methylpropyl)-5-isoxazolyl]-2, 6-dimethoxybenzamide in or on the raw agricultural commodities Hop, dried cones at 0.01 parts per million (ppm) and Caneberry subgroup 13-07A at 0.01 ppm. Acceptable analytical methods are available for enforcement purposes. Contact: RD.

4. PP 8F8695. (EPA-HQ-OPP-2018-0718). Syngenta Crop Protection, LLC, P.O. Box 18300, Greensboro, NC 27419 requests to establish a tolerance in 40 CFR part 180.475 for residues of the fungicide difenoconazole in or on vegetable, leaves of root and tuber, group 2 at 8.0 parts per million (ppm) and vegetable, root, subgroup 1A at 0.60 ppm. The gas chromatography equipped with a nitrogen-phosphorous detector and the liquid chromatography (LC)/mass spectrometry (MS)/MS) method are used to measure and evaluate the chemical difenoconazole. Contact: RD.

5. PP 8F8729. (EPA-HQ-OPP-2019-0130). Bayer CropScience, 2 T.W. Alexander Drive, P.O. Box 12014, Research Triangle Park, NC 27709, requests to establish a tolerance in 40 CFR part 180 for residues of the fungicide, trifloxystrobin (benzeneacetic acid, (E,E)-α-(methoxyimino)-2-[[[[1-[3-(trifluoromethyl) phenyl]ethylidene]amino]oxy]methyl]-methyl ester) and the free form of its acid metabolite CGA-321113 ((E,E)-methoxyimino-[2-[1-(3-trifluoromethyl-phenyl)-ethylideneaminooxymethyl]-phenyl]acetic acid) in or on dried shelled pea and bean (except soybean) subgroup 6C at 0.06 parts per million (ppm). The analytical method involves solvent mixtures and solvent to matrix ratio, deuterated internal standards, and Liquid Chromatography/Mass Spectrometry-Mass Spectrometry (LC/MS-MS) with an electrospray interface, operated in the positive ion mode. Residues of trifloxystrobin are quantified by high-pressure liquid chromatography/triple stage quadrupole mass spectrometry (LC/MS/MS) using stable-labeled internal standards. Contact: RD.

6. PP 9F8733. (EPA-HQ-OPP-2019-0062). Syngenta Crop Protection, 410 Swing Road, P.O. Box 18300, Greensboro, NC 27419, requests to establish a tolerance in 40 CFR part 180 for residues of the fungicide, mandipropamid: 4-chloro-N-[2-[3-methoxy-4-(2-propynyloxy) phenyl]ethyl]-alpha-(2-propynyloxy)-benzeneacetamide, in or on cocoa bean at 0.05 parts per million (ppm). The analytical method involves extraction of mandipropamid residues from crop samples by homogenization with acetonitrile:water (80:20 v/v). Extracts are centrifuged and aliquots diluted with water prior to being cleaned-up using polymeric solid-phase extraction cartridges. Residues of mandipropamid are quantified using high performance LC-MS/MS. Contact: RD.

7. PP 9F8736. (EPA-HQ-OPP-2019-0128). Syngenta Crop Protection, LLC, P.O. Box 18300, Greensboro, NC 27419, requests to establish a tolerance in 40 CFR part 180.685 for residues of the fungicide oxathiapiprolin (1-[4-[4-[5-(2,6-difluorophenyl)-4,5-dihydro-3-isoxazolyl]-2-thiazolyl]-1-piperidinyl]-2-[5-methyl-3-(trifluoromethyl)-1H-pyrazol-1-yl]-ethanone), in or on bushberry crop subgroup 13-07B at 0.5 parts per million (ppm); tree nuts, crop group 14-12 at 0.01 ppm; and almond hulls at 0.05 ppm. High-pressure liquid chromatography with tandem mass-spectrometry (LC-MS/MS) detection is used to measure and evaluate residues of the chemical oxathiapiprolin. Contact: RD.

8. PP 9F8744. (EPA-HQ-OPP-2019-0273). Syngenta Crop Protection, LLC, P.O. Box 18300, Greensboro, NC 27419, requests to establish rotational crop tolerances in 40 CFR part 180 for residues of the fungicide, pydiflumetofen, in or on rice, grain at 0. 01 parts per million (ppm); Non-grass animal feed (crop group 18), forage at 0.01 ppm; non-grass animal feed (crop group 18), hay at 0.03 ppm; grasses, forage at 0.15 ppm; grasses, hay at 0.50 and grasses, straw at 0.04 ppm. The QuEChERS method is used to measure and evaluate the chemical in plant commodities. Contact: RD.

The RCRA, as amended by the Hazardous and Solid Waste Amendments of 1984, requires States to develop and implement permit programs or other systems of prior approval to ensure that MSWLFs which may receive hazardous household waste or small quantity generator waste will comply with the revised Federal MSWLF Criteria. The RCRA requires the Environmental Protection Agency (EPA) to determine whether States have adequate “permit” programs for MSWLFs. Pursuant to the RCRA, the term “State” includes the territory of the U.S. Virgin Islands. To implement these statutory provisions, EPA promulgated a State Implementation final rule, which provides criteria and procedures for making adequacy determinations of State municipal landfill permit programs. The EPA approval of state MSWLF programs provides Directors of approved states with various flexibilities including the authority to approve expansion of an existing landfill or siting a new landfill in a seismic zone, application of alternative daily cover, and alternate financial assurance mechanisms. The EPA notes that federal landfill criteria apply to all permitted and unpermitted MSWLF facilities.

On October 9, 1991, EPA promulgated revised criteria for MSWLFs (40 CFR part 258). Subtitle D of RCRA, as amended by the Hazardous and Solid Waste Amendments of 1984 (HSWA), requires States to develop permitting programs or other systems of prior approval to ensure that MSWLFs comply with the Federal Criteria under part 258. RCRA also requires in Section 4005(c)(1)(C), 42 U.S.C. 6945(c)(1)(C) that EPA determine whether State MSWLF permit programs are adequate to comply with the revised Federal Criteria. Title 40 CFR part 239 specifies the minimum requirements which State landfill permit programs must satisfy to be determined by EPA to be adequate, including: The state must have legally adopted enforceable standards for new and existing MSWLFs that are technically comparable to EPA's revised MSWLF landfill criteria; the state must have an adequate compliance monitoring program and the legal authority to issue permits or other forms of prior approval to all new and existing MSWLFs in its jurisdiction; the State must provide for public participation in permit issuance and enforcement as required in section 7004(b) of RCRA, 42 U.S.C. 6974(b); and the State must also demonstrate that it has sufficient compliance monitoring and enforcement authorities to take specific action against any owner or operator that fails to comply with applicable regulations or its landfill permit.

The EPA Regions are authorized to determine whether a State has submitted an “adequate” program based on the statute and the regulations summarized above. EPA expects States to meet all these requirements for its MSWLF program before it gives full approval of the adequacy of a MSWLF program.

As a general matter, the Agency believes that approvals of state programs have an important benefit. Approved State permit programs establish procedures for interaction between a state and an owner/operator regarding site-specific permit conditions. Only those owners/operators located in States with approved permit programs can use the site-specific flexibility provided by part 258 to the extent that the State permit program allows such flexibility. EPA notes that regardless of the approval status of a State and the permit status of any facility, the federal landfill criteria apply to all permitted and unpermitted MSWLF facilities. EPA also notes that Section 4005(a) of RCRA, 42 U.S.C. 6945(a), provides that citizens may use the citizen suit provisions of Section 7002 of RCRA to enforce the Federal MSWLF criteria in 40 CFR part 258 independent of any State enforcement program.

The USVI originally applied for a determination of adequacy under RCRA in October 1993. EPA reviewed the application and published in the Federal Register a Tentative Determination of Adequacy on June 16, 1995. However, the public hearings and public comments contained many adverse statements concerning deficiencies in the USVI solid waste program; in addition, the USVI did not promulgate revised solid waste regulations that could meet EPA approval. Accordingly, EPA did not publish a Final Determination of Adequacy. Based on continuing deficiencies in the USVI solid waste management program, on May 8, 2000 (65 FR 26546) EPA published in the Federal Register a Tentative Determination of Inadequacy and held two public hearings on St. Thomas and St. Croix. After review of public comments, EPA decided not to proceed with a Final Determination of Inadequacy and to allow the USVI additional time to develop its solid waste management program, which EPA believes has now occurred.

The EPA has continued to work with the USVI both on its day-to-day landfill operation practices and the development of appropriate solid waste regulations. In addition, in 2004 the USVI established the Waste Management Authority and in recent years has pursued various efforts to improve its solid waste management program. Also, scheduling the work for the final closure of both the Anguilla and Bovoni landfills is now under the supervision of a federal judge and the Department of Justice, pursuant to federal Consent Decrees, which became effective in 2013 and 2014.

The USVI submitted program application material to EPA in 2008, and in 2017 and 2018 submitted additional information that EPA requested. EPA has reviewed all relevant materials concerning the USVI's MSWLF program, including revised solid waste regulations, and has made a tentative determination that all portions of the U.S. Virgin Islands' MSWLF permit program now are adequate to assure compliance with the revised Federal Criteria, except that correction of a technical/typographical error in a section of the Virgin Islands solid waste regulations needs to be made.

The USVI Attorney General has certified that the current laws and regulations, which are part of the Virgin Islands solid waste management program, are in full force and effect, and that an appropriate correction to the solid waste regulations is being processed. The Attorney General will update its certification when the correction of the regulations has been officially promulgated.

The USVI application materials for this program adequacy determination are available for public review in the locations described in the ADDRESSES section of this document.

EPA will consider all public comments received during the public comment period and public hearings, including any comments offered by the Virgin Islands government, and make a final determination on whether to approve the Virgin Islands' RCRA Subtitle D MSWLF Permit Program. EPA will give notice of its final determination in the Federal Register . The document will include a summary of the reasons for the final determination, and a summary of responses to all major comments received at the public hearings and during the public comment period.

State solid waste program application, Requirements for adequate permit programs, EPA adequacy determination procedures.

This is a summary of the Commission's document, Report No. 3128, released May 24, 2019. The full text of the Petition is available for viewing and copying at the FCC Reference Information Center, 445 12th Street SW, Room CY-A257, Washington, DC 20554. It also may be accessed online via the Commission's Electronic Comment Filing System at: http://apps.fcc.gov/ecfs/. The Commission will not send a Congressional Review Act (CRA) submission to Congress or the Government Accountability Office pursuant to the CRA, 5 U.S.C. 801(a)(1)(A), because no rules are being adopted by the Commission.

Subject: Promoting Investment in the 3550-3700 MHz Band, GN Docket No. 17-258, FCC 18-149, published at 83 FR 63076, December 7, 2018. This document is being published pursuant to 47 CFR 1.429(e). See also 47 CFR 1.4(b)(1) and 1.429(f), (g).

Number of Petitions Filed: 1.

The Atlantic mackerel fishery is managed under the Atlantic Mackerel, Squid, and Butterfish Fishery Management Plan (FMP) through an annual quota, possession limits, and a catch cap for bycatch of river herring and shad. In-season accountability measures (AM), including closures of the fishery through possession limit reductions, help ensure catch does not exceed the Atlantic mackerel annual catch limit (ACL) or the river herring and shad catch cap. Reactive AMs require a pound-for-pound payback the following year if landings exceed the Atlantic mackerel ACL.

Current regulations require the Council's Atlantic Mackerel, Squid, and Butterfish Monitoring Committee to develop specification recommendations based upon the acceptable biological catch (ABC) advice of the Council's Scientific and Statistical Committee (SSC). Specifications are the combined suite of commercial and recreational catch levels and management measures necessary to prevent such catch levels from being exceeded. As part of this process, the Council sets the ACL, domestic annual harvest (DAH), domestic annual processing, total allowable level of foreign fishing, joint venture processing, and commercial and recreational annual catch targets (ACT) for up to 3 years. These specifications are reviewed annually, and may be revised by the Council based on updated information.

A November 2017 benchmark stock assessment (Stock Assessment Workshop (SAW) 64) concluded that the Atlantic mackerel stock is overfished and subject to overfishing. The final assessment summary report is available on the Northeast Fisheries Science Center (NEFSC) website ( www.nefsc.noaa.gov/saw/reports.html ). The Atlantic mackerel benchmark assessment identifies an above average year-class in 2015 that drives the rebuilding projections. However, both the SAW 64 report and the SSC note that estimates of the 2015 year-class are highly uncertain, as is typical for terminal year recruitment estimates. If this year-class materializes and results in increased biomass as projected, rebuilding should occur quickly. Projections also indicate there will likely be no overfishing in 2018 and that the stock should have climbed above the overfished threshold in 2018. An assessment update is expected in 2020 to evaluate rebuilding progress and the realized size of the 2015 and subsequent year-classes.

In response to SAW 64, the Council developed Framework Adjustment 13 to create an Atlantic mackerel rebuilding plan that would prevent overfishing and rebuild the stock, as required by section 303 of the Magnuson-Stevens Fishery Conservation and Management Act. Based on the new stock assessment, NMFS declared the Atlantic mackerel stock to subject to overfishing and overfished, and notified the Council of its determination and the requirement for the Council to prepare a rebuilding plan in July 2018. The SSC had already met in May 2018 to review the assessment and develop ABC recommendations for Atlantic mackerel based on the new stock assessment. The Council was already developing a rebuilding plan when it received the formal notification from NMFS. At its August 2018 meeting, the Council recommended to establish specifications for a 5-year rebuilding plan, including the river herring and shad catch cap and in-season closure measures through Framework 13. On October 12, 2018, the Council submitted the amendment and draft EA to NMFS for preliminary review, with submission of the final draft amendment on February 28, 2019. The Council reviewed the proposed regulations in this rule, as drafted by NMFS, and deemed them to be necessary and appropriate, as specified in section 303(c) of the Magnuson-Stevens Act. This action also includes 2019-2021 specifications based on the proposed rebuilding plan and adjustments to in-season closure measures to slow fishery catch and allow Atlantic mackerel bycatch in the Atlantic herring fishery, as described further below.

NMFS closed the limited access Atlantic mackerel fishery on March 12, 2019, due to the river herring and shad catch cap being reached (March 13, 2019; 84 FR 8999). As a result, the mackerel catch in 2019 will be less than the projected 2019 catch allocation under the proposed 5-year rebuilding plan. We anticipate impacts of the 5-year rebuilding plan to be similar to those described in the 3-year rebuilding plan due to the lower catch in 2019. We will not know how the low catch in 2019 will affect the projections after the fishing year. The Council will conduct its annual review of Atlantic mackerel specifications in 2020, taking into account the actual 2019 catch to determine if adjustments should be made to the fishery specifications under the rebuilding plan for 2021 and beyond.

Under the Magnuson-Stevens Act, we are required to publish proposed rules for comment after preliminarily determining whether they are consistent with applicable law. The Magnuson-Stevens Act allows us to approve, partially approve, or disapprove measures that the Council proposes based only on whether the measures are consistent with the FMP, the Magnuson-Stevens Act and its National Standards, and other applicable law. Otherwise, we must defer to the Council's policy choices. We are seeking comments on the Council's proposed measures in Framework 13, as described below, and whether they are consistent with the Atlantic Mackerel, Squid, and Butterfish FMP, the Magnuson-Stevens Act and its National Standards, and other applicable law.

For stocks that are overfished, section 304(e)(4) of the Magnuson-Stevens Act requires that a rebuilding program shall be as short as possible, taking into account the status and biology of any overfished stocks, the needs of fishing communities, and the interaction of the overfished stock within the marine ecosystem. The Magnuson-Stevens Act also requires the Council to develop measures for a rebuilding plan as soon as possible and the rebuilding plan must rebuild the stock within 10 years. The Council considered 3-, 5-, and 7-year rebuilding programs in this action. The Council proposed the 5-year rebuilding plan, which ends overfishing immediately and establishes measures that would rebuild the stock within 5 years. The 5-year rebuilding plan is as short as possible while also balancing the needs of the fishing communities and considers the interaction of the overfished stock within the marine ecosystem. The proposed 5-year rebuilding plan would have increased the 2019 DAH by 89 percent relative to the 2018 DAH, but as noted, the limited access fishery closed on March 12, 2019. The proposed 5-year plan would allow for an 124-percent increase in 2020 commercial catch compared to 2018, as described further below. Even with higher catch, biomass is projected to reach 94 percent of the target biomass by 2021 and target rebuilt levels by 2023.

The Council selected the 5-year rebuilding plan in part because it addresses community needs while still rebuilding the stock in a time period that is well below the maximum 10-year rebuilding time period. The 5-year rebuilding program would result in about an additional $6.6 and $6.9 million in fishing revenue in 2020 and 2021, respectively, compared to current specifications. In contrast, the 3-year rebuilding plan would have had a $5.8 million decrease in revenue in the first year, compared to the 5-year rebuilding program if the fishery was open and the proposed specifications were implemented. The second and third years of the 3-year rebuilding program would have had a difference of $5.2 and $3.8 million less revenue, respectively, compared to the 5-year plan. In addition, the Council notes that due to the substantial overlap between the Atlantic herring and Atlantic mackerel fisheries, the expected drastic reductions in Atlantic herring quotas and potential mid-water trawl gear restrictions that may have negative impacts on the Atlantic herring fishery and the stability of associated fishing communities. The higher annual catch associated with the 5-year rebuilding program would help mitigate such economic impacts while still rebuilding the stock within the 10-year maximum allowable rebuilding period. Also, as a precautionary measure, the Council capped ABCs under the 5-year plan at levels associated with the Council's current risk policy for a fully rebuilt Atlantic mackerel stock (33,474 mt), instead of allowing the ABCs to increase in 2021 and beyond (as supported by the SSC).

The Council also considered the interaction of mackerel within the marine ecosystem when considering the rebuilding program. The available information on Atlantic mackerel predation suggests that the ecosystem would not be disrupted under a longer rebuilding period because of the available species to sample, few were found to rely on Atlantic mackerel as prey. Establishing a 5-year plan would rebuild Atlantic mackerel well within the maximum rebuilding period while balancing the needs of fishing communities with the needs of the ecosystem.

The Council adopted a standard risk policy in 2011 as part of Amendment 13 to the Atlantic Mackerel, Squid, and Butterfish FMP (September 29, 2011; 76 FR 60606). This risk policy formalized the process of addressing scientific and management uncertainty when setting catch limits for specifications and establishes a comprehensive system of accountability for catch relative to those limits, including catch limits associated with a rebuilding plan for overfished stocks. Due to the dynamic nature of fisheries and the environment, the Council anticipated that the risk policy may need to be revised in the future and allowed the risk policy to be adjusted via a framework adjustment to allow for flexibility in its application.

The Council's risk policy is codified at 50 CFR 648.21. The regulations at § 648.21(c) require the Council's SSC to recommend the lowest ABC between that derived from either the Council's risk policy or a rebuilding plan. The proposed 5-year rebuilding plan would allow catches that are higher than what would occur under the Council's current standard risk policy because the 5-year plan is based on a higher rebuilding F (0.237) than is allowed by the current risk policy (0.14). The higher catches proposed under the 5-year rebuilding plan would allow the stock to be rebuilt by 2023 while providing an additional $9 million in fishing revenue from 2020-2021. In order to adopt the 5-year rebuilding plan, Framework 13 includes a measure that would modify the risk policy to allow the SSC to recommend 2019-2023 Atlantic mackerel ABCs based on the higher rebuilding fishing mortality rate. The change to the Council's risk policy proposed in this action is specific to the Atlantic mackerel rebuilding plan, and would not affect the application of the Council's risk policy for any other species or FMP.

The current Atlantic mackerel specifications are for 2016-2018, which means that new specifications are needed for 2019, regardless of the assessment findings. If approved, Framework 13 would replace the current specifications that have rolled over from 2018. Table 1 presents the proposed 2019-2021 Atlantic mackerel specifications. These specifications include 10,000 mt for expected Canadian catch, 1,209 mt for expected recreational catch, a 3-percent management uncertainty buffer, and an assumed 0.37 percent commercial discard rate. The 10,000-mt Canadian catch deduction is based on the 2018 Canadian catch limit set by the Canadian Department of Fisheries and Oceans. The 1,209-mt recreational catch is based on the total median recreational catch from 2013-2017. The 3-percent management uncertainty buffer is a reduction from the 10-percent buffer used in recent specifications due to the in-season closure measures proposed in Framework 13 that would slow the fishery by reducing possession limits in a phased approach. The proposed changes to the in-season measures reduce the need for a larger management uncertainty buffer to achieve optimum yield and facilitate effective operation of the mackerel fishery while reducing the likelihood of exceeding the ACL, and are described in the next section. The 31,764 mt overfishing limit (OFL) is defined for only 2019. The SSC determined that it could not set the OFL for 2020 and 2021 because there is too much uncertainty in the actual 2019 catch, given the early in-season closure and likely resulting stock size. However, in the temporary absence of an OFL, based on recent catch data and projected trends in stock biomass showing annual growth, the defined ABC for 2020 and 2021 is sufficient to prevent overfishing, when combined with the proposed changes for in-season closure provisions that are described below. In addition, an updated stock assessment for Atlantic mackerel will be completed in 2020, which NMFS expects will enable the SSC and Council to develop and set the OFL for 2021 through 2023. Finally, 0.37 percent of expected commercial catch would be set aside for expected discards based on the 2012-2016 discards, which accounted for 0.37 percent of catch in the recent benchmark assessment. The Council will review each component of the Atlantic mackerel specifications annually, and will consider the results of an updated stock assessment in 2020 to refine future specifications.

The mackerel fishery is variable in production, especially given its mixed-fishery nature with Atlantic herring. This results in potentially leaving a higher than expected amount of quota uncaught. Setting a larger management uncertainty buffer and lower percentage catch triggers may be more likely to avoid ACL overages (which must be paid back) but also more likely to leave quota uncaught. Smaller management uncertainty buffers and higher percentage catch triggers will be more likely to catch the quota but also more likely to lead to ACL overages.

In order to achieve optimum yield and effectively use the available commercial landings, Framework 13 proposes to adjust the in-season closure measures for the commercial Atlantic mackerel fishery. The proposed measures would require an in-season closure of the limited access commercial fishery when 90 percent of the DAH is projected to be landed. Once that trigger is reached, the Regional Administrator would reduce Atlantic mackerel possession limits to 40,000 lb (18,144 kg) per trip for Tier 1-3 limited access Atlantic mackerel permits and to 5,000 lb (2,268 kg) for open access permits. When 98 percent of the DAH is projected to be landed, the Regional Administrator would implement a 5,000-lb (2,268-kg) trip limit for all permits for the rest of the fishing year to cover remaining incidental catches. The proposed measures would also give the Regional Administrator the discretion to not implement these triggered possession limit reductions in November and December if landings are not projected to exceed the DAH by the end of the year. This measure is intended to increase the likelihood that optimum yield can be harvested, while still minimizing the likelihood of an overage by limiting this authority to November and December at the end of the fishing year.

The proposed in-season management measures would reduce the possibility of ACL overages and help preserve fishing opportunities for the trawl-based herring fishery. However, we note that it may negatively affect a few participants in a small-scale Atlantic mackerel jig fishery, if the Atlantic mackerel fishery closures are triggered. Using July-December jig/handline landings from 2015-2017, a 5,000-lb (2,268-kg) trip limit would have impacted 21 federally-permitted open access vessels. Twenty-one vessels represent one percent of the entire Atlantic mackerel fleet, two percent of small businesses within the fleet, and seven percent of businesses that rely solely on Atlantic mackerel. Due to the small-scale Atlantic mackerel jig fishery using open access permits, participation in the fishery may increase in the future. It is also possible that with the higher Atlantic mackerel quotas closures would not occur, so the 5,000-lb (2,268-kg) trip limit for incidental permits may not be triggered. Further, the possession limit after a closure due to the river herring and shad catch cap remains at 20,000 lb (9,071 kg) for all Atlantic mackerel vessels. We have included a summary of the economic impacts on this fleet in the “Classification” section of this rule.

In 2014, Amendment 14 to the FMP (February 24, 2014; 79 FR 10029) implemented a catch cap to manage the bycatch of river herring and shad in the Atlantic mackerel fishery. Once reached, Atlantic mackerel possession limits are reduced to 20,000 lb (9,071 kg) for the rest of the year, which effectively closes the limited access Atlantic mackerel fishery. To continue to manage river herring and shad catch in the Atlantic mackerel fishery, this action would revise the existing catch cap based on the proposed 2019-2021 Atlantic mackerel quotas. The catch caps are monitored based on river herring and shad bycatch recorded in observer and portside sampling data for mackerel trips by limited access vessels, or trips in which at least 20,000 lb (9,071 kg) of Atlantic mackerel are landed.

The proposed measures would scale the river herring and shad catch cap with Atlantic mackerel landings. The initial cap would be set at 89 mt for 2019-2021, but could increase if the fishery can first land 10,000 mt of Atlantic mackerel without hitting the initial 89-mt river herring and shad catch cap in each year, which was the cap limit in 2015. The 89-mt cap represents the median annual river herring and shad catch by all vessels landing over 20,000 lb (9,071 kg) of mackerel per trip from 2005-2012. Data used to establish the original river herring and shad catch cap in Amendment 14 to the Atlantic Mackerel, Squid, and Butterfish FMP found that Atlantic mackerel landings would be limited to around 10,000 mt, the approximate DAH at the time of implementation (February 24, 2014; 79 FR 10029). The catch cap would increase to 129 mt in 2019, 152 mt in 2020, and 159 mt in 2021 due to the proposed increasing Atlantic mackerel DAHs under the proposed rebuilding plan. This scaling provision is meant to provide incentives to reduce river herring and shad bycatch, particularly as the Atlantic mackerel quotas would increase in the next few years, regardless of the rate of mackerel catches. The potential increased catch caps are determined by multiplying each year's Atlantic mackerel DAH by 0.74 percent, which is the same river herring/shad bycatch ratio used in 2015. This is a lower ratio than used in 2018 (0.89 percent), so there would be a strong incentive for the fishery to avoid river herring and shad to increase the likelihood of fully harvesting the available Atlantic mackerel DAH in each year.

This proposed rule includes additional revisions to address regulatory text that is unnecessary, outdated, or unclear. These revisions were not adopted by the Council under Framework 13, but are consistent with section 305(d) of the Magnuson-Stevens Act, which provides authority to the Secretary of Commerce to promulgate regulations necessary to ensure that amendments to an FMP are carried out in accordance with the FMP and the Magnuson-Stevens Act. This proposed rule would modify § 648.24(b)(1)(i)(A) and § 648.24(b)(6), to reference “limited access” and “open access” permits instead of the “directed” and “incidental” fishery to be clear and consistent with the regulations being added and changed with this action.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the Assistant Administrator has determined that this proposed rule is consistent with the Framework Adjustment 13 to the Atlantic Mackerel, Squid, and Butterfish FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment. In making a final determination, NMFS will take into account the data, views, and comments received during the comment period.

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

The Council prepared a draft EA for this action that analyzes the impact of measures contained in this proposed rule. The EA includes a regulatory flexibility analysis, as required by section 603 of the Regulatory Flexibility Act (RFA), which is supplemented by information contained in the preamble of this proposed rule. The IRFA, as summarized below, describes the economic impact this proposed rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this action are contained in the preamble to this proposed rule. A copy of the RFA analysis is available from the Mid-Atlantic Council (see ADDRESSES ).

The purpose of this action is to establish a 5-year rebuilding program for Atlantic mackerel, set 2019-2021 Atlantic mackerel specifications and a river herring and shad cap for the Atlantic mackerel fishery, and modify in-season closure measures. The intended effect of this rule is to sustainably manage the Atlantic mackerel fishery and achieve optimum yield on a continuing basis. Section 4.0 of the EA prepared for this action (see ADDRESSES ) contains a more thorough description of the purpose and need for this action.

The legal basis and objectives for this action are contained in the preamble to this proposed rule, and are not repeated here. Sections 4.0 and 5.0 of the EA prepared for this action (see ADDRESSES ) contains a more thorough description of the purpose and need for this action and the rational for each measure considered.

The measures proposed in this action apply to vessels that hold any commercial permit for Atlantic mackerel. We analyzed the impacts using NMFS's database for Atlantic mackerel permit holders in 2017 (the most recent year of full year permit data) cross referenced with NMFS ownership data. Some small entities own multiple vessels with Atlantic mackerel permits. For purposes of the Regulatory Flexibility Act, NMFS established a small business size standard for businesses, including their affiliates, whose primary industry is commercial fishing (see 50 CFR 200.2). A business primarily engaged in commercial fishing (NAICS code 11411) is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $11 million for all its affiliated operations worldwide. The determination of whether the entity is large or small is based on the average annual revenue for the most recent 3 years for which data are available. In 2017, 1,829 separate vessels held Atlantic mackerel permits. These vessels were owned by 1,379 entities, nearly all of which (1,368) were small business entities. Based on revenue from all species landed, 951 of these were commercial fishing entities, 116 were for-hire entities, and 301 had no revenue, but are considered small businesses. For those small businesses with revenues, average revenues were $0.6 million in 2017. There were 299 entities that reported revenue from Atlantic mackerel during 2017. Of these entities, 4 were large and 295 were small. In 2017, 145 vessels were issued limited access permits and may be affected by the directed fishery closure measures proposed in this action. They are owned by 105 entities, of which 98 are small entities.

This action does not contain a collection-of-information requirement for purposes of the Paperwork Reduction Act.

In addition to the no action (no rebuilding, current specifications continue), the Council considered three rebuilding alternatives with time frames of: 3 years; 5 years; and 7 years. All of the rebuilding alternatives allow an increase in landings over time and have positive long-term socio-economic benefits compared to taking no action. The 3-year rebuilding program would require a cut in quota in the first year with increases in the second and third years, compared to the current quota. The 5-year and 7-year rebuilding program specifications would significantly increase the allowable quota by over 8,000 mt in the first year, with increases in subsequent years. The 7-year program would allow a larger quota increase, compared to the 5-year program. The 5-year program was selected because it would rebuild the fishery within the 5-year timeframe, before the 7-year program, while considering the economic needs of fishing communities. The proposed 5-year rebuilding program would result in an additional $9 million in fishing revenue annually in 2020-2021, compared to 2020-2021 under the no action alternative (which would continue current specifications).

The in-season closure alternatives would achieve efficient operation of the fishery by allowing most of the DAH to be caught without a high risk of exceeding the annual catch limit. The difference in socioeconomic outcomes is related to the DAHs selected in the proposed rebuilding program and associated specifications in relation to the proposed changes to the in-season closure provisions, which would result in slight changes to fishery operation. Closing the limited access fishery earlier, as proposed and maintaining larger trip limits may benefit smaller scale operators later in the year, but reduces available quota for the larger scale limited access fishery. However, preserving a higher trip limit after an Atlantic mackerel fishery closure may help larger scale entities offset the impacts of an earlier closure by allowing more incidental Atlantic mackerel catch in other fisheries, particularly Atlantic herring.

Limiting incidental landings to 5,000 lb (2,268 kg) once the directed fishery closes is a measure in all of the proposed alternatives other than the no action alternative. While this would reduce the possibility of ACL overages, there is a small-scale directed Atlantic mackerel jig/handline fishery that has developed in recent years by vessels with open access permits. Using July-December jig/handline landings from 2015-2017, a 5,000-lb (2,268-kg) trip limit would have impacted 21 federally-permitted vessels. If those vessels had been limited to 5,000 lb (2,268 kg) during those 3 years, their combined Atlantic mackerel landings would have been reduced by 17 percent. Individual vessel Atlantic mackerel landings for these 21 vessels would have been impacted with an average and median reduction of 13 percent. Based on the average 2015-2017 price from July-December jig/handline trips of $0.45 per lb, individual vessels would have approximately lost, over a total of 3 years, an average of $14,773 and a median of $5,171. The least impacted would have experienced losses of around $104 and the most would be around $108,917 in ex-vessel revenues over three years. The proportion of total revenues from Atlantic mackerel for these 21 vessels was an average of 23 percent and a median of 20 percent, with a range of 1 percent to 93 percent. The 21 vessels that may be impacted are 1 percent of the entire Atlantic mackerel fleet, 2 percent of small businesses within the fleet, and 7 percent of businesses that solely rely on Atlantic mackerel. It is also possible that with the higher Atlantic mackerel quotas closures would not occur, so the 5,000-lb (2,268-kg) trip limit for incidental permits may not be triggered.

The Council considered alternatives for the river herring and shad catch cap for the Atlantic mackerel fishery. The proposed measures are a combination of alternatives that would increase the river herring and shad catch cap but scale the ratio of river herring and shad in the Atlantic mackerel fishery when landings are above 10,000 mt. If the river herring and shad catch triggers a closure under any of the alternatives, the 145 vessels with limited access permits are potentially affected, and they represent 105 entities, of which 98 are small entities. If the river herring and shad encounter rates are relatively low, as in most years the cap has been in operation (2014-2017), then they will not be impacted at all. If river herring and shad catch encounter rates are high, as in 2018 and 2019, then it is possible that a substantial portion of the mackerel DAH could go unharvested once the directed fishery is closed due to exceeding the river herring and shad catch cap.

Under the proposed action, if the fishery has a similar encounter rate as 2018 and 2019, when the fishery was closed early in the year, Atlantic mackerel landings could still close the limited access fishery with the higher DAHs because the river herring and shad catch cap is scaled up with the quota and landings. The fishery landed about 8,000 mt, or nearly 88 percent of the DAH before the river herring and shad catch cap closed the fishery in 2018. In 2019, the fishery landed about 4,145 mt, or 45 percent of the DAH before the river herring and shad catch cap closed the fishery. The proposed 89 mt river herring and shad catch cap is slightly higher than the current catch cap of 82 mt, so under the proposed action, there would be a closure at approximately 8,700 mt at 2018 catch rates. Atlantic mackerel landings could increase, but they would be limited compared to the proposed 2020-2021 DAHs of 20,557 mt and 21,517 mt, respectively. Looking at the differences, this would leave, for 2020-2021 DAHs, 11,857 mt and 12,817 mt, respectively, unharvested. If high river herring and shad catch rates trigger a closure of the directed fishery, the fishery may experience an opportunity cost of up to $7.7 million in forgone revenue if the proposed DAHs are not fully landed. This would not be a decrease in revenue, but a limit to a potential increase in revenue if the river herring and shad catch cap were reached. The proposed action combination provides more flexibility to allow the fishery to continue than all of the other alternatives considered.

If the river herring and shad catch cap is triggered, the Atlantic mackerel trip limit for all permits becomes 20,000 lb (9,071 kg), which is not a change from the current measures. Under the proposed changes for in-season closures, if 90 percent of the DAH was caught, incidental permits would go to 5,000 lb (2,268 kg). In the next in-season closure phase of the fishery, if 98 percent of the DAH was caught, all permits would go to a 5,000-lb (2,268-kg) trip limit. During a river herring and shad catch cap closure, a 20,000-lb (9,071-kg) trip limit would be most likely, which would allow more DAH to be available than in an in-season closure.

For the reasons set out in the preamble, 50 CFR part 648 is proposed to be amended as follows: