The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2022-0801; Project Identifier MCAI-2022-00092-T” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments.

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

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Dan Rodina, Aerospace Engineer, Large Aircraft Section, International Validation Branch, FAA, 2200 South 216th Street, Des Moines, WA 98198, telephone and fax 206-231-3225; email dan.rodina@faa.gov. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2022-0014, dated January 25, 2022 (EASA AD 2022-0014) (also referred to as the MCAI), to correct an unsafe condition for all Airbus SAS Model A350-941 and -1041 airplanes.

This proposed AD was prompted by a report indicating that the VSSF of certain captain's, first officer's, and third occupant's seats could fail. The FAA is proposing this AD to address failure of the VSSF, which could lead to flight deck seat failure and unexpected seat movement under certain loading conditions, possibly resulting in flightcrew injury and reduced control of the airplane. See the MCAI for additional background information.

EASA AD 2022-0014 specifies procedures for modifying or replacing each affected captain's, first officer's, and third occupant's seat. EASA AD 2022-0014 also limits the installation of affected seats under certain conditions. 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, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2022-0014 described previously, except for any differences identified as exceptions in the regulatory text of this proposed AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate EASA AD 2022-0014 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2022-0014 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2022-0014 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2022-0014. Service information required by EASA AD 2022-0014 for compliance will be available at https://www.regulations.gov by searching for and locating Docket No. FAA-2022-0801 after the FAA final rule is published.

The FAA estimates that this proposed AD would affect 27 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code (U.S.C.). Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it would modify Class E airspace at Rexburg-Madison County Airport, ID, to support IFR operations at the airport.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Persons wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2022-0567; Airspace Docket No. 21-ANM-67”. The postcard will be date/time stamped and returned to the commenter.

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

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

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 2200 S 216th Street, Des Moines, WA 98198.

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

The FAA is proposing an amendment to 14 CFR part 71 by modifying the Class E airspace extending upward from 700 feet above the surface at Rexburg-Madison County Airport, ID. North and south extensions to the existing Class E airspace are needed to ensure containment of arriving IFR operations below 1,500 feet above the surface and departing IFR operations until they reach 1,200 feet above the surface at the airport.

Additionally, the FAA proposes an administrative modification to the airport's legal description. The geographic coordinates should be updated to match the FAA's database.

The Class E5 airspace designation is published in paragraph 6005 of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in FAA Order JO 7400.11, which is published yearly and becomes effective on September 15.

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

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

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

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code (U.S.C.). Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it would establish Class E airspace at McCarley Field, Blackfoot, ID, to support IFR operations at the airport.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Persons wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2022-0572; Airspace Docket No. 21-ANM-66”. The postcard will be date/time stamped and returned to the commenter.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code (U.S.C.). Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, part A, subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it would modify Class D and Class E airspace at Idaho Falls Regional Airport, ID, to support IFR and VFR operations at the airport.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Persons wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2022-0569; Airspace Docket No. 21-ANM-65.” The postcard will be date/time stamped and returned to the commenter.

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

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

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198.

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

The FAA is proposing an amendment to 14 CFR part 71 by modifying Class D and E surface areas, the Class E airspace area designated as an extension to a Class D or Class E surface area, the Class E airspace extending upward from 700 feet above the surface, and the Class E airspace extending upward from 1,200 feet above the surface at Idaho Falls Regional Airport, ID.

Class D airspace is intended to contain the point at which an aircraft executing an instrument approach procedure (IAP) can be expected to descend to less than 1,000 feet above the surface. The 1,000 foot point of the VOR RWY 3 IAP is currently outside of the lateral boundary of the airport's Class D surface area. The Class D should be extended to the southwest to contain this point. Additionally, the exclusionary language for the nearby Eastern Idaho Regional Medical Center Heliport needs to be reworded to simplify the Idaho Falls Regional Airport's Class D legal description.

The Class E surface airspace should be amended to be coincident with the Class D airspace legal description.

The Class E airspace area designated as an extension to a Class D or Class E surface area should be removed southwest of the airport. The RWY 3 VOR 1,000 foot point is proposed to be contained within the Class D surface area, and the airspace would not be needed. The Class E airspace area designated as an extension to a Class D or Class E surface area northeast of the airport is currently seven miles wide, but should have its width reduced. The extension is used to contain the VOR RWY 21 1,000 foot point, and only a 4.8 mile width is needed.

The Class E airspace extending upward from 700 feet above the surface should be removed southwest of the airport. Existing and proposed Class E airspace extending upward from 1,200 feet above the surface contains all procedure turns for the VOR RWY 3 and LOC BC RWY 3 approaches, and at least 1,500 feet exists between the highest terrain and the procedure turn altitudes. Additional Class E airspace extending upward from 700 feet above the surface is needed northeast of the airport to contain procedure turns for the ILS/LOC RWY 21 IAP, as terrain exists within 1,500 feet of the procedure turn altitude. The Class E airspace extending upward from 700 feet above the surface immediately encircling the airport needs to be expanded. This area should be increased from a 7.5-mile radius to an 8-mile radius around the airport to more appropriately contain departures and circling approaches. The existing Class E airspace extending upward from 1,200 feet above the surface over the airport consistently overlaps with adjacent airspace, creating the potential for future airspace “traps.” The FAA proposes to re-define the boundaries of this area to more appropriately align it with other airspace and simplify its legal description.

Finally, the FAA proposes several administrative modifications to the airport's legal descriptions. The geographic coordinates should be updated to match the FAA's database. The Class D and Class E2 legal descriptions should also be updated to replace the outdated use of the phrase “Notice to Airmen.” This phrase should be amended to read “Notice to Air Missions” to match the FAA's current definition of “NOTAM.” The outdated phrase “Airport/Facility Directory” in the Class D and Class E2 legal descriptions should be replaced with the phrase “Chart Supplement” to align with current FAA publication nomenclature. Lastly, all navigational aids (NAVAID) should be removed from the Class E4 and E5 legal description text headers, as they're not required to describe the airspace areas, and the removal of the NAVAIDs simplifies the legal descriptions.

Class D, E2, E4, and E5 airspace designations are published in paragraphs 5000, 6002, 6004, and 6005, respectively, of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class D and Class E airspace designations listed in this document will be published subsequently in FAA Order JO 7400.11.

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

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

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

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code (U.S.C.) Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it would establish Class E airspace at Christmas Valley Airport, OR, to support IFR operations at the airport.

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Persons wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2022-0571; Airspace Docket No. 22-ANM-46.” The postcard will be date/time stamped and returned to the commenter.

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

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

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 2200 S 216th Street, Des Moines, WA 98198.

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

Class E airspace beginning at 700 feet above the surface should be established at Christmas Valley Airport to contain departing aircraft until reaching 1,200 feet above the surface, and arriving aircraft below 1,500 feet above the surface. The proposed airspace is centered on the Christmas Valley Airport reference point, with a 14 nautical mile (NM) radius to account for rising terrain in the vicinity of the airport.

The Class E5 airspace designation is published in paragraph 6005 of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in FAA Order JO 7400.11, which is published annually and becomes effective on September 15.

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

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

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

The BE-13, Survey of New Foreign Direct Investment in the United States, is a mandatory survey conducted by BEA under the authority of the International Investment and Trade in Services Survey Act (22 U.S.C. 3101-3108).

The purpose of the BE-13 survey is to collect data on the acquisition or establishment of U.S. business enterprises by foreign investors and the expansion of existing U.S. affiliates of foreign companies to establish a new facility where business is conducted. The data collected on the survey are used to measure the amount and economic significance of new foreign direct investment in the United States and assess its impact on the U.S. economy. Foreign direct investment in the United States is defined as the ownership or control, directly or indirectly, by one foreign person (foreign parent) of 10 percent or more of the voting securities of an incorporated U.S. business enterprise, or an equivalent interest of an unincorporated U.S. business enterprise, including a branch.

This proposed rule would amend 15 CFR 801.7 to set forth the reporting requirements for the BE-13, Survey of New Foreign Direct Investment in the United States. Under this proposed rule, persons subject to the reporting requirements of the BE-13, Survey of New Foreign Direct Investment in the United States, would be required to respond, whether or not they are contacted by BEA.

The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520 (PRA).

The proposed change amends the regulations for the BE-13 survey. Specifically, BEA proposes to change the reporting requirements of form BE-13E, Fiscal Year End Cost Update for Projects Originally Reported on Forms BE-13B and BE-13D. The form collects updated cost information for greenfield investments— i.e., establishments or expansions of U.S. businesses by foreign investors filed on BE-13B or BE-13D forms, respectively—and is required to be filed annually until the establishment or expansion of the U.S. business enterprise is complete.

BEA proposes to limit the filing requirement of the BE-13E form to three years after the year the investment is initiated. BEA has found that this timeframe would be sufficient to collect the vast majority of the changes to total planned expenditures of greenfield investments and provide data users with insightful statistics on the ultimate cost of these investments. The proposed change would reduce respondent burden and the BEA resources needed to continue to collect and process these updates, allowing BEA to focus resources on the featured statistics for more recent periods.

BEA will describe any proposed changes to the information collected through the survey (including the addition, deletion, and/or modification of existing questions and definitions) in a public notice and will solicit comments as part of the requirements of the Paperwork Reduction Act (PRA). Any changes to reporting requirements or significant expansions in scope of the surveys would be conducted by rulemaking.

This proposed rule has been determined to be not significant for purposes of E.O. 12866.

This proposed rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under E.O. 13132.

This proposed rule contains a collection-of-information requirement subject to review and approval by OMB under the PRA. The requirement will be submitted to OMB for approval as a reinstatement, with change, of a previously approved collection under OMB control number 0608-0035.

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

The BE-13 survey, as proposed, is expected to result in the filing of approximately 3,027 reports from U.S. affiliates each year. The respondent burden for this collection of information is expected to vary because of differences in company structure, size, and complexity, but is estimated to average 1.1 hours per response. The burden includes time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Thus, the total respondent burden for this survey is estimated at 3,027 hours, compared to 2,547 hours for the previous BE-13 survey estimate. The increase in burden hours is due to the increase in the overall number of respondents expected to file, partially offset by a reduction in the number of BE-13E forms expected to be filed.

We are soliciting public comments to permit the Department of Commerce/Bureau of Economic Analysis to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.

Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in the proposed rule should be sent to both BEA and OMB following the instructions given in the ADDRESSES section above.

The Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration, under the provisions of the Regulatory Flexibility Act (RFA), 5 U.S.C. 605(b), that this proposed rulemaking, if adopted, will not have a significant economic impact on a substantial number of small entities.

Most of the U.S. business enterprises that are required to file the survey are units of multinational enterprises. For the few small businesses that are foreign-owned, BEA has attempted to keep burden to a minimum by asking only those questions that are considered essential and for which answers are likely to be readily available from the existing records of the business. The amount of information required to be reported by each U.S. business enterprise is determined by the type and cost of the transaction. When the cost of the acquisition, establishment, or expansion is less than $3 million, the U.S. business enterprise will only be required to report selected items on the BE-13 Claim for Exemption. The burden for this form is an average of 15 minutes.

Because relatively few small businesses are required to file the survey and because those that are impacted are subject to only a minimal recordkeeping burden, the Chief Counsel for Regulation certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities.

For reasons set forth in the preamble, BEA proposes to amend 15 CFR part 801 as follows:

FDA is proposing to establish requirements for a nonprescription drug product with an additional condition for nonprescription use (ACNU), which is a drug product that could be marketed without a prescription if an applicant implements an additional condition to ensure appropriate self-selection or appropriate actual use, or both, by consumers without the supervision of a healthcare practitioner. Currently, nonprescription drug products are limited to drugs that can be labeled with sufficient information for consumers to appropriately self-select and use the drug product. For certain drug products, limitations of labeling present challenges for adequate communication of information needed for consumers to appropriately self-select or use the drug product without the supervision of a healthcare practitioner. The proposed rule is intended to increase options for applicants to develop and market safe and effective nonprescription drug products, which could improve public health by broadening the types of nonprescription drug products available to consumers.

The proposed rule, if finalized, would establish requirements for a nonprescription drug product with an ACNU. The evidentiary standards that an application must meet under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and current FDA regulations for demonstrating safety and effectiveness would continue to apply to nonprescription drug products approved with an ACNU. This proposed rule would establish additional application requirements, labeling requirements, and postmarketing reporting requirements for a nonprescription drug product with an ACNU.

The proposed rule would establish the requirements for a new drug application (NDA) or abbreviated new drug application (ANDA) for a nonprescription drug product with an ACNU. An applicant would be required to submit a separate application for the approval of a nonprescription drug product with an ACNU, rather than a supplement to an application approved as a prescription drug product. In addition to applicable existing application requirements, NDA applicants would also be required to describe the ACNU and submit information to support the ACNU.

The proposed rule would clarify that an ACNU would constitute a meaningful difference between a prescription drug product and a nonprescription drug product that makes the nonprescription drug product safe and effective for use without the supervision of a healthcare practitioner licensed by law to administer the drug. For instance, two drug products could have the same active ingredient, dosage form, strength, route of administration, and indication, with one made available as a nonprescription drug product with an ACNU and the other product made available only by prescription.

The proposed rule would specify that FDA would refuse to approve an NDA or ANDA for a nonprescription drug product with an ACNU if the application fails to meet the applicable requirements of proposed § 314.56 (21 CFR 314.56).

The proposed rule would establish postmarketing reporting requirements for a nonprescription drug product with an ACNU. NDA and ANDA applicants would be required to submit a report with information concerning any incident of failure in the implementation of an ACNU, such as a consumer gaining access to the drug product without fulfilling the ACNU.

FDA's proposal to establish requirements for a nonprescription drug product with an ACNU is authorized by sections 201(n), 502, 503(b), 505, and 701(a) of the FD&C Act (21 U.S.C. 321(n), 352, 353(b), 355, and 371(a)).

The proposed rule, if finalized, would establish, for any applicant, the requirements for a nonprescription drug product with an ACNU. Compared to the traditional labeling paradigm of nonprescription drug products, this approved ACNU in addition to the labeling would ensure the appropriate self-selection, appropriate use, or both, of a drug product. We expect that this proposed rule, if finalized, would expand consumer access to certain drug products in a nonprescription setting.

Greater access to drug products would allow consumers to treat certain medical conditions using nonprescription drug products with an ACNU without the supervision of a healthcare practitioner. We estimate a reduction in access costs to consumers who could transfer from a prescription to a nonprescription drug product with an ACNU. Our primary estimate for this item is $26.70 with a range of $0 to $53.40 per consumer per purchase. There may also be cost savings associated with a potential reduction in the number of repetitive meetings between FDA and industry. Our primary estimate is $55,469 per applicant with a range of $45,260 to $66,174. Government and private insurance payers may also experience cost savings because the availability of nonprescription drug products with an ACNU may decrease future medical costs and the number of submitted insurance claims. In addition, we assume that applicants would submit applications when they believe that the profits from a potential approval would exceed the costs of the application. We lack information to monetize these potential profits and costs. We do not monetize our estimates of benefits over a 10-year horizon because of the high uncertainty about the number of applicants, applications, potential approvals, the number of purchases that might occur, and consumer preferences to switch products. For details, see the Preliminary Regulatory Impact Analysis (PRIA), the Uncertainty and Sensitivity section, as well as the Appendix of the same document.

Monetized costs include a one-time cost of reading and understanding the rule for those applicants potentially interested in submitting applications for their nonprescription drug products with an ACNU. Our primary estimate of these costs equals $821 with a range of $379 and $1,264 using a 7-percent discount rate annualized over a ten-year horizon.

Nonprescription drug products are important for the treatment of many conditions and diseases, although at present most nonprescription drug products are intended to provide temporary relief of minor symptoms or self-diagnosable, self-limited conditions and diseases, rather than chronic diseases. Unlike prescription drug products, nonprescription drug products may be accessed and used safely and effectively by consumers without the supervision of a healthcare practitioner when certain conditions are met. Currently, nonprescription drug products are limited to drugs that can be labeled with sufficient information to enable consumers to appropriately self-select and use the drug product without the supervision of a healthcare practitioner. Self-selection is the decision consumers make to use or not to use a drug product based on reading the information on the drug product labeling and applying knowledge of their personal medical history (Ref. 1). Nonprescription drug products are usually available for consumers to purchase at pharmacies, supermarkets, or other retail locations, and from online retailers.

FDA recognizes the potential benefit of providing consumers with access to additional types of nonprescription drug products, such as some drug products that are currently available only by prescription and that treat chronic diseases or conditions. However, there are certain drug products that an applicant may seek to market on a nonprescription basis where labeling alone cannot adequately communicate the information needed for consumers to appropriately self-select, use, or both self-select and use the drug product safely and effectively without the supervision of a healthcare practitioner.

The proposed rule has the potential to broaden the types of drug products that FDA could approve as nonprescription. Under the proposed rule, when labeling alone is not sufficient to ensure that the consumer can appropriately self-select or appropriately actually use, or both, a drug product correctly in a nonprescription setting, an applicant may submit an application proposing an ACNU that a consumer must successfully fulfill to obtain the nonprescription drug product with an ACNU. For example, an applicant may submit an application for a nonprescription drug product with an ACNU that enables a consumer to treat a chronic condition that currently does not have a nonprescription treatment. The availability of nonprescription drug products with an ACNU may provide public health benefits by facilitating consumers' self-care and autonomy over their medical treatment (Ref. 2).

There are two regulatory pathways to bring a nonprescription drug product to market in the United States: (1) the over-the-counter (OTC) drug review process under section 505G of the FD&C Act (21 U.S.C. 355h); and (2) the new drug application process under section 505 of the FD&C Act. Under the OTC drug review process, a nonprescription drug product may be marketed without an approved NDA or ANDA under section 505 of the FD&C Act if the nonprescription drug product meets the requirements of section 505G of the FD&C Act, and other applicable requirements.

FDA approves drugs as either prescription or nonprescription drug products under section 505 of the FD&C Act. A drug must be dispensed by prescription when it is not safe for use except under the supervision of a healthcare practitioner licensed by law to administer such drug product because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use (see section 503(b)(1) of the FD&C Act). If the approved drug does not meet the criteria for prescription-only dispensing, it may be marketed as nonprescription.

Section 503(b)(4)(B) of the FD&C Act provides that a drug product to which the prescription provisions of the FD&C Act do not apply ( i.e., a nonprescription drug product) will be deemed to be misbranded if at any time before dispensing, the label of the drug bears the “Rx only” symbol. Read together with section 503(b)(4)(A) of the FD&C Act, which requires prescription drug products to bear the “Rx only” symbol, this effectively means that absent a meaningful difference between the products, simultaneous marketing of two drug products with the same active ingredient as both a prescription and a nonprescription drug would result in one of the two products being misbranded. Examples of meaningful differences that can make a prescription drug product safe and effective only under the supervision of a healthcare practitioner licensed by law to administer such drug include the indication, strength, route of administration, dosage form, or patient population (see 83 FR 13994 at 13995, April 2, 2018; see also 70 FR 52050, September 1, 2005).

An applicant may submit an NDA for a nonprescription drug product using the pathways described in section 505(b)(1) or (2) of the FD&C Act to market a new drug product. A 505(b)(1) NDA includes full reports of investigations to demonstrate that the proposed drug product is safe and effective under the conditions prescribed, recommended, or suggested in its proposed labeling (see sections 505(d) and (b)(1) of the FD&C Act). Thus, an NDA for a nonprescription drug product must include, among other things, information to demonstrate that consumers can appropriately self-select and use the proposed drug product safely and effectively without the supervision of a healthcare practitioner. An NDA submitted under section 505(b)(2) of the FD&C Act also includes information to demonstrate that the proposed drug product is safe and effective under the conditions prescribed, recommended, or suggested in its proposed labeling, but at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use (21 U.S.C. 355(b)(2)).

Applicants may submit an ANDA using the pathway described in section 505(j) of the FD&C Act for a drug product that is a generic version of a previously approved drug product. An ANDA for a nonprescription drug product generally references a nonprescription drug product previously approved under section 505(c) of the FD&C Act (known as the RLD) and relies on the Agency's finding that the RLD is safe and effective. An ANDA generally must contain information to show that the proposed generic product (1) is the same as the RLD with respect to the active ingredient(s), conditions of use, route of administration, dosage form, strength, labeling (with certain permissible differences) and (2) is bioequivalent to the RLD. The procedures and requirements for the submission and approval of NDAs, ANDAs, and supplements to those applications are provided in part 314 (21 CFR part 314).

Generally, nonprescription drug products must be labeled with adequate directions for use so the consumer: (1) can use the drug product safely and for the purposes for which it is intended and (2) make an appropriate self-selection decision and appropriately use the nonprescription drug product (see section 502(f)(1) of the FD&C Act and § 201.5 (21 CFR 201.5)). Consumer studies can help demonstrate that the requirement for adequate directions for use is met. These studies may include label comprehension studies (Ref. 3), self-selection studies (Ref. 1), actual-use studies, and other human factors studies.

Nonprescription drug products must also comply with applicable labeling requirements under part 201 (21 CFR part 201), including the format and content requirements for OTC drug product labeling under § 201.66. Labeling created to satisfy the requirements in § 201.66 is commonly referred to as the Drug Facts labeling (DFL). The DFL is intended to enable consumers to appropriately self-select and use the nonprescription drug product safely and effectively. In addition to the DFL, FDA may approve additional labeling for nonprescription drug products.

FDA has received a number of inquiries from stakeholders about whether applications may be submitted for nonprescription drug products with one or more additional conditions that consumers must fulfill to ensure that the drug product is safe and effective for nonprescription use. As explained in detail below, FDA held a public hearing and participated in a series of workshops convened by the Engelberg Center for Health Care Reform at the Brookings Institution (Brookings Institution) to solicit public input on expanding the approval of nonprescription drug products. FDA used stakeholder input from the public hearing and the workshops to develop the proposed rule.

In the Federal Register of February 28, 2012 (77 FR 12059), FDA announced a public hearing under part 15 (21 CFR part 15) entitled “Using Innovative Technologies and Other Conditions of Safe Use to Expand Which Drug Products Can Be Considered Nonprescription” (2012 public hearing). FDA held this public hearing on March 22 and 23, 2012, to: (1) seek input from interested stakeholders on a potential new paradigm where FDA would approve certain drug products for nonprescription use with certain conditions specific to a drug product that would otherwise require a prescription and (2) obtain information and comments on the feasibility of this paradigm and its potential benefits and costs. As part of the public hearing, FDA requested information and public comment on the types of technology that could be used; the types of conditions of safe use; and the potential impacts on pharmacies, consumers, and healthcare practitioners, as well as other issues that might arise under the paradigm. FDA received comments from various stakeholders, including consumers, private industry, healthcare professional associations, academic institutions, and patient advocacy organizations, on a broad range of topics such as: (1) access to care, (2) medication nonadherence, (3) practitioner oversight, (4) potential effect on healthcare and healthcare costs, (5) potential impact on medical conditions or diseases, (6) use of diagnostic aids and technologies as possible conditions of safe use, and (7) potential barriers to successful implementation and adoption (see Docket No. FDA-2012-N-0171).

The Brookings Institution convened a series of three expert workshops, based on a cooperative agreement with FDA, to seek stakeholder feedback on practical considerations for the development of a new paradigm focused on developing innovative approaches for consumers to self-select nonprescription drug products appropriately and maintain their safe and effective use and to explore potential practical strategies. Participants included a diverse set of stakeholders from both public and private sectors, including FDA and other Government agencies, healthcare professional associations, trade associations, technology developers, pharmaceutical manufacturers, healthcare professionals, academic institutions, retail pharmacy representatives, and patient advocacy organizations.

On November 8, 2012, the Brookings Institution convened the first expert workshop, “Nonprescription Medications With Conditions of Safe Use as a Novel Solution for Undertreated Diseases or Conditions.” This workshop explored issues and practical considerations for the development of this new paradigm (Ref. 4).

On May 9, 2013, the Brookings Institution held the second expert workshop, “Innovative Technologies and Nonprescription Medications: Addressing Undertreated Diseases and Conditions Through Technology Enabled Self-Care.” This workshop explored the potential for innovative technologies to facilitate safe and effective use of nonprescription drug products (Ref. 5).

On November 4, 2013, the Brookings Institution held the final expert workshop, “Exploring Implications of the Nonprescription Drug Safe Use Regulatory Expansion Initiative on Reimbursement and Access.” This workshop focused on assessing this paradigm's potential impact on consumer access and reimbursement (Ref. 6).

In the Federal Register of July 18, 2018 (83 FR 33938), FDA published a notice of availability of a draft guidance entitled “Innovative Approaches for Nonprescription Drug Products” and established Docket No. FDA-2018-D-2281. This draft guidance describes two innovative approaches that may be useful for applicants to consider in cases where the DFL alone is not sufficient to ensure that a drug product can be used safely and effectively in a nonprescription setting. These approaches include the development of labeling in addition to the DFL and the implementation of additional conditions so that consumers can appropriately self-select and use the product.

FDA's proposal to establish requirements for a nonprescription drug product with an ACNU is authorized by sections 201(n), 502, 503(b), 505, and 701(a) of the FD&C Act (21 U.S.C. 321(n), 352, 353(b), 355, and 371(a)). Section 502(f) of the FD&C Act deems a drug to be misbranded unless its labeling bears adequate directions for use and adequate warnings against use in those conditions where its use may be dangerous to health, as well as adequate warnings against unsafe dosage or methods or duration of administration or application, in such manner and form, as are necessary for the protection of users. Section 502(f) also authorizes the promulgation of regulations exempting a drug or device from the requirement to bear adequate directions for use upon a determination that such directions are not necessary for the protection of public health.

We are proposing to add an exemption for human nonprescription drug products approved with an ACNU from the requirement in section 502(f)(1) of the FD&C Act for drug products to have labeling that provides adequate directions for use (see proposed § 201.130). When labeling alone cannot provide adequate directions for use for a human nonprescription drug product, FDA may approve the nonprescription drug product with an ACNU under proposed § 314.56.

In addition, section 502(a) of the FD&C Act deems a drug to be misbranded if its labeling is false or misleading in any particular. Under section 201(n) of the FD&C Act, in determining whether labeling is misleading, there shall be taken into account (among other things), not only representations made or suggested but also the extent to which the labeling fails to reveal facts material in the light of such representations or material with respect to consequences that may result from the use of the drug under the conditions of use prescribed in the labeling or under usual or customary conditions of use.

In addition, under section 505 of the FD&C Act, FDA will approve an NDA only if the drug is shown to be both safe and effective for use under the conditions prescribed, recommended, or suggested in the proposed labeling for the product. See section 505(c)(1) and (d) of the FD&C Act. If, for example, on the basis of information submitted as part of the application or on the basis of any other information before the Agency with respect to such drug, there is insufficient information to determine whether such drug is safe for use under such conditions, the Agency will not approve the drug. Section 505(j) of the FD&C Act describes the requirements for ANDAs. In particular, section 505(j)(2)(A) specifies the information that must be included in an ANDA, and section 505(j)(4) describes the approval standard for an ANDA.

In addition, section 503(b) of the FD&C Act contains provisions regarding the marketing of a drug as either a prescription drug product or a nonprescription drug product.

Finally, section 701(a) of the FD&C Act authorizes FDA to issue regulations for the efficient enforcement of the FD&C Act.

We are proposing to add § 314.56 to part 314, subpart B, to establish additional application requirements for a nonprescription drug product with an ACNU under an NDA or an ANDA. The evidentiary standards that an NDA for a nonprescription drug product must meet under the FD&C Act and current FDA regulations to demonstrate the safety and effectiveness of the drug product would apply to a nonprescription drug product approved with an ACNU. An ANDA referencing a nonprescription drug product with an ACNU previously approved under an NDA may rely on FDA's finding that the listed drug product is safe and effective for use under the conditions described in the labeling. We are proposing to add § 314.125(b)(20) to part 314, subpart D, to specify that FDA would refuse to approve an NDA for a nonprescription drug product with an ACNU that does not meet the applicable requirements established in § 314.56. We are also proposing to add § 314.127(a)(15) to part 314, subpart D, to specify that FDA would refuse to approve an ANDA for a nonprescription drug product with an ACNU that does not meet the applicable requirements established in § 314.56. We are proposing to add § 314.81(b)(3)(v) to part 314, subpart B, to establish postmarketing reporting requirements for a nonprescription drug product with an ACNU. We are also proposing to add § 201.67 to part 201, subpart C, to establish labeling requirements for a nonprescription drug product with an ACNU. We are proposing to add § 201.130 to part 201, subpart D, to establish an exemption from the statutory requirement for adequate directions for use for a nonprescription drug product with an ACNU. The proposed rule is intended to increase options for applicants to develop and market safe and effective nonprescription drug products, which could improve public health by broadening the types of nonprescription drug products available to consumers. For example, FDA may approve a nonprescription drug product with an ACNU to treat a chronic condition that currently does not have nonprescription treatments.

A detailed description of each proposed section is provided in sections V.A through V.K of this document.

The proposed rule would apply to NDAs and ANDAs for nonprescription drug products with an ACNU (see proposed §§ 314.56, 314.81, 314.125, 314.127, 201.67, and 201.130). Nonprescription drug products currently marketed under an approved application do not need an ACNU to ensure appropriate self-selection and appropriate actual use because FDA previously determined that labeling alone is sufficient for these drugs to be used safely and effectively without a prescription. The proposed rule would not apply to nonprescription drugs marketed under section 505G of the FD&C Act. Therefore, a requestor (as defined in section 505G(q)(3) of the FD&C Act) cannot submit a request under section 505G(b) of the FD&C Act for a nonprescription drug product with an ACNU.

We are proposing to define the term “additional condition for nonprescription use” (ACNU) as one or more FDA-approved conditions that an applicant of a nonprescription drug product must implement to ensure consumers' appropriate self-selection or appropriate actual use, or both, of the nonprescription drug product without the supervision of a healthcare practitioner if the applicant demonstrates and FDA determines that labeling alone is insufficient to ensure appropriate self-selection or appropriate actual use, or both (see proposed §§ 314.56(a) and 201.67(b)). If the ACNU is intended to address appropriate self-selection only, the labeling must enable appropriate actual use of the nonprescription drug product by consumers. Alternatively, if the ACNU is intended to address appropriate actual use only, the labeling must enable consumers to appropriately self-select the nonprescription drug product.

The proposed definition for an ACNU is intentionally broad to give applicants flexibility regarding the types of additional conditions applicants may propose and how those additional conditions can be implemented. For example, an applicant could propose an ACNU that requires a consumer, in order to purchase the nonprescription drug product, to respond with specific answers to a set of questions on a self-selection test available by either a mobile application or an automated telephone response system. An applicant may also propose that before purchasing the nonprescription drug product with an ACNU, a consumer be required to view labeling (for example, text or images in a video), that describes how to appropriately use the nonprescription drug product and to respond to questions to confirm understanding.

The proposed rule would not require a nonprescription drug product with an ACNU to be first marketed as a prescription drug product. However, in cases where there is an approved prescription drug product, the proposed rule would establish the requirement that a nonprescription drug product with an ACNU cannot be approved through a supplement to the approved prescription application. Rather, an applicant must submit a separate application for a nonprescription drug product with an ACNU. Although a separate application would be required, an applicant may cross reference information in its approved NDA for the prescription product and would not need to duplicate studies already conducted for and submitted in its NDA for the prescription product. As explained in Section III.B., a different applicant may submit an NDA under section 505(b)(2) of the FD&C Act, where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. This is provided the 505(b)(2) applicant establishes that the relied upon NDA or literature is relevant to its nonprescription drug product with an ACNU and its application includes support for any differences between the applicant's proposed drug product and the listed drug on which the applicant is relying to demonstrate the safety and effectiveness of the proposed nonprescription drug product with an ACNU.

As explained in section V.E of this document, the approved prescription drug product and the approved nonprescription drug product with an ACNU are two different products and could be simultaneously marketed.

Requiring a separate application for the nonprescription drug product with an ACNU would enable continued marketing of the prescription product under the original NDA and would allow it to serve as an RLD for ANDAs for the prescription product. Continued access to the prescription drug product, along with availability of the nonprescription drug product approved with an ACNU, would ensure greater access to needed drugs by providing flexibility in how to obtain them. For example, if a nonprescription drug product approved with an ACNU is available through a kiosk in a pharmacy, patients who do not live near a pharmacy with such a kiosk may find it easier to obtain the drug through a prescription.

Additionally, patients who prefer to continue interacting with their healthcare providers and obtain the drug by prescription would have that option. Patients who had not previously used the drug may also feel more comfortable initiating treatment and obtaining the drug with the involvement of their healthcare providers. While FDA would generally expect any technology that is used to operationalize an ACNU to be easily usable to the majority of consumers, there may be some consumers who may not be comfortable using such technology. Continued availability of the prescription drug product would provide greater flexibility in obtaining the drug and enable these patients to continue their care without potential interruption.

An applicant seeking an initial approval of an ANDA to market a nonprescription drug product with an ACNU may submit an ANDA referencing a nonprescription drug product with an ACNU previously approved under an NDA and may rely on FDA's finding that the RLD is safe and effective. This ANDA would also be required to have a separate application from an existing ANDA approved as a prescription drug product. Because the RLD nonprescription drug product with an ACNU would have a separate NDA from the NDA approved as a prescription drug product, the ANDA would be using a different NDA as its RLD from the RLD for the ANDA for the prescription product. Section 505(j)(2)(D) of the FD&C Act prohibits an applicant from amending or supplementing its ANDA to rely on a different listed drug from the listed drug identified in the ANDA submitted to FDA.

An applicant may submit an amendment, supplement, or annual report to an application for a nonprescription drug product with an ACNU, consistent with FDA regulations (§§ 314.60, 314.96, 314.70, and 314.97). An applicant seeking to make changes to an NDA or ANDA submitted for a nonprescription drug product with an ACNU that is under review by FDA would submit an amendment to the application to request a change (§§ 314.60 and 314.96). An applicant seeking to make changes to an FDA-approved NDA or ANDA for a nonprescription drug product with an ACNU would submit a supplement to the approved NDA or ANDA (§§ 314.70 and 314.97).

The proposed rule would establish the specific NDA and ANDA requirements for a nonprescription drug product with an ACNU (see proposed § 314.56(c)).

In addition to applicable existing application requirements, NDA applicants would also be required to describe the ACNU and submit information to support the ACNU. Specifically, the proposed rule would require that an NDA for a nonprescription drug product with an ACNU must, when fulfilling the content and format requirements under § 314.50, include the following information about the ACNU in the application: (1) a statement regarding the purpose of the ACNU ( i.e., appropriate self-selection or appropriate actual use, or both, by consumers of the nonprescription drug product without the supervision of a healthcare practitioner) (see proposed § 314.56(c)(1)(i)); (2) a statement of the necessity of the ACNU (see proposed § 314.56(c)(1)(ii)); (3) a description of how the ACNU ensures appropriate self-selection or appropriate actual use, or both (see proposed § 314.56(c)(1)(iii)); (4) a description of the key elements of the ACNU (see proposed § 314.56(c)(1)(iv)); (5) adequate data or other information that demonstrate the necessity of the ACNU to ensure appropriate self-selection or appropriate actual use, or both (see proposed § 314.56(c)(1)(v)); (6) adequate data or other information that demonstrate the effect of the ACNU on the appropriate self-selection or appropriate actual use, or both (see proposed § 314.56(c)(1)(vi)); and (7) a description of the specific way the ACNU is operationalized (see proposed § 314.56(c)(1)(vii)). The first four requirements for the ACNU in the application (see proposed § 314.56(c)(1)(i) through (iv)) and the last requirement for the ACNU in the application (see proposed § 314.56(c)(1)(vii) provide statements, including explanations, descriptions, and justifications, about the ACNU; the remaining requirements for the ACNU in the application (see proposed § 314.56(c)(1)(v) through (vi)) provide data or other information to support these statements. Each of these seven requirements for the ACNU to be included in the application are further described in this section.

We are providing an example of one fictitious nonprescription drug product with an ACNU, Drug X, to provide a simplified illustration of a product that may potentially be considered under this proposed regulatory framework. We will use Drug X to explain examples of information that the applicant would submit in the NDA for a nonprescription drug product with an ACNU. This is only one type of example; many other types of ACNUs for nonprescription drug products could be possible.

Drug X is proposed as a nonprescription drug product indicated for the treatment of symptom Y in adults who have a disease-specific risk score below the threshold for developing serious side effect E when taking Drug X. As part of the nonprescription development program, the applicant conducted robust self-selection and label comprehension studies. The results of the self-selection and label comprehension studies demonstrated that consumers cannot appropriately self-select Drug X with labeling alone. FDA acknowledges these self-selection and label comprehension studies were well designed and conducted and concurs that consumers cannot self-select Drug X with labeling alone. Results of the self-selection and label comprehension studies show that, although consumers recognize that they have symptom Y, they cannot appropriately calculate their disease-specific risk score for side effect E. Therefore, the applicant proposes an ACNU for Drug X to ensure consumers' appropriate self-selection and now seeks approval of Drug X as a nonprescription drug product with an ACNU. The ACNU requires all consumers to complete a questionnaire located on a secure website created by the applicant to determine whether Drug X is appropriate for the consumer. The questionnaire has a series of questions that the consumer answers. The underlying program or other operating information used by the secure website calculates the risk score for serious side effect E using the consumer's answers and determines if the consumer has an acceptable disease-specific risk score to use Drug X. A consumer with an acceptable risk score can then either: (1) purchase Drug X on the applicant's secure website or (2) purchase Drug X at a retail site specified by the applicant after presenting a barcoded voucher that can be printed or downloaded onto the consumer's mobile device from the applicant's secure website.

a. Statement regarding the purpose of the ACNU. The proposed rule would require the applicant to provide a statement regarding the purpose of the ACNU (see proposed § 314.56(c)(1)(i)). This statement would indicate whether the ACNU is intended for: (1) appropriate self-selection, (2) appropriate actual use, or (3) both. For example, the purpose of the ACNU for Drug X is to ensure appropriate self-selection by consumers.

b. Statement of the necessity of the ACNU. The proposed rule would require the applicant to explain why the ACNU is necessary to ensure appropriate self-selection or appropriate actual use, or both, by consumers of the nonprescription drug product (see proposed § 314.56(c)(1)(ii)). The applicant must explain why labeling alone cannot be sufficient for the purposes of meeting the approval requirements for a nonprescription drug product. The applicant may include a summary of the adequate data or other information that is submitted as part of an application for a nonprescription drug product with an ACNU, pursuant to proposed § 314.56(c)(1)(v), to explain why labeling alone cannot be sufficient.

c. Description of how the ACNU ensures appropriate self-selection or appropriate actual use, or both. The proposed rule would require the applicant to describe how the ACNU will ensure appropriate self-selection or appropriate actual use, or both, by consumers (see proposed § 314.56(c)(1)(iii)). For example, with Drug X, the applicant would describe that the ACNU requires a consumer to complete a questionnaire, located on a website, created by the applicant, that would assist in calculating a consumer's risk score for developing serious side effect E. This questionnaire would determine whether Drug X is appropriate for the consumer. The applicant may be expected, among other things, to justify the appropriateness of the self-selection questions, including the criteria and/or considerations used in calculating the risk score for a particular consumer. This may include a description of the algorithm in the underlying program or other operating information used by the website that calculates the risk score for serious side effect E to determine if the consumer has an acceptable risk score to use Drug X. The applicant would also describe how a consumer with an acceptable risk score can then purchase Drug X.

d. Description of key elements of the ACNU. The proposed rule would require the applicant to describe the key elements of the ACNU (see proposed § 314.56(c)(1)(iv)). The description of the key elements must include: (1) the additional condition(s) implemented by the applicant to be fulfilled by the consumer to be able to obtain or use the nonprescription drug product with an ACNU, (2) the labeling specifically associated with the ACNU, and (3) the criteria by which the consumer would successfully fulfill the ACNU, including a description of the specific actions to be taken by a consumer or required responses to be provided by a consumer. Labeling specifically associated with the ACNU should be annotated with each specific element of the ACNU. All labeling, including labeling specifically associated with the ACNU, should be provided in editable documents whenever possible. For example, labeling specifically associated with Drug X would include the carton and container annotated with the elements specific to the ACNU. All questions in the questionnaire would be submitted as labeling. The applicant for Drug X would describe the criteria by which the consumer would fulfill the ACNU including the questions and all potential consumer responses that would determine that Drug X was appropriate or not appropriate for the consumer.

e. Adequate data or other information that demonstrates the necessity of the ACNU to ensure appropriate self-selection or appropriate actual use, or both. The proposed rule would require an applicant to include data or other information that demonstrates the necessity of the ACNU to ensure appropriate self-selection or appropriate actual use, or both (see proposed § 314.56(c)(1)(v)). To do so, the applicant must conduct or reference adequate testing to show that labeling alone would not support the safe and effective use of the nonprescription drug product. For example, the applicant of Drug X would submit adequate data from robust self-selection studies and label comprehension studies that demonstrate that consumers could not appropriately self-select Drug X with labeling alone.

Alternatively, the applicant can submit information explaining the necessity of the ACNU for appropriate self-selection or appropriate actual use, or both, when FDA has previously signaled that labeling alone is not sufficient to ensure appropriate self-selection or appropriate actual use, or both. For example, this might apply if FDA has previously approved multiple nonprescription drug products for the same indication with a similar ACNU. The applicant is encouraged to discuss its drug development plans with FDA if the applicant has questions about whether an ACNU would be appropriate.

f. Adequate data or other information that demonstrates the effect of the ACNU on the appropriate self-selection or appropriate actual use, or both. The applicant must also submit adequate data or information that demonstrates the effect of the ACNU on the appropriate self-selection or appropriate actual use, or both, by the consumer of the nonprescription drug product (see proposed § 314.56(c)(1)(vi)). The data must show that consumers can appropriately self-select or use the drug product safely and effectively, or both, with the ACNU. For example, the applicant of Drug X would submit adequate data from robust self-selection studies that demonstrate that consumers could appropriately self-select Drug X with the ACNU.

g. Description of how the applicant will operationalize the ACNU. The proposed rule would require that the applicant describe the specific way the ACNU is operationalized (see proposed § 314.56(c)(1)(vii)). While it is important for FDA to understand how the ACNU is operationalized because this is part of achieving appropriate self-selection or use, the specific way an ACNU is operationalized is not a key element of the ACNU. The purpose of the ACNU is to enable self-selection and appropriate use without the oversight of a healthcare practitioner. The ACNU can be operationalized in different ways provided it reliably meets the objective. Alternatives to the way the ACNU is operationalized in the previous example, which involves administration of a questionnaire using a website, might include: (1) administering the questionnaire using a display screen at a pharmacy kiosk, (2) administering the questionnaire using a mobile application, and (3) administering the questionnaire using an automated telephone response system. These examples differ in the way the ACNU is operationalized ( i.e., how the questionnaire is being administered), but the key elements (including the questions in the questionnaire and responses that ensure appropriate self-selection) remain the same. FDA seeks comment on any unique issues that might arise for retailers or consumers based on the way the applicant operationalizes the ACNU in the previous examples, e.g., in a store kiosk, online, or otherwise.

h. Additional considerations. If an NDA applicant submits an application for a nonprescription drug product with an ACNU that proposes to use certain technologies, but FDA determines that labeling alone is sufficient to enable appropriate self-selection and appropriate actual use, FDA would refuse to approve the application for the nonprescription drug product with the ACNU (see proposed §§ 314.125(b)(20) and 314.127(a)(15)). However, FDA may approve an application for a nonprescription drug product with technologies that do not meet the definition of an ACNU. In cases where FDA determines that labeling alone is sufficient to enable appropriate self-selection and appropriate actual use, the labeling statements specifically required for a nonprescription drug product with an ACNU under this proposed rule (see proposed § 201.130) must not appear on the drug product labeling.

Applicants may submit an ANDA referencing a listed drug that has been approved with an ACNU under section 505(c) of the FD&C Act and rely on FDA's previous finding that the RLD is safe and effective. The proposed rule would require that an ANDA for a nonprescription drug product with an ACNU must, when fulfilling the content and format requirements under § 314.94: (1) state the purpose of the ACNU (the same purpose as the ACNU for the RLD), (2) include information demonstrating that the key elements of the proposed ACNU are the same as the key elements of the ACNU for its RLD, and (3) include information on the way the ANDA applicant intends to operationalize the proposed ACNU. If an applicant believes the ACNU is operationalized in the same way as the RLD ( e.g., both use a mobile application), the ANDA must include information demonstrating the operationalization of the ACNU is the same as the RLD. If the ANDA proposes a different way to operationalize the proposed ACNU, the ANDA must include information to show that this different operationalization of the proposed ACNU achieves the same purpose as the ACNU for its RLD and the differences from the RLD are otherwise acceptable in an ANDA (see proposed § 314.56(c)(2)). As with all ANDAs, an ANDA for a nonprescription drug product with an ACNU also would be expected to be pharmaceutically equivalent and bioequivalent to its RLD and to have the same clinical effect and safety profile as its RLD when administered to patients under the conditions specified in the labeling. Information concerning the purpose of the reference product's ACNU and the description of the key elements should be available in the approval letter for the reference product or in the publicly available approval package.

The labeling for the ANDA drug product must be the same as the labeling for its RLD at the time of the ANDA's approval, except for changes required because of differences approved under a petition filed under § 314.93 or because the drug product for which an ANDA is submitted and the RLD are produced or distributed by different manufacturers (see sections 505(j)(2)(A) and (j)(4) of the FD&C Act) and §§ 314.94(a)(8) and 314.127(a)(7)).

a. Statement regarding the purpose of the ACNU. As part of the submission, an ANDA applicant would state the purpose of the ACNU (the same purpose as the ACNU for the RLD) (see proposed § 314.56(c)(2)(i)). Although an ANDA must state the purpose of the ACNU, an ANDA would not be required to include the explanation of the necessity for the ACNU or how the ACNU would ensure appropriate self-selection, appropriate actual use, or both. As a general matter, the ANDA would rely on FDA's findings of safety and effectiveness for an RLD with an ACNU.

b. Description of key elements of the ACNU. An ANDA applicant would also provide information to show that the key elements of the proposed ACNU are the same as the key elements of the ACNU approved for its RLD (see proposed § 314.56(c)(2)(ii)).

c. Description of how the applicant will operationalize the ACNU. An ANDA applicant would include information on how the ACNU would be operationalized. The proposed rule would allow ANDA applicants to operationalize its ACNU in a different way from its RLD. For instance, an ANDA applicant may consider proposing to make available on the internet a self-selection aid for its nonprescription drug product with an ACNU, whereas the self-selection aid for its RLD is made available at a physical retail store via an electronic display. Consistent with section 505(j) of the FD&C Act and our general approach to ANDAs, an ANDA would have a variety of ways to achieve the same purpose as the ACNU for its RLD. The ANDA would contain information to support that the way in which it is operationalized, as proposed, achieves the same purpose as the ACNU for its RLD and the differences from the RLD are otherwise acceptable in an ANDA (see proposed § 314.56(c)(2)(iii)). As with all ANDAs, an ANDA for a nonprescription drug product with an ACNU also would be expected to be pharmaceutically equivalent and bioequivalent to its RLD and have the same clinical effect and safety profile as its RLD when administered to patients under the conditions specified in the labeling.

FDA requests comment on the proposal to allow potential permissible differences between the NDA and the ANDA in the ways to operationalize the ACNU and how an applicant would demonstrate that the ACNU for the ANDA achieves the same purpose as the ACNU for its RLD.

As stated earlier in this proposed rule, the specific ways to operationalize the ACNU are not considered key elements of the ACNU and otherwise are not considered a condition of use of the drug product. For example, to the extent NDA applicants operationalize their ACNUs using proprietary means, ANDA applicants can use different ways than their RLD for operationalizing the ACNU (provided that the purpose of the ACNU is achieved through the same key elements).

Although FDA plays a ministerial role in listing patents in the publication “Approved Drug Products with Therapeutic Equivalence Evaluations” (commonly known as the Orange Book), FDA seeks comment on whether patents claiming aspects of the ACNU for the nonprescription drug product may be submitted for listing consistent with § 314.53 and section 505(b)(1)(A)(viii) and (c)(2) of the FD&C Act. FDA seeks comments on this topic and other issues FDA should consider in implementing this proposal that will help avoid unnecessarily delaying the entry of ANDA nonprescription drug products with an ACNU to the drug market.

FDA has interpreted the language in section 503(b)(4) of the FD&C Act to allow simultaneous marketing of drug products with the same active ingredient as prescription and nonprescription if some meaningful difference, such as indication, strength, route of administration, dosage form, or patient population, exists between the drug products that makes the prescription product safe and effective only under the supervision of a healthcare practitioner licensed by law to administer the drug (see 83 FR 13994, April 2, 2018; see also 70 FR 52050, September 1, 2005). Section 503(b)(1) of the FD&C Act requires a drug which: (1) because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, is not safe for use except under the supervision of a practitioner licensed by law to dispense such drug or (2) is limited by an approved application under section 505 of the FD&C Act to use under the professional supervision of a practitioner licensed by law to administer such drug, to be dispensed only upon prescription of a practitioner licensed to administer such drug. Under section 503(b)(4)(B) of the FD&C Act, a drug, for which the prescription dispensing provisions of section 503(b)(1) of the FD&C Act do not apply, shall be deemed to be misbranded if at any time before dispensing, the label of the drug bears the “Rx only” symbol. Likewise, under section 503(b)(4)(A), drugs that are subject to the prescription dispensing provisions of section 503(b)(1) must bear the “Rx only” symbol, or else they are misbranded. This effectively means that, absent a meaningful difference between the products, simultaneous marketing of two drug products with the same active ingredient as both a prescription and a nonprescription drug product would result in one of the two products being misbranded.

Under this proposed rule, the additional condition(s) that allow a nonprescription drug product to be safely used without the supervision of a healthcare practitioner would be a meaningful difference between the prescription drug product and the nonprescription drug product with an ACNU. Therefore, under the proposed rule, a prescription drug product and a nonprescription drug product with an ACNU that contain the same active ingredient can be simultaneously marketed even if they do not have other meaningful differences, such as different indications or strengths (see proposed § 314.56(d)).

The proposed rule would require applicants seeking approval for the first time of an NDA for a nonprescription drug product with an ACNU to submit a separate NDA, rather than a supplement to an approved NDA (see proposed § 314.56(b)). The approval of a separate NDA would permit simultaneous marketing and access to the drug as both a prescription drug product and a nonprescription drug product with an ACNU. Consistent with FDA's goal of increasing options for applicants to develop and market safe and effective drugs for consumers, this proposed rule would enable continued access to the drug product as a prescription drug product, while also extending access to the drug product in the nonprescription setting with the ACNU. Even if the application holder of the NDA for the prescription drug product decides to discontinue marketing of the NDA for the prescription drug product, generic versions of the prescription drug product would be eligible for approval relying on the discontinued NDA for the prescription product as an RLD, so long as FDA determines that the NDA for the prescription product was not discontinued for reasons of safety or effectiveness (see § 314.161).

The proposed rule would specify that FDA would refuse to approve an NDA for a nonprescription drug product with an ACNU if FDA has determined the NDA failed to meet the requirements in § 314.56 applicable to NDAs (see proposed § 314.125(b)(20)). Similarly, the proposed rule would specify that FDA would refuse to approve an ANDA for a nonprescription drug product with an ACNU that fails to meet the requirements in § 314.56 applicable to ANDAs (see proposed § 314.127(a)(15)). In addition to other reasons cited in § 314.125 or § 314.127, FDA would refuse to approve an application for a nonprescription drug product with an ACNU if FDA has determined that the applicant failed to demonstrate that labeling is insufficient to ensure consumers' appropriate self-selection or appropriate actual use, or both, of the nonprescription drug product without the supervision of a healthcare practitioner or if the applicant failed to demonstrate that its proposed ACNU is adequate to ensure appropriate self-selection or appropriate actual use, or both, by consumers without the supervision of a healthcare practitioner. We also note that under current § 314.125(b)(8), FDA may refuse to approve an NDA if the drug product's proposed labeling does not comply with the requirements for labels and labeling in part 201. This authority would permit FDA to refuse to approve an NDA with an ACNU if the labeling does not comply with labeling requirements specific to such NDAs, such as proposed §§ 201.67 and 201.130. Similarly, under current § 314.127(a)(7), FDA will refuse to approve an ANDA if its labeling is not the same as the labeling of its RLD, with certain permitted exceptions. Thus, FDA may refuse to approve an ANDA with an ACNU if its proposed labeling does not comply with labeling requirements specific to nonprescription products with an ACNU, such as proposed §§ 201.67 and 201.130.

The proposed rule would require NDA and ANDA applicants to report to FDA information concerning any incident of failure in the implementation of an ACNU using the FDA Adverse Event Reporting System (FAERS) (see proposed § 314.81(b)(3)(v)). A failure in implementation of an ACNU would include any event that results from a deviation in an applicant's implementation of the ACNU that may cause or lead to inappropriate medication use or consumer harm, such as a consumer gaining access to the drug product without fulfilling all necessary conditions for the nonprescription drug product with an ACNU. A failure in implementation of an ACNU must be reported by the applicant whether or not the failure is associated with an adverse event. To meet these reporting requirements, applicants will likely need quality assurance systems in place to capture instances where failures in implementation of an ACNU occur. A failure in implementation of an ACNU includes the following circumstances: (1) the consumer accessed or used the drug product without successfully fulfilling the ACNU, (2) the consumer successfully fulfilled the ACNU but could not access or appropriately use the drug product in the nonprescription setting, or (3) the consumer was unable to make an attempt to fulfill the ACNU due to systematic, technological, or mechanical errors in the implementation of the ACNU. For example, for the fictitious nonprescription drug product with an ACNU Drug X (as discussed in section V.D of this document), a report would be required to be submitted to FDA if the consumer with an acceptable risk score, was unable to purchase Drug X on the applicant's website or receive a voucher from the applicant's website in order to purchase Drug X at a retail site specified by the applicant. Failure to access the drug product could result in the consumer missing doses of the drug product.

The applicant must submit a single report (an individual case safety report (ICSR) of an adverse event) describing both the failure in implementation of an ACNU and an associated adverse event when both occur and the applicant is aware of both before submitting a report. If the applicant determines that a failure of implementation of an ACNU occurred that is associated with a previously submitted ICSR of an adverse event, a followup report must be submitted to FAERS using the same unique identification number as the original ICSR of an adverse event and must include the information concerning the failure in implementation of an ACNU as required by proposed § 314.81(b)(3)(v)(A). If the applicant receives information of an adverse event associated with a previously submitted report in FAERS of a failure in implementation of an ACNU, a followup report must be submitted to FAERS as an ICSR of an adverse event. Such followup report must use the same unique identification number as the original report in FAERS of a failure in implementation of an ACNU and must include the information concerning the adverse event as required in § 314.80(f).

A report to FAERS for a failure in implementation of an ACNU would be submitted when the applicant has at least the minimum dataset for a failure in implementation, which includes the following three elements: (1) an identifiable reporter, (2) the drug product name, and (3) a description of the failure in implementation of the ACNU. The proposed rule would require the report to include certain information that the applicant is aware of about the drug product and the initial reporter, as well as a narrative summary of the failure in implementation of an ACNU and a description of the action initiated or completed to address the failure in implementation of an ACNU. The applicant would be required to submit a report for each failure in implementation of an ACNU as soon as possible but no later than 15 calendar days from the date when the applicant has acquired the minimum dataset for a report of a failure in implementation of an ACNU. Additionally, if an applicant obtains or otherwise receives any new information about previously submitted reports about the failure in implementation of an ACNU, the applicant would be required to investigate the new information, assess the relationship or impact of the new information on the initial report, and submit followup reports as soon as possible but no later than 15 calendar days after obtaining the new information. Proposed § 314.81(b)(3)(v)(C) would require the report to be submitted to FDA in an electronic format that FDA can process, review, and archive unless a waiver has been requested and granted. To better enable FDA to assess compliance with reporting requirements and to facilitate FDA's inspection of related records, we are proposing to require an applicant to maintain for a period of 10 years the records of all reports of failures in implementations of an ACNU and associated adverse events known to the applicant (proposed § 314.81(b)(3)(v)(D)).

FDA seeks specific comment on the burden and benefits of submitting an individual report to FDA for each individual failure in implementation of an ACNU encountered by a consumer resulting from the same cause of failure, as opposed to a single, consolidated report for all such failures. For example, there could be a situation where an ACNU involves administration of a questionnaire using a pharmacy kiosk, and the kiosk screen malfunctions, preventing multiple consumers from fulfilling the ACNU because they cannot complete the questionnaire on the kiosk screen. We are seeking comment on the benefits and burdens in this type of situation of submitting individual reports for each consumer affected by the malfunction versus one single, consolidated report for all consumers affected.

The proposed rule would clarify that a nonprescription drug product with an ACNU must comply with all applicable regulatory requirements for nonprescription drug products, including those under part 201. Specifically, the applicant must comply with the existing content and format requirements for nonprescription drug products in § 201.66, known as the DFL (see proposed § 201.67(c)(1)). As required in § 201.66(c)(6), the labeling for all nonprescription drug products must contain directions for use under the heading “Directions.” The proposed rule would require the labeling for all nonprescription drug products approved with an ACNU to include the following statement, as specified in proposed § 201.130(a)(1), as the first statement under the heading “Directions”: “To check if this drug is safe for you, go to [insert where or how consumers can find information about the ACNU; for example, applicant's website, applicant's phone number, or specific retail location] and [insert action to be taken by consumer]. Do not take this drug without completing this step.” This initial statement would be followed by the other required information in § 201.66(c)(6). This proposed statement would alert consumers that the nonprescription drug product with an ACNU has a requirement that must be fulfilled to ensure safe and effective use. The proposed statement would further remind the original purchaser and alert persons other than the original purchaser that the product is not suitable for all individuals and that consumers should carefully examine any labeling accompanying the nonprescription product with an ACNU before using the product.

As stated previously, FDA may currently approve labeling for nonprescription drug products in addition to the DFL, and this would continue if the proposed rule is finalized (see proposed § 201.67(c)(2)). For example, FDA could approve information leaflets or other documents contained inside the carton or container for a nonprescription drug product, including for a nonprescription drug product with an ACNU.

A list of questions to be answered by the consumer in a self-selection aid could be labeling necessary to effectively implement the ACNU. All labels and other written, printed, or graphic matter that are necessary to effectively implement the ACNU ( e.g., questions associated with a self-selection aid) would be considered to accompany the nonprescription drug product and, therefore, would meet the definition of labeling under the FD&C Act.

Approved labeling for a nonprescription drug product with an ACNU must be available to consumers at the time of purchase and use as required in section 502(c) of the FD&C Act. In general, we believe that the applicant should describe in their application the process for ensuring consumers have access to the approved labeling prior to fulfilling the ACNU.

The proposed rule would require that the statement specified in § 201.130(a)(2) meet specific format requirements (see proposed § 201.67(d)). This statement must be visible to consumers at the time of purchase and use. Additionally, the statement would alert persons that may have access to the drug product ( e.g., family members in the purchaser's home), including the individual who originally purchased the product, that these nonprescription drug products are not suitable for all individuals and should only be used after fulfilling the ACNU. The proposed rule would require that the statement appear on the principal display panel (see § 201.60) and the immediate container surface that the consumer is most likely to view when seeking information about the drug product (see proposed § 201.67(d)(1)). If the immediate container is a bottle, the statement must appear on the surface that the consumer would most likely consider to be the front of the bottle. If the immediate container is a blister card, the statement must appear on the blister card surface that the consumer would most likely view when removing the drug product from the blister card. If the blister card contains more than one blister unit, the statement would not need to be included on each blister unit of a blister card. However, the statement must remain intact and be readable on the blister card when the drug product is removed from each blister unit.

The proposed rule would require that the statement be prominently presented in boldface and black type in a yellow background banner (see proposed § 201.67(d)(2) and (3)). No other information or statement may be included in the yellow background banner. The hue of the yellow color in the background banner must be a shade that provides a high contrast with the black type of the statement. The font size of the statement would be at least 25 percent as large as the font size of the largest printed words on the container surface that the consumer would most likely view when seeking information about the drug product; in no case could the font size be smaller than 12 point type (1 point = 0.0138 inches) (see proposed § 201.67(d)(4)). For containers where the size would render compliance with this requirement impractical, the applicant would be able to request an exception to the minimum font size requirement (see proposed § 201.67(d)(5)). However, FDA would not determine an exception is warranted if the statement is not prominent in relation to other elements on the container surface containing the statement.

Consistent with the proposed definition of ACNU, a drug product can only be approved with an ACNU if the applicant demonstrates and FDA determines that labeling alone is insufficient to ensure appropriate self-selection or appropriate actual use, or both. Therefore, it is not possible for these products to be labeled with adequate directions for use under section 502(f)(1) of the FD&C Act, as defined in § 201.5. The proposed rule would exempt a nonprescription drug product with an ACNU from the statutory requirement to be labeled with adequate directions for use, provided that certain conditions are met. Specifically, a nonprescription drug product approved with an ACNU under section 505(c) or (j) of the FD&C Act would be exempt from section 502(f)(1) if the product contains the labeling required under proposed § 201.130(a) and the ACNU is implemented by the applicant as approved by FDA in the application (see proposed § 201.130). FDA is proposing this exemption to the requirement for adequate directions for use for a nonprescription drug product with an ACNU because we have determined that the labeling and the ACNU are sufficient to ensure consumers' appropriate self-selection and actual use of the nonprescription product without the supervision of a healthcare practitioner. Therefore, adequate directions for use, as required by section 502(f)(1) of the FD&C Act and § 201.5, would not be necessary for the protection of the public health.

The proposed rule would require that the following statement appear as the first direction under the heading “Directions” in the labeling, as required in § 201.66(c)(6): “To check if this drug is safe for you, go to [insert where or how consumers can find information about the ACNU; for example, applicant's website, phone number, or specific retail location] and [insert action to be taken by consumer]. Do not take this drug without completing this step.” (See proposed § 201.130(a)(1).) The applicant would include information to inform consumers where the additional condition would be found and explain the additional condition that the consumer must fulfill. For example, “To check if this drug is safe for you, go to www.XYZCompany.com and take the self-selection questionnaire. Do not take this drug without completing this step.” The statement would be followed by the other information required in § 201.66(c)(6). FDA is specifically seeking comment on the content of the statements and the ability of these statements to sufficiently inform consumers that the product is a nonprescription drug product with an ACNU and how consumers would fulfill the ACNU.

The proposed rule would also require that the following statement appear on the immediate container label and, if one exists, the outside container or wrapper of the retail package: “You must complete an extra step to see if this drug is safe for you before you use it. Do not take this drug without completing this step. See the Drug Facts labeling for more information.” (See proposed § 201.130(a)(2).) This statement must meet the specific format requirements as specified in proposed § 201.67(d). The statement would remind the original purchaser and alert persons other than the original purchaser that these nonprescription drug products are not suitable for all individuals and should only be used after fulfilling the ACNU. FDA is specifically seeking comment on whether this statement would sufficiently alert consumers that this product is a nonprescription drug product with an ACNU.

The proposed rule would require the ACNU to be implemented by the applicant under the conditions set forth in the approved application for the nonprescription drug product with an ACNU to be exempt from the requirement to be labeled with adequate directions for use (see proposed § 201.130(b)).

As noted immediately above, the proposed rule would exempt a nonprescription drug product with an ACNU from the requirement to be labeled with adequate directions for use under section 502(f)(1) of the FD&C Act, provided that certain conditions are met (see proposed § 201.130). If a nonprescription drug product with an ACNU is made available to consumers without the labeling specified in proposed § 201.130(a) or the ACNU is not implemented by the applicant as approved by FDA in the application, the drug product would be misbranded under section 502(f)(1) of the FD&C Act (see proposed § 201.67(e)).

As discussed in sections V.H and V.I of this document, the proposed rule would include specific labeling requirements for a nonprescription drug product with an ACNU. If the nonprescription drug product with an ACNU is made available to consumers without the specific required labeling, the product would also be misbranded under section 502(a) of the FD&C Act, which provides that a drug's labeling must not be false or misleading in any particular (see proposed § 201.67(e)). Under section 201(n) of the FD&C Act, in determining whether labeling is misleading, there shall be taken into account (among other things), not only representations made or suggested but also the extent to which the labeling fails to reveal facts material in the light of such representations or material with respect to consequences that may result from the use of the drug under the conditions of use prescribed in the labeling or under usual or customary conditions of use. The required labeling statements described in proposed § 201.130(a) are intended to inform consumers that the product is a nonprescription drug product with an ACNU; to instruct consumers on how to fulfill the ACNU; and to remind the original purchaser (and alert persons other than the original purchaser) that the nonprescription drug product is not suitable for all individuals and should only be used after fulfilling the ACNU. Thus, failure of a nonprescription drug product approved with an ACNU to bear the required labeling statements described in proposed § 201.130(a) would constitute a failure to reveal material facts about the product or with respect to consequences that might result from its use and would misbrand the product.

In addition, a nonprescription drug product with an ACNU could be misbranded under other provisions of section 502 of the FD&C Act. For example, in certain circumstances, such a drug may be misbranded under section 502(j) if the product does not meet the requirements of this proposed rule.

Under the proposed rule, a nonprescription drug product with an ACNU must only be made available to the consumer after the ACNU has been fulfilled by the consumer. It is a prohibited act under section 301(a) of the FD&C Act to introduce or deliver for introduction into interstate commerce any drug that is misbranded (21 U.S.C. 331(a)). It is also a prohibited act under section 301(k) of the FD&C Act to do any act with respect to a drug if such act is done while such drug is held for sale after shipment in interstate commerce and results in the drug being misbranded.

Additionally, a nonprescription drug product approved with an ACNU would be an unapproved new drug if it is made available to consumers without the ACNU. With certain limited exceptions not relevant here, it is a violation of sections 301(d) and 505(a) of the FD&C Act to introduce or deliver for introduction into interstate commerce an unapproved new drug.

We propose that a final rule based on this proposed rule become effective 60 days after the date the final rule publishes in the Federal Register .

We have examined the impacts of the proposed rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). This proposed rule has been designated by the Office of Information and Regulatory Affairs as a significant regulatory action as defined by Executive Order 12866.

The Regulatory Flexibility Act requires us to analyze regulatory options that would minimize any significant impact of a rule on small entities. This rule would establish the requirements for a nonprescription drug product with an ACNU. We cannot anticipate the number of applicants that would submit applications or the types of drug products that would be covered under such applications. However, we estimate the costs for any applicant to read and understand the rule would likely range between 0.04 percent and 0.14 percent of the gross receipts of very small applicants. Therefore, we propose to certify that the proposed rule, if finalized, would not have a significant economic impact on a substantial number of small entities.

The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $165 million, using the most current (2021) Implicit Price Deflator for the Gross Domestic Product. This proposed rule would not result in an expenditure in any year that meets or exceeds this amount.

The proposed rule, if finalized, would establish the requirements for a nonprescription drug product with an ACNU. Compared to the traditional labeling paradigm of nonprescription drug products, this approved ACNU in addition to the labeling would ensure the appropriate self-selection, appropriate use, or both, of a drug product. We expect this rule could expand consumer access to certain drug products in a nonprescription setting.

Table 1 shows our quantified benefits. We estimate a reduction in access costs to consumers who could transfer from a prescription to a nonprescription drug product with an ACNU. Our primary estimate for this item is $26.70 with a range of $0 to $53.40 per consumer per purchase. We also quantify the value of the potential reduction in the number of repetitive meetings with sponsors that the rule could eliminate, which occur during the approval process. This estimate includes benefits to FDA and industry. Our primary estimate is $55,469 per applicant with a range of $45,260 to $66,174. We do not monetize our estimates of benefits over a 10-year horizon because of the high uncertainty about number of applicants, applications, potential approvals, the number of purchases that might occur, and consumer preferences to switch products but present estimates in the uncertainty section of the full preliminary analysis of economic impacts.

Although an applicant would incur the development and postmarketing, including reporting of failure in the implementation of the ACNU and recordkeeping costs, we assume that applicants submit applications when they believe that their expected profits from the approval will exceed the costs of the application. We present a range of these potential development and postmarketing costs in the appendix of the complete economic analysis. However, we lack information to monetize these costs over a 10-year horizon and request comment or data on these potential costs.

Monetized costs include a one-time cost of reading and understanding the rule. Using a 7-percent discount rate, the primary estimate, annualized over a 10-year horizon, equals $821 with a range of $379 to $1,264. These annualized costs are the same using a 3-percent discount rate.

Government and private insurance payers may experience positive transfers because consumers may decrease future medical costs and the number of submitted insurance claims. Earlier access to drug products would allow consumers to treat medical conditions using nonprescription drug products with an ACNU without the supervision of a healthcare practitioner.

We have developed a comprehensive Preliminary Economic Analysis of Impacts that assesses the impacts of the proposed rule. The full preliminary analysis of economic impacts is available in the docket for this proposed rule (Ref. 7) and at https://www.fda.gov/about-fda/reports/economic-impact-analyses-fda-regulations .

We have determined under 21 CFR 25.30(h) and (k) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This proposed rule contains information collection provisions that are subject to review by OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). A description of these provisions is given in the Description section below, with an estimate of the annual reporting, recordkeeping, and third-party disclosure burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

FDA invites comments on these topics: (1) whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.

Title: Premarket applications, postmarketing reports and recordkeeping, and labeling for Nonprescription Drug Products With an Additional Condition for Nonprescription Use.

Description: We are revising requirements applicable to NDA and ANDA applicants of nonprescription drug products with an ACNU (collectively, respondents). If finalized, the proposed rule will modify information collections applicable to regulations in part 314 governing new and abbreviated new drug application submissions and drug labeling provisions in part 201 pertaining to nonprescription drug products.

Description of Respondents: The respondents are: (1) for NDA and ANDA submissions, an applicant who submits an NDA (including a 505(b)(2) application) or an ANDA under part 314 to obtain FDA approval of a nonprescription drug with an ACNU; (2) for failure of implementation of an ACNU reporting and recordkeeping, any person who holds an approved NDA (including a 505(b)(2) application) or an approved ANDA that includes an ACNU; and (3) for labeling, any person who holds an approved NDA (including a 505(b)(2) application) or an approved ANDA that includes an ACNU.

We estimate the burden of the information collection as follows:

Based on our experience with information collection associated with current NDA and ANDA submissions, we estimate six applications for a nonprescription drug product with an ACNU will be submitted annually by six respondents. Based on Broad Agency Announcement proposals that set forth the number of hours anticipated to produce study reports for submission to us, we assume it will take an average of 320 hours per application for both NDA and ANDA applicants to prepare and submit the information required for applications for nonprescription drugs with an ACNU (in addition to meeting the general NDA or ANDA requirements under §§ 314.50 and 314.94, already approved in OMB control number 0910-0001).

We estimate six respondents will each submit 25 reports to FDA for an individual failure in implementation of an ACNU under § 314.81(b)(3)(v). We assume an average of 40 hours per response for each applicant, for a total of 6,000 hours annually. As noted in the preamble of the proposed rule, we are also soliciting comments on the alternative reporting mechanism requiring the applicant to submit a single, consolidated report for all consumers affected by the same failure in implementation of an ACNU rather than a report for each individual impacted by the same failure in implementation of an ACNU. If that alternative is implemented in the final rule, we estimate that the number of reports per respondent would be reduced from 25 annual responses per respondent to 1 per year per respondent.

Based on our experience with postmarket recordkeeping requirements, we assume an average burden of 8 hours of recordkeeping for each report and therefore have calculated 1,200 hours annually.

This document contains proposed amendments to the Estate Tax Regulations (26 CFR part 20) under section 2053.

Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent who was at death a citizen or resident of the United States. Section 2051 defines the taxable estate as the value of the gross estate less the deductions provided for in sections 2053 through 2058. Section 2031(a) describes the value of the gross estate of the decedent as including the value at the time of the decedent's death of all property, real or personal, tangible or intangible, wherever situated.

Under section 2053(a), for Federal estate tax purposes, the value of the taxable estate is determined by deducting from the value of the gross estate the following amounts that are allowable by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered: (1) funeral expenses, (2) administration expenses, (3) claims against the estate, and (4) unpaid mortgages on, or any indebtedness in respect of, property where the value of the decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate.

Final regulations amending the regulations under section 2053 (TD 9468) were published in the Federal Register (74 FR 53652) on October 20, 2009 (2009 Final Regulations). The 2009 Final Regulations generally limit the deduction for claims and expenses to the amount actually paid in settlement or satisfaction of that item, with exceptions for certain ascertainable amounts, claims against the estate, and indebtedness. See § 20.2053-1(d)(1) and (4); § 20.2053-4(b) and (c); and § 20.2053-7. The 2009 Final Regulations also reserve § 20.2053-1(d)(6) to provide future guidance on the issue of the appropriate application of present-value principles in determining the amount deductible under section 2053. These proposed regulations address this issue. In addition, these proposed regulations provide or clarify rules under section 2053 addressing the deductibility of interest expense accruing on tax and penalties owed by an estate, the deductibility of interest expense accruing on certain loan obligations incurred by an estate, requirements for substantiating the value of a claim against an estate that is deductible under § 20.2053-4(b) or (c), and the deductibility of amounts paid under a decedent's personal guarantee.

“Present value” is a widely accepted principle of accounting for the time value of money. If a payor can defer paying a dollar until a later time, the payor can earn income on that dollar until the date of payment. The longer a payor can defer payment, the more income the payor potentially can earn. Taxpayers, the IRS, and courts regularly employ present-value principles for valuation and for other income tax and transfer tax purposes. See, e.g., section 1274(b), §§ 1.642(c)-6, 20.7520-1, and 25.2512-5; Simpson et al. v. United States, 252 U.S. 547 (1920); Commissioner v. Estate of Sternberger, 348 U.S. 187 (1955).

The deduction allowable under section 2053 eliminates from taxation under section 2001 that portion of the gross estate that the estate expends or necessarily will expend in paying certain expenses and liabilities of the estate and certain claims against the estate. The expended portions of the gross estate do not pass to the decedent's legatees, beneficiaries, or heirs and, therefore, are not subject to the estate tax. The 2009 Final Regulations implement these principles in determining the amount an estate may deduct for certain claims and expenses. Section 20.2053-1(d)(1) generally limits the deduction under section 2053 for certain claims and expenses to the total amount actually paid in settlement or satisfaction of that item. Section 20.2053-1(d)(2) clarifies that events occurring after the date of a decedent's death will be taken into consideration in determining the allowable deduction under section 2053.

Applying present-value principles to determine the allowable deduction under section 2053 for payments made or to be made after an extended period following a decedent's death is consistent with the principles underlying section 2053 and the approach of the 2009 Final Regulations. By limiting the deduction to the discounted amount of a payment or payments made or to be made after an extended period following the decedent's death, the gross estate is reduced by a more accurate measure of the amounts not passing to the heirs and legatees. Accordingly, the Department of the Treasury (Treasury Department) and the IRS have determined that limiting the amount deductible to the present value of the amounts paid after an extended post-death period will more accurately reflect the economic realities of the transaction, the true economic cost of that expense or claim, and the amount not passing to the beneficiaries of the estate. Moreover, consistent with the 2009 Final Regulations, this approach treats the date of payment of the otherwise deductible expense or claim as a post-death event properly taken into account under section 2053.

Rules applying present-value principles to certain long-term obligations were provided in proposed regulations (REG-143316-03) published in the Federal Register (72 FR 20080) on April 23, 2007 (2007 Proposed Regulations), which preceded the issuance of the 2009 Final Regulations. Specifically, the 2007 Proposed Regulations required the computation of the present value of future payments for a decedent's noncontingent recurring obligation, such as a noncontingent recurring obligation to pay an annuity amount under a property settlement agreement. See § 20.2053-4(b)(7)(i) of the 2007 Proposed Regulations. However, that rule did not apply to contingent recurring obligations. Rather, amounts payable for a decedent's contingent recurring obligation became deductible only as amounts were paid by the estate in satisfaction of the claim and the amount deductible equaled the dollar amount actually paid. No computation of present value factored into the amount deductible for such obligations. See § 20.2053-4(b)(7)(ii) of the 2007 Proposed Regulations.

The preamble to the 2009 Final Regulations indicated that the Treasury Department and the IRS found persuasive criticism of those proposed rules by commenters suggesting they produced an inconsistent and inequitable result. The 2009 Final Regulations clarified that the amount payable pursuant to a decedent's noncontingent recurring obligation is deemed ascertainable with reasonable certainty and, hence, deductible in advance of payment under the rule in § 20.2053-1(d)(4), while the amount payable pursuant to a decedent's contingent recurring obligation is not ascertainable with reasonable certainty and, hence, the amount deductible is limited to amounts actually paid by the estate in satisfaction of the claim. See § 20.2053-4(d)(6). However, the 2009 Final Regulations removed the present-value limitation applicable only to noncontingent recurring obligations and reserved § 20.2053-1(d)(6) to provide future guidance on the issue.

With regard to a decedent's obligations that satisfy the requirements for deductibility as described in the preceding paragraph, whether such obligations are recurring or nonrecurring, there is no persuasive technical or policy basis for limiting the application of present-value principles to payments made or to be made only under noncontingent obligations. Because discounting the amounts actually paid or to be paid in the future to determine the present value of the payments is consistent with the purpose of section 2053 of reducing the gross estate only by the amounts not passing to the heirs and legatees, these proposed regulations propose to incorporate present-value principles in determining the amount deductible under section 2053. The proposed regulations will apply present-value principles consistently to expenses and claims (whether contingent or noncontingent) that are deductible under section 2053. The mechanics of applying present-value principles to expenses and claims, including expenses and claims that are deductible in advance of payment, are described in section II.B of this Background and Explanation of Provisions.

The Treasury Department and the IRS propose to amend the regulations under section 2053 to incorporate present-value principles in determining the amount deductible under section 2053 for claims and expenses (excluding unpaid mortgages and indebtedness deductible under § 20.2053-7). The Treasury Department and the IRS recognize, however, that estates often cannot pay every deductible claim and expense within a short time after the decedent's death and that sound tax administration should balance the benefit of more accurately determining the amounts not passing to the beneficiaries of an estate garnered from applying present-value principles with the administrative burden of applying those principles to deductible claims and expenses that occur during a reasonable period of administration of the estate. The Treasury Department and the IRS understand that a significant percentage of estates pay most, if not all, of their ordinary estate administration expenses during the three-year period following the decedent's date of death. This three-year period takes into account a reasonable time for administering and closing the estate. The Treasury Department and the IRS note that a reasonably short period of time between the decedent's death and the payment of a claim prevents the lack of a present-value discount from significantly distorting the value of the net (distributable) estate. Applying present-value principles in computing the deductible amount of those claims and expenses paid more than three years after the decedent's death strikes an appropriate balance between benefits and burdens.

Accordingly, the Treasury Department and the IRS propose to amend the regulations under section 2053 to require the discounting to present value of certain amounts paid or to be paid in settlement or satisfaction of certain claims and expenses in determining the amount deductible under section 2053. Specifically, the rule in these proposed regulations requires calculating the present value of the amount of a deductible claim or expense described in section 2053(a) and § 20.2053-1(a) that is not paid or to be paid on or before the third anniversary of the decedent's date of death, which three-year period the proposed regulations define as the “grace period.” The proposed regulations provide the general formula for calculating the present value of such amounts and state that the discount rate to be used in the calculation is the applicable Federal rate determined under section 1274(d) for the month in which the decedent's date of death occurs, compounded annually. The length of time from the decedent's death to the date of payment or expected date of payment will determine whether the Federal rate applicable to that amount is the Federal mid-term rate or the Federal long-term rate. The proposed regulations provide that any reasonable assumptions or methodology in regard to time period measurements may be used in calculating the present value. In addition, the proposed regulations require a supporting statement to be filed with the Form 706 showing any calculations of present value.

The proposed regulations explain how to calculate present value when the amount of a claim or expense is deductible in advance of the payment of such amount, as under §§ 20.2053-1(d)(4) and 20.2053-4(b) and (c). The proposed regulations provide that the expected date or dates of payment will be used in computing present value and that the expected date or dates of payment will be determined by making a fair and reasonable estimate using all information reasonably available to the taxpayer. For amounts deductible under § 20.2053-4(b) and (c), the proposed regulations provide that the expected date or dates of payment must be identified in a written appraisal document. Consistent with the rule in § 20.2053-1(d)(2), which takes into consideration events occurring during the post-death period described in that section, the proposed regulations also provide that the computation of present value is subject to adjustment if the actual date of payment differs from the estimate used.

Section 2053(a)(2) allows an estate to deduct from the value of the gross estate the amount of administration expenses that are allowable by the law of the jurisdiction in which the estate is being administered. In some cases, interest expense incurred by an estate may be a deductible administration expense under section 2053(a)(2) if the facts support a finding that the expense satisfies the requirements of section 2053 and the regulations thereunder. Several statutory and regulatory provisions are relevant to the deductibility of interest as an administration expense under section 2053(a)(2).

First, effective for decedents dying after December 31, 1997, section 2053(c)(1)(D) provides that, “no deduction shall be allowed under [section 2053] for any interest payable under section 6601 on any unpaid portion of the [Federal estate tax] for the period during which an extension of time for payment of such tax is in effect under section 6166.”

Second, § 20.2053-3(a) provides that the amounts deductible from a decedent's gross estate as administration expenses under section 2053(a)(2) are limited to such expenses that actually and necessarily are incurred in the administration of the decedent's estate. The expenses contemplated in the law are those that are associated with the settlement of an estate and the transfer of the property of the estate to individual beneficiaries or to a trustee. Expenditures not essential to the proper settlement of the estate, but incurred for the individual benefit of the heirs, legatees, or devisees, may not be taken as deductions.

Third, § 20.2053-1(b)(2) provides that only expenses that are bona fide in nature are deductible under section 2053. Section 20.2053-1(b)(2) applies to any amounts deductible under section 2053(a) and (b), including deductible administration expenses.

The issue of the extent to which and the circumstances under which interest expense satisfies the requirements for a deductible administration expense under section 2053(a)(2) and the regulations thereunder is longstanding. Over the past half century, a number of litigated cases and sub-regulatory published guidance items have provided some clarity on the legal issues surrounding the ability to deduct, as an administration expense under section 2053(a)(2), interest accruing on deferred tax and penalties and on loan obligations incurred by an estate. Litigation on this fact-driven issue continues in regard to interest accruing on loan obligations incurred by an estate.

The Treasury Department and the IRS consider it appropriate to amend the regulations under section 2053 to address specifically the issue of interest expense as a deductible administration expense under section 2053(a)(2). In particular, the Treasury Department and the IRS propose to address interest expense accruing after the death of the decedent on any unpaid portion of tax or penalties and on a loan obligation incurred by the estate to pay estate taxes or other estate expenses.

In general, interest is payable at the underpayment rate in section 6621 on (i) any amount of unpaid Federal tax, and (ii) any unpaid additions to tax, additional taxes, and penalties (such interest referred to in this preamble as “section 6601 interest” and such additions to tax, additional taxes, and penalties collectively referred to in this preamble as “penalties”). See section 6601(a) and (e)(2). However, interest payable under section 6601 on unpaid estate tax deferred under section 6166 (which includes interest accruing on any such deferred payment during any period when an extension of time for payment is in effect under section 6161(a)(2)(B) with respect to that payment) (referred to in this preamble as “section 6166 interest”) is subject to a more favorable interest rate under section 6601(j), and section 2053(c)(1)(D) provides that such interest is not deductible. The statutory prohibition of a deduction for section 6166 interest does not apply to “non-section 6166 interest,” defined for purposes of this preamble as any section 6601 interest other than section 6166 interest and interest payable on any unpaid portion of state tax and penalties pursuant to state law. Thus, non-section 6166 interest that accrues on and after the decedent's date of death may qualify as a deductible administration expense under section 2053(a)(2).

To determine the deductibility of non-section 6166 interest accruing on and after the decedent's date of death, the existing regulatory requirements in §§ 20.2053-1(b)(2) and 20.2053-3(a) apply. Non-section 6166 interest satisfies the “bona fide” requirement in § 20.2053-1(b)(2) because such interest accrues pursuant to either Federal or state law. Non-section 6166 interest may satisfy the “actually and necessarily incurred” requirement in § 20.2053-3(a), but such determination depends on the facts and circumstances.

Non-section 6166 interest may accrue on and after the date of a decedent's death on unpaid estate tax in connection with an extension granted under section 6161 (but not under section 6161(a)(2)(B)) or a deferral elected under section 6163. A section 6161 extension is granted upon a showing of reasonable cause for extending the time for payment. A section 6163 deferral is appropriate when the value of a reversionary or remainder interest is includible in the gross estate, but such value is not immediately available for payment of the estate tax. The nature of both section 6161 extensions and section 6163 deferrals indicates they are based on a demonstrable need to defer payment. Accordingly, the Treasury Department and the IRS have determined that interest payable under section 6601 on unpaid estate tax in connection with an extension under section 6161 or a deferral under section 6163 is necessarily incurred in the administration of the estate.

Non-section 6166 interest may accrue on and after the date of a decedent's death on unpaid tax and penalties in connection with an underpayment of tax or a deficiency (as that term is defined in section 6211). In many cases, such interest and the underlying underpayment of tax or deficiency is attributable to the reasonable exercise of an executor's fiduciary duties in administering the estate, as may occur in cases involving legitimate disagreements with the IRS, inadvertent errors, or reasonable reliance on a qualified professional. The Treasury Department and the IRS have determined that, generally, such interest is actually and necessarily incurred in the administration of the estate. However, the Treasury Department and the IRS are concerned that there are some circumstances in which such interest expense would not satisfy the “actually and necessarily incurred” requirement in § 20.2053-3(a). For instance, when non-section 6166 interest accrues on unpaid tax and penalties in connection with an underpayment of tax or deficiency and the underlying underpayment or deficiency is attributable to an executor's negligence, disregard of the rules or regulations (including careless, reckless, or intentional disregard of rules or regulations) as defined in § 1.6662-3(b)(2), or fraud with intent to evade tax, the interest expense is not an expense actually and necessarily incurred in the administration of the estate. Accordingly, the Treasury Department and the IRS have determined that, when interest accrues on any unpaid tax or penalty and the interest expense is attributable to an executor's negligence, disregard of the rules or regulations, or fraud with intent to evade tax, the interest expense is neither actually and necessarily incurred in the administration of the estate nor essential to the proper settlement of the estate. Further, the Treasury Department and the IRS have determined that the rationale underlying this determination applies to all non-section 6166 interest, whether the interest accrues in connection with a deferral, underpayment, or deficiency.

The proposed regulations amend the regulations under section 2053 to confirm that section 6166 interest on estate tax deferred under section 6166, including interest accruing on an installment under section 6166 during the period of an extension of time for payment under section 6161(a)(2)(B), is not a deductible administration expense under section 2053. The proposed regulations also provide that non-section 6166 interest that accrues on or after the decedent's date of death on any unpaid tax or penalties may be deductible to the extent permitted by §§ 20.2053-1 and 20.2053-3(a). The proposed regulations further provide that non-section 6166 interest on estate tax deferred under section 6161 or section 6163 is actually and necessarily incurred in the administration of the estate because the grant of the extension was based on a demonstrated need to defer payment. Finally, the proposed regulations provide that, in general, non-section 6166 interest accruing post-death on any unpaid tax or penalties in connection with an underpayment of tax or a deficiency is actually and necessarily incurred in the administration of the estate. However, the proposed regulations provide that, notwithstanding these rules, non-section 6166 interest accruing on unpaid tax and penalties on and after the decedent's date of death, whether in connection with a deferral, underpayment, or deficiency, is not actually and necessarily incurred in the administration of the estate and is not deductible to the extent the interest expense is attributable to an executor's negligence, disregard of applicable rules or regulations (including careless, reckless, or intentional disregard of rules or regulations) as defined in § 1.6662-3(b)(2), or fraud with intent to evade tax. Interest expense is attributable to an executor's negligence, disregard of applicable rules or regulations, or fraud with intent to evade tax to the extent that the underlying underpayment, deficiency, or penalty is attributable to such conduct by the executor. Similarly, even when the underlying underpayment, deficiency, or penalty is not attributable to such conduct by the executor, interest expense is attributable to an executor's negligence, disregard of applicable rules or regulations, or fraud with intent to evade tax to the extent the subsequent accrual of interest is attributable to such conduct by the executor.

The rules in the proposed regulations pertaining to whether non-section 6166 interest satisfies the requirement in § 20.2053-3(a) supplant the rule reflected in Rev. Rul. 79-252, 1979-2 C.B. 333, and in the second holding of Rev. Rul. 81-154, 1981-1 C.B. 470. ( See § 601.601(d)(2)(ii)( b ).) Together, these two holdings create an implicit presumption that interest accruing on any unpaid portion of tax or penalties in all cases satisfies the requirements for a deductible administration expense, which is inconsistent with the requirement in § 20.2053-3(a) that the expense be actually and necessarily incurred in the administration of the estate.

The same requirements that apply for deductible interest accruing on unpaid tax and penalties also apply for deductible interest accruing on loan obligations incurred by an estate. Interest accruing on a loan obligation incurred by an estate satisfies the “bona fide” requirement in § 20.2053-1(b)(2) when both the interest expense and the loan underlying the interest expense are bona fide in nature and do not constitute a transfer that is essentially donative in character. Such interest satisfies the “actually and necessarily incurred” requirement in § 20.2053-3(a) when the loan on which the interest expense accrues and its terms are necessary to the administration of the decedent's estate and are essential to the proper settlement of the decedent's estate.

Among the reasons an estate might enter into a loan arrangement is to facilitate the payment of the estate's taxes and other liabilities or the administration of the estate. Some estates face genuine liquidity issues that make it necessary to find a means to satisfy their liabilities, and incurring a loan obligation on which interest accrues may be the only or best way to obtain the necessary liquid funds. However, if illiquidity has been created intentionally (whether in the estate planning, or by the estate with knowledge or reason to know of the estate tax liability) prior to the creation of the loan obligation to pay estate expenses and liabilities, the underlying loan may be bona fide in nature but most likely will not be found to be actually and necessarily incurred in the administration of the estate.

The issue of the deductibility of interest expense accruing on a loan obligation incurred by an estate has been litigated often, with varying results. See, e.g., Estate of Black v. Commissioner, 133 T.C. 340 (2009); Estate of Graegin v. Commissioner, T.C. Memo. 1988-477. In order to provide guidance on the deductibility of interest accruing on a loan obligation entered into by the decedent's estate to facilitate the payment of the estate's taxes and other liabilities or the administration of the estate, the Treasury Department and the IRS propose to amend the regulations under section 2053. The proposed regulations provide that interest expense is deductible only if: (i) the interest accrues pursuant to an instrument or contractual arrangement that constitutes indebtedness under applicable income tax regulations and general principles of Federal tax law; (ii) both the interest expense and the loan on which interest expense accrues satisfy the requirement of § 20.2053-1(b)(2) that they are bona fide in nature; and (iii) the loan on which interest accrues and the loan's terms are actually and necessarily incurred in the administration of the decedent's estate and are essential to the proper settlement of the decedent's estate (within the meaning of § 20.2053-3(a)).

Finally, the proposed regulations include a nonexclusive list of factors to consider in determining whether interest expense payable pursuant to such a loan obligation of an estate satisfies the requirements of §§ 20.2053-1(b)(2) and 20.2053-3(a). In general, the factors suggest that interest accruing on a loan obligation may satisfy these requirements when the loan and its underlying terms are reasonable and comparable to an arms-length loan transaction and correspond to the estate's ability to satisfy the loan, and the loan obligation is entered into by the executor with a lender who is not a substantial beneficiary of the decedent's estate (or an entity controlled by such a beneficiary) at a time when there is no viable alternative to obtain the necessary liquid funds to satisfy estate liabilities. In addition to providing guidance on when interest accruing on a loan obligation may satisfy the requirements of §§ 20.2053-1(b)(2) and 20.2053-3(a), the list of factors may suggest when the opposite is true and interest accruing on a loan obligation does not satisfy these requirements. For instance, if, taken in their entirety, the facts and circumstances indicate that either the need for the loan or any of the loan terms are contrived to generate, or increase the amount of, a deduction for the interest expense, the interest is not deductible. Thus, if the lender is a primary beneficiary of the estate (or an entity controlled by such beneficiary) who may have liability for payment of the estate tax or whose share of the estate may bear the burden of estate taxes and other liabilities, the facts indicate the loan is not necessarily incurred in the administration of the estate and, therefore, indicate that any interest accruing on the loan is not necessarily incurred in the administration of the estate. Further, if the loan obligation carries an extended loan term with a single balloon payment that does not correspond with the estate's ability to satisfy the loan, the facts indicate that the interest accruing on the loan is not necessarily incurred in the administration of the estate.

Section 20.2053-4(b) and (c) provides exceptions to the general rule in § 20.2053-4(a) that an estate may deduct only amounts that actually are paid by the estate in satisfaction of a claim. Section 20.2053-4(b) generally allows a deduction for the value of claims and counterclaims in a related matter, and § 20.2053-4(c) allows a deduction for the value of unpaid claims totaling not more than $500,000. In each case, certain requirements must be satisfied to enable the estate to use these exceptions.

One such requirement is that the value of a claim against the estate that may be deducted under either § 20.2053-4(b) or (c) must be determined from a “qualified appraisal” performed by a “qualified appraiser” within the meaning of section 170 and the regulations thereunder. The Treasury Department and the IRS have reconsidered this requirement. The definition of “qualified appraiser” and “qualified appraisal” in the regulations under section 170 were drafted in the context of appraising an asset being donated, and not a liability such as a claim against an estate. Certain of the elements of a qualified appraisal, including references to the “date of contribution,” and the requirements necessary to meet the definition of a “qualified appraiser,” do not apply in the context of valuing a claim against an estate for purposes of determining the value to be deducted from the gross estate under section 2053.

The Treasury Department and the IRS have determined that the rule in § 20.2053-4(b) and (c) should be amended to remove the requirement that the value be determined by a “qualified appraisal” performed by a “qualified appraiser” within the meaning of section 170 and the regulations thereunder. Instead, the Treasury Department and the IRS propose to amend the regulations under section 2053 to provide revised rules for valuing claims for purposes of § 20.2053-4(b) and (c).

The Treasury Department and the IRS propose to amend the regulations under section 2053 to remove the requirement in § 20.2053-4(b)(1)(iv) and (c)(1)(iv) that valuations of the claims deductible under § 20.2053-4(b) and (c) must be supported by a “qualified appraisal” performed by a “qualified appraiser.” For purposes of determining the allowable deduction under § 20.2053-4(b) and (c), these proposed regulations instead provide new requirements intended to facilitate the appropriate valuation of these claims.

Specifically, to determine the current value of a claim deductible under § 20.2053-4(b) or (c), the proposed regulations require a written appraisal that adequately reflects the current value of the claim when the Form 706 is being completed. The current value of the claim should take into account post-death events occurring prior to the time a deduction is claimed as well as those events reasonably anticipated to occur. In addition, the proposed regulations require the written appraisal to consider all relevant facts and elements of value that are known or that can be reasonably anticipated at the time of the appraisal. The written appraisal must be prepared, signed, and dated by a person who is qualified to appraise the claim being valued, but who is not (i) a family member of the decedent, a related entity as to the decedent, or a beneficiary of the decedent's estate or revocable trust (as those terms are defined in § 20.2053-1(b)(2)(iii)), (ii) a family member of a beneficiary or a related entity as to a beneficiary (as those terms would be defined in § 20.2053-1(b)(2)(iii) if references therein to the decedent were replaced with a reference to such beneficiary, and without the limitations based on the decedent's date of death), or (iii) an employee or other owner of any of them. The appraisal also must include a statement describing the basis for the person's qualification to appraise the claim being valued.

A commenter responding to the 2007 Proposed Regulations suggested that the final regulations confirm that payments made pursuant to a decedent's personal guarantee existing at the decedent's death are deductible in the same manner as payments made in satisfaction of any other deductible claim against a decedent's estate.

For payments made pursuant to a decedent's obligation as a guarantor of indebtedness to be deductible, the claim must represent a personal obligation of the decedent existing at the time of the decedent's death, and the claim must be enforceable against the decedent's estate. See § 20.2053-4(a)(1). However, not all enforceable debts are deductible under section 2053. A claim founded upon a decedent's guarantee is considered a claim founded upon a promise or agreement. Accordingly, the deduction for such a claim is limited to the extent that the guarantee was contracted bona fide and in exchange “for an adequate and full consideration in money or money's worth.” See section 2053(c)(1)(A) and § 20.2053-4(d)(5). For a claim founded upon a decedent's guarantee to satisfy the “adequate and full consideration in money or money's worth” requirement and, therefore, be deductible under section 2053, the decedent must have received a benefit reducible to money value in exchange for the decedent's guarantee. See United States v. Stapf, 375 U.S. 118, 131 (1963) (“Absent such an . . . augmentation of the estate, a testator could disguise transfers as payments in settlement of debts and claims and thus obtain deductions for transmitting gifts.”); Commissioner v. Wemyss, 324 U.S. 303 (1945) (construing the requirement of “adequate and full consideration in money or money's worth” in the gift tax context to require a benefit to the donor reducible to money value “to relieve a transfer by him from being a gift.”); Estate of Theis v. Commissioner, 81 T.C. 741, 745, 748 (1983) (noting the amounts at issue must have been contracted bona fide and for full and adequate consideration), aff'd 770 F.2d 981 (11th Cir. 1985).

Guarantor agreements often are required in the context of a loan to the guarantor's closely-held business. In these cases, the guarantor may be motivated to enter into the guarantee agreement to preserve the value of the guarantor's interest in the business. The Treasury Department and the IRS have determined that it is appropriate to provide guidance on whether, for purposes of section 2053, a guarantor agreement is contracted for an adequate and full consideration in money or money's worth in such a situation for purposes of section 2053.

When payments pursuant to a decedent's guarantee satisfy the requirements for a deductible claim, the amount deductible is limited to the portion of the total claim due from and actually paid by the estate, but reduced by the amount recovered, or the amount that could have been recovered, from another party, insurance, or otherwise. See §§ 20.2053-1(d)(1) and (3) and 20.2053-4(d)(3). Further, to avoid the double-counting of a debt that occurs when the debt both is taken into account in computing the gross estate and is taken as a section 2053 deduction, payments made pursuant to the decedent's guarantee are deductible only to the extent that the debt for which the guarantee is given has not been taken into account in computing the value of an asset includible in the decedent's gross estate.

A regulatory provision specifically addressing the deductibility of claims founded upon a decedent's guarantee will assist taxpayers in understanding and meeting their tax responsibilities and will result in consistent treatment for similarly situated taxpayers.

The proposed regulations provide that a claim founded upon the decedent's agreement to personally guarantee a debt of another is a claim founded on a promise and, accordingly, must satisfy the applicable requirements in section 2053(c)(1)(A) and § 20.2053-4(d)(5). Specifically, the guarantee must have been bona fide and in exchange for adequate and full consideration in money or money's worth. The proposed regulations confirm that the bona fide nature of a claim related to the guarantee of a debt of a family member, a related entity, or a beneficiary will be determined with reference to § 20.2053-1(b)(2)(ii). The proposed regulations provide a bright line rule that a decedent's agreement to guarantee a bona fide debt of an entity in which the decedent had control (within the meaning of section 2701(b)(2)) at the time of the guarantee satisfies the requirement that the agreement be in exchange for adequate and full consideration in money or money's worth. Alternatively, the proposed regulations provide that this requirement also is satisfied if, at the time the guarantee is given, the maximum liability of the decedent under the guarantee did not exceed the fair market value of the decedent's interest in the entity. Finally, the proposed regulations provide that the estate's right of contribution or reimbursement will reduce the amount deductible in accordance with § 20.2053-1(d)(3).

The regulations are proposed to apply to the estate of each decedent dying on or after the date of publication in the Federal Register of a Treasury decision adopting these rules as final regulations.

Rev. Rul. 79-252 (1979-2 C.B. 333) states that interest on a Federal estate tax deficiency is a necessary administration expense under section 2053(a)(2) and is deductible to the extent allowable under local law. Rev. Rul. 81-154 (1981-1 C.B. 470) states, in the second holding, that interest incurred because of a late payment of tax is deductible under section 2053(a)(2) to the extent it is allowable under local law. Rev. Rul. 79-252 will be obsoleted and Rev. Rul. 81-154 will be modified, effective as of the date that a Treasury decision adopting these rules as final regulations is published in the Federal Register .

IRS revenue procedures, revenue rulings, notices, and other guidance cited in this document are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.

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

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these regulations primarily affect estates of a decedent which generally are not small entities under the Act. Accordingly, these regulations are not expected to have a significant economic impact on a substantial number of small entities, and a regulatory flexibility analysis is not required.

Pursuant to section 7805(f) of the Code, these proposed regulations will be submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on their impact on small businesses.

The collections of information contained in this notice of proposed rulemaking have been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), under Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and assigned control number 1545-0015. Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, and to Clearance Officer, SE:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by August 29, 2022. Comments are specifically requested concerning:

Whether the proposed collections of information are necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collection of information;

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs of operation, maintenance, and purchase of services to provide information.

The collections of information in these proposed regulations are in proposed §§ 20.2053-1(d)(6)(iv) and 20.2053-4(b)(1)(iv) and (c)(1)(iv). The information requested in § 20.2053-1(d)(6)(iv) is necessary in order to evaluate whether an estate is entitled to a deduction in the amount claimed on Form 706. The collection of information is mandatory to obtain a benefit. The information requested in § 20.2053-4(b)(1)(iv) and (c)(1)(iv) is necessary in order to evaluate whether an estate is entitled to a deduction claimed on Form 706 and, if so, the amount of the deduction. The collection of information is mandatory to obtain a benefit. The likely respondents are estates of decedents seeking to deduct on Form 706 funeral expenses, administration expenses, and/or certain claims against the estate under section 2053.

Estimated total annual reporting burden: 23,661 hours.

Estimated average annual burden per respondent: 3 hours.

Estimated number of respondents: 7,887.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million (updated annually for inflation). This proposed 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.

E.O. 13132, titled “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 E.O. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the E.O.

The principal authors of these regulations are Karlene Lesho and Melissa Liquerman, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development.

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 section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations.

Any electronic comments submitted, and to the extent practicable, any paper comments submitted, will be made available at www.regulations.gov or upon request.

A public hearing is being held by teleconference on October 12, 2022, at 10:00 a.m. EST unless no outlines are received by September 26, 2022.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to comment by telephone at the hearing must submit electronic or written comments and an outline of the topics to be discussed and the time to be devoted to each topic by September 26, 2022 as prescribed in the preamble under the ADDRESSES section. A period of ten minutes will be allotted to each person for making comments (although this rule may be waived in unusual circumstances or for good cause shown). After the deadline for receiving outlines has passed, the IRS will prepare an agenda containing the schedule of speakers. Copies of the agenda will be made available at www.regulations.gov, search IRS and REG-130975-08. Copies of the agenda will also be available by emailing a request to publichearings@irs.gov. Please put “REG-130975-08 Agenda Request” in the subject line of the email.

Announcement 2020-4, 2020-17 IRB 667 (April 20, 2020), provides that until further notice, public hearings conducted by the IRS will be held telephonically. Any telephonic hearing will be made accessible to people with disabilities.

Accordingly, the IRS proposes to amend 26 CFR part 20 as follows:

The Supplementary Information section follows this outline:

OSHA's lead standard for general industry (29 CFR 1910.1025), adopted in 1978, established a permissible exposure limit (PEL) airborne concentration of 50 μg/m 3 averaged over an 8-hour period and was based on consideration of health effects, feasibility issues, and the goal to keep BLLs below 40 μg/dL for the majority of workers occupationally exposed to lead (43 FR 54191). During approximately the same time-frame, the United States Congress enacted a law to provide Federal financial assistance to help cities and communities eliminate the causes of lead-based paint poisoning and detect and treat incidences of lead poisoning (Pub. L., 91-695; 42 U.S.C. Ch. 63). Additionally, the Consumer Products Safety Commission (CPSC) implemented regulations prohibiting lead from most consumer products and banned lead from residential paint (16 CFR 1303). The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Housing and Urban Development (HUD) enacted rules to reduce human and environmental exposure to lead (24 CFR 35; 40 CFR 80; 40 CFR 745).

In 1992, OSHA promulgated an interim final rule for lead exposure in construction (29 CFR 1926.62) as required by Title X of the Housing and Community Development Act of 1992 (102 Pub. L. 550). This rule amended Subpart D of 29 CFR part 1926 by adding a new section, 1926.62, that lowered the existing lead PEL in construction to 50 μg/m 3 and included ancillary provisions similar to those in the general industry lead standard. OSHA's general industry and construction standards contain medical removal provisions for workers whose BLLs exceed a certain level: in general industry, when a periodic and a follow-up blood test result show BLL ≥60 μg/dL, or an average of the last three blood lead tests show BLL ≥50 μg/dL; and in construction, when a periodic and a follow-up blood test result show BLL ≥50 μg/dL. These workers must be temporarily removed to a job with exposures at or below the action level (58 FR 26590).

In 1992, the U.S. Congress passed the Workers' Family Protection Act (29 U.S.C. 671a). The Act required the National Institute for Occupational Safety and Health (NIOSH) to report on take-home contamination from workplace chemicals and substances, including lead. 2 NIOSH found take-home exposure to be a widespread problem (NIOSH, 1995). The report identified workplace measures that are effective in reducing take-home exposure such as changing clothes before going home and leaving soiled clothing at work for laundering, storing street clothes in areas separate from work clothes, showering before leaving work, and prohibiting removal of toxic substances or contaminated items from the workplace, in addition to citing the importance of primary prevention by limiting exposure in the workplace. NIOSH noted that preventing take-home exposure is critical because decontaminating homes and vehicles is not always effective.

In 1996, OSHA implemented a Special Emphasis Program (SEP) for lead in construction (CPL 2.105) in response to documented elevated BLLs in construction workers. The SEP established a mechanism for programmed health inspections of construction sites where lead may be present. In 2001, OSHA implemented a National Emphasis Program (NEP) for lead (CPL 2-0.130). The NEP was implemented to direct OSHA's field inspection efforts to reduce occupational exposures to lead. This ongoing NEP includes general industry, construction, longshoring, and marine terminals. OSHA updated its NEP for lead in 2008 and expanded its targeting in 2013 to include indoor and outdoor firing ranges and recycling industries (OSHA, 2008; OSHA, 2013). In 2007, OSHA completed a Regulatory Flexibility Act Section 610 review and Executive Order 12866 lookback review of 29 CFR 1926.62 Lead in Construction (OSHA, 2007). The agency found that for the hazards associated with lead in the construction industry, a mandatory standard remains necessary to adequately protect employees. The lookback study also concluded that the lead in construction standard has not had negative economic impacts on business, including small businesses, and therefore remains economically feasible.

Exposure to lead is associated with adverse health effects, including but not limited to effects on the reproductive, cardiovascular, neurological, respiratory, and immune systems. Since promulgation of OSHA's lead standards, extensive research has been published indicating adverse health effects in adults at lower levels than had been previously documented (see, e.g., AOEC 2007; NTP 2012; ATSDR 2020; ACGIH 2013; EPA 2013). A variety of public health and government organizations have developed recommendations or revisions to standards to more stringently limit occupational exposures to lead and manage the effects of exposure in exposed workers. In 2007, the Association of Occupational and Environmental Clinics (AOEC) published guidelines for medical management of lead exposed adults (with special emphasis on those exposed to lead at work). The recommendations included: clinical assessment with detailed medical, occupational, and environmental history, physical exam, BLL determination, and other labs (CBC, BUN, Creatinine, Urine Analysis, EP); medical surveillance with follow-up BLL; and medical management with evaluation of exposures and risk factors, family and social context, and consideration for potential removal from exposure (AOEC, 2007). In 2016, the American College of Occupational and Environmental Medicine (ACOEM) released a Position Statement on Workplace Lead Exposure recommending revisions to OSHA's AL and PEL; workplace hygiene requirements; medical surveillance and medical removal protection provisions; and introduction of surface lead dust requirements (ACOEM 2016, p. e371). The Department of Defense (DOD) commissioned the National Research Council (NRC) to conduct a study to determine whether current OSHA exposure standards used on firing ranges are protective. The committee concluded that the current OSHA standard of a BLL of under 40 μg/dL is not sufficiently protective of personnel who have repeated lead exposures on firing ranges (NRC, 2013). DOD subsequently lowered the medical removal triggers for BLLs in military and civilian DOD personnel. DOD's medical removal is based on BLLs at or greater than 20 μg/dl, and employee return to work when BLL is at or below 15 μg/dL (DOD, 2018, p. 55; Table C4.T2, pp. 57-61). In 2018, NIOSH published a Request for Information (RFI) indicating NIOSH's intent to update its recommended exposure limit (REL) for inorganic lead and to develop updated recommendations for handling of inorganic lead and medical surveillance in the workplace (NIOSH 2018).

Several states have initiated updates to their occupational lead standards. In 2018 Michigan OSHA's State Plan (MIOSHA) in the Michigan Department of Licensing & Regulatory Affairs revised its lead standards for general industry and construction. The revisions included changing the BLL at which an employee is required to be removed from lead exposure, previously 50 μg/dL, to 30 μg/dL for both standards. In addition, the BLL at which an employee may be returned to work involving lead exposure was changed from < 40 μg/dL to 15 μg/dL in both standards. MIOSHA also removed a previous requirement to analyze for the zinc protoporphyrin (ZPP) level. MIOSHA's revisions followed recommendations developed by a group of stakeholders over the course of meetings held in 2017 and 2018. The group's proposed revisions to the occupational standards were the subject of public hearings in August 2018 and became effective in December 2018 (MOEMA 2019, p. 8). Michigan's revisions did not alter the PEL for lead.

The California Department of Public Health (CDPH) Occupational Lead Poisoning Prevention Program made recommendations for revisions to the California OSHA (Cal/OSHA) lead standards for general industry in 2010 and construction in 2011, including recommendations to lower the BLLs for medical removal and return to former job status; require more frequent BLL testing; broaden the provision and notification processes for BLL testing for exposed workers; and lower the 8-hour time-weighted average (TWA) PEL (CDPH, 2010; CDPH, 2011). CDPH's recommendation for lowering the PEL was based on a report produced by the California Environmental Protection Agency (Cal/EPA, Office of Environmental Health Hazard Assessment (OEHHA)) that used an updated physiologically-based pharmacokinetic (PBPK) model to characterize the relationship between air lead levels and BLLs (OEHHA, 2014).

Cal/OSHA has held advisory meetings to discuss potential changes to its lead standards and has published a discussion draft of possible amendments to the existing regulations in general industry and construction operations. California's most recent discussion draft includes a medical removal level of 30 μg/dL for a single test result; or when the last two monthly blood lead tests are ≥ 20 μg/dL; or when the average of the results of all blood lead tests conducted in the last 6 months is at or above 20 μg/dL of whole blood. The discussion draft includes a return to former job status when two consecutive blood lead tests are ≤ 15 μg/dL. The discussion draft also includes a reduction in the PEL from 50 μg/m 3 to 10 μg/m 3 and the AL from 30 μg/m 3 to 2 μg/m 3 , among other changes. The discussion draft and related documents are available at https://www.dir.ca.gov/dosh/DoshReg/5198Meetings.htm.

Washington State Department of Labor & Industries, Division of Occupational Safety and Health (Washington DOSH), is also developing a variety of updates to Washington State's occupational lead standards. In 2012, Public Health—Seattle and King County (PHSKC) petitioned the Washington State Department of Labor & Industries to update the occupational lead standards, including the BLLs for medical removal and return to former job status; the AL and PEL; and provisions for protective clothing, hygiene, medical surveillance, training, and education. Washington DOSH has proposed lowering its medical removal BLL to ≥ 30 μg/dL for a single test result, ≥ 20 μg/dL for multi-test results, and a return to former work status BLL of < 15 μg/dL. Washington DOSH has also proposed a reduction in the PEL from 50 μg/m 3 to 20 μg/m 3 , among other changes to the lead standard. Washington DOSH's stakeholder review draft (2019) and other information related to its stakeholder meetings on the lead rule revision process are available at https://lni.wa.gov/safety-health/safety-rules/rulemaking-stakeholder-information/sh-rules-stakeholder-lead.

OSHA is also considering revisions to its lead standards. Through this ANPRM, OSHA seeks input on the BLL triggers used for medical removal and return to work status. The agency also requests information on other potential changes to the current standards to reduce the risk of adverse health effects from occupational lead exposure.

In accordance with OSHA's intent to assess the potential impacts of revising blood lead triggers for medical removal protection, the agency made preliminary estimates of the annual number of firms, by industry, expected to have workers with elevated BLLs. For these estimates, OSHA used the reporting levels in CDC's Adult Blood Lead Epidemiology and Surveillance (ABLES) dataset of 5 μg/dL, 10 μg/dL, and 25 μg/dL, and OSHA's lead standards' medical removal levels (50 μg/dL for construction and 60 μg/dL for general industry).

OSHA identified the industry sectors associated with lead exposure as those found in the ABLES dataset. This dataset shows that the national prevalence rate of BLLs ≥10 μg/dL for adults declined from 26.6 adults per 100,000 employed in 2010 (among 37 reporting states) to 15.8 in 2016 (among 26 reporting states). For context, the geometric mean BLL for all adults in the US (including workers) was 0.855 μg/dL in 2018 (HHS, 2022). Historically, in the U.S., most lead exposures among adults have been occupational. Among the 11,695 adults with known lead exposures at BLL of ≥10 μg/dL in 2016, 90.3% had occupational exposures. The majority of these adults were employed in four main industry sectors: manufacturing, construction, services, and mining (NIOSH, 2016).

To help inform the rulemaking process, OSHA contracted with Abt Associates to generate preliminary estimates of the number of establishments and cases across all states at the ABLES reporting levels of 5 μg/dL, 10 μg/dL, 25 μg/dL, and the lead standards' medical removal levels (50 μg/dL for construction and 60 μg/dL for general industry). The first step was to identify industry sectors associated with lead exposure by 4-digit NAICS that were identified in a 2017 CDPH report (Payne, 2017), industries identified by OSHA in the personal sampling data reported by the OSHA Information System (OIS) (OSHA, 2020a), and industries with violations of lead exposure medical surveillance requirements in the last 10 years of OSHA inspections and violations (OSHA, 2020b; OSHA, 2020c). To estimate the number of workers with BLLs at or above each ABLES reporting level and the OSHA standards' medical removal levels by NAICS, BLL data from the ABLES program and the CDPH Occupational Blood Lead Registry for the years 2012-2014 and 2015-2018 (Payne, 2017; CDPH, 2020a; CDPH, 2020b) were pooled. Because ABLES data are limited to those states that report testing results to ABLES, the next step was to use U.S. Census data to extrapolate a preliminary estimate of the national number of cases from the ABLES state data. The method and results are described in full in the memorandum entitled Estimated Number of Work-Related BLL Cases and Firms (Abt Associates, 2021). This memorandum includes a table that provides the number of firms with preliminary BLL estimates at or above the relevant levels (the ABLES reporting levels and the OSHA standards' medical removal levels) and a table that provides the number of workers with preliminary BLL estimates at or above the relevant levels; the preliminary BLL estimates are presented by industry. In Appendix A at the end of this ANPRM, Table 1 “Summary of Annual Number of Firms with BLL Tests and Cases” presents the estimated number of firms where employees received test results that were at or above each ABLES reporting level and the OSHA standards' medical removal levels.

Of 44,144 firms where employee BLLs are tested, 8,611 firms were estimated to have recorded BLLs equal to or above 5 μg/dL, while 2,087, were estimated to have recorded BLLs at or above 25 μg/dL; only 137 firms were estimated to have baseline BLL cases annually resulting in medical removal protection under OSHA's existing requirements (BLLs greater than or equal to 50 and 60 μg/dL for construction and general industry, respectively).

This preliminary analysis shows that, among all affected employers, approximately 44 percent of firms where employee BLL is tested are in five industry groups: NAICS 7139: Other Amusement and Recreation Industries (6,656 firms); NAICS 3272: Glass and Glass Product Manufacturing (5,156 firms); NAICS 8111: Automotive Repair and Maintenance (3,333 firms); NAICS 2383: Building Finishing Contractors (2,746 firms); and NAICS 5629: Remediation and Other Waste Management Services (1,663 firms). OSHA requests public input on the agency's preliminary profile of affected industries, in particular the list of affected NAICS industries and the estimated number of firms that have workers with BLLs at or above the selected thresholds.

Exposure to lead is associated with adverse health effects, including but not limited to effects on the reproductive, cardiovascular, neurological, respiratory, and immune systems. As highlighted by a National Research Council report (NRC, 2013), lead has been shown to have both acute and chronic toxic effects, affecting virtually every organ and system in the body (ATSDR, 2020). Since OSHA's lead standard for general industry was promulgated, BLLs in the general adult population have declined from an overall mean blood-lead level of 15.8 μg/dL (1976-1980) to 0.855 μg/dL in 2018, primarily reflecting the decrease in lead used in gasoline production, as well as the removal of lead from consumer paint (CDC, 1982; HHS, 2022, p. 212; ATSDR, 2020, p. 2). However, extensive research has emerged indicating that adverse health effects can occur in adults with lower BLLs than was previously recognized (ATSDR, 2020; ACGIH, 2013; CDPH, 2009 and 2013; EPA, 2013; NTP, 2012). For example, BLLs as low as 5 μg/dL have been associated with impaired kidney and reproductive function, high blood pressure, and cognitive effects attributed to prenatal exposure. Poorer performance on neurocognitive and neuropsychologic assessments were observed in adults with BLLs as low as 5-19 μg/dL compared with adults with BLLs below 5 μg/dL (Kosnett, 2007, pp. 464, 466; EPA, 2013, pp. 4-311—4-313, 2013; NTP, 2012, pp. 19-42). While there is also evidence of adverse health effects in adults with BLLs below 5 μg/dL, those are not discussed in OSHA's literature review (please see ATSDR, 2020). Table 1 provides an overview of the adverse health effects associated with adult lead exposure, including the effects of exposure on pregnant workers and their developing fetuses, and longer-term effects on children/adolescents exposed in utero to lead.

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

On January 22, 2010, the EPA established a new 1-hour primary NAAQS for NO 2 at a level of 100 parts per billion (ppb), based on a 3-year average of the 98th percentile of the yearly distribution of 1-hour daily maximum concentrations. 1 See 75 FR 6474 (February 9, 2010). This NAAQS is designed to protect against exposure to the entire group of nitrogen oxides (NO X ). NO 2 is the component of greatest concern and is used as the indicator for the larger group of NO X . Emissions that lead to the formation of NO 2 generally also lead to the formation of other NO X . Therefore, control measures that reduce NO 2 can generally be expected to reduce population exposures to all gaseous NO X which may have the co-benefit of reducing the formation of ozone and fine particles both of which pose significant public health threats. For comprehensive information on the 2010 1-hour NO 2 NAAQS, please refer to the February 9, 2010 Federal Register action. See 75 FR 6474.

Whenever the EPA promulgates a new or revised NAAQS, CAA section 110(a)(1) requires states to submit SIPs meeting the applicable requirements of section 110(a)(2) within 3 years after promulgation of a new or revised NAAQS or within such shorter period as the EPA may prescribe. Section 110(a)(2) requires states to address structural SIP elements such as requirements for monitoring, basic program requirements, and legal authority that are designed to provide for implementation, maintenance, and enforcement of the NAAQS. The EPA refers to the SIP submissions required by these provisions as “infrastructure SIPs.” Section 110(a) imposes the obligation upon states to make an infrastructure SIP submission to the EPA for a new or revised NAAQS, but the contents of individual state submissions may vary depending upon the facts and circumstances. This proposed rule pertains to the infrastructure SIP requirements for interstate transport of air pollution. These submissions must meet the various requirements of CAA section 110(a)(2), as applicable. 2

Section 110(a)(2)(D)(i) of the CAA requires SIPs to include provisions prohibiting any source or other type of emissions activity in one state from emitting any air pollutant in amounts that will contribute significantly to nonattainment, or interfere with maintenance, of the NAAQS, or interfere with measures required to prevent significant deterioration of air quality or to protect visibility in any other state. This proposed rule addresses the two requirements under section 110(a)(2)(D)(i)(I), which we refer to as prong 1 (significant contribution to nonattainment of the NAAQS in any other state) and prong 2 (interference with maintenance of the NAAQS in any other state). The EPA often refers to SIP revisions addressing the requirements of section 110(a)(2)(D)(i)(I) as “interstate transport SIPs.”

The EPA evaluates each state's interstate transport SIP to see how the state evaluates the transport of air pollution to other states for a given air pollutant; what types of information the state used in its analysis; how that analysis compares with prior EPA rulemakings, modeling, monitoring, and guidance; and what conclusions were drawn by the state. If the EPA concludes that the SIP contains adequate provisions to prohibit sources from emitting air pollutants that significantly contribute to nonattainment, or interfere with maintenance, of a given NAAQS in any other state, we will approve the state's submission with regard to prongs 1 and 2 of CAA section 110(a)(2)(D)(i)(I).

On March 12, 2014, the New Mexico Environment Department (NMED) submitted its Infrastructure SIP to the EPA for the revised 2010 1-hour NO 2 standard. At that time, NMED addressed the 2010 NO 2 interstate transport prongs 1 and 2 by referencing the EPA's November 19, 2012 Memorandum  3 which outlined the EPA's intention to abide by the August 21, 2012 decision of the U.S. Court of Appeals for the D.C. Circuit, holding that a SIP cannot be deemed deficient for failing to meet the prong 1 and 2 requirements in Section 110(a)(2)(D)(i) before the EPA quantifies the state's obligation. EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir. 2012). In the March 2014 submittal, the state stated that the EPA had not yet quantified New Mexico's interstate transport obligation under the 2010 NO 2 and therefore New Mexico's infrastructure SIP was adequate for section 110(a)(2)(D)(i)(I).

On April 29, 2014, the U.S. Supreme Court reversed and remanded the D.C. Circuit's EME Homer City ruling and upheld the EPA's approach in the Cross-State Air Pollution Rule. EPA v. EME Homer City Generation, L.P., 572 U.S. 489 (2014). As a result of the Supreme Court reversal, each state was again required to address the interstate transport requirements of 110(a)(2)(D)(i) regardless of whether the EPA had quantified the state's obligation. In accordance with the Supreme Court's decision, on June 25, 2021, the state of New Mexico supplemented its 2010 NO 2 infrastructure SIP to address interstate transport prongs 1 and 2 of Section 110(a)(2)(D)(i), the submission supplements the State's prior 2014 interstate transport SIP for the NO 2 NAAQS.

Unlike certain other NAAQS like ozone and PM 2.5 , the EPA has not developed a recommended approach for states to use when addressing prongs 1 and 2 for the 2010 NO 2 NAAQS. Following promulgation of the 2010 NO 2 NAAQS, the EPA designated all areas of the United States as “unclassifiable/attainment” for this NAAQS because monitors throughout the country had indicated no violations of the NAAQS from 2008-2010. 4 77 FR 9532 (February 17, 2012). Additionally, no violations occurred at any monitor in the country in the most recent available design value period of 2018-2020. 5 For these reasons, 110(a)(2)(D)(i)(I) demonstrations for states have been relatively straightforward because the EPA has not identified areas in any state to which emissions from another state would likely contribute significantly to nonattainment or interfere with maintenance.

In New Mexico's June 25, 2021, SIP revision, NMED concluded that its SIP adequately addresses prong 1 and 2 with respect to the 2010 1-hour NO 2 NAAQS. NMED provided the following reasons for its determinations: (1) all areas in the United States are designated as unclassifiable/attainment for the 2010 1-hour NO 2 NAAQS; (2) there are SIP-approved and state-only regulations that directly or indirectly control NO 2 emissions.

In addition to the information provided in the SIP, the EPA notes that the highest monitored valid NO 2 design values in each state bordering New Mexico are well below the NAAQS (see Table 1, below), as are the maximum single year 98th percentile values from each neighboring state between 2018-2020 (see Table 2, below). These facts further support the State's assertion that significant contribution to nonattainment or interference with maintenance of the NO 2 NAAQS from New Mexico is unlikely.

With respect to prong 2 (interference with maintenance), specifically, in addition to the lack of areas violating the NO 2 NAAQS, there are also no areas in neighboring states approaching a violation of the 2010 NO 2 NAAQS ( i.e., 100 ppb) which might therefore be expected to have difficulty maintaining the standard. With respect to both prongs, we also note that there are no areas elsewhere in the United States approaching a violation of the 2010 NO 2 NAAQS.

NMED notified the public with the publication of the notice in both print and online versions of the Albuquerque Journal (in English and Spanish). The public notice provided opportunity for comment and public hearing. NMED did not receive any public comment and no request for public hearing was received. A copy of the New Mexico SIP revision submittal is available online at www.regulations.gov, Docket number EPA-R06-OAR-2021-0772

Based on our review of New Mexico's June 25, 2021, SIP revision submission, and our analysis of additional relevant information, we propose to determine that emissions from New Mexico will not significantly contribute to nonattainment or interfere with the maintenance of the 2010 NO 2 NAAQS in any other state. Accordingly, we propose to approve the June 25, 2021, New Mexico SIP submission as satisfying the requirements of CAA section 110(a)(2)(D)(i)(I) for the 2010 1-hour NO 2 NAAQS interstate transport prongs 1 and 2. The EPA is soliciting public comments on this proposed action and will consider public comments received during the comment period.

Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, Feb. 16, 1994) directs federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. The EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” The EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”  6 The EPA is providing additional analysis of environmental justice associated with this action for the purpose of providing information to the public.

The EPA reviewed demographic data, which provides an assessment of individual demographic groups of the populations within New Mexico. 7 The EPA then compared the data to the national average for each of the demographic groups. The results of the demographic analysis indicate that, for populations within New Mexico, the percentage of people of color (persons who reported their race as a category other than White alone (not Hispanic or Latino)) is significantly higher than the national average (63.8 percent versus 40 percent). Within people of color, the percentage of the population that is Hispanic or Latino is higher than the national averages (49.3 percent versus 18.5 percent) and the percentage of the population that is American Indian/Alaska Native is also higher than the national average (11.0 percent versus 1.3 percent). The percentage of people living below the poverty level in New Mexico is higher than the national average (16.8 percent versus 11.4 percent). The percentage of people over 25 with a high school diploma in New Mexico is slightly below the national average (86.5 percent versus 88.5 percent), similarly, for the percentage with a bachelor's degree or higher education is slightly lower than the national average (28.1 percent versus 32.9 percent).

Communities in close proximity to and/or downwind of industrial sources may be subject to disproportionate environmental impacts of NO 2 emissions. Short- and/or long-term exposure to elevated concentrations of NO 2 may contribute to the development of asthma and may potentially increase susceptibility to respiratory infections. People with asthma, as well as children and the elderly are generally at greater risk for the health effects of NO 2 . 8 However, there are no areas in New Mexico or nationwide that show problems attaining or maintaining air quality with regard to NO 2 emissions that may contribute to environmental and health impacts on all populations including minority and low-income population. In addition, the national average of NO 2 concentrations have decreased substantially over the years. 9 We therefore conclude that this proposed rule will not have or lead to disproportionately high or adverse human health or environmental effects on communities with environmental justice concerns.

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely proposes to approve state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

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

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

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

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

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

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

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

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

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

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

The Gulf reef fish fishery, which includes red snapper, is managed under the FMP. The FMP was prepared by the Council and is implemented by NMFS through regulations at 50 CFR part 622 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Steven Act).

Unless otherwise noted, all weights in this proposed rule are in round weight.

This proposed rule would implement management measures for both the Gulf of Mexico Red Snapper Recreational Data Calibration and Recreational Catch Limits Framework Action (Calibration Framework) and the Modification of Annual Catch Limits for Gulf of Mexico Red Snapper Framework Action (Catch Limits Framework). Briefly, the Calibration Framework would modify the state-specific red snapper private angling component ACLs using the calibration ratios developed by NMFS' Office of Science and Technology and the Gulf states. The Catch Limits Framework would increase the red snapper overfishing limit (OFL), acceptable biological catch (ABC), ACLs, and ACTs consistent with the red snapper interim analyses and recommendations from the Council's Scientific and Statistical Committee (SSC). These two framework actions are combined in this single proposed rule because both actions adjust the red snapper catch limits.

The Magnuson-Stevens Act requires NMFS and regional fishery management councils to prevent overfishing and to achieve, on a continuing basis, the OY from federally managed fish stocks to ensure that fishery resources are managed for the greatest overall benefit to the nation, particularly with respect to providing food production and recreational opportunities, and protecting marine ecosystems.

Red snapper in the Gulf EEZ is harvested by both the commercial and recreational sectors. Each sector has its own ACL and associated management measures. The stock ACL is allocated 51 percent to the commercial sector and 49 percent to the recreational sector. These sector allocations were implemented in 1990 through Amendment 1 to the Reef Fish FMP (55 FR 14; January 22, 1990). The stock ACL for red snapper was set at and remains equal to the ABC. In 2015, Amendment 40 to the FMP (80 FR 22422; April 22, 2015) divided the recreational ACL (quota) between the Federal for-hire component (42.3 percent), which includes operators of federally permitted charter vessels and headboats (for-hire vessels), and the private angling component (57.7 percent), which includes private anglers.

In February 2020, NMFS implemented state management of red snapper for the private angling component through Amendments 50 A-F to the FMP (85 FR 6819; February 6, 2020). Through these amendments, each state was allocated a portion of the red snapper private angling component ACL and was delegated the authority to set the private angling fishing season, bag limit, and size limit. These amendments also established an accountability measure that required any overage of a state's ACL to be deducted in the following year ( i.e., a payback provision).

The Calibration Framework describes in detail the various data collection programs used to estimate red snapper landings by private anglers. Until recently (2014), NMFS provided the only estimates of private angler red snapper landings in all of the Gulf states, except Texas. Texas anglers have never participated in the NMFS recreational data collection survey. In 2014, Alabama and Louisiana, and in 2015, Florida and Mississippi, implemented state data collection programs to collect this private angler information. Each of these programs is unique and NMFS has observed differences (sometimes substantial) between Federal estimates of recreational catch and each state's own estimate. Specifically, the Alabama and Mississippi surveys tend to generate much lower landings estimates than the Federal survey.

The current red snapper catch limits (OFL, ABC, ACLs, and ACTs) are based, in part, on private-angling landings estimated using the Federal data collection system, and NMFS uses the estimates from the Federal survey to determine whether landings exceed the total recreational ACL (quota) and the stock OFL. However, each Gulf state manages the harvest by its private anglers using estimates from its own state data collection program. The MRIP-based catch limits for Florida, Alabama, Mississippi, and Louisiana are not directly comparable to the landings estimates generated by each of those states, and the state estimates are not directly comparable to each other. In other words, each state is estimating landings in a different “currency.” Therefore, the NMFS Office of Science and Technology (OST) worked with the Gulf States to develop calibration ratios so that each state's catch limit could be converted to the “currency” in which each state monitors landings.

The current systems each state uses to manage private angling harvest have resulted in exceeding the total recreational ACL (quota) and the OFL. In 2018 and 2019, the private angling component ACL and recreational ACL were exceeded even though the Federal for-hire component landings did not exceed the for-hire component ACL. In 2019, total red snapper landings exceeded the OFL.

To address this issue, the Council developed the Calibration Framework and selected as preferred the alternative that uses the calibration ratios to adjust each state's ACL into the “currency” in which that state monitors landings. These ratios are: Alabama (0.4875); Florida (1.0602); Louisiana (1.06); Mississippi (0.3840); Texas (1.00). The MRIP-based ACLS are multiplied by the ratios to determine the state currency ACLs. The preferred alternative also included an implementation date of January 1, 2023. The Council concluded that this delay in implementation would afford the Gulf states and the NMFS OST an opportunity to resolve the differences in state-specific data collection programs and MRIP-FES ( e.g., scale and precision of catch estimates), as recommended by both the Council's SSC (during discussion at several SSC meetings) and a 2021 National Academy of Sciences report to Congress.

In February 2022, NMFS OST and the Gulf states participated in a workshop on the transition to the use of state survey catch data in Gulf of Mexico fisheries. The purpose of the workshop was to agree on the elements of a Gulf State Recreational Catch and Effort Estimation Surveys Transition Plan. When executed, this plan will allow for the full use of state recreational fishing data in NOAA Fisheries' stock assessment and management processes. More information about this workshop can be found at https://www.fisheries.noaa.gov/event/gulf-state-recreational-catch-and-effort-surveys-transition-workshop.

In 2019, NMFS implemented a framework action that set the current red snapper catch limits (85 FR 6819; February 6, 2020). These catch limits are based on most recent Gulf red snapper Southeast Data, Assessment, and Review stock assessment (SEDAR 52), completed in 2018, and the Council's SSC recommendations. The current red snapper stock OFL is 15.5 million lb (7.0 million kg), the ABC and stock ACL are 15.1 million lb (6.8 million kg). The commercial ACL is 7.701 million lb (3.493 million kg), and the recreational ACL is 7.399 million lb (3.356 million kg). The Federal for-hire component ACL is 3.130 million lb (1.420 million kg) and the private angling component ACL is 4.269 million lb (1.936 million kg). The Federal for-hire component ACT is 2.848 million lb (1.292 million kg) and the private angling component ACT is 3.415 million lb (1.5498 million kg). The commercial sector does not have a sector ACT because it is managed under an individual fishing quota (IFQ) program that effectively constrains landings to the commercial ACL. The 2019 framework also set the Federal for-hire component ACT at 9 percent below its ACL. The for-hire component ACT is in place to reduce the likelihood of exceeding the for-hire ACL, as well as the total recreational ACL. A private angling component ACT is set 20 percent below the private angling ACL, but would only be used if a Gulf state did not have an active delegation under the red snapper state management program.

In 2016, Congress awarded funding to researchers in an effort to independently estimate the population size of red snapper in the Gulf. Commonly known as the “Great Red Snapper Count” (GRSC), this project's primary goal was to provide a snapshot of estimate abundance and distribution of age 2 and older red snapper on artificial, natural, and uncharacterized bottom habitat across the northern Gulf through 2019. At its April 2021 meeting, the Council was briefed on the results of the GRSC. The GRSC estimated the abundance of red snapper in the Northern Gulf was approximately three times greater than had been estimated in the previous stock assessment (SEDAR 52).

The Southeast Fisheries Science Center (SEFSC) worked collaboratively with the GRSC investigators to develop a method that could be used to integrate the results of the GRSC into catch limit advice that is currently based on SEDAR 52. The SEFSC developed catch projections using GRSC estimates of abundance to scale projections that initially used abundance estimates from SEDAR 52. The SEFSC also developed catch level projections based on an interim analysis using information from the NMFS Bottom Longline (BLL) survey, which was similar to the approach previously used for Gulf red grouper and gray triggerfish projections. The NMFS BLL survey is an annual survey that can be used to determine long-term trends in the abundance of a stock.

The SSC reviewed both sets of projections at its March 30-April 2, 2021, meeting. The SSC expressed some concerns about using the GRSC findings to recommend catch levels. Specifically, the SSC noted the uncertainty associated with the GRSC biomass estimate, questions about the productivity of the red snapper stock that are raised by the GRSC findings (that the productivity of the stock appears to be lower than previously assumed), and the declining trend observed recently in the NMFS BLL survey. Based on these concerns, and until additional information could be presented related to the SSC's questions about some aspects of the GRSC, the SSC determined that it was appropriate to use the GRSC based interim analysis to recommend the OFL, which would be used determine if overfishing is occurring, but not to recommend the ABC, which constrains the total allowable catch that may be specified by the Council.

For the OFL recommendation, the SSC decided to use the projection based on the abundance of all red snapper over structure (artificial reef, natural reef, and pipeline) and 13 percent of the abundance from the unclassified bottom, and used a 3-year average of the maximum sustainable yield proxy for Gulf red snapper (the mortality corresponding to a 26 percent reduction in the spawning potential ratio from an unfished condition). This OFL for Gulf red snapper is 25.6 million lb (11.6 million kg). With respect to the ABC, the SSC determined that 2020 data should not be used for this interim analysis because of the low sample size and high coefficient of variation for that data, and recommended that the catch advice be derived from the 5-year average. Based on these selections, the Council's SSC provided an ABC recommendation for Gulf red snapper of 15.4 million lb (7.0 million kg). This recommendation reflects the SSC's determination that the ABC should be considerably more conservative than the OFL, at least until the SSC questions related to the GRSC are more thoroughly explored.

The SSC has reviewed new information related the GRSC on several occasions. At its March 2022 meeting, the SSC made new catch level recommendations based a SEFSC analysis that used updated GRSC information. These new recommendations would decrease the OFL to 18.91 million lb (8.58 million kg) and increase the ABC to 16.31 million lb (7.40 million kg). In April 2022, the Council began work on a new framework action to adjust the red snapper catch limits consistent with these recommendations.

The Council approved both the Data Calibration Framework Action and the Catch Limits Framework Action at its April 2021 meeting. However, NMFS expressed concern about the Council's proposal to delay implementation of the Calibration Framework until 2023, and requested that the Council reconsider that implementation timing. The Council discussed the request at its August 2021 meeting but did not make any changes to the implementation date of the preferred alternative.

This proposed rule would modify the state-specific red snapper private angling component ACLs using the calibration ratios adopted by the Council, and increase the red snapper ACLs and ACTs consistent with the red snapper interim analyses and the subsequent SSC recommendations. The calibrations are necessary to convert the state private angling component ACLs into the same “currency” in which each state monitors landings by the private angling component. This would reduce the likelihood of exceeding the red snapper private angling component ACL, the total recreational ACL, and the OFL.

If implemented, this proposed rule would increase the Gulf red snapper catch limits. The stock ACL would increase from 15,100,000 lb (6,800,000 kg) to 15,400,000 lb (7,000,000 million kg). The commercial ACL (commercial quota) would increase from 7,701,000 lb (3,493,000 kg) to 7,854,000 lb (3,562,514 kg), and the recreational ACL (recreational quota) would increase from 7,399,000 lb (3,356,000 kg) to 7,546,000 lb (3,422,808 kg). The for-hire component recreational ACL would increase from 3,130,000 lb (1,420,000 kg) to 3,191,958 lb (1,447,848 kg). The private angling component recreational ACL would increase from 4,269,000 lb (1,936,000 kg) to 4,354,042 lb (1,974,960 kg). In addition, the private angling recreational ACT would increase from 3,415,000 lb (1,549,000 million kg kg) to 3,483,234 lb (1,579,968 kg).

For the Federal for-hire component, the Council chose to maintain the current buffer between the ACL and ACT at 9 percent to minimize the risk of ACL overages. Therefore, as a result, the for-hire component ACT would increase from 2,848,000 lb (1,292,000 kg) to 2,904,682 lb (1,317,542 kg).

Because of the increased recreational private angling component ACL in this proposed rule, each Gulf state would be initially allocated an increase in their specific state private angling component ACL. Alabama's ACL would increase from 1,122,662 lb (509,231 kg) to 1,145,026 lb (519,375 kg); Florida's ACL would increase from 1,913,451 lb (867,927 kg) to 1,951,569 lb (885,217 kg); Louisiana's ACL would increase from 816,233 lb (370,237 kg) to 832,493 lb (377,612 kg); Mississippi's ACL would increase from 151,550 lb (68,742 kg) to 154,568 lb (70,110 kg); and Texas's ACL would increase from 265,105 lb (120,250 kg) to 270,386 lb (122,645 kg). The above proposed changes to state catch limits are based on the Catch Limits Framework. These are not the final catch limits that would be implemented through this proposed rule and they are not included in the codified text in this rule because the calibration ratios need to be applied as described in the following paragraph.

Each Gulf state's private angling component ACL in the prior paragraph would be modified by applying the calibration ratios adopted by the Council. The final private angling component ACLs followed by the Federal equivalent are as follows: the Alabama private angling component ACL would be 558,200 lb (253,195 kg) or Federal equivalent of 1,145,026 lb (519,375 kg); The Florida private angling component ACL would be 2,069,053 lb (938,507 kg) or Federal equivalent of 1,951,569 lb (885,217 kg); The Louisiana private angling component ACL would be 882,443 lb (400,269 kg) or Federal equivalent of 832,493 lb (337,612 kg); the Mississippi private angling component ACL would be 59,354 lb (26,923 kg) or Federal equivalent of 154,568 lb (70,111 kg); and the Texas private angling component ACL (Equal to Federal) would be 270,386 lb (122,645 kg). Each state will use its reporting system to monitoring landings and appropriately constrain harvest to its ACL. NMFS will convert the state landings estimates to the Federal “currency” to determine whether landings have been constrained to the private angling ACL, total recreational ACL (quota) and OFL. This is necessary because the private angling ACL, total recreational ACL (quota) and OFL will remain in the Federal “currency.”

A minority report signed by three Council members raised objections to the Council's decision to approve the Calibration Framework with an implementation date of January 1, 2023 included in the preferred alternative. These Council members were concerned that delaying implementation until 2023 would allow 2 additional fishing years (2021 and 2022) where the private angling component of the recreational sector would be allowed to catch more than its allocation of red snapper. NMFS invites specific comment on the proposed implementation date of January 1, 2023, and has otherwise determined that the proposed rule is consistent with the Magnuson-Stevens Act. Any final rule will respond to comments on the proposed rule received by NMFS during the comment period, as well as the issues raised in the Council's minority report. The minority report is available at the website: https://gulfcouncil.org/wp-content/uploads/Council-Minority-Report-FINAL-Signatures.pdf.

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

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

The Chief Counsel for Regulation of the Department of Commerce has certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination follows.

A description of this proposed rule, why it is being considered, and the objectives of this proposed rule are contained in the preamble. The Magnuson-Stevens Act provides the statutory basis for this proposed rule. No duplicative, overlapping, or conflicting Federal rules have been identified. In addition, no new reporting, record-keeping, or other compliance requirements are introduced by this proposed rule.

This proposed rule would apply to all federally-permitted commercial vessels, federally-permitted charter vessels and headboats (for-hire vessels), and recreational anglers that fish for or harvest red snapper in Federal waters of the Gulf. It would also apply to red snapper IFQ shareholders. It would not directly apply to federally-permitted dealers. Any change in the supply of red snapper available for purchase by dealers as a result of this proposed rule, and associated economic effects, would be an indirect effect of the proposed rule and would therefore fall outside the scope of the RFA. Similarly, although it would apply to for-hire vessels, it would not be expected to have any direct effects on these entities. For-hire vessels sell fishing services to recreational anglers. The proposed changes to the red snapper management measures would not directly alter the services sold by these vessels. Any change in demand for these fishing services, and associated economic effects, as a result of this proposed rule would be a consequence of a change in anglers' behavior, secondary to any direct effect on anglers and, therefore, an indirect effect of the proposed rule. Because the effects on for-hire vessels would be indirect, they fall outside the scope of the RFA. Furthermore, for-hire captains and crew are not allowed to retain red snapper under the recreational bag limits, so only recreational anglers would be directly affected by the proposed changes to the red snapper recreational ACLs and ACTs. The RFA does not consider recreational anglers to be small entities, so they are outside the scope of this analysis (5 U.S.C. 603). Small entities include small businesses, small organizations, and small governmental jurisdictions (5 U.S.C. 601(6) and 601(3)-(5)). Recreational anglers are not businesses, organizations, or governmental jurisdictions. In summary, commercial vessels and IFQ shareholders are the only small entities that would be directly affected by the proposed rule, and therefore only the impacts on these small entities will be discussed.

As of April 26, 2021, after the Council approved both framework actions, there were 827 limited access valid or renewable commercial Gulf reef fish permits. In order to harvest red snapper, a vessel permit must also be linked to an IFQ account and possess sufficient allocation for this species. IFQ accounts can be opened and valid permits can be linked to IFQ accounts at any time during the year. Eligible vessels can receive red snapper allocation from other IFQ participants. On average, from 2015 through 2019, there were 637 IFQ accounts that held red snapper allocation and 364 that held red snapper shares. During the same time period, there were 434 federally-permitted commercial vessels, on average each year, with reported landings of red snapper in the Gulf. Their average annual vessel-level gross revenue from all species for 2015 through 2019 was approximately $147,000 (2019 dollars) and red snapper accounted for approximately half of this revenue. The maximum annual revenue from all species reported by a single one of the commercial vessels that landed Gulf red snapper from 2015 through 2019 was approximately $2.7 million (2019 dollars).

For RFA purposes only, NMFS has 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. All of the commercial fishing businesses directly regulated by this proposed rule are believed to be small entities based on the NMFS size standard.

No other small entities that would be directly affected by this proposed rule have been identified.

This proposed rule would modify the red snapper ACLs and recreational ACTs based on the OFL and ABC recommendations of the Council's SSC and ratio calibrations adopted by the Council for the state-specific red snapper private angling components. Under this proposed rule, the commercial ACL (quota) would increase by 153,000 lb (69,399 kg), which, if harvested in full, would correspond to an estimated increase in annual ex-vessel revenue of $719,000 (2019 dollars). Divided by the average number of commercial vessels with reported landings of red snapper from 2015 through 2019, this would be an increase of approximately $1,657 (2019 dollars) per vessel. In addition to the expected increase in ex-vessel revenue, the proposed increase in the commercial red snapper quota would be expected to result in an annual increase in allocation value of approximately $0.5 million (2019 dollars). Finally, total red snapper IFQ share value would be expected to increase by approximately $5.6 million (2019 dollars). These estimates rely on average ex-vessel, IFQ allocation, and IFQ share price estimates from 2019. Actual future prices could increase or decrease relative to 2019 as a result of market forces. NMFS expects that any negative price effects induced by this proposed rule, should they occur, would be outweighed by the benefits of the increased commercial quota.

In summary, the information provided above supports a determination that this proposed rule would not have a significant economic impact on a substantial number of small entities. As a result, an initial regulatory flexibility analysis is not required and none has been prepared.

This proposed rule contains no information collection requirements under the Paperwork Reduction Act of 1995.

For the reasons set out in the preamble, 50 CFR part 622 is proposed to be amended as follows: