Agricultural Marketing Service
Economic Development Administration
Industry and Security Bureau
International Trade Administration
National Institute of Standards and Technology
National Oceanic and Atmospheric Administration
Patent and Trademark Office
Defense Acquisition Regulations System
Federal Energy Regulatory Commission
Children and Families Administration
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Fish and Wildlife Service
Land Management Bureau
Employee Benefits Security Administration
Federal Aviation Administration
Federal Highway Administration
Foreign Assets Control Office
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription.
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for certain Pratt & Whitney Canada Corp. (P&WC) PT6E-67XP model turboprop engines with serial number HP0194 and earlier. This AD is prompted by multiple reports of engines failing to achieve required power (torque) during high power applications due to internal leaks in the bleed-off valves (BOVs). This AD requires replacement of the compressor BOV assembly, replacement of the BOV orifice feed air tube assembly, and installation of a redesigned P3 probe snorkel, as specified in a Transport Canada AD, which is incorporated by reference (IBR). The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective March 21, 2023.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of March 21, 2023.
• For material that is IBR in this final rule, contact Transport Canada, Transport Canada National Aircraft Certification, 159 Cleopatra Drive, Nepean, Ontario K1A 0N5, Canada; phone: (888) 663-3639; email:
• You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 1200 District Avenue, Burlington, MA 01803. For information on the availability of this material at the FAA, call (817) 222-5110. It is also available at
Barbara Caufield, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803; phone: (781) 238-7146; email:
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain P&WC PT6E-67XP model turboprop engines with serial number HP0194 and earlier. The NPRM published in the
In the NPRM, the FAA proposed to require replacement of the compressor BOV assembly, replacement of the BOV orifice feed air tube assembly, and installation of a redesigned P3 probe snorkel, as specified in Transport Canada AD CF-2022-26. The FAA is issuing this AD to address the unsafe condition on these products.
You may examine the MCAI in the AD docket at
The FAA received no comments on the NPRM or on the determination of the cost to the public.
This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
The FAA reviewed Transport Canada AD CF-2022-26, which specifies procedures for the replacement of the compressor BOV assembly, replacement of the BOV orifice feed air tube assembly, and installation of a redesigned P3 probe snorkel.
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 FAA estimates that this AD affects 100 engines installed on airplanes of U.S. registry.
The FAA estimates the following costs to comply with this AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective March 21, 2023.
None.
This AD applies to Pratt & Whitney Canada Corp. (P&WC) PT6E-67XP model turboprop engines with serial number HP0194 and earlier, as identified in Transport Canada AD CF-2022-26, dated May 12, 2022 (Transport Canada AD CF-2022-26).
Joint Aircraft Service Component (JASC) Code 7230, Turbine Engine Compressor Section.
This AD was prompted by reports of multiple incidents in which engines were unable to achieve the required power (torque) during high power applications due to internal leaks in the bleed-off valves (BOVs) caused by glass bead contamination. The FAA is issuing this AD to prevent internal leaks in the BOVs, and to prevent the failure of the engine to achieve the required power (torque) during high power applications. The unsafe condition, if not addressed, could result in loss of thrust control and loss of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraphs (h) and (i) of this AD: Perform all required actions within the compliance times specified in, and in accordance with, Transport Canada AD CF-2022-26.
(1) Where Transport Canada AD CF-2022-26 refers to hours air time, this AD requires using flight hours.
(2) Where Transport Canada AD CF-2022-26 specifies compliance from its effective date, this AD requires using the effective date of this AD.
Although the service information referenced in Transport Canada AD CF-2022-26 specifies to submit certain information to the manufacturer, this AD does not include that requirement.
(1) The Manager, ECO Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in § 39.19. In accordance with § 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (k) of this AD or email to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
For more information about this AD, contact Barbara Caufield, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803; phone: (781) 238-7146; email:
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Transport Canada AD CF-2022-26, dated May 12, 2022.
(ii) [Reserved]
(3) For Transport Canada AD CF-2022-26-E, contact Transport Canada, Transport Canada National Aircraft Certification, 159 Cleopatra Drive, Nepean, Ontario K1A 0N5, Canada; phone: (888) 663-3639; email:
(4) You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 1200 District
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email:
Bureau of Industry and Security, Department of Commerce.
Final rule.
In this rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) by adding six entities to the Entity List, under the destination of the People's Republic of China (China). These six entities have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States.
This rule is effective on February 10, 2023.
Chair, End-User Review Committee, Office of the Assistant Secretary for Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Email:
The Entity List (supplement no. 4 to part 744 of the EAR (15 CFR parts 730-774)) identifies entities for which there is reasonable cause to believe, based on specific and articulable facts, that the entities have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States, pursuant to § 744.11(b). The EAR impose additional license requirements on, and limit the availability of, most license exceptions for exports, reexports, and transfers (in-country) when a listed entity is a party to the transaction. The license review policy for each listed entity is identified in the “License Review Policy” column on the Entity List, and the impact on the availability of license exceptions is described in the relevant
The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and makes all decisions to remove or modify an entry by unanimous vote.
The ERC determined to add Beijing Nanjiang Aerospace Technology Co., Ltd.; China Electronics Technology Group Corporation 48th Research Institute; Dongguan Lingkong Remote Sensing Technology Co., Ltd.; Eagles Men Aviation Science and Technology Group Co., Ltd. (EMAST); Guangzhou Tian-Hai-Xiang Aviation Technology Co., Ltd.; and Shanxi Eagles Men Aviation Science and Technology Group Co., Ltd. all under the destination of China, to the Entity List. These entities are being added for their support to China's military modernization efforts, specifically the People's Liberation Army's (PLA) aerospace programs including airships and balloons and related materials and components. The PLA is utilizing High Altitude Balloons (HAB) for intelligence and reconnaissance activities. This activity is contrary to U.S. national security and foreign policy interests under § 744.11 of the EAR. For these six entities, BIS imposes a license requirement for all items subject to the EAR and will review license applications under a presumption of denial.
For the reasons described above, this final rule adds the following six entities to the Entity List and includes, where appropriate, aliases:
• Beijing Nanjiang Aerospace Technology Co., Ltd.;
• China Electronics Technology Group Corporation 48th Research Institute;
• Dongguan Lingkong Remote Sensing Technology Co., Ltd.;
• Eagles Men Aviation Science and Technology Group Co., Ltd. (EMAST);
• Guangzhou Tian-Hai-Xiang Aviation Technology Co., Ltd.;
• Shanxi Eagles Men Aviation Science and Technology Group Co., Ltd.
For the changes being made in this final rule, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on February 10, 2023, pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before March 13, 2023. Any such items not actually exported, reexported or transferred (in-country) before midnight, on March 13, 2023, require a license in accordance with this final rule.
On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-4852). ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule.
1. This rule has been determined to be not significant for purposes of Executive Order 12866.
2. Notwithstanding any other provision of law, no person is required to respond to or be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
3. This rule does not contain policies with federalism implications as that term is defined in Executive Order 13132.
4. Pursuant to section 1762 of the Export Control Reform Act of 2018, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date.
5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601,
Exports, Reporting and recordkeeping requirements, Terrorism.
Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:
50 U.S.C. 4801-4852; 50 U.S.C. 4601
Office of National Marine Sanctuaries (ONMS), National Ocean Service (NOS), National Oceanic and Atmospheric Administration (NOAA), Department of Commerce (DOC).
Final rule.
The National Oceanic and Atmospheric Administration (NOAA) is issuing this final rule to remove a provision from one section of the existing Flower Garden Banks National Marine Sanctuary (FGBNMS) regulations, regarding the resolution of conflicting Federal agency regulations by the Director of the Office of National Marine Sanctuaries.
This final rule is effective on March 16, 2023.
George P. Schmahl, Superintendent, Flower Garden Banks National Marine Sanctuary, 4700 Avenue U, Building 216, Galveston, Texas 77551, at 409-356-0383, or
George P. Schmahl, Superintendent, Flower Garden Banks National Marine Sanctuary, 4700 Avenue U, Building 216, Galveston, Texas 77551, at 409-356-0383, or
The National Marine Sanctuaries Act (NMSA) authorizes the Secretary of Commerce (Secretary) to designate and protect, as national marine sanctuaries, areas of the marine environment that are of special national significance due to their conservation, recreational, ecological, historical, scientific, cultural, archeological, educational, or aesthetic qualities. Day-to-day management of national marine sanctuaries is delegated by the Secretary to NOAA's ONMS. The primary objective of the NMSA is to protect nationally significant marine resources, including biological features such as coral reefs, and cultural resources, such as historic shipwrecks and archaeological sites. The mission of FGBNMS is to identify, protect, conserve, and enhance the natural and cultural resources, values, and qualities of the sanctuary and its regional environment for this and future generations.
FGBNMS is located in the northwestern Gulf of Mexico approximately 70 to 115 miles (113 to 185 kilometers) off the coasts of Texas and Louisiana. These offshore areas encompass a wide range of geologic features and habitat conditions that support several distinct biological communities, including the northernmost stony coral reefs in the continental United States. The banks, reefs, and similar formations provide the foundation for essential benthic habitats that support a wide variety of species. They are home to the most significant examples of coral and algal reefs, mesophotic and deepwater coral communities, and other biological assemblages in the Gulf of Mexico. The combination of location and geology makes FGBNMS extremely productive and diverse, and presents a unique set of challenges for managing and protecting its natural wonders.
When NOAA first designated FGBNMS on December 5, 1991 (56 FR 63634) and Congress subsequently passed a law recognizing the designation on January 17, 1992 (Pub. L. 102-251, Title I, Sec. 101), the sanctuary consisted of only two areas known as East and West Flower Garden Banks (56 FR 63634). Among other things, FGBNMS regulated a narrow range of activities, established permit and certification procedures, and exempted certain U.S. Department of Defense (DOD) activities from the sanctuary's prohibitions (56 FR 63634). The regulations also exempted activities necessary to respond to emergencies threatening life, property, or the environment (56 FR 63634). Those regulations became effective on January 18, 1994 (58 FR 65664). In 1996, Congress added Stetson Bank to the sanctuary (Pub. L. 104-283). The boundaries of Stetson Bank and West Flower Garden Bank were later amended to improve administrative efficiencies and increase the precision of all boundary coordinates based on new positioning technology (65 FR 81175, Dec. 22, 2000). Subsequently, on January 19, 2021, NOAA issued a final rule for the expansion of FGBNMS (86 FR 4953). The final rule went into effect on March 22, 2021 (86 FR 15404), and expanded the boundaries of FGBNMS from approximately 56 square miles to approximately 160 square miles (145 square kilometers to 414 square kilometers), and increased the number of protected reefs and banks (86 FR 4953). FGBNMS now protects East and West Flower Garden Banks, Stetson Bank, Horseshoe Bank, MacNeil Bank, Rankin/28 Fathom Banks, Bright Bank, Geyer Bank, Elvers Bank, McGrail Bank, Bouma Bank, Sonnier Bank, Rezak Bank, Sidner Bank, Parker Bank, and Aldrice Bank.
The areas designated as FGBNMS are currently managed by several Federal
This action responds to the issues raised by Federal agency partners during interagency review of the final rule to expand FGBNMS (86 FR 4953), and during interagency review of a separate, unrelated interim final rule to update and reorganize the existing sanctuary regulations and eliminate redundancies (87 FR 29606). Specifically, the Federal agency partners expressed concern that the sanctuary regulation at 15 CFR 922.122(b) does not reflect existing practice and may be an overreach of the ONMS Director's delegated authority under the NMSA. Specifically, section 922.122(b) provides that if a Federal agency regulation and a Sanctuary regulation conflict, then the regulation deemed by the Director of the ONMS as being more protective of sanctuary resources and qualities shall govern. The NMSA does not contain express language that prescribes how potential conflicts with other Federal regulations are to be resolved. The NMSA instead establishes a framework “to facilitate to the extent compatible with the primary objective of resource protection, all public and private uses of the resources of these marine areas not prohibited pursuant to other authorities” (16 U.S.C. 1431(b)(6)). The NMSA also “provide[s] authority for comprehensive and coordinated conservation and management of . . . marine areas, and activities affecting them, in a manner which complements existing regulatory authorities” (16 U.S.C. 1431(b)(2)). To ensure sanctuary regulations facilitate compatible use and complement existing regulatory authorities, the NMSA directs NOAA to consult with other Federal agencies on the proposed designation of new sites or expansion of existing sites (16 U.S.C. 1433(b)(2), 1434(a)(4)). It is through this consultation process, which occurs before the designation or expansion of sanctuaries, that potential conflicts among Federal agency regulations are typically resolved or avoided. NOAA is unaware of any situation in which 15 CFR 922.122(b) has ever been triggered, and section 922.122(b) does not reflect NOAA's preferred approach to resolve potential interagency regulatory conflicts. Therefore, to address the concerns raised by Federal partners, NOAA finalizes the proposal to remove the existing language from 15 CFR 922.122(b) to reflect existing practice and better track the NMSA. The remaining paragraphs of 15 CFR 922.122 will remain unchanged.
A provision similar to 15 CFR 922.122(b) also appears in Article V of the terms of designation codified in appendix B of 15 CFR part 922, subpart L. This action does not modify that provision. Pursuant to section 304(a)(4) of the NMSA, the terms of designation may only be modified by the same procedures by which the designation is made. The process includes scoping, proposal, consultation with Federal agency partners and public review, as well as review by Congress. Because additional procedures are required to alter the terms of designation, NOAA is using regulatory action as the first step in the process.
NOAA received one comment in response to the proposed rule, and it is posted and publicly available on
NOAA's Policy and Procedures for Compliance with the National Environmental Policy Act (NEPA) and Related Authorities (NOAA Administrative Order (NAO) 216-6A and Companion Manual for NAO 216-6A) provide that all NOAA major Federal actions be reviewed with respect to environmental consequences on the human environment. Based on the NAO and Companion Manual, NOAA examined the proposed rule for its potential to impact the quality of the human environment and concluded that it is categorically excluded from the requirement to prepare an Environmental Assessment or Environmental Impact Statement in accordance with the NOAA Categorical Exclusion G7 because, this action is a notice of an administrative and legal nature, any future effects of subsequent actions are too broad, speculative, or conjectural to lend themselves to meaningful analysis and will be subject to later NEPA analysis, and there are no extraordinary circumstances precluding the application of this categorical exclusion. NOAA received no public comments related to effects on the human environment. As such, this final rule has been determined to be categorically excluded under G7 as described in the Companion Manual for NAO 216-6A, Appendix, page E-14, and which applies to preparation of policy directives, rules, regulations, and guidelines of an administrative, financial, legal, technical, or procedural nature, or for which the environmental effects are too broad, speculative or conjectural to lend themselves to meaningful analysis.
This final rule has been determined to be not significant within the meaning of Executive Order 12866.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities for purposes of the Regulatory Flexibility Act. The factual basis for the certification was published in the proposed rule and is not repeated here. No comments were received regarding this certification, but NOAA did receive one public comment about the evaluation of the insurance, capacity, or regulatory impacts on small businesses. However, NOAA has determined that said public comment is outside the scope of this rulemaking given the fact that this final rule is strictly administrative in nature, the amendment addresses how potential conflict among other Federal agency regulations and FGBNMS sanctuary regulations are to be resolved, and the final rule does not create any new requirements for small businesses nor does it create or remove any environmental protections. As a result, a regulatory flexibility analysis was not required and none was prepared.
Administrative practice and procedure, Marine resources, Natural resources.
Accordingly, for the reasons set forth above, NOAA amends part 922, title 15 of the Code of Federal Regulations as follows:
16 U.S.C. 1431
Federal Energy Regulatory Commission, Energy.
Final rule.
Pursuant to the authority delegated by the Commission's regulations, the Director of the Office of Energy Projects (OEP) computes and publishes the project cost and annual limits for natural gas pipelines blanket construction certificates for each calendar year.
This final rule is effective February 14, 2023 and establishes cost limits applicable from January 1, 2023, through December 31, 2023.
Daniel Green, Chief, Certificates Branch 2, Division of Pipeline Certificates, (202) 502-8755.
Section 157.208(d) of the Commission's Regulations provides for project cost limits applicable to construction, acquisition, operation, and miscellaneous rearrangement of facilities (Table I) authorized under the blanket certificate procedure (Order No. 234, 19 FERC ¶ 61,216). Section 157.215(a) specifies the calendar year dollar limit which may be expended on underground storage testing and development (Table II) authorized under the blanket certificate. Section 157.208(d) requires that the “limits specified in Tables I and II shall be adjusted each calendar year to reflect the ‘GDP implicit price deflator’ published by the Department of Commerce for the previous calendar year.”
Pursuant to § 375.308(x)(1) of the Commission's Regulations, the authority for the publication of such cost limits, as adjusted for inflation, is delegated to the Director of the Office of Energy Projects. The cost limits for calendar year 2023, as published in Table I of § 157.208(d) and Table II of § 157.215(a), are hereby issued.
This final rule is effective February 14, 2023. The provisions of 5 U.S.C. 804 regarding Congressional review of Final Rules does not apply to the Final Rule because the rule concerns agency procedure and practice and will not substantially affect the rights or obligations of non-agency parties. The final rule merely updates amounts published in the Code of Federal Regulations to reflect the Department of Commerce's latest annual determination of the Gross Domestic Product (GDP) implicit price deflator, a mathematical updating required by the Commission's existing regulations.
Administrative practice and procedure, Natural Gas, Reporting and recordkeeping requirements.
Accordingly, 18 CFR part 157 is amended as follows:
15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
(d) * * *
(a) * * *
(5) * * *
Office of Foreign Assets Control, Treasury.
Publication of web general licenses.
The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing seven general licenses (GLs) issued in the Venezuela Sanctions program: GLs 16, 16A, 16B, 16C, 17, 18, and 18A, each of which was previously made available on OFAC's website.
GLs 16, 17, and 18 were issued on March 22, 2019. See
OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Sanctions Compliance & Evaluation, 202-622-2490.
This document and additional information concerning OFAC are available on OFAC's website:
On March 22, 2019, OFAC issued GLs 16 and 17 to authorize certain transactions otherwise prohibited by Executive Order (E.O.) 13850 of November 1, 2018, “Blocking Property of Additional Persons Contributing to the Situation in Venezuela” (83 FR 55243, November 2, 2018). Subsequently, OFAC issued three further iterations of GL 16. On April 17, 2019, OFAC issued GL 16A, which superseded GL 16. On August 5, 2019, OFAC issued GL 16B, which superseded GL 16A and also authorized certain transactions otherwise prohibited by E.O. 13884 of August 5, 2019, “Blocking Property of the Government of Venezuela” (84 FR 38843, August 7, 2019). On November 22, 2019, OFAC incorporated the prohibitions of E.O. 13850, as well as any other Executive orders issued pursuant to the national emergency declared in E.O. 13692 of March 8, 2015, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela,” into the Venezuela Sanctions Regulations, 31 CFR part 591 (VSR). On March 12, 2020, OFAC issued GL 16C, which superseded GL 16B, pursuant to the VSR. GL 17 expired on May 21, 2019.
Also on March 22, 2019, OFAC issued GL 18 to authorize certain transactions otherwise prohibited by E.O. 13808 of August 24, 2017, “Imposing Additional Sanctions with Respect to the Situation in Venezuela” (82 FR 41155, August 29, 2017) or E.O. 13850. On August 5, 2019, OFAC issued GL 18A, which superseded GL 18 and also authorized certain transactions otherwise prohibited by E.O. 13884.
Each GL was made available on OFAC's website (
(a) Except as provided in paragraph (d) of this general license, the following transactions and activities involving Banco
(1) All transactions and activities ordinarily incident and necessary to maintaining, operating, or closing accounts of U.S. persons in Banco de Venezuela or Banco Bicentenario del Pueblo; and
(2) All transactions and activities ordinarily incident and necessary to processing noncommercial, personal remittances.
(b) Noncommercial, personal remittances do not include charitable donations of funds to or for the benefit of an entity or funds transfers for use in supporting or operating a business, including a family-owned business.
(c) U.S. financial institutions processing transactions authorized by paragraph (a)(2) of this general license may rely on the originator of a funds transfer with regard to compliance with paragraph (a)(2), provided that the transferring institution does not know or have reason to know that the funds transfer is not in compliance with paragraph (a)(2).
(d) This general license does not authorize:
(1) Any transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela (BANDES) or Banco Bandes Uruguay S.A. (Bandes Uruguay);
(2) The unblocking of any property blocked pursuant to E.O. 13850, as amended by E.O. 13857, or any part of 31 CFR chapter V, except as authorized by paragraph (a); or
(3) Any transaction that is otherwise prohibited under E.O. 13850 of November 1, 2018, E.O. 13835 of May 21, 2018, E.O. 13827 of March 19, 2018, E.O. 13808 of August 24, 2017, E.O. 13692 of March 8, 2015, each as amended by E.O. 13857, or any part of 31 CFR chapter V, or any transactions or dealings with any blocked person other than the blocked persons described in paragraph (a) of this general license.
Dated: March 22, 2019.
(a) Except as provided in paragraph (e) of this general license, all transactions and activities ordinarily incident and necessary to maintaining, operating, or closing accounts of U.S. persons in Banco de Venezuela, S.A. Banco Universal (Banco de Venezuela) or Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunas, Banco Universal C.A. (Banco Bicentenario del Pueblo) prohibited by Executive Order (E.O.) 13850, as amended by E.O. 13857 of January 25, 2019 (“Taking Additional Steps to Address the National Emergency With Respect to Venezuela”) (E.O. 13850), are authorized through 12:01 a.m. eastern daylight time, March 22, 2020.
(b) Except as provided in paragraph (e) of this general license, all transactions and activities ordinarily incident and necessary to processing noncommercial, personal remittances involving Banco de Venezuela, Banco Bicentenario del Pueblo, or Banco Central de Venezuela are authorized through 12:01 a.m. eastern daylight time, March 22, 2020.
(c) Noncommercial, personal remittances do not include charitable donations of funds to or for the benefit of an entity or funds transfers for use in supporting or operating a business, including a family-owned business.
(d) U.S. financial institutions processing transactions authorized by paragraph (a) or (b) of this general license may rely on the originator of a funds transfer with regard to compliance with paragraph (a) or (b), provided that the transferring institution does not know or have reason to know that the funds transfer is not in compliance with paragraph (a) or (b).
(e) This general license does not authorize:
(1) Any transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela (BANDES) or Banco Bandes Uruguay S.A. (Bandes Uruguay);
(2) The unblocking of any property blocked pursuant to E.O. 13850 or any part of 31 CFR chapter V, except as authorized by paragraph (a) or (b); or
(3) Any transaction that is otherwise prohibited under E.O. 13850, E.O. 13835 of May 21, 2018, E.O. 13827 of March 19, 2018, E.O. 13808 of August 24, 2017, E.O. 13692 of March 8, 2015, each as amended by E.O. 13857, or any part of 31 CFR chapter V, or any transactions or dealings with any blocked person other than the blocked persons described in paragraph (a) or (b) of this general license.
(f) Effective April 17, 2019, General License No. 16, dated March 22, 2019, is replaced and superseded in its entirety by this General License No. 16A.
Dated: April 17, 2019.
(a) Except as provided in paragraph (e) of this general license, all transactions and activities ordinarily incident and necessary to maintaining, operating, or closing accounts of U.S. persons in Banco de Venezuela, S.A. Banco Universal (Banco de Venezuela), Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunas, Banco Universal C.A. (Banco Bicentenario del Pueblo), or Banco del Tesoro, C.A. Banco Universal (Banco del Tesoro) prohibited by Executive Order (E.O.) 13850, as amended by E.O. 13857 of January 25, 2019, or E.O. of August 5, 2019, are authorized through 12:01 a.m. eastern daylight time, March 22, 2020.
(b) Except as provided in paragraph (e) of this general license, all transactions and activities ordinarily incident and necessary to processing noncommercial, personal remittances involving Banco de Venezuela, Banco Bicentenario del Pueblo, Banco del Tesoro, or Banco Central de Venezuela are authorized through 12:01 a.m. eastern daylight time, March 22, 2020.
(c) Noncommercial, personal remittances do not include charitable donations of funds to or for the benefit of an entity or funds transfers for use in supporting or operating a business, including a family-owned business.
(d) U.S. financial institutions processing transactions authorized by paragraph (a) or (b) of this general license may rely on the originator of a funds transfer with regard to compliance with paragraph (a) or (b), provided that the transferring institution does not know or have reason to know that the funds transfer is not in compliance with paragraph (a) or (b).
(e) This general license does not authorize:
(1) Any transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela (BANDES) or Banco Bandes Uruguay S.A. (Bandes Uruguay);
(2) The unblocking of any property blocked pursuant to E.O. of August 5, 2019, E.O. 13850, as amended, or any part of 31 CFR chapter V, except as authorized by paragraph (a) or (b); or
(3) Any transaction that is otherwise prohibited by E.O. of August 5, 2019, or E.O. 13850, E.O. 13835 of May 21, 2018, E.O. 13827 of March 19, 2018, E.O. 13808 of August 24, 2017, or E.O. 13692 of March 8, 2015, each as amended by E.O. 13857, or any part of 31 CFR chapter V, or any transactions or dealings with any blocked person other than the blocked persons described in paragraph (a) or (b) of this general license.
(f) Effective August 5, 2019, General License No. 16A, dated April 17, 2019, is replaced and superseded in its entirety by this General License No. 16B.
Dated: August 5, 2019.
(a) Except as provided in paragraph (e) of this general license, all transactions and activities prohibited by Executive Order (E.O.) 13850 of November 1, 2018, as amended by E.O. 13857 of January 25, 2019,
(b) Except as provided in paragraph (e) of this general license, all transactions and activities prohibited by E.O. 13850, as amended, or by E.O. 13884, each as incorporated into the VSR, that are ordinarily incident and necessary to processing noncommercial, personal remittances involving Banco de Venezuela, Banco Bicentenario del Pueblo, Banco del Tesoro, or Banco Central de Venezuela are authorized.
(c) Noncommercial, personal remittances do not include charitable donations of funds to or for the benefit of an entity or funds transfers for use in supporting or operating a business, including a family-owned business.
(d) U.S. financial institutions processing transactions authorized by paragraph (a) or (b) of this general license may rely on the originator of a funds transfer with regard to compliance with paragraph (a) or (b), provided that the transferring institution does not know or have reason to know that the funds transfer is not in compliance with paragraph (a) or (b).
(e) This general license does not authorize:
(1) Any transactions or activities with Banco de Desarrollo Economico y Social de Venezuela (BANDES) or Banco Bandes Uruguay S.A. (Bandes Uruguay);
(2) The unblocking of any property blocked pursuant to the VSR, or any other part of 31 CFR chapter V, except as authorized by paragraph (a) or (b); or
(3) Any transactions or activities otherwise prohibited by the VSR, or any other part of 31 CFR chapter V, or any transactions or activities with any blocked person other than the blocked persons identified in paragraph (a) or (b) of this general license.
(f) Effective March 12, 2020, General License No. 16B, dated August 5, 2019, is replaced and superseded in its entirety by this General License No. 16C.
Dated: March 12, 2020.
(a) Except as provided in paragraph (b) of this general license, all transactions and activities prohibited by Executive Order (E.O.) 13850, as amended by E.O. 13857 of January 25, 2019 (“Taking Additional Steps to Address the National Emergency With Respect to Venezuela”), that are ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving Banco de Venezuela, S.A. Banco Universal (Banco de Venezuela), Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunas, Banco Universal C.A. (Banco Bicentenario del Pueblo), or Banco Prodem S.A. that were in effect prior to March 22, 2019, are authorized through 12:01 a.m. eastern daylight time, May 21, 2019.
(b) This general license does not authorize:
(1) Any transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela (BANDES) or Banco Bandes Uruguay S.A. (Bandes Uruguay);
(2) The unblocking of any property blocked pursuant to E.O. 13850, as amended by E.O. 13857, or any part of 31 CFR chapter V, except as authorized by paragraph (a); or
(3) Any transactions or dealings otherwise prohibited by E.O. 13850 of November 1, 2018, E.O. 13835 of May 21, 2018, E.O. 13827 of March 19, 2018, E.O. 13808 of August 24, 2017, E.O. 13692 of March 8, 2015, each as amended by E.O. 13857, or any part of 31 CFR chapter V, or any transactions or dealings with any blocked person other than the blocked persons identified in paragraph (a) of this general license.
Dated: March 22, 2019.
(a) Except as provided in paragraph (c) of this general license, all transactions and activities prohibited by Section 1(b) of Executive Order (E.O.) 13808, as amended by E.O. 13857 of January 25, 2019 (“Taking Additional Steps to Address the National Emergency With Respect to Venezuela”), or E.O. 13850, as amended by E.O. 13857, that are ordinarily incident and necessary to maintain or operate Integración Administradora de Fondos de Ahorro Previsional, S.A., whose fund administrator is owned 50 percent or more by Banco Bandes Uruguay S.A. (Bandes Uruguay), are authorized.
(b) For the purposes of this general license, the transactions and activities authorized in paragraph (a) include the purchase from or sale to the Integración Administradora de Fondos de Ahorro Previsional, S.A. of securities or serving as a custodian for securities held by the Integración Administradora de Fondos de Ahorro Previsional, S.A.
(c) This general license does not authorize:
(1) Any transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela (BANDES), or any transactions or dealings with Bandes Uruguay, other than as authorized by paragraph (a) of this general license;
(2) The unblocking of any property blocked pursuant to E.O. 13850, as amended by E.O. 13857, or any part of 31 CFR chapter V, except as authorized by paragraph (a); or
(3) Any transaction that is otherwise prohibited under E.O. 13850 of November 1, 2018, E.O. 13835 of May 21, 2018, E.O. 13827 of March 19, 2018, E.O. 13808 of August 24, 2017, E.O. 13692 of March 8, 2015, each as amended by E.O. 13857, or any part of 31 CFR chapter V, or any transactions or dealings with any blocked person other than the blocked persons described in paragraph (a) of this general license.
Dated: March 22, 2019.
(a) Except as provided in paragraph (c) of this general license, all transactions and activities prohibited by Section l(b) of Executive Order (E.O.) 13808 or by E.O. 13850, each as amended by E.O. 13857 of January 25, 2019, or by E.O. of August 5, 2019, that are ordinarily incident and necessary to maintain or operate Integración Administradora de Fondos de Ahorro Previsional, S.A., whose fund administrator is owned 50 percent or more by Banco Bandes Uruguay S.A. (Bandes Uruguay), are authorized.
(b) For the purposes of this general license, the transactions and activities authorized in paragraph (a) include the purchase from or sale to the Integración Administradora de Fondos de Ahorro Previsional, S.A. of securities or serving as a custodian for securities held by the Integración Administradora de Fondos de Ahorro Previsional, S.A.
(c) This general license does not authorize:
(1) Any transactions or dealings with Banco de Desarrollo Economico y Social de Venezuela (BANDES), or any transactions or dealings with Bandes Uruguay, other than as authorized by paragraph (a) of this general license;
(2) The unblocking of any property blocked pursuant to E.O. of August 5, 2019, or E.O. 13850, as amended, or any part of 31 CFR chapter V, except as authorized by paragraph (a); or
(3) Any transaction that is otherwise prohibited by E.O. of August 5, 2019, or E.O.
(d) Effective August 5, 2019, General License No. 18, dated March 22, 2019, is replaced and superseded in its entirety by this General License No. 18A.
Dated: August 5, 2019.
Office of Foreign Assets Control, Treasury.
Publication of Web General License.
The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing general license (GL) 31B issued pursuant to the Venezuela Sanctions Regulations. GL 31B was previously made available on OFAC's website.
GL 31B was issued on January 9, 2023. See
OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Sanctions Compliance & Evaluation, 202-622-2490.
This document and additional information concerning OFAC are available on OFAC's website:
On January 9, 2023, OFAC issued GL 31B to authorize certain transactions otherwise prohibited by the Venezuela Sanctions Regulations, 31 CFR part 591. The GL was made available on OFAC's website (
(a) Except as provided in paragraph (c) of this general license, U.S. persons are authorized to engage in all transactions prohibited by Executive Order (E.O.) 13884, as incorporated into the Venezuela Sanctions Regulations, 31 CFR part 591 (the VSR), involving the IV Venezuelan National Assembly seated on January 5, 2016 (“IV National Assembly”); its Delegated Commission; any entity established by, or under the direction of, the IV National Assembly to exercise its mandate (“IV National Assembly Entity”); or any person appointed or designated by, or whose appointment or designation is retained by, the IV National Assembly, its Delegated Commission, or a IV National Assembly Entity, including their respective members and staff.
(b) Except as provided in paragraph (c) of this general license, U.S. persons are authorized to engage in all transactions prohibited by E.O. 13850, as amended by E.O. 13857, and incorporated into the VSR, involving any person appointed or designated by, or whose appointment or designation is retained by, the IV National Assembly, its Delegated Commission, or a IV National Assembly Entity to the board of directors (including any ad hoc board of directors) or as an executive officer of a Government of Venezuela entity (including entities owned or controlled, directly or indirectly, by the Government of Venezuela).
(c) This general license does not authorize:
(1) Any transaction involving the Venezuelan National Constituent Assembly convened by Nicolas Maduro or the National Assembly seated on January 5, 2021, including their respective members and staff; or
(2) Any transaction otherwise prohibited by the VSR, including transactions involving any person blocked pursuant to the VSR other than the persons identified in paragraph (a) or (b) of this general license, unless separately authorized.
(d) Effective January 9, 2023, General License No. 31A, dated January 4, 2021, is replaced and superseded in its entirety by this General License No. 31B.
Dated: January 9, 2023.
Office of Foreign Assets Control, Treasury.
Publication of web general license.
The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing two general licenses (GL) issued pursuant to the Global Terrorism Sanctions Regulations, GLs 21A and 21B, which of which was previously made available on OFAC's website.
GL 21A was issued on December 14, 2022. See
OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Sanctions Compliance & Evaluation, 202-622-2490.
This document and additional information concerning OFAC are available on OFAC's website:
On December 14, 2022, OFAC issued GL 21A to authorize certain transactions otherwise prohibited by the Global Terrorism Sanctions Regulations, 31 CFR part 594. GL 21A superseded GL 21. Subsequently, OFAC issued one further iteration of GL 21: on January 13, 2023, OFAC issued GL 21B, which superseded GL 21A. Each GL was made available on OFAC's website (
(a) Except as provided in paragraph (c) of this general license, all transactions that are ordinarily incident and necessary to one of the following activities involving the persons or vessels described in paragraph (b) of this
(1) The safe docking and anchoring of any of the blocked vessels listed in paragraph (b) of this general license (“blocked vessels”) in port;
(2) The preservation of the health or safety of the crew of any of the blocked vessels; and
(3) Emergency repairs of any of the blocked vessels or environmental mitigation or protection activities relating to any of the blocked vessels.
(b) The authorization in paragraph (a) of this general license applies to the following blocked persons and vessels listed on the Office of Foreign Assets Control's Specially Designated Nationals and Blocked Persons List and any entity in which any of the following persons own, directly or indirectly, a 50 percent or greater interest:
(c) This general license does not authorize:
(1) The entry into any new commercial contracts involving the property or interests in property of any of the blocked persons or vessels described in paragraph (b) of this general license, except as authorized by paragraph (a);
(2) The offloading of any cargo onboard any of the blocked vessels; or
(3) Any transactions otherwise prohibited by the GTSR, including transactions involving the property or interests in property of any person blocked pursuant to the GTSR, other than the blocked persons described in paragraph (b) of this general license, unless separately authorized.
(d) Effective December 14, 2022, General License No. 21, dated November 15, 2022, is replaced and superseded in its entirety by this General License No. 21A.
Dated: December 14, 2022.
(a) Except as provided in paragraph (c) of this general license, all transactions that are ordinarily incident and necessary to one of the following activities involving the persons or vessels described in paragraph (b) of this general license that are prohibited by the Global Terrorism Sanctions Regulations, 31 CFR part 594 (GTSR), are authorized through 12:01 a.m. eastern daylight time, April 13, 2023, provided that any payment to a blocked person must be made into a blocked account in accordance with the GTSR:
(1) The safe docking and anchoring of any of the blocked vessels listed in paragraph (b) of this general license (“blocked vessels”) in port;
(2) The preservation of the health or safety of the crew of any of the blocked vessels; and
(3) Emergency repairs of any of the blocked vessels or environmental mitigation or protection activities relating to any of the blocked vessels.
(b) The authorization in paragraph (a) of this general license applies to the following blocked persons and vessels listed on the Office of Foreign Assets Control's Specially Designated Nationals and Blocked Persons List and any entity in which any of the following persons own, directly or indirectly, a 50 percent or greater interest:
(c) This general license does not authorize:
(1) The entry into any new commercial contracts involving the property or interests in property of any of the blocked persons or vessels described in paragraph (b) of this general license, except as authorized by paragraph (a);
(2) The offloading of any cargo onboard any of the blocked vessels; or
(3) Any transactions otherwise prohibited by the GTSR, including transactions involving the property or interests in property of any person blocked pursuant to the GTSR, other than the blocked persons described in paragraph (b) of this general license, unless separately authorized.
(d) Effective January 12, 2023, General License No. 21A, dated December 14, 2022, is replaced and superseded in its entirety by this General License No. 21B.
Dated: December 14, 2022.
Postal Service
Final rule.
On November 21, 2022, the Postal Service published notice of international product changes concerning requests by the Postal Service for classification changes filed with the Postal Regulatory Commission (PRC) about Priority Mail International Regional Rate Boxes. On December 20, 2022, the PRC favorably reviewed the classification changes which have an effective date of January 22, 2023. Therefore, the Postal Service is revising
Effective: February 14, 2023.
Dale Kennedy at 202-268-6592 or Kathy Frigo at 202-268-4178.
On November 10, 2022, in PRC Docket No. MC2023-45, the Postal Service filed a request to remove Priority Mail International Regional Rate Boxes—Non-Published Rates and Priority Mail International Regional Rate Boxes Contracts from the Competitive Price List. In addition, on November 10, 2022, in PRC Docket No. MC2023-46, the Postal Service filed a request for changes to the Global Reseller Expedited Package Contracts product to remove mention of Priority Mail International Regional Rate Box. On
As stated in the PRC's Order No. 6378 issued in Docket Nos. MC2023-45 and MC2023-46 on December 20, 2022, the PRC favorably reviewed the requests, which have an effective date of January 22, 2023. The order is available on the PRC's website at
The Postal Service adopts the described changes to the IMM, which is incorporated by reference in the
Foreign relations, International postal services.
Accordingly, the Postal Service amends Mailing Standards of the United States Postal Service, International Mail Manual (IMM), incorporated by reference in the Code of Federal Regulations as follows (see 39 CFR 20.1):
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401, 403, 404, 407, 414, 416, 3001-3011, 3201-3219, 3403-3406, 3621, 3622, 3626, 3632, 3633, and 5001.
[Remove from the list the entry for “Priority Mail International Regional Rate.”]
[Revise 232.5 by removing the title of 232.51 and the title and text of 232.52]
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is approving a portion of a state implementation plan (SIP) revision submitted by the State of Delaware, through the Delaware Department of Natural Resources and Environmental Control (DNREC), on November 22, 2016. The revision was submitted in response to EPA's finding of substantial inadequacy and SIP call published on June 12, 2015, which included certain provisions in the Delaware SIP related to excess emissions during startup, shutdown, and malfunction (SSM) events. EPA is approving two specific provisions of the submitted SIP revision and finds that such SIP revision corrects some of the deficiencies in Delaware's SIP identified in the 2015 SSM SIP Action. EPA plans to act on the remainder of the SIP revision in a separate action or actions.
This final rule is effective on March 16, 2023.
EPA has established a docket for this action under Docket ID Number EPA-R03-OAR-2017-0090. All documents in the docket are listed on the
Mallory Moser, Planning & Implementation Branch (3AD30), Air & Radiation Division, U.S. Environmental Protection Agency, Region III, Four Penn Center, 1600 John F. Kennedy Boulevard, Philadelphia, Pennsylvania 19103. The telephone number is (215) 814-2030. Ms. Moser can also be reached via electronic mail at
Throughout this document, wherever “we,” “us,” or “our” is used, it means the EPA.
On October 12, 2022 (87 FR 61555), we proposed to approve two specific provisions of a SIP revision submitted by the State of Delaware, through DNREC, on November 22, 2016. In that proposal, we also proposed to determine that the portion of the SIP revision we are approving corrects some of the deficiencies with respect to Delaware's SIP that we identified in our June 12, 2015 action entitled “State Implementation Plans: Response to Petition for Rulemaking; Restatement and Update of EPA's SSM Policy Applicable to SIPs; Findings of Substantial Inadequacy; and SIP Calls to Amend Provisions Applying to Excess Emissions During Periods of Startup, Shutdown, and Malfunction” (2015 SSM SIP Action). 80 FR 33840. The reasons for our proposed approval and determination are stated in the proposal for this action and will not be restated here. 87 FR 61555 (October 12, 2022). The public comment period for our proposed approval and determination ended on November 14, 2022. One comment was received and is described below.
Delaware submitted a SIP revision on November 22, 2016, in response to the SIP call issued in the 2015 SSM SIP Action. Delaware's 2016 SIP submission
EPA received one comment which can be found in the docket. The commenter expressed support for this action to the extent that it approved Delaware's revision to correct two of the SSM exemptions identified in the 2015 SSM SIP Action. However, the commenter urged EPA to take action to address the other four SSM provisions in Delaware's SIP that were identified in the 2015 SSM SIP Action. EPA acknowledges this comment supporting the removal of the two provisions at issue in this action, and notes that additional actions are planned for the other Delaware SIP provisions cited in the 2015 SSM SIP Action.
EPA is approving the portion of Delaware's November 22, 2016, SIP submission addressing 7 DE Admin. Code 1124 Section 1.4, and 7 DE Admin. Code 1142 Section 2.3.1.6. EPA has also determined this SIP revision partially corrects the deficiency identified in EPA's 2015 SSM SIP Action. EPA will address the remaining deficiencies in 7 DE Admin. Code 1104 Section 1.5, 7 DE Admin. Code 1105 Section 1.7, 7 DE Admin. Code 1109 Section 1.4, and 7 DE Admin. Code 1114 Section 1.3 in a separate action or actions.
In this document, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of the State of Delaware's revised 7 DE Admin Code 1124, Control of Volatile Organic Compound Emissions, and 1142, Specific Emission Control Requirements, as described in Section II of this preamble and set forth below in the amendments to part 52. EPA has made, and will continue to make, these materials generally available through
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• 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
• 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, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the State, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by April 17, 2023. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed and shall not postpone the effectiveness of such rule or action. This action, which corrects two of the deficiencies in Delaware's SIP identified in the 2015 SSM SIP Action may not be challenged later in proceedings to enforce its requirements (See section 307(b)(2)).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Volatile organic compounds.
For the reasons stated in the preamble, the EPA amends 40 CFR part 52 as follows:
42 U.S.C. 7401
The revisions read as follows:
(c) * * *
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted by the State of New Hampshire. This revision establishes reasonably available control technology (RACT) requirements for Fujifilm Dimatix Incorporated located in Lebanon, NH. The intended effect of this action is to approve the state's order for this facility into the New Hampshire SIP. This action is being taken in accordance with the Clean Air Act (CAA).
This rule is effective on March 16, 2023.
EPA has established a docket for this action under Docket Identification No. EPA-R01-OAR-2022-0866. All documents in the docket are listed on the
Michele Kosin, Physical Scientist, Air Quality Planning Unit, Air Programs Branch (Mail Code OEP5-MI), U.S. Environmental Protection Agency, Region 1, 5 Post Office Square, Suite 100, Boston, Massachusetts 02109-3912; (617) 918-1175;
Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.
On November 15, 2022 (87 FR-68415), EPA published a notice of proposed rulemaking (NPRM) for the State of New Hampshire. The NPRM proposed approval of revisions to the New Hampshire SIP consisting of an order establishing reasonably available control technology (RACT) requirements to limit emissions of volatile organic compounds (VOCs) for Fujifilm Dimatix, Inc. located in Lebanon, New Hampshire. The formal SIP revision was submitted by New Hampshire on August 26, 2021.
Other specific requirements of New Hampshire's RACT orders and the rationale for EPA's proposed action are explained in the NPRM and will not be restated here. No public comments were received on the NPRM.
EPA is approving RACT Order RO-0006, dated July 8, 2021, establishing RACT for Fujifilm Dimatix, Inc. to limit emissions of VOCs as a revision to the New Hampshire SIP.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference RACT Order RO-0006, dated July 8, 2021, issued to Fujifilm Dimatix, Inc., discussed in the Final Action section of this preamble. The EPA has made, and will continue to make, these documents generally available through
Under the Clean Air Act, 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, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• 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
• 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 Clean Air Act; 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 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 Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by April 17, 2023. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
Part 52 of chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(d) * * *
Environmental Protection Agency (EPA).
Final rule.
This regulation establishes an exemption from the requirement of a tolerance for residues of glycerides, soya mono- and di-, ethoxylated (CAS Reg. No. 68553-06-0) when used as an inert ingredient in a pesticide chemical formulation. Spring Regulatory Sciences on behalf of Nouryon Chemicals LLC (USA), submitted a petition to EPA under the Federal Food, Drug, and Cosmetic Act (FFDCA), requesting an exemption from the requirement of a tolerance. This regulation eliminates the need to establish a maximum permissible level for residues of glycerides, soya mono- and di-, ethoxylated on food or feed commodities when used in accordance with the terms of those exemptions.
This regulation is effective February 14, 2023. Objections and requests for hearings must be received on or before April 17, 2023 and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2021-0320, is available at
Daniel Rosenblatt, Registration Division (7505T), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; main telephone number: (202) 566-2875; email address:
You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code 112).
• Food manufacturing (NAICS code 311).
• Pesticide manufacturing (NAICS code 32532).
You may access a frequently updated electronic version of 40 CFR part 180 through the Office of the Federal Register's e-CFR site at
Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2021-0320 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before April 17, 2023. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).
In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2021-0320, by one of the following methods:
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Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
In the
Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and use in residential settings but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing an exemption from the requirement of a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . . .” and specifies factors EPA is to consider in establishing an exemption.
EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be shown that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.
Consistent with FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action and considered its validity, completeness and reliability and the relationship of this information to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. In the case of certain chemical substances that are defined as polymers, the Agency has established a set of criteria to identify categories of polymers expected to present minimal or no risk. The definition of a polymer is given in 40 CFR 723.250(b) and the exclusion criteria for identifying these low-risk polymers are described in 40 CFR 723.250(d). Glycerides, soya mono- and di-, ethoxylated (CAS Reg. No. 68553-06-0) conforms to the definition of a polymer given in 40 CFR 723.250(b) and meets the following criteria that are used to identify low-risk polymers.
1. The polymer is not a cationic polymer nor is it reasonably anticipated to become a cationic polymer in a natural aquatic environment.
2. The polymer does contain as an integral part of its composition at least two of the atomic elements carbon, hydrogen, nitrogen, oxygen, silicon, and sulfur.
3. The polymer does not contain as an integral part of its composition, except as impurities, any element other than those listed in 40 CFR 723.250(d)(2)(ii).
4. The polymer is neither designed nor can it be reasonably anticipated to substantially degrade, decompose, or depolymerize. An available biodegradation study supports that glycerides, soya mono- and di-, ethoxylated is not readily biodegradable (MRID: 51796501).
5. The polymer is manufactured or imported from monomers and/or reactants that are already included on the TSCA Chemical Substance Inventory or manufactured under an applicable TSCA section 5 exemption.
6. The polymer is not a water absorbing polymer with a number average molecular weight (MW) greater than or equal to 10,000 Daltons.
7. The polymer does not contain certain perfluoroalkyl moieties consisting of a CF
Additionally, the polymer also meets as required the following exemption criteria: specified in 40 CFR 723.250(e):
The polymer's number average MW of 1,500 Daltons is greater than 1,000 and less than 10,000 Daltons. The polymer contains less than 10% oligomeric material below MW 500 and less than 25% oligomeric material below MW 1,000, and the polymer does not contain any reactive functional groups.
Thus, glycerides, soya mono- and di-, ethoxylated meets the criteria for a polymer to be considered low risk under 40 CFR 723.250. Additionally, no soy protein is present as an impurity. Based on its conformance to the criteria in this unit, no mammalian toxicity is anticipated from dietary, inhalation, or dermal exposure to glycerides, soya mono- and di-, ethoxylated.
For the purposes of assessing potential exposure under this exemption, EPA considered that glycerides, soya mono- and di-, ethoxylated could be present in all raw and processed agricultural commodities and drinking water, and that non-occupational non-dietary exposure was possible. The number average MW of glycerides, soya mono- and di-, ethoxylated is 1,500 Daltons. Generally, a polymer of this size would be poorly absorbed through the intact gastrointestinal tract or through intact human skin. Since glycerides, soya mono- and di-, ethoxylated conform to the criteria that identify a low-risk polymer, there are no concerns for risks associated with any potential exposure scenarios that are reasonably foreseeable. The Agency has determined that a tolerance is not necessary to protect the public health.
Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular
EPA has not found glycerides, soya mono- and di-, ethoxylated to share a common mechanism of toxicity with any other substances, and glycerides, soya mono- and di-, ethoxylated does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance exemption, therefore, EPA has assumed that glycerides, soya mono- and di-, ethoxylated does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's website at
Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold 10X margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. Due to the expected low toxicity of glycerides, soya mono- and di-, ethoxylated, EPA has not used a safety factor analysis to assess the risk. For the same reasons no additional safety factor is needed for assessing risk to infants and children.
Based on the conformance to the criteria used to identify a low-risk polymer, EPA concludes that there is a reasonable certainty of no harm to the U.S. population, including infants and children, from aggregate exposure to residues of glycerides, soya mono- and di-, ethoxylated.
An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance without any numerical limitation.
Accordingly, EPA finds that exempting residues of glycerides, soya mono- and di-, ethoxylated from the requirement of a tolerance will be safe.
This action establishes a tolerance exemption under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501
Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance exemption in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
This action directly regulates growers, food processors, food handlers, and food retailers, not States or Tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or Tribal Governments, on the relationship between the National Government and the States or Tribal Governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian Tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501
This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.
Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows:
21 U.S.C. 321(q), 346a and 371.
Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy.
Notice of public meetings and webinars.
The U.S. Department of Energy (DOE or the Department) announces public meetings and webinars for the Commercial Unitary Air Conditioner and Commercial Unitary Heat Pump (CUAC and CUHP) working group.
See the
The next several rounds of public meetings will be held at the U.S. Department of Energy, Forrestal Building, 1000 Independence Avenue SW, Washington, DC 20585-0121. Please see the
Mr. Lucas Aiden, U.S. Department of Energy, Office of Building Technologies, EE-5B, 950 L'Enfant Plaza SW, Washington, DC 20024. Telephone: (202) 287-5904. Email:
On July 7, 2022, the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) met and passed the recommendation to form a CUAC and CUHP working group to meet and discuss and, if possible, reach a consensus on proposed Federal test procedures and energy conservation standards for CUACs and CUHPs. On August 2, 2022, DOE published a notice of intent to establish a working group for CUACs and CUHPs to negotiate recommended test procedures and energy conservations standards for CUACs and CUHP equipment. Once the working group reaches consensus on recommended test procedures and energy conservation standards, these recommendations are made to ASRAC, which may then use such consensus as the basis for making a recommendation to the Department. The Department, consistent with its legal obligations, may use such consensus as the basis of a rulemaking, which then is published in the
The working group for CUACs and CUHPs held public meetings on September 20-21, 2022, October 11-12, 2022, November 9-10, 2022, November 29-30, 2022, December 7-8, 2022, and December 14-15, 2022. As a result of these meetings, the working group successfully reached consensus on an amended test procedure for CUAC and CUHP equipment. This notice announces public meetings to begin negotiations in an attempt to reach consensus on energy conservation standards for CUACs and CUHPs.
DOE will host a public meeting and webinar on the following dates:
• Wednesday, February 22nd, 2023 from 10:00 a.m. to 5:00 p.m. at U.S. Department of Energy, Forrestal Building, Room 6E-069.
• Thursday, February 23rd, 2023 from 9:00 a.m. to 3:00 p.m. at U.S. Department of Energy, Forrestal Building, Room 6E-069.
• Tuesday, March 7th, 2023 from 10:00 a.m. to 5:00 p.m. at U.S. Department of Energy, Forrestal Building, Room 4A-104.
• Wednesday, March 8th, 2023 from 9:00 a.m. to 3:00 p.m. at U.S. Department of Energy, Forrestal Building, Room 4A-104.
• Tuesday, March 21st, 2023 from 10:00 a.m. to 5:00 p.m. at U.S. Department of Energy, Forrestal Building, Room 1E-245.
• Wednesday, March 22nd, 2023 from 9:00 a.m. to 3:00 p.m. at U.S. Department of Energy, Forrestal Building, Room 1E-245.
The times, dates, and locations of the public meetings are listed in the
Please note that foreign nationals participating in the public meeting or webinar are subject to advance security screening procedures which require advance notice prior to attendance at the public meeting. If a foreign national wishes to participate in the public meeting or webinar, please inform DOE as soon as possible by contacting Ms. Regina Washington at (202) 586-1214 or by email:
Anyone attending the meetings will be required to present a government photo identification, such as a passport, driver's license, or government identification. Due to the required security screening upon entry, individuals attending should arrive early to allow for the extra time needed.
In addition, you can attend the public meeting via webinar. Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE's website:
Members of the public will be heard in the order in which they sign up for the Public Comment Period. Time allotted per speaker will depend on the number of individuals who wish to speak but will not exceed five minutes. Reasonable provisions will be made to include the scheduled oral statements on the agenda. A third-party neutral facilitator will make every effort to allow the presentations of views of all interested parties and to facilitate the orderly conduct of business.
Any person who has plans to present a prepared general statement may
ASRAC's Designated Federal Officer will preside at the public meetings and may also use a professional facilitator to aid discussion. The meetings will not be judicial or evidentiary-type public hearings, but DOE will conduct them in accordance with section 336 of EPCA (42 U.S.C. 6306). A court reporter will be present to record the proceedings and prepare a transcript. A transcript of each public meeting will be included on DOE's website:
The docket is available for review at:
This document of the Department of Energy was signed on February 7, 2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
Employee Benefits Security Administration, Labor.
Proposed program amendments and amendments to prohibited transaction exemption; reopening of comment period.
This document reopens the comment period with respect to amendments to the Voluntary Fiduciary Correction Program (VFC Program or Program) under Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and to the proposed amendment to Prohibited Transaction Exemption 2002-51 (PTE 2002-51), both published in the
The comment periods for the documents published on November 21, 2022, at 87 FR 70753 and 87 FR 71164, are reopened. Written comments should be submitted on or before April 17, 2023. The Department will notify the public of the availability of the amended and restated VFC Program in a subsequent
You may submit written comments, identified by RIN 1210-AB64, to one of the following addresses:
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Yolanda R. Wartenberg, Office of Regulations and Interpretations, EBSA, (202) 693-8500, for questions regarding the VFC Program amendments in this document; Susan Wilker, Office of Exemption Determinations, EBSA, (202) 693-8540, for questions regarding the proposed amendments to the associated class exemption PTE 2002-51; and James Butikofer, Office of Research and Analysis, EBSA, (202) 693-8410, for questions regarding the regulatory impact analysis. (These are not toll-free numbers.)
For general questions regarding the VFC Program: contact Dawn Miatech-Plaska, Office of Enforcement, EBSA, (202) 693-8691. For questions regarding specific applications and self-corrections under the VFC Program, contact the appropriate EBSA Regional Office listed in Appendix C of the document at 87 FR 71164 (Nov. 21, 2022). (These are not toll-free numbers.)
The Department of Labor's (Department) authority to establish the Voluntary Fiduciary Correction Program (VFC Program or Program) derives from its authority to enforce the fiduciary standards in Title I of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(2) and 1132(a)(5), and thereby to establish policies on how this authority will be implemented. The Department also has the authority under section 408(a) of ERISA (29 U.S.C. 1108) to issue exemptions from the prohibited transaction rules in sections 406 and 407 of ERISA (29 U.S.C. 1106 and 1107) and in section 4975 of the Internal Revenue Code (Code).
The Employee Benefits Security Administration (EBSA) originally adopted the VFC Program in 2002, and later revised it in 2005 and 2006.
H.R. 2617, Consolidated Appropriations Act, 2023 (CAA) was signed into law on December 29, 2022. CAA includes a number of provisions related to retirement and other types of plans in Division T, which is also cited as SECURE 2.0 Act of 2022 (SECURE 2.0). Section 305 of SECURE 2.0 provides for expansion of EPCRS to cover any “eligible inadvertent failure.” The term “eligible inadvertent failure” as defined in section 305(e) generally includes a failure that occurs despite the existence of practices and procedures that satisfy EPCRS standards and is not egregious, related to the diversion or misuse of plan assets, or related to an abusive tax avoidance transaction. Section 305(b) specifically provides for correction of an “eligible inadvertent failure” relating to a loan from a plan to a participant, and furthermore indicates that the Department shall treat any such loan failures self-corrected in accordance with applicable requirements as meeting the requirements of the VFC Program, although the Department may impose reporting or other procedural requirements. Section 305(g) contemplates the issuance of further guidance by the Department of Treasury (“Treasury”) on EPCRS to take into account the provisions of section 305.
Given the general effect of section 305 of SECURE 2.0 on EPCRS and the specific references to the VFC Program in connection with corrected loans to participants, the Department is reopening for 60 days the period for submitting comments on the amended and restated VFC Program and proposed amendment to PTE 2002-51.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a Clean Air Act (CAA) section 111(d) plan submitted by the South Carolina Department of Health and Environmental Control (SCDHEC) on January 19, 2022. This state plan was submitted to fulfill the requirements of the CAA and is responsive to EPA's promulgation of Emissions Guidelines and Compliance Times for municipal solid waste (MSW) landfills. The South
Written comments must be received on or before March 16, 2023.
Submit your comments, identified by Docket ID No. EPA-R04-OAR-2022-0741 at
Tracy Watson, Communities and Air Toxics Section, Air Analysis and Support Branch, Air and Radiation Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth St. SW, Atlanta, Georgia 30303. The telephone number is (404) 562-8998. Mr. Watson can also be reached via electronic mail at
On August 29, 2016, EPA finalized revised Standards of Performance for new MSW landfills and Emission Guidelines and Compliance Times for existing MSW landfills in 40 CFR part 60 subpart XXX and Cf, respectively (81 FR 59332 and 81 FR 59276). These actions were taken in accordance with section 111 of the CAA.
Section 111(d) of the CAA requires EPA to establish a procedure for a state to submit a plan to EPA which establishes standards of performance for any existing source of any air pollutant: (1) for which air quality criteria have not been issued or which is not included on a list published under CAA section 108 or emitted from a source category which is regulated under CAA section 112, but (2) to which a standard of performance under CAA section 111 would apply if such existing source were a new source. EPA established these requirements for state plan submittals in 40 CFR part 60, subpart B. State submittals under CAA sections 111(d) must be consistent with the relevant emission guidelines, in this instance 40 CFR part 60, subpart Cf, and the requirements of 40 CFR part 60, subpart B and 40 CFR part 62, subpart A. If the state plan is complete and approvable with reference to these requirements, EPA notifies the public, promulgates the plan pursuant to 40 CFR part 62, and delegates implementation and enforcement of the standards and requirements of the emission guidelines to the state under the terms of the state plan as published in the CFR.
On January 19, 2022, the SCDHEC submitted to EPA a formal section 111(d) plan for existing MSW landfills. The section 111(d) plan was submitted in response to the August 29, 2016, promulgation, and the March 26, 2020, subsequent amendments, of the emission guidelines requirements for MSW landfills, 40 CFR part 60, Cf (81 FR 59276 and 85 FR 17244, respectively).
EPA has reviewed the South Carolina section 111(d) plan submittal in the context of the plan completeness and approvability requirements of 40 CFR part 60, subparts B and Cf, and part 62, subpart A. EPA is proposing to determine that the submitted section 111(d) plan meets the above cited requirements. The South Carolina state plan submittal package includes all materials necessary to be deemed administratively and technically complete according to the criteria of 40 CFR 60.27. Included within the section 111(d) plan are regulations under the South Carolina Code of State Regulations Annotated (S.C. Code Ann. Regs.) specifically, S.C. Code Ann. Regs. 61-62.60, Subpart Cf—“Performance Standards and Compliance Times for Existing Municipal Solid Waste Landfills.” South Carolina houses its implementation and enforcement authority for the state plan requirements in this regulation. In this action, EPA is proposing to incorporate by reference S.C. Code Ann. Regs. 61-62.60, Subpart Cf, which became effective in the State of South Carolina on November 26, 2021. A detailed explanation of the rationale behind this proposed approval is available in the Technical Support Document (TSD) included in the docket for this action.
EPA is proposing to approve the South Carolina section 111(d) plan for MSW landfills pursuant to 40 CFR part 60, subparts B and Cf. Therefore, EPA is proposing to amend 40 CFR part 62, subpart PP to reflect this action. This approval is based on the rationale previously discussed and in further detail in the TSD associated with this action.
The EPA Administrator continues to retain authority for approval of alternative methods to determine the nonmethane organic compound concentration or a site-specific methane generation rate constant (k), as stipulated in 40 CFR 60.30f(c).
In this document, EPA is proposing to include regulatory text that incorporates by reference the state plan. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference S.C. Code Ann. Regs. 61-62.60, Subpart Cf, which became effective in the State of South Carolina on November 26, 2021. The regulatory provisions of this section of the South Carolina rule incorporate all the CAA 111(d)/129 state plan elements required by the EG for existing MSW landfill units promulgated at 40 CFR part 60, subpart Cf. The emissions standards and compliance times established within the South Carolina state plan are at least as stringent as those required by the EG for existing MSW landfill units subject to subpart Cf. EPA has made, and will continue to make, these materials generally available through the docket for this action, EPA-R04-OAR-2022-0741, at
In reviewing state plan submissions, EPA's role is to approve state choices, provided they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• 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
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this proposed approval of South Carolina's state plan for existing MSW landfills does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the state plan is not approved to apply in Indian country located in the state, and the EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
Administrative practice and procedure, Air pollution control, Environmental protection, Landfills, Incorporation by reference, Intergovernmental relations, Methane, Ozone, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
Children's Bureau (CB); Administration on Children, Youth and Families (ACYF); Administration for Children and Families (ACF); Department of Health and Human Services (HHS).
Notice of proposed rulemaking.
ACF is proposing to revise the definition of “foster family home” to allow each title IV-E agency to adopt foster family home licensing or approval standards for foster family homes of individuals related to a child by blood, marriage, or adoption and other individuals who have an emotionally significant relationship with the child, including fictive kin, (referred herein as “relative(s) and kin(ship)”) that differ from non-relative foster family homes agency standards. In this context, a “non-relative” foster family home means a home of an unrelated individual who is not kin or fictive kin. This notice of proposed rulemaking (NPRM) would allow a title IV-E agency to claim title IV-E federal financial participation (FFP) for the cost of foster care maintenance payments (FCMP) on behalf of an otherwise eligible child who is placed in a relative or kinship licensed or approved foster family home when the agency uses different licensing or approval standards for relative or kinship foster family homes and non-relative foster family homes. In addition, the NPRM would amend the requirement that title IV-E agencies review the amount of FCMPs to also assure that the agency provides a licensed or approved relative and kinship foster family home the same amount of FCMP that would have been made if the child was placed in a non-related foster family home.
In order to be considered, ACF must receive written comments on this NPRM on or before April 17, 2023.
ACF encourages the public to submit comments electronically to ensure they are received in a timely manner. Please be sure to include identifying information on any correspondence. To download an electronic version of the proposed rule, please go to
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Kathleen McHugh, Director, Policy Division, Children's Bureau, (202) 401-5789
This NPRM is published under the authority granted to the Secretary of Health and Human Services (the Secretary) by section 1102 of the Social Security Act (the Act), 42 U.S.C. 1302. Section 1102 of the Act authorizes the Secretary to publish regulations, not inconsistent with the Act, as may be necessary for the efficient administration of the functions with which the Secretary is responsible under the Act.
When parents are unable to safely care for their own children, it is often grandparents, other relatives, or kin who step forward to provide a loving home for those children, either temporarily or permanently. All over the nation, there is a preference to prioritize placing children entering foster care with relatives and kin over non-relative foster families when appropriate (“How can we prioritize kin in the home study and licensure process, and make placement with relatives the norm?” Casey Family Programs, 2020.). This preference stems from the knowledge that it is generally best for children to be with family and also from the increasing shortage of qualified foster parents (Miller, Jennifer, “Creating a Kin-First Culture,”
Title IV-E agencies have discretion to define “relative” and “kin” with regard to licensing standards. The definitions among title IV-E agencies vary, and sometimes “kin” is used more broadly than “relative”. Fictive kin often include people who are not related by blood, marriage or adoption, but who have an emotionally significant relationship with the child, and those who are treated “like family.” (American Bar Association,
Encouraging and assisting relative and kin caregivers to become a licensed or approved foster care placement is important, in part, because it allows families to receive financial support through FCMPs (sections 472(b)(1) and (c)(1) of the Act and section I of ACYF-CB-PI-10-11). Licensing or approval is also one component of eligibility for the title IV-E Kinship Guardianship Assistance Program, which can provide longer-term financial support and benefits to a guardian that provides permanency to a child who cannot safely return home (section 473(d)(3)(A)(i)(II) of the Act). The section-by-section discusses other reasons why licensing or approving relative and kinship foster family homes is important for children in foster care.
Although the Act includes provisions requiring each agency to give priority consideration to relatives as foster care placements over a non-related caregiver when determining an out-of-home placement for a child, we understand that title IV-E agencies take varied approaches to licensing and approving relative and kin foster family homes. Research identifies that many agencies have policies that prioritize placements with appropriate relatives and kin and provide them with an option to become a licensed or approved foster parent so that they may receive FCMPs (Beltran, Ana, and Redlich Epstein, Heidi.
State licensing and approval standards for foster family homes were developed before research demonstrated that relative and kinship care is often the best option for children in foster care. As a result, standards were created to ensure safety for children living with someone they did not know, making many licensing standards irrelevant for children living with a relative or kin (Miller, “Creating a Kin-First Culture,” July 1, 2017). For example:
• The Act requires only that licensing or approval standards established by the state or tribe are reasonably in accordance with recommended standards of national organizations for foster family homes related to admission policies, safety, sanitation, protection of civil rights, and use of the reasonable and prudent parenting standard (section 471(a)(10)(A) of the Act), and that the caregiver fully meet federal requirements under section 471(a)(20) of the Act (concerning criminal background checks for all foster parents). However, in 2000, ACF promulgated regulations that interpreted the Act to require that each state establish and apply its licensing or approval standards to all relative and non-relative foster family homes equally (45 CFR 1355.20). A title IV-E agency may waive non-safety-related licensing or approval standards for relative foster family homes on a case-by-case basis (section 471(a)(10)(D) of the Act). In 2020, ACF reported that 42 states, the District of Columbia, Puerto Rico, the Virgin Islands, and 3 tribes reported using waivers for non-safety licensing standards for relative foster family homes. Examples of non-safety waivers include waiving requirements for the home itself (the physical dimensions of home, room size requirements, the size and location of bedrooms, well water testing, proximity of the relative foster care provider's home to the child's parents), financial standards of the kinship caregiver, pre-service or training standards, and the age and marital status of the caregiver (ACYF-CB-IM-20-08). However, the Act does not allow a title IV-E agency to establish a policy or procedure that provides a blanket waiver of the standards for licensing or approving relative foster family homes (section 471(a)(10)(D) of the Act). Subsequent research found that, partially as a result of the 2000 rule, more than half of states changed their licensing standards. Some states implemented stricter licensing standards for relatives than they had previously. Many states that had standards specific to licensing relatives and kin repealed those standards in their entirety (Beltran and Redlich Epstein,
State licensing or approval standards developed for un-related foster parents also may be unnecessary for relative or kin foster parents. For example, many states require the same time-consuming and intensive foster parent training classes for relatives and kin as they do for non-relatives. However, relative caregivers may require a different level or type of foster parent training to take care of their kin, particularly when they already know the child for whom they are going to provide care. Non-relative
Title IV-E of the Act includes provisions requiring each agency to identify relatives of a child placed in foster care and to give priority consideration to relatives as foster care placements. Specifically, a title IV-E agency shall consider giving preference to an adult relative over a non-related caregiver when determining an out-of-home placement for a child, provided that the relative caregiver meets all relevant state or tribal child protection standards (section 471(a)(19) of the Act). Also, the Act requires that within 30 days after the removal of a child from their home, the title IV-E agency must exercise due diligence to identify and provide notice to certain relatives that the child has been or is being removed from the home, explain the options for relatives to participate in the care and placement of the child, describe how to become a foster family home, describe the additional services and supports that are available to the relative, as well as how a relative guardian of the child may participate in the title IV-E Kinship Guardianship Assistance Program if the title IV-E agency elected to operate the optional program (section 471(a)(29) of the Act).
This NPRM would allow a title IV-E agency to adopt one set of licensing or approval standards for all relative or kinship foster family homes that is different from the licensing or approval standards used for non-relative foster family homes. ACF encourages title IV-E agencies to adopt licensing or approval standards for all relative or kinship foster family homes that place as few burdens on such families as possible, consistent with ensuring the safety and wellbeing of children in foster care. Specifically, ACF encourages title IV-E agencies to strongly consider developing standards for relative and kinship foster family homes that meet only the requirements in the Act described earlier (
Finally, title IV-E of the Act and regulations require title IV-E agencies to provide a periodic review of the standards referred to in the preceding paragraph and amounts paid as foster care maintenance payments and adoption assistance to assure their continuing appropriateness (section 471(a)(11) of the Act; 45 CFR 1356.21(m)). The NPRM would also revise this requirement to assure that the agency provides a licensed or approved relative and kinship foster family home the same amount of foster care maintenance payments that would have been made if the child was placed in a non-related foster family home.
ACF proposes to revise the definition of “foster family home” by removing “Foster family homes that are approved must be held to the same standards as foster family homes that are licensed[.]” and replacing it with “Agencies may establish foster family home licensing or approval standards for all relative or kinship foster family homes that are different from standards for non-relative foster family homes.” This would allow a title IV-E agency to establish a set of foster family home licensing or approval standards that apply to all relative or kinship foster family homes, and that are different from non-relative foster family homes. An agency may also designate different names for the different type of standards. For example, an agency may designate the term “approval” to relative foster family home standards for relatives, and “licensing” to non-relative foster family homes. However, all standards and foster family homes must meet the requirements under title IV-E of the Act.
As a result of this NPRM, a title IV-E agency would be able to remove a possible barrier to claiming title IV-E FCMP on behalf of an otherwise eligible child who is placed in a licensed or approved relative or kinship foster family home. For example, the agency could require that relative and kinship families only meet the licensing requirements in the Act stated earlier, and not additional standards the agency requires non-relative foster family homes to meet. Or, the agency could implement state or tribal licensing standards for all relative or kinship foster family homes to extend age limits for relative or kinship foster care providers; allow relative children to share sleeping spaces; disregard certain income, transportation, literacy, language, and education requirements; and remove disqualifications for non-child-related past crimes such as issuing bad checks (Beltran and Redlich Epstein,
This NPRM proposes to allow title IV-E agencies to establish a set of foster family home licensing or approval standards that apply to all relative or kinship foster family homes, for several reasons. First, this proposed change is consistent with long-standing recommendations of stakeholders and experts in child welfare to license or approve more relative and kinship foster family homes to significantly increase the services and financial resources available to relative and kinship caregivers., ACF has heard from stakeholders and discussed their recommendations. Second, placing children in licensed or approved relative foster family homes has multiple benefits to relatives and children. Third, the proposed change allows title IV-E agencies more flexibility without compromising child safety and well-being.
The current regulation requires the same licensing or approval standards for all foster family homes. This can lead to placing children with unlicensed relative foster family caregivers because some relatives are not able to meet the agency's licensing or approval standards. (Children's Defense Fund.
Second, allowing a title IV-E agency to establish different foster family home licensing or approval standards for all relative or kinship foster family homes so that more children can be placed with relatives and kin has multiple benefits to relatives and to children. Research confirms that children in foster care often do best when placed with relatives and kin and that family connections are critical to healthy child development and a sense of belonging (Miller, “Creating a Kin-First Culture,” July 1, 2017). Relative and kinship care also helps to preserve children's cultural identity and relationship to their community. This regulation would allow children placed with a relative or kin to remain connected to their families, communities, and schools. For youth in foster care, having a strong cultural identity can lead to greater self-esteem, higher education levels, improved coping abilities, and decreased levels of loneliness and depression (Child Welfare Information Gateway. (2022). Kinship care and the child welfare system. U.S. Department of Health and Human Services, Administration for Children and Families, Children's Bureau.
ACF believes that title IV-E agencies can develop different foster family home licensing or approval standards for relatives in a manner that does not compromise child safety and well-being. The Act requires that all foster family home licensing standards be reasonably in accord with recommended standards of national organizations concerned with these standards for foster family homes related to admission policies, safety, sanitation, protection of civil rights and use of the reasonable and prudent parenting standard (section 471(a)(10) of the Act). Further, the Act specifies that a child is only eligible to receive a title IV-E FCMP if placed in a licensed or approved placement, which includes federal requirements that the foster parent fully meet the requirements concerning criminal background checks (section 471(a)(20) of the Act). A child is not eligible for FCMP if the criminal records check reveals that the prospective foster or adoptive parent has been convicted of a felony related to child abuse or neglect, spousal abuse, a crime against a child or children (including child pornography), or a crime involving violence, including rape, sexual assault, or homicide. In addition, a child is not eligible for FCMP if the criminal record checks reveal that within the last 5 years, the prospective foster or adoptive parent has been convicted of a felony involving physical assault, battery, or a drug-related offense (Section 471(a)(20)(A) of the Act; 45 CFR 1356.30). This NPRM does not propose to change those important safety requirements for relative or kinship caregivers. Therefore, a title IV-E agency may choose to develop standards for relative and kinship foster family homes that meet only the federal requirements outlined in the Act. As previously discussed, research shows that children placed in foster care with relatives are just as safe, or safer, when compared with children placed with unrelated foster families (Beltran and Redlich Epstein,
Finally, we propose to revise the definition of “foster family home” by removing “[T]he term may include group homes, agency-operated boarding homes or other facilities licensed or approved for the purpose of providing foster care by the State or Tribal agency responsible for approval or licensing of such facilities.” Public Law 115-123, the Family First Prevention Services
With these proposed revisions, the definition would read, “ `Foster family home' means, for the purpose of title IV-E eligibility, the home of an individual or family licensed or approved as meeting the standards established by the licensing or approval authority(ies), that provides 24-hour out-of-home care for children. The licensing authority must be a state authority in the state in which the foster family home is located, a tribal authority with respect to a foster family home on or near an Indian Reservation, or a tribal authority of a tribal title IV-E agency with respect to a foster family home in the tribal title IV-E agency's service area. Agencies may establish foster family home licensing or approval standards for all relative or kinship foster family homes that are different from standards for non-relative foster family homes. Anything less than full licensure or approval is insufficient for meeting title IV-E eligibility requirements. Title IV-E agencies may, however, claim title IV-E reimbursement during the period of time between the date a prospective foster family home satisfies all requirements for licensure or approval and the date the actual license is issued, not to exceed 60 days.”
The NPRM would also revise section § 1356.21(m) to require that title IV-E agencies review the amount of foster care maintenance payments to assure that the agency provides a licensed or approved relative and kinship foster family home the same amount of foster care maintenance payments that would have been made if the child was placed in a non-related foster family home. This proposed revision codifies the holding in Miller v. Youakim, 440 U.S. 125 (1979). In Miller, the Supreme Court established that children placed with relative foster homes that met approval or licensing standards were full participants in the IV-E program. The Court stated that “neither the legislative history nor the structure of the [Social Security] Act indicates that Congress intended to differentiate among neglected children based on their relationship to their foster parents.” (Id. at 138-139). Further, the definition of “foster care maintenance payments” for IV-E purposes is based on the costs of the services and supplies provided to the foster child, not the relationship of the child to the foster parent (42 U.S.C. 675(4)(A)). This proposed revision means that a title IV-E agency must use the same payment schedule(s) for relative and non-relative licensed or approved foster family homes. The agency may not establish a separate payment schedule for licensed or approved relative and kinship foster family homes. For example, a title IV-E agency has a foster care maintenance payment schedule of monthly payments based on age and including basic maintenance and difficulty-of-care Levels 1, 2 & 3. The agency determines that, if placed with a non-relative, the child of a certain age in title IV-E foster care requires level 3 care at $31.00 per day. However, the child is placed in a relative foster family home that is licensed or approved using separate licensing standards, established consistent with this proposal. The amount of the level 3 foster care maintenance payment based on the child's age must also be $31.00 per day.
With this proposed revision, the regulation would read, “(m) Review of payments and licensing standards. In meeting the requirements of section 471(a)(11) of the Act, the title IV-E agency must review at reasonable, specific, time-limited periods to be established by the agency: (1) The amount of the payments made for foster care maintenance to assure their continued appropriateness, and that the amount made to a licensed or approved relative or kinship foster family home is the same as the amount that would have been made if the child was placed in a licensed or approved non- relative foster family home; (2) The amount of the payments made for adoption assistance to assure their continued appropriateness; and (3) The licensing or approval standards for child care institutions and foster family homes.”
This NPRM supports the Administration's priority of advancing equity for those historically underserved and adversely affected by persistent poverty and inequality (U.S. President. Executive Order. “Executive Order on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, Executive Order 13985 of January 20, 2021.”). The current regulation prohibits a title IV-E agency from uniformly adopting separate foster family home licensing or approval standards for relative or kinship caregivers. This disadvantages lower income prospective relative caregivers, some of whom are disqualified from providing care as a result of not meeting income and other standards established for licensing or approving foster family homes.
This NPRM would especially provide a support to low-income prospective relative caregivers, many of whom are families of color, are from underserved rural areas, or are members of other communities in which long-term systemic factors such as poverty hamper families from making intergenerational progress. Ethnically and culturally diverse populations are disproportionately represented in relative and kinship families. “While Black or African American individuals represent just 13% of the U.S. population, they make up nearly a quarter of all children in households where a grandparent is responsible for the needs of the child” (Advisory Council to Support Grandparents Raising Grandchildren with Assistance from the HHS Administration for Community Living.
Policies that expand access to FCMPs can have an especially strong impact on underserved groups. Encouraging and removing barriers to kinship placement also is consistent with cultural norms of some underserved groups that traditionally rely more heavily on kin
• Children age 3 to 5 who are the subject of a child maltreatment report in rural areas and those in households with incomes less than 50 percent of federal poverty level were more likely to be placed in informal kinship settings than similarly situated children in urban areas (
• African American families rely on extended family and other informal systems of care not only because these informal systems are cultural strengths, but because African American children historically were excluded from public and private sector child welfare programs and supports (U.S. Government Accountability Office, Child Welfare and Aging Programs: HHS Could Enhance Support for Grandparents and Other Relative Caregivers (GAO-20-434), July 2020).
• Traditionally, grandparents and other family members assume integral roles in raising children within American Indian/Alaska Native communities. This type of extensive familial support system helps parents to pass on to their children the knowledge of customs, culture, and language essential to community survival and well-being (Capacity Building Center for Tribes. Engaging and Supporting Native Grandfamilies. 2022.
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, and safety effects; distributive impacts; and equity). Executive Order 13563 is supplemental to, and reaffirms the principles, structures, and definitions governing regulatory review as established in Executive Order 12866, emphasizing the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Section 3(f) of Executive Order 12866 defines “a significant regulatory action” as an action that is likely to result in a rule that may (1) have an annual effect on the economy of $100 million or more in any 1 year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, and tribal governments or communities (also referred to as “economically significant”); (2) create a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. A regulatory impact analysis must be prepared for rules determined to be significant regulatory actions within the scope of section 3(f)(1) of Executive Order 12866, and all significant regulatory actions are subject to review by the Office of Management and Budget (OMB).
ACF consulted OMB and determined that this proposed rule meets the criteria for a significant regulatory action under Executive Order 12866 and subject to OMB review. Based on ACF's estimates of the likely costs associated with this proposal, OMB designated this proposed rule as a significant regulatory action within the scope of section 3(f)(1) of Executive Order 12866.
The estimated cost and transfer impacts of this regulatory proposal are provided below (see the sections titled “Federal cost estimate with implementation of this proposal in a final rule” and “Estimated costs of this proposal to title IV-E agencies”). As described in the Section-by-Section above, children in foster care do best when placed with relatives and kin and family connections are critical to healthy child development and a sense of belonging. Relative and kinship care also helps to preserve children's cultural identity and relationship to their family, community and school, which can help buffer depressive symptoms. Children living with relatives experience fewer behavioral problems and higher placement stability rates then children living with un-related foster parents. Situating relatives and kin to become a licensed or approved foster care placement is important, in part, because it allows families to receive financial support through FCMPs (sections 472(b)(1) and (c)(1) of the Act and section I.C. of ACYF-CB-PI-10-11), and it meets one component of eligibility for the title IV-E Kinship Guardianship Assistance Program, which can provide longer-term financial support and benefits to a family that provides permanency to a child who cannot safely return home (section 473(d)(3)(A)(i)(II) of the Act). Relative and kinship placements also support cultural norms of some underserved groups that traditionally rely more heavily on kin and family in times of need. In addition, there is an increasing shortage of qualified foster parents, and research demonstrates that when a parent(s) is not able to safely care for their child, it is best for child to be cared for by family who step forward to provide the child(ren) with a loving home.
The Regulatory Flexibility Act (RFA) (see 5 U.S.C. 605(b) as amended by the Small Business Regulatory Enforcement Fairness Act) requires federal agencies to determine, to the extent feasible, a rule's impact on small entities, explore regulatory options for reducing any significant impact on a substantial
The Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4) was enacted to avoid imposing unfunded federal mandates on state, local, and tribal governments, or on the private sector. Section 202 of UMRA requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2022, that threshold is approximately $165 million. This rule does not contain mandates that would impose spending costs on state, local, or tribal governments in the aggregate, or on the private sector, in excess of the threshold.
Section 654 of the Treasury and General Government Appropriations Act of 2000 requires federal agencies to determine whether a policy or regulation may negatively affect family well-being. If the agency determines a policy or regulation negatively affects family well-being, then the agency must prepare an impact assessment addressing seven criteria specified in the law. ACF believes it is not necessary to prepare a family policymaking assessment (see Pub. L. 105-277) because the action it takes in this NPRM would not have any impact on the autonomy or integrity of the family as an institution.
Executive Order 13132 requires federal agencies to consult with state and local government officials if they develop regulatory policies with federalism implications. Federalism is rooted in the belief that issues that are not national in scope or significance are most appropriately addressed by the level of government close to the people. This rule would not have substantial direct impact on the states, on the relationship between the federal government and the states, or on the distribution of power and responsibilities among the various levels of government because allowing each title IV-E agency to adopt foster family home licensing or approval standards for relative foster family homes is optional and not mandatory. Therefore, in accordance with section 6 of Executive Order 13132, it is determined that this action does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.
The Paperwork Reduction Act of 1995 (Pub. L. 104-13) seeks to minimize government-imposed burden from information collections on the public. In keeping with the notion that government information is a valuable asset, it also is intended to improve the practical utility, quality, and clarity of information collected, maintained, and disclosed.
The Paperwork Reduction Act defines “information” as any statement or estimate of fact or opinion, regardless of form or format, whether numerical, graphic, or narrative form, and whether oral or maintained on paper, electronic, or other media (5 CFR 1320.3(h)). This includes requests for information to be sent to the government, such as forms, written reports and surveys, recordkeeping requirements, and third-party or public disclosures (5 CFR 1320.3(c)). There is no burden to the Federal government or to title IV-E agencies as a result of this proposed regulation. First, it is optional for a title IV-E agency to develop separate licensing standards for relative and kinship foster family homes. If the agency elects to do so, there are no new reporting requirements. Second, title IV-E agencies are already required by section 471(a)(11) of the Act to conduct periodic reviews of the rates and standards related to foster care maintenance payments. Therefore, the regulatory proposal that during these reviews, agencies ensure that the rate of FCMP to relative and non-related foster family homes is equal, does not impose any new reporting requirements. Finally, title IV-E agencies were required to make changes consistent with Public Law 115-123, the Family First Prevention Services Act. Therefore, the proposed technical change to bring federal regulations up to date with title IV-E of the Act does not impose any new reporting requirements.
If this proposed regulatory action becomes final, ACF estimates that there would be annual increases in the number of title IV-E relative foster family home placements and annual increases in federal costs for foster care maintenance payments (FCMPs) and administration. ACF estimates that the proposed regulatory change would cost the federal government $28,753,988 in title IV-E FFP
• First, we anticipate that without any changes to the regulation, the annual caseload growth rate (
• Second, if the NPRM becomes final, we assume a varied implementation rate of title IV-E relative and kinship foster family home placements. The estimate assumes a slow rate of change because agencies may not immediately decide to implement new or revised relative foster family home licensing or approval standards. In addition, states and tribes vary on whether policy, regulation or statutory change must precede such changes.
• Finally, the title IV-E participation rate for relative foster family home placements was 27.6 percent in FY 2019. Conversely, the title IV-E participation rate for other foster care placements was 47.7 percent in FY 2019. We assume that this percentage would increase for relative foster family home placements over time as a result of the proposed regulation because it allows different licensing or approval standards for relative and non-relative foster family home placements. We also assume that the difference in the title IV-E participation rate of relatives and non-relatives is almost entirely due to the use of the same licensing or approval standard for both relative and non-relative foster family home placements. We anticipate incremental changes in the IV-E participation rate for relative and kinship foster family home placements over a total of 10 years, and that by year ten, this rate would increase to 41.7 percent.
From a society-wide perspective, many of the effects estimated above are transfers. We seek comment on estimation of the portion that represents new resource use attributable to the proposed rule. Preliminary, as shown in the table below, the full amounts are categorized as transfers—from either the federal government or Title IV-E agencies to Title IV-E participants.
Executive Order 13175,
January Contreras, Assistant Secretary of the Administration for Children and Families, approved this document on January 20, 2023.
Administrative costs, Adoption Assistance, Child welfare, Fiscal requirements (title IV-E), Grant programs—social programs, Statewide information systems, Adoption and foster care, Child welfare, Grant programs—social programs.
Adoption and foster care, Child welfare, Grant programs—social programs.
For the reasons set forth in the preamble, ACF proposes to amend 45 CFR parts 1355 and 1356 as follows:
42 U.S.C. 620
(a) * * *
42 U.S.C. 620
(m) * * *
(1) The amount of the payments made for foster care maintenance to assure their continued appropriateness, and that the amount made to a licensed or approved relative or kinship foster family home is the same as the amount that would have been made if the child was placed in a licensed or approved non-relative foster family home;
(2) The amount of the payments made for adoption assistance to assure their continued appropriateness; and
(3) The licensing or approval standards for child care institutions and foster family homes.
Defense Acquisition Regulations System, Department of Defense (DoD).
Proposed rule; extension of comment period; public meeting.
DoD published a proposed rule on December 19, 2022, seeking public input on a proposed revision to the Defense Federal Acquisition Regulation Supplement (DFARS) to implement the intellectual property (
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Comments received generally will be posted without change to
Mr. David E. Johnson, telephone 202-913-5764.
DoD is interested in continuing a dialogue with experts and interested parties in Government and the private sector regarding amending the DFARS to implement the Small Business Administration's Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) Program Policy Directive. DoD held a public meeting on February 2, 2023, regarding this proposed rule.
• Full name.
• Valid email address, which will be used for admittance to the meeting.
• Valid telephone number, which will serve as a secondary connection method. Registrants must provide the telephone number they plan on using to connect to the virtual meeting.
• Company or organization name.
• Whether the individual desires to make a presentation.
Preregistered individuals will receive instructions for connecting using the Zoom video conferencing software not more than one week before the meeting is scheduled to commence.
The comment period for the proposed rule is extended through March 20, 2023, to provide additional time for interested parties to provide inputs.
Government procurement.
National Aeronautics and Space Administration (NASA).
Proposed rule.
NASA is proposing to amend the NASA Federal Acquisition Regulation Supplement (NFS) to reflect updates to NASA's Mentor Protégé Program (MPP) including: the requirement of Small Business Specialists' concurrence on the signed letter of endorsement; requirements associated with credit received towards subcontracting goals; the change of the MPP reporting requirement from semi-annually to annually; identified the NASA Mentor Protégé Program Office; and clerical, semantic improvements. NASA also proposes to amend the NFS language to reflect the annual negotiation of its small business percentage goals. Lastly, the NFS will be amended to emphasize collaboration amongst representatives from the Office of Small Business Programs, Office of Procurement, and Program Offices to reduce barriers to entry and to opportunities for all small business concerns and Historically Black Colleges and Universities or Minority Institutions.
Comments on the proposed rule should be submitted in writing to the address shown below on or before April 17, 2023, to be considered in the formation of a final rule.
Submit comments identified by NFS Case 2022-N018, Mentor Protégé Program using any of the following methods:
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R. Todd Lacks, NASA HQ, Office of Procurement Management and Policy Division, LP-011, 300 E Street SW, Washington, DC 20456-0001. Telephone 202-358-0799 and; facsimile 202-358-3082.
NASA is proposing to revise the NFS to add new text that: requires concurrence of the Small Business Specialist on the signed letter of endorsement for the MPP; adds requirements associated with credit received towards subcontracting goals; changes the reporting requirement from semi-annually to annually; and makes clerical and other semantic improvements.
NFS parts 1819, Small Business Programs, and 1852, Solicitation Provisions and Contract Clauses, are being revised to add language to
The objective of this proposed rule is to implement updates to NASA's MPP. Subpart 1819.72 does not limit the application of the program requirements to non-commercial contracts or contracts above the simplified acquisition threshold. Consistent with 41 U.S.C. 1905, 1906 and 1907, the NASA Assistant Administrator for Procurement has determined that it is in the best interest of NASA to apply this policy change to the acquisition of commercial items, including COTS items, and those requirements below the SAT.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action as defined in E.O. 12866 and therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.
NASA does not expect this proposed rule to have a significant economic impact on small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601
The proposed rule will apply to all current and future participants of the MPP. While the proposed rule will apply to all classes of small business, it will not necessarily affect all those businesses because the proposed rule only applies to those that are a part of the MPP. As reported by NASA's OSBP, NASA has entered 6, 1 and 3 mentor protégé agreements in 2018, 2019 and 2020, respectively. Therefore, this policy will have minimal impact on small businesses at large.
NASA invites comments from small business concerns and other interested parties on the expected impact of this proposed rule on small entities.
This proposed rule contains information collection requirements requiring the approval of the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. chapter 35). As part of this proposed rule, NASA is also requesting comments on the reinstatement with change of a collection, OMB 2700-008,
NASA, in coordination with its Office of Small Business Programs, initiated this proposed rule and is proposing to reinstate this collection to decrease the collection requirement from semi-annual to annual. NASA conducts semi-annual Mentor Protégé performance reviews, which are more effective in tracking milestones over the life of the agreement than the submission of semi-annual reports. This change will reduce the reporting requirement on small businesses from semi-annual to annual and still capture necessary information from the semi-annual performance reviews.
Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of NASA, including whether the information collected has practical utility; (2) the accuracy of NASA's estimate of the burden (including hours and cost) of the proposed collection of information; (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 automated collection techniques or the use of other forms of information technology. Comments submitted in response to this document will be summarized and included in the request for OMB approval of this information collection. They will also become a matter of public record.
Government procurement.
Accordingly, NASA proposes to amend 48 CFR parts 1819 and 1852 as follows:
51 U.S.C. 20113(a) and 48 CFR chapter 1.
(a) * * *
(ii) NASA annually negotiates Agency small business prime and subcontracting goals with the Small Business Administration pursuant to section 15(g) of the Small Business Act (15 U.S.C. 644). In addition, representatives from the Office of Small Business Programs, Office of Procurement, and Program Offices will collaborate to reduce barriers to entry and to opportunities for small business concerns, identified in paragraph (a)(i) of this section, and Historically Black Colleges and Universities or Minority Institutions.
The revision reads as follows:
(a) This subpart implements the NASA Mentor-Protégé Program (hereafter referred to as the Program) as authorized by the Small Business Administration in accordance with 13
(a) To be eligible as a mentor, an entity must be—
(1) A large business prime contractor or research institution performing with at least one approved subcontracting plan (other than a commercial plan) negotiated with NASA, pursuant to FAR subpart 19.7. A contractor may apply to become a mentor if they currently are not performing under a NASA contract, as long as they are currently performing another Federal agency contract with an approved subcontracting plan. However, the NASA MPA will not be approved until the mentor company is performing under a NASA contract with an approved subcontracting plan.
(2) Eligible for receipt of Government contracts. An entity will not be approved for participation in the program if, at the time of submission of the application to the NASA Mentor Protégé Program Office (MPPO), the entity is debarred or suspended from contracting with the Federal Government pursuant to FAR subpart 9.4.
(b) To be eligible to participate as a protégé, an entity must be eligible for award of Federal contracts in accordance with FAR subpart 9.4,
(1) Small disadvantaged business;
(2) Women-owned small or economically disadvantaged women-owned concern;
(3) Veteran-owned or service-disabled veteran-owned small business concern;
(4) Historically underutilized business zone concern;
(5) Historically Black College and University or Minority-Serving Institution;
(6) Current NASA Small Business Innovation Research (SBIR)/Small Business Technology Transfer (STTR) Phase II Company; or
(7) An entity participating in the AbilityOne Program.
If advance payments are contemplated, the mentor must first have the advance payments approved by the contracting officer in accordance with FAR subpart 32.4.
The revisions and addition read as follows:
(a) To participate in the Program, entities approved as mentors, will submit a complete agreement package to the contracting officer, contracting officer's representative (COR), and the cognizant Small Business Specialist (SBS) at the NASA Center. The submission package must include the following:
(1) A signed MPA;
(3) The estimated cost of the developmental assistance to be provided, broken out per year and per task, in a separate cost volume; and
(b) The NASA MPPO may require additional information as requested upon agreement submission.
The revisions read as follows:
(a) Mentors may be eligible to earn a separate award fee associated with the provision of developmental assistance to NASA SBIR/STTR Phase II Protégés only. The award fee will be assessed at each award fee determination period.
(d) The Award Fee Program is an addition to the credit agreement, reference 1819.7206. Participants that are eligible for award fee may also receive credit under their individual contract's award fee plan.
In a MPA (as referenced in section 6 “Agreements” of the MPP Guidebook), a mentor receives credit toward its subcontracting goals. The credit agreement only applies to mentors with an Individual Subcontract Plan.
(a) Costs incurred under a credit agreement are applied on a one-to-one basis toward applicable subcontracting goals, under a Federal agency subcontracting plan (FAR subpart 19.7).
(b) The credit is reported on the mentor's individual subcontracting report (ISR) in the comments section twice a year and in the Summary Subcontract Report (SSR) once a year. The MPPO will verify the dollars contained in the annual reports.
(a) Mentors must report on the progress made under active MPA annually throughout the term of the agreement.
(b) Reports are due 30 days after the end of each 12-month period of performance commencing with the start of the agreement.
(c) Each annual report must include the following data on performance under the MPA:
(d) Annually the protégé must provide an independently developed progress report using the annual report template, on the progress made during the prior twelve months by the protégé in employment, revenues, and participation in NASA contracts during each year of the Program participation term. The protégé must also provide an additional post-agreement report for each of the two years following the expiration of the Program participation term.
(e) The protégé annual report required by paragraph (d) of this section must be submitted separately from the mentor's annual report submission.
(f) Reports for all agreements must be submitted to the NASA Mentor Protégé Program Manager, the mentor's cognizant administrative Contracting Officer, and their Small Business Specialist.
(g) Templates for the annual report and the Post-Agreement report and guidance for their submission are available at:
The mentor may include its developmental expenditures from the annual report, reference 1819.7212, in its reported dollars in its Summary Subcontracting Report (SSR) in the Electronic Subcontracting Reporting System (eSRS).
(a) If the protégé is also the mentor's immediate next-tier subcontractor under a NASA contract that contains a subcontracting plan, the mentor may also include its developmental expenditures in its Individual Subcontracting Report (ISR) for that contract. Expenditures may be applied to each socio-economic subcategory on the SSR and ISR for which the protégé qualifies.
(b) Developmental expenditures included in SSR's and ISR's must also be separately reported and explained (including the actual dollar amount) in the “Remarks” section of each report.
(c) Expenditures for AbilityOne protégés cannot be included in SSR's or ISR's since there is no such reporting category for SSR's or ISR's.
(a) The contracting officer shall insert the clause at 1852.219-77, NASA Mentor-Protégé Program, in any contract that includes the clause at FAR 52.219-9, Small Business Subcontracting Plan.
NASA Mentor-Protégé Program (Abbreviated Month and Year of Publication in The
(b) The Program consists of—
(1) Mentors, which are large business prime or research institution with at least one approved NASA subcontracting plan;
(2) Protégés, which qualify as one or more of the following:
(i) Small Business Concern, as defined in FAR part 2, Definitions of Parts and Terms, including: Women-Owned or Economically-Owned Concern; Veteran-Owned or Service-Disabled Veteran-Owned Small Business Concern; Historically Underutilized Business Zone Concern;
(ii) Historically Black College and University or Minority-Serving Institution;
(iii) Current NASA SBIR/STTR Phase II Company; or
(iv) An Entity Participating in the AbilityOne Program;
(3) MPA endorsed by the cognizant NASA centers and approved by the NASA MPPO; and
(4) In contracts with award fee incentives, potential for payment of an award fee for voluntary participation and successful performance in the Mentor-Protégé Program, in accordance with NFS 1819.7205.
(c) Mentor participation in the program, described in NFS 1819.72, means providing technical, managerial and financial assistance to aid protégés in developing requisite high-tech expertise and business systems to compete for and successfully perform NASA, as well as other Federal and commercial contracts and subcontracts.
(d) Eligible businesses and research institutions interested in participating in the program are encouraged to contact the NASA MPPO.
The revisions and addition read as follows:
(a) The purpose of the NASA Mentor-Protégé Program is for a NASA prime contractor to provide developmental assistance to:
(1) Provide incentives to NASA contractors, performing under at least one active approved subcontracting plan negotiated with NASA to assist protégés in enhancing their capabilities to perform as viable NASA, other Government, and commercial suppliers on contract and subcontract requirements;
(2) Increase the overall participation of protégés as subcontractors and suppliers under NASA contracts, other Federal agency contracts, and commercial contracts; and
(3) Foster the establishment of long-term business relationships between protégés and mentors.
(b) The Mentor shall comply with the annual reporting requirements detailed in NASA FAR Supplement 1819.7212.
(c) NASA will evaluate the Mentor's performance on the following factors in the subcontracting element of the annual Contractor Performance Assessment Report (CPAR). If this contract includes an award fee incentive, this evaluation will also be included as part of the subcontracting element in the award fee evaluation process.
(3) The extent to which the mentor and protégé have met the developmental milestones outlined in the agreement; and
(4) The extent to which the mentor has contributed to advancing the protégé's technical readiness level. This factor only applies if the protégé is a current NASA SBIR/STTR Phase II contractor.
(d) Annual reports shall be submitted by the Mentor and the Protégé to the MPPO, following the annual report template found on the website at
(1) Except for as noted in paragraph (d)(4) of this section, the Mentor may include its developmental expenditures from the annual report, reference 1819.7212, Reporting Requirements, in its reported dollars in its Summary Subcontracting Report (SSR) in eSRS.
(2) If the protégé is also the mentor's immediate next-tier subcontractor under a NASA contract that contains a subcontracting plan, the Mentor may also include its developmental expenditures in its Individual Subcontracting Report (ISR) for that contract. Expenditures may be applied to each socio-economic subcategory on the SSR and ISR for which the protégé qualifies.
(3) Developmental expenditures included in SSR's and ISR's must also be separately reported and explained (including the actual dollar amount) in the “Remarks” section of each report.
(4) Expenditures for AbilityOne protégés cannot be included in SSR's or ISR's, since there is no such reporting category for SSR's or ISR's.
(e) The mentor will notify the cognizant NASA center and NASA OSBP in writing, at least 30 days in advance of the Mentor's intent to
(f) Every six months, the Mentor and Protégé, as appropriate, will formally brief the MPPO, and the contracting officer during a formal program review regarding program accomplishments, as it pertains to the approved agreement.
(g) NASA may terminate MPA for good cause, thereby excluding mentors or protégés from participating in the program. These actions shall be approved by the MPPO. NASA shall terminate an agreement by delivering to the contractor a letter specifying the reason for termination and the effective date. Termination of an agreement does not constitute a termination of the subcontract between the mentor and the protégé. A plan for accomplishing the subcontract effort should the agreement be terminated shall be submitted with the agreement.
Agricultural Marketing Service, USDA.
Notice of public meeting.
In accordance with the Federal Advisory Committee Act, as amended, the Agricultural Marketing Service (AMS), U.S. Department of Agriculture (USDA), is announcing a meeting of the National Organic Standards Board (NOSB). The NOSB assists the USDA in the development of standards for substances to be used in organic production and advises the Secretary of Agriculture on any other aspects of the implementation of the Organic Foods Production Act (OFPA).
An in-person meeting will be held April 25-27, 2023, from 8:30 a.m. to approximately 6:00 p.m. Eastern Time (ET) each day and will include a virtual broadcast.
The webinars are virtual and will be accessed via the internet and/or phone. Access information will be available on the AMS website prior to the webinars. The in-person meeting will take place at Crowne Plaza Atlanta Midtown, 590 West Peachtree Street NW, Atlanta, Georgia, United States and will be broadcast virtually. Detailed information pertaining to the webinars and in-person meeting, including virtual viewing options, can be found at
Ms. Michelle Arsenault, Advisory Committee Specialist, National Organic Standards Board, USDA-AMS-NOP, 1400 Independence Avenue SW, Room 2642-S, STOP 0268, Washington, DC 20250-0268; Phone: (202) 997-0115; Email:
In accordance with the Federal Advisory Committee Act, 5 U.S.C. 10 and 7 U.S.C. 6518(e), as amended, AMS is announcing a meeting of the NOSB. The NOSB makes recommendations to USDA about whether substances should be allowed or prohibited in organic production and/or handling, assists in the development of standards for organic production, and advises the Secretary on other aspects of the implementation of the Organic Foods Production Act, 7 U.S.C. 6501
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the Connecticut Advisory Committee (Committee) to the U.S. Commission on
March 16, 2023, Thursday; 12:00 p.m. (ET).
Meeting will be held via Zoom.
Evelyn Bohor, at
Members of the public can listen to these discussions. Committee meetings are available to the public through the above call-in number. Any interested member of the public may call this number and listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. Callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Individuals who are deaf, deafblind and hard of hearing may also follow the proceedings by first calling the Federal Relay Service at 1-800-877-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are also entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be emailed to Evelyn Bohor at
Records generated from the meetings may be inspected and reproduced at the Regional Programs Unit Office, as they become available, both before and after the meeting. Records of the meeting will be available via
Economic Development Administration, U.S. Department of Commerce.
Request for information.
The Department of Commerce, through the Economic Development Administration (EDA), is seeking information to inform the planning and design of the Regional Technology and Innovation Hub (Tech Hubs) program. Responses to this Request for Information (RFI) will inform planning for the implementation of the Tech Hubs program.
Comments must be received by 5 p.m. Eastern Time on March 16, 2023. Submissions received after that date may not be considered. Written comments in response to this RFI should be submitted in accordance with the instructions in the Addresses and Supplementary Information sections below.
Interested persons are invited to submit written comments by email to
Eric Smith, Director, Office of Innovation and Entrepreneurship, via email at
Section 10621 of the Research and Development, Competition, and Innovation Act authorizes the Department of Commerce to designate geographically distributed regional technology and innovation hubs and to award strategy development grants and strategy implementation grants to eligible consortia (15 U.S.C. 3722a; Pub. L. 117-167, Division B, Title VI, Subtitle C, Sec. 10621(a)(2), 136 Stat. 1642). Tech Hubs will focus on technology development, job creation, entrepreneurial development, and expanding U.S. innovation capacity. Of the $10 billion authorized for the Tech Hubs program from Federal fiscal year 2023 through Federal fiscal year 2027, $500 million has been made available for the Tech Hubs program as of the publication of this RFI.
Section 10621 of the Research and Development, Competition, and Innovation Act provides that the Tech Hubs program shall:
(A) Encourage constructive collaborations among a wide range of new and traditional economic development stakeholders, including public and private sector entities;
(B) Support the development and implementation of regional innovation strategies;
(C) Designate regional technology and innovation hubs and facilitate the following implementation activities:
(i) Enable United States leadership in technology and innovation sectors critical to national and economic security.
(ii) Support regional economic development and resilience, including in small cities and rural areas, and promote increased geographic diversity of innovation across the United States;
(iii) Promote the benefits of technology development and innovation for all Americans, including underserved communities and vulnerable communities;
(iv) Support the modernization and expansion of United States manufacturing based on advances in technology and innovation;
(v) Support domestic job creation and broad-based economic growth; and
(vi) Improve the pace of market readiness, industry maturation, and overall commercialization and domestic production of innovative research;
(D) Ensure that the regional technology and innovation hubs address the intersection of emerging technologies and either regional challenges or national challenges; and
(E) Conduct ongoing research, evaluation, analysis, and dissemination of best practices for regional development and competitiveness in technology and innovation.
The Tech Hubs program is an economic development initiative to drive technology- and innovation-centric growth that leverages existing R&D strengths and technology demonstration and deployment capacities (public and private) within a region to catalyze the creation of good jobs for American workers at all skill levels equitably and inclusively.
EDA intends to run a rigorous, fair, and evidence-driven competition informed by the vision and experiences of all stakeholders, technology practitioners, and relevant policy research to guide program design, structure, and evaluation, and to aim for the strongest geographic and demographic diversity among hubs. This RFI seeks to encourage the field of regional innovation and economic development to provide evidence-based input that will be used to inform the design and implementation of the Tech Hubs program to maximize American competitiveness. The following sections provide specific requests for information, group into a number of categories.
1. What are the indicia of a successful future Tech Hub?
a. What are the defining features of a region that indicate that a Tech Hub will take hold, and how will EDA know if Tech Hubs succeed?
b. What existing assets and resources that generate, support, and enable technology innovation, demonstration, and deployment should Tech Hubs have? How does a Tech Hub leverage those assets and resources collaboratively?
c. When designating Tech Hubs, what additional geographic, demographic, or other place-specific factors or data should EDA consider?
d. Are there specific metrics that EDA should consider for designating Tech Hubs?
e. What are the technological considerations that EDA should consider?
2. How might EDA determine how the size and timing of investments will best accelerate a future Tech Hub's evolution into a global leader in an industry of the future that strengthens its region and our economic and national security? What data and information are important to that determination?
3. What are historical and existing examples of successful regional hub programs and what can be learned from these examples?
4. How might EDA determine the relative competitiveness of proposed Tech Hubs in the context of current and future global competition, in addition to domestic competition?
5. Please share specific examples of evidence-based or evidence-informed investments, interventions, or policies, including those implemented in other countries, that would support technology-based economic development, particularly at the scale required to enable U.S. leadership in technology and innovation sectors critical to economic and national security.
a. What limitations currently prevent EDA from investing, intervening, or making policies in these ways? For example, are there statutory, regulatory, policy, design, or implementation issues with current EDA programs or operations that inhibit or prohibit EDA in some way? Are there other Federal organizations that have overcome these issues?
6. Are there specific workforce and labor development, business and entrepreneurial development, technology development and maturation, or infrastructure activities that EDA should emphasize through the program?
7. How should EDA consider worker and community input in Tech Hub design?
8. What are some of the most innovative approaches to commercialization at research institutions (
9. What are some of the most innovative approaches to ensuring the growth of globally competitive industries occurs in an inclusive and equitable manner? Where possible, please provide examples of evidence-based and/or evidence-informed investments, interventions, or policies that drive inclusive and equitable outcomes.
10. Please share best-in-class ideas for inclusive and accessible competition processes for the Tech Hubs program, including examples of best-in-class regional competitions in the United States or internationally.
11. How should EDA evaluate the extent to which certain technology and innovation sectors are critical to national and economic security? How should EDA take into account whether a consortium would help promote increased geographic diversity of innovation?
12. How can Federal designations and Federal grants be structured to maximize the desired impacts of the Tech Hubs program?
13. What other existing Federal programs can complement Tech Hubs?
14. In addition to existing Federal programs, what types of benefits or support could be helpful for “designated” regional Tech Hubs?
15. What should EDA consider in designing the program for its current appropriation of $500 million given the $10 billion vision in the program's statutory authorization? How should those considerations affect EDA's design of the program now and potentially into future years?
16. How should EDA evaluate the effectiveness and return on public-private partnerships or other collaborative arrangements that may emerge from the Tech Hubs?
17. What criteria should EDA use to shift investments within or between Tech Hubs to maximize the impact of the program?
18. What else should EDA consider when building this program, including but not limited to alignment with other Federal programs?
19. How should EDA measure whether the Tech Hubs program has been successful in achieving these outcomes, and how might EDA capture those data?
a. What are the indicia of successful investments under the Tech Hubs program? What, if any, earlier-in-time proxies are predictive of those indicia?
b. What is a realistic time horizon over which to evaluate the economic development, national security, and global competitiveness impacts of Tech Hubs? Which measures are meaningful over which time horizons (
20. What desirable organizational and institutional changes within and among tech hubs' participants, beneficiaries, and other stakeholders could the Tech Hubs program competition incentivize? How could those changes be incentivized, and how could those changes be measured?
21. How can EDA ensure input from, and engagement with, community members in the administration of the Tech Hubs program, particularly for underserved community members?
22. What are unique challenges faced by Established Program to Stimulate
On October 14, 2021, in the U.S. District Court for the Eastern District of Michigan, Arash Yousefi Jam (“Arash Jam”) was convicted of violating 18 U.S.C. 371. Specifically, Arash Jam was convicted of conspiring to export goods from the United States to Iran through the United Arab Emirates without having first obtained the required licenses from the Office of Foreign Assests Control. As a result of his conviction, the Court sentenced Arash Jam time served, one year of supervised release and a $100 assessment.
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS received notice of Arash Jam's conviction for violating 18 U.S.C. 371. As provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”), BIS provided notice and opportunity for Arash Jam to make a written submission to BIS. 15 CFR 766.25.
Based upon my review of the record and consultations with BIS's Office of Exporter Services, including its Director, and the facts available to BIS, I have decided to deny Arash Jam's export privileges under the Regulations for a period of seven years from the date of Arash Jam's conviction. The Office of Exporter Services has also decided to revoke any BIS-issued licenses in which Arash Jam had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export, reexport, or transfer (in-country) to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
Bureau of Industry and Security, Commerce.
Publication of a report.
The Bureau of Industry and Security (BIS) in this notice is publishing a report that summarizes the findings of an investigation conducted by the U.S. Department of Commerce (the “Department”) pursuant to section 232 of the Trade Expansion Act of 1962, as amended (“section 232”), into the effect of imports of neodymium-iron-boron (NdFeB) permanent magnets on the national security of the United States. This report was completed in June 2022 and posted on the BIS website in September 2022. BIS has not published the appendices to the report in this notification of report findings, but they are available online at the BIS website, along with the rest of the report (
The report was completed in June 2022. The report was posted on the BIS website in September 2022.
The full report, including the appendices to the report, are available online at
For further information about this report contact Erika Maynard, Special Projects Manager, (202) 482-5572; and Leah Vidovich, Management and Program Analyst, (202) 482-1819. For more information about the Office of Technology Evaluation and the section 232 Investigations, please visit:
This report summarizes the findings of an investigation conducted by the U.S. Department of Commerce (the “Department”) pursuant to section 232 of the Trade Expansion Act of 1962, as amended, into the effect of imports of neodymium-iron-boron (NdFeB) permanent magnets on the national security of the United States.
As required by the statute, the Secretary considered all factors set forth in section 232(d). In particular, the Secretary examined the effect of imports on national security requirements, specifically:
i. domestic production needed for projected national defense requirements;
ii. the capacity of domestic industries to meet such requirements, including the commercial demand needed for economic viability;
iii. existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense;
iv. the requirements of growth of such industries and such supplies and services including the investment, exploration, and development necessary to assure such growth; and
v. the importation of goods in terms of their quantities, availabilities, character, and use as those affect such industries; and the capacity of the United States to meet national security requirements.
In preparing this report, the Secretary also recognized the close relationship between the economic welfare of the United States and its national security. Factors that can compromise the nation's economic welfare include, but are not limited to, the impact of “foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills, or any other serious effects resulting from the displacement of any domestic products by excessive imports.”
The investigation was initiated to evaluate the effects of imports of NdFeB magnets on the national security. There are two types of NdFeB magnets—sintered and bonded. However, the investigation and this report largely focus on sintered NdFeB magnets because: (1) Sintered NdFeB magnets comprise over 93 percent of the global NdFeB magnet market and are forecast to grow to over 97 percent of the global market by 2030; (2) Sintered NdFeB magnets have a greater maximum energy product than bonded NdFeB magnets, making them essential in high-temperature applications required by the defense and critical infrastructure sectors; and (3) Sintered NdFeB magnets are less easily substituted for than their bonded counterparts.
NdFeB magnets are the strongest permanent magnets commercially available and improve the efficiency of electrical machines. NdFeB magnets are used in hundreds of products ranging from the ubiquitous, such as headphones and air conditioners, to the highly specialized, like industrial robots. Of particular importance for evaluating the effects of imports of NdFeB magnets on the national security are NdFeB magnets' use in defense systems, including ship propulsion systems and guided missile actuators, as well as numerous critical infrastructure applications such as electric vehicle motors and offshore wind turbine generators.
NdFeB magnets are composed of about 69 percent iron, 30 percent rare earths, and one percent boron by weight.
There are five main value chain steps prior to the production of NdFeB magnets: mixed rare earth element mining, processing of rare earth elements into rare earth carbonates, separation of rare earth carbonates into individual rare earth oxides, reduction of rare earth oxides into metals, and alloying of rare earth metals.
Except for rare earths mining, the United States is not presently a major participant in the NdFeB magnet value chain. The United States has extremely limited capacity to manufacture NdFeB magnets and is nearly one hundred percent dependent on imports to meet commercial and defense requirements. In 2021, the United States imported 75 percent of its sintered NdFeB magnet supply from China, with nine percent, five percent, and four percent coming from Japan, the Philippines, and Germany, respectively.
China dominates all steps of the global NdFeB magnet value chain.
China is the only country with operations in all steps of the NdFeB magnet value chain, including upstream (mining, carbonates production, and separation to oxides) and downstream (metal refining, alloy production, and final magnet production) markets. All other countries maintain operations in only some steps of the upstream or downstream magnet value chain. Firms in the European Union, and especially Japan, specialize in the production of NdFeB magnets and alloys, but have no mining capacity. Japan is the second largest producer of NdFeB magnets after China, comprising about seven percent of the global market. Japanese firms also maintain magnet, alloy, and metal capacity in other countries. Firms in Germany, Finland, the Netherlands, and Slovenia produce minimal amounts of NdFeB magnets (less than one percent of global production).
The top upstream producers of rare earth minerals in 2021 were China (60 percent), the United States (15 percent), Burma, (nine percent), and Australia (eight percent).
The NdFeB magnet value chain's fragmentation means that even countries which produce NdFeB magnets remain dependent in part on Chinese inputs. Japan began diversifying its sources of rare earth elements, carbonates, and oxides away from China in the early 2010s, and the European Union has ongoing initiatives to develop a resilient non-Chinese NdFeB magnet supply chain. Despite these efforts, both economies and the United States remain reliant, to differing degrees, on Chinese inputs. China has previously appeared to leverage its market dominance to achieve foreign policy outcomes. For example, in 2010 China restricted exports of rare earth elements to Japan for two months after a collision between a Chinese fishing boat and the Japanese coast guard in disputed waters.
Ongoing efforts by the U.S. Government and the private sector are intended to mitigate this reliance on Chinese inputs and to establish U.S. production capacity at all steps of the NdFeB magnet value chain. The Department of Defense and the Department of Energy have made limited investments in organizations with the goal of reestablishing domestic production capacity throughout the supply chain. Noveon plans to expand production over the next four years. In addition, three U.S.-headquartered firms—MP Materials, Quadrant Magnetics, and USA Rare Earth—and the German company Vacuumschmelze
If successful, these efforts to produce NdFeB magnets in the United States will be more than sufficient to satisfy U.S. defense-related demand. However, given the fact that defense demand accounts for only a small percentage of total demand, domestic firms in the NdFeB magnet value chain cannot rely solely on defense-related contracts to be viable. The nascent U.S. NdFeB magnet value chain will require substantial and consistent commercial demand and need a broad customer base to be economically sustainable. While domestic production is expected to be substantially less than total U.S. demand, direct U.S. demand for NdFeB magnets will be less than total demand because many NdFeB magnets are integrated into intermediate and final products overseas. These products—and the embedded magnets—are then imported into the United States. In addition, firms that integrate NdFeB magnets in the U.S. may be unwilling to pay a premium for domestic magnets, which are expected to cost more than their Chinese counterparts.
On a potentially positive note, global and domestic demand for NdFeB magnets is forecast to increase dramatically by 2030 and even more so by 2050. The increase in demand is largely driven by global efforts to reduce greenhouse gas emissions which boost the electric vehicle and wind turbine industries. Substantial demand growth may result in a supply crunch for NdFeB magnets but also represents a critical opportunity to establish and maintain a resilient and economically viable domestic NdFeB magnet supply chain.
In conducting the investigation, the Secretary came to the following key findings:
a. NdFeB magnets are required for national defense systems. NdFeB magnets are currently irreplaceable in key defense applications such as fighter aircraft and missile guidance systems.
b. NdFeB magnets are required for critical infrastructure. NdFeB magnets are used in critical infrastructure sectors including but not limited to the energy sector (
c. NdFeB magnets are required for infrastructure that is critical for climate change mitigation, identified by the President as an essential element of U.S. national security, and the transition to a green economy.
a. Total U.S. consumption of NdFeB magnets is forecast to more than double from 2020 to 2030, driven by increased demand from the electric vehicle and wind energy industries.
b. Total domestic demand growth provides an opportunity to develop the U.S. NdFeB magnet industry if enough end-user applications are manufactured in the United States and the price differential between U.S. and Chinese magnets is narrowed.
a. The United States is essentially one hundred percent dependent on imports of sintered NdFeB magnets and is highly dependent on imports of bonded NdFeB magnets, primarily from China. The United States also lacks domestic capacity at various earlier steps in the NdFeB magnet value chain.
b. U.S. allies are also dependent on Chinese production, which provides China political leverage.
a. There are multiple firms that intend to establish domestic capacity at different steps of the NdFeB magnet value chain. Although these plans have the potential to create a U.S. NdFeB magnet value chain from mine to magnet, they will not produce enough magnets to eliminate U.S. dependence on Chinese imports.
b. Domestic NdFeB magnet manufacturing will be constrained by capacity limitations at earlier steps in the value chain, in particular rare earth metal refining and NdFeB alloy production. Some U.S. NdFeB magnet manufacturers will have to rely on imported metal and alloy feedstocks to produce NdFeB magnets.
c. The U.S. NdFeB magnet industry will struggle to fulfill total critical infrastructure demand.
a. The nascent U.S. NdFeB magnet industry faces significant barriers to reaching its production targets. These include but are not limited to Chinese competition, financial and human capital constraints, and consistent demand for more expensive domestic magnets.
Based on the findings in this report, the Secretary concludes that the present quantities and circumstances of NdFeB magnet imports threaten to impair the national security as defined in section 232 of Trade Expansion Act of 1962, as amended.
The Department has identified several non-exhaustive actions that would facilitate the development of a domestic
1. The U.S. Government should engage with allies through existing fora to efficiently develop production from diverse sources, promote research on NdFeB magnet-related technologies, encourage intellectual property licensing, and cooperate on foreign investment review mechanisms.
2. To bolster the U.S. NdFeB magnet industry by targeting domestic supply the U.S. Government should:
a. Establish a tax credit for domestic manufacturing of rare earth elements, NdFeB magnets, and NdFeB magnet substitutes.
b. Continue to direct Defense Production Act (DPA) Title III funding to firms in the U.S. NdFeB magnet industry, in particular to establish metal refining and alloy production facilities.
c. Encourage eligible NdFeB magnet industry participants to use Export-Import Bank financing through the Make More in America Initiative and the China and Transformational Exports Program.
d. Allocate additional funding to NdFeB magnet industry participants through other applicable instruments, such as the Bipartisan Infrastructure Law.
e. Use the Defense Priorities and Allocations System to facilitate NdFeB magnet industry participants' acquisition of critical equipment and feedstock.
f. Evaluate the use of export controls for domestic producers who face difficulties acquiring feedstocks from domestic sources due to competition with foreign consumers.
g. Increase the National Defense Stockpile inventories of rare earth elements and other strategic and critical materials related to NdFeB magnets.
3. To promote the development of a domestic industry by enhancing domestic demand the U.S. Government should:
a. Establish a forum under a lead U.S. Government agency to facilitate cooperation and share information about industry-wide issues between producers and consumers of NdFeB magnets, alloys, rare earth metals, and rare earth oxides. In particular, the U.S. Government should use DPA Title VII to promote offtake agreements using voluntary agreements.
b. Promote the recycling and reprocessing of NdFeB magnets by developing labeling requirements for end-of-life products using NdFeB magnets, leveraging the Defense Logistics Agency's Strategic Material Recovery and Reuse Program, U.S. Government-owned data centers, and other U.S. Government-owned products like electric vehicles to establish a source of recyclable feedstock, and exploring reuse of other potential feedstocks such as heavy mineral sands and coal tailings.
c. Mandate minimum domestic and ally content requirements for NdFeB magnets used in U.S. Government-owned electric vehicles and offshore wind turbines that power U.S. Government-owned buildings. NdFeB magnets used in these products should be produced domestically or by allies and contain feedstock sourced domestically or from allies. To minimize disruption, content requirements can be phased-in and waived if there are insufficient eligible sources.
d. Establish a consumer rebate for products, such as electric vehicles, that use U.S. or ally produced NdFeB magnets.
4. To support the medium- to long-term development of the U.S. NdFeB magnet industry and enhance the resiliency of the U.S. NdFeB magnet supply chain, the U.S. Government should:
a. Continue to fund research to reduce the use of rare earth elements in NdFeB magnets, develop magnets that can substitute for NdFeB magnets, and develop technologies that avoid the use of magnets—including NdFeB magnets—in electric vehicle motors and wind turbine generators.
b. Support the development of the human capital required by the nascent NdFeB magnet industry, including materials scientists and production line workers, through applicable funding sources.
5. The U.S. Government should continue to monitor the NdFeB magnet value chain to ensure that U.S. and ally firms are not adversely impacted by non-market factors or unfair trade actions, such as intellectual property violations or dumping.
Section 232 of the Trade Expansion Act of 1962, as amended, provides the Secretary with the authority to conduct investigations to determine the effect on the national security of the United States of imports of any article. It authorizes the Secretary to conduct an investigation if requested by the head of any department or agency, upon application of an interested party, or upon their own motion.
Section 232 directs the Secretary to submit to the President a report with recommendations for “action or inaction under this section” and requires the Secretary to advise the President if any article “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.”
Section 232(d) directs the Secretary and the President to, in light of the requirements of national security and without excluding other relevant factors, give consideration to the domestic production needed for projected national defense requirements and the capacity of the United States to meet national security requirements.
Section 232(d) also directs the Secretary and the President to “recognize the close relation of the economic welfare of the Nation to our national security, and . . . take into consideration the impact of foreign competition on the economic welfare of individual domestic industries” by examining whether any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports, or other factors, results in a “weakening of our internal economy” that may impair the national security.
Once an investigation has been initiated, section 232 mandates that the Secretary provide notice to the Secretary of Defense that such an investigation has been initiated. section 232 also requires the Secretary to do the following:
1. “Consult with the Secretary of Defense regarding the methodological and policy questions raised in [the] investigation;”
2. “Seek information and advice from, and consult with, appropriate officers of the United States;” and
3. “If it is appropriate and after reasonable notice, hold public hearings or otherwise afford interested parties an opportunity to present information and advice relevant to such investigation.”
As detailed in the report, all of the requirements set forth above have been satisfied.
In conducting the investigation, section 232 permits the Secretary to request that the Secretary of Defense provide an assessment of the defense requirements of the article that is the subject of the investigation.
Upon completion of a section 232 investigation, the Secretary is required to submit a report to the President no later than 270 days after the date on which the investigation was initiated.
1. Set forth “the findings of such investigation with respect to the effect of the importation of such article in such quantities or under such circumstances upon the national security;”
2. Set forth, “based on such findings, the recommendations of the Secretary for action or inaction under this section;” and
3. “If the Secretary finds that such article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security . . . so advise the President.”
All unclassified and non-proprietary portions of the report submitted by the Secretary to the President must be published.
Within 90 days after receiving a report in which the Secretary finds that an article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the President shall:
1. “Determine whether the President concurs with the finding of the Secretary” and
2. “If the President concurs, determine the nature and duration of the action that, in the judgment of the President, must be taken to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security.”
Although section 232 does not specifically define “national security,” both section 232, and the implementing regulations at 15 CFR part 705, contain non-exclusive lists of factors that the Secretary must consider in evaluating the effect of imports on the national security. Congress in section 232 explicitly determined that “national security” includes, but is not limited to, “national defense” requirements.
In a 2001 report, the Department determined that “national defense” includes both the defense of the United States directly, and the “ability to project military capabilities globally.”
Section 232 directs the Secretary to determine whether imports of any article are being made “in such quantities” or “under such circumstances” that those imports “threaten to impair the national security.”
The statute does not define a threshold for when “such quantities” of imports are sufficient to threaten to impair the national security, nor does it define the “circumstances” that might qualify.
Similarly, the statute does not require a finding that the quantities or circumstances are impairing the national security. Instead, the threshold question under section 232 is whether the quantities or circumstances “threaten to impair the national security.”
Section 232(d) contains a list of factors for the Secretary to consider in determining if imports “threaten to impair the national security”
In addition to “national defense” requirements, two of the factors listed in the second sentence of section 232(d) are particularly relevant in this investigation. Both are directed at how “such quantities” of imports threaten to impair national security
After careful examination of the facts in this investigation, the Secretary has determined that the present quantities and circumstance of NdFeB magnets imports threaten to impair the national security, as defined in section 232.
On September 21, 2021, Secretary of Commerce Gina Raimondo initiated the investigation to determine the effects of imports of NdFeB magnets on the national security based on a recommendation in the June 2021 White House Report “
On September 27, 2021, the Department published a
(a) Quantity of the articles subject to the investigation and other circumstances related to the importation of such articles;
(b) Domestic production capacity needed for these articles to meet projected national defense requirements;
(c) The capacity of domestic industries to meet projected national defense requirements;
(d) Existing and anticipated availability of human resources, products, raw materials, production equipment, facilities, and other supplies and services essential to the national defense;
(e) Growth requirements of domestic industries needed to meet national defense requirements and the supplies and services including the investment, exploration and development necessary to assure such growth;
(f) The impact of foreign competition on the economic welfare of any domestic industry essential to our national security;
(g) The displacement of any domestic products causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
(h) Relevant factors that are causing or will cause a weakening of our national economy; and
(i) Any other relevant factors.
The public comment period closed on November 12, 2021. The Department received 41 submissions. Parties who submitted comments included representatives of the domestic NdFeB magnet industry, including firms at different stages of the NdFeB magnet value chain, representatives of the foreign NdFeB magnet industry, representatives of consumers of NdFeB magnets such as the automobiles and electronics industries, representatives of the governments of Australia, Canada, the European Union, and Japan, and other concerned parties.
The Department carefully reviewed the public comments and factored all arguments and data into the investigative process. Public comments from representatives of consumers of NdFeB magnets tended to oppose the implementation of tariffs, citing the negative impact of tariffs for domestic industries that incorporate NdFeB magnets into end products. Representatives of foreign governments echoed concern for the imposition of tariffs and urged the investigation to recognize the strong ties between the United States and its allies. Representatives of the domestic NdFeB magnet industry discussed their future production plans, enumerated the difficulties firms faced in establishing a domestic value chain for the production of NdFeB magnets, and proposed recommendations to alleviate challenges. Two of the most cited challenges were Chinese competition, aided by favorable tax policies, lower environmental and labor costs, and domestic subsidies, and the difficulty of acquiring key intellectual property for sintered NdFeB magnets owned by Hitachi. A number of NdFeB magnet industry stakeholders indicated support for tax credit legislation for domestically produced NdFeB magnets. The public comments of key stakeholders are summarized in Appendix C, “Public Comment Summaries,” which also includes a link to the docket number
Due to the limited number of firms engaged in the U.S. NdFeB magnet industry, it was determined that a public hearing was not necessary to conduct a comprehensive investigation. In lieu of holding a public hearing on this investigation, the Department fielded a mandatory U.S. NdFeB Permanent Magnet Industry Survey (the “survey”) (
The survey provided a mechanism for respondents to disclose confidential and non-public information. The survey collected detailed information concerning factors such as current and planned facilities, production, capacity utilization, purchases/sales, employment, capital expenditure, critical machinery, research and development, and challenges and competition. The resulting data provided the Department with detailed industry information that was otherwise not publicly available and was needed to effectively conduct analysis for this investigation.
The Department deems the information furnished in the survey responses business confidential and will not publish or disclose it except in accordance with section 705 of the DPA, which prohibits the publication or disclosure of this information unless the President determines that the withholding of such information is contrary to the interest of the national defense. Therefore, the information submitted to the Department in response to the survey will not be shared with any non-government entity other than in aggregate form.
The Department also held 17 meetings with 19 unique U.S. NdFeB magnet industry stakeholders to gather information on firms' perspectives on the industry. Table 1 displays the firms the Department held meetings with, along with their place in the value chain and the domicile of their parent firm.
The Department consulted with the Department of Defense's Office of Industrial Base Policy and the Defense Logistics Agency regarding estimates of defense-related demand, as well as methodological and policy questions that arose during the investigation. The Department also consulted with other U.S. Government agencies with expertise and information regarding the NdFeB magnet industry including the Department of Energy, the Department of State, and the Environmental Protection Agency.
The directive of the investigation is to assess the effects of imports of NdFeB magnets on the national security of the United States. NdFeB magnets can be produced through bonding or sintering processes. Sintered magnets currently comprise approximately 93 percent of the global NdFeB magnet market, can be used in more demanding applications, and are not easily substitutable with alternative materials.
In order to ensure that the full NdFeB magnet value chain was covered, the Department also examined the supply chains of feedstocks and primary and intermediate products essential to the production of NdFeB magnets. These include rare earths, rare earth carbonates, rare earth oxides, rare earth metals, and rare earth alloys. NdFeB magnets generally use four rare earth elements with supply chain vulnerabilities: neodymium, praseodymium, dysprosium, and terbium.
As of 2020, consumer electronics constituted the largest source of total U.S. demand for NdFeB magnets (45 percent), followed by industrial motors (30 percent).
NdFeB magnets are an intermediate product composed of rare earths and other elements and are necessary for incorporation into a variety of consumer, infrastructure, and defense end-uses.
Rare earth elements can be extracted from mining, unconventional sources, and recycled materials. There are two groups of rare earths—light rare earths and heavy rare earths—defined by their atomic weights. In the United States, rare earths are mined from bastnaesite, a light rare earth-rich ore, or monazite, generally as a byproduct of heavy mineral sands.
Once mined and concentrated, rare earths are separated into individual rare earth oxides. The primary method used to separate rare earth oxides is solvent extraction. The first step in the process is usually to remove cerium, since it is a low-value rare earth element. The cerium-free rare earth oxide mixture is then placed in mixer settlers composed of acidic reagents to separate rare earth elements based on their atomic weight. As a result, solvent extraction consumes significant quantities of acid and water and generates environmentally unfriendly waste. Solvent extraction processes are also tailored to feedstocks. Although facilities can be reorganized to accommodate new sources of rare earth concentrate, it takes time and resources to do so.
Rare earth oxides are then refined into metals, most often through electrowinning and calcium reduction.
Finally, alloys are made by combining selected rare earth metals with iron and boron. There are two types of alloying approaches depending on whether they are meant to produce bonded or sintered NdFeB magnets. Although both sintered and bonded NdFeB magnets use neodymium and praseodymium, sintered NdFeB magnet alloy includes between 0.5 and 11 percent dysprosium or terbium by weight to improve high-temperature resistance to demagnetization, while the absence of these elements in bonded magnets precludes their use in elevated temperature applications.
Sintered NdFeB magnets are manufactured using powder metallurgy. For sintered magnets, specific alloys are first produced and melted. The molten alloy is then poured on the outer surface of a rotating metal cylinder in a process known as strip casting. After strip casting, the as-cast strips are jet milled into a powder with small grains that can be used for magnet production. Jet milling shapes the grains that define the magnet microstructure and affects the magnet's performance parameters. The powder is next aligned and pressed in a magnetic field before being sintered in a high temperature furnace to form the anisotropic magnets. The magnets are then machined to specified shapes depending on their end-use and coated with a metal film to protect the magnet from corrosion. The most common coating is a nickel-copper-nickel layer, although other coatings use gold, chrome, copper, and dry-sprayed epoxy or e-coat epoxy. Finally, magnets are magnetized using a high magnetic field to align the magnetization of the grains.
Bonded NdFeB magnets follow a similar process to sintered NdFeB magnets through the production of magnetic powder. Bonded NdFeB magnets are often made from rapidly solidified material turned into ribbons through melt-spinning or jet casting, which is subsequently milled, or from spherical powders through gas or centrifugal atomization.
It is difficult to estimate rare earth element losses from the mining to metallization value chain steps. Rare earth recovery from ore is complex since there are a variety of different rare earth minerals including bastnaesite, monazite, and ionic clays.
There is more information on material losses from alloying to magnet production.
The United States is essentially one hundred percent dependent on imports of NdFeB magnets to satisfy demand. However, the United States did not always have negligible capacity in the NdFeB magnet value chain. Rare earths were first discovered at Mountain Pass in California in 1949 and extracted by the mining firm Molycorp beginning in 1951.
However, the 1980s were marked by growing foreign competition that presaged the end of the U.S. rare earths industry. By 1985 Japan had already exceeded the United States in NdFeB magnet production and by 1987 produced over half the world's magnets.
The U.S. NdFeB magnet value chain experienced a brief revival in the late 2000s and early 2010s, in part due to rising rare earths prices.
As one of the strongest types of permanent magnets, NdFeB magnets, in particular sintered NdFeB magnets, are used in an extensive range of products. Example applications include actuators for machine tools, robots, and water pumps, refrigerator and air conditioner compressors, speakers in phones and laptops (as well as more advanced applications in computing and telecommunications), and traction motors in electric vehicles.
The Department of Energy's (DoE) “Rare Earth Permanent Magnets: Supply Chain Deep Dive Report” estimates total domestic demand for selected NdFeB magnet applications in aggregate and by broad application area, as detailed in Table 2.
Since U.S. production of NdFeB magnets is minimal almost all the United States' direct and indirect NdFeB magnet consumption is met through imports.
Presidential Policy Directive 21 (Critical Infrastructure Security and Resilience) designates 16 critical infrastructure sectors as vital to national security, national economic security, and/or national public health and safety.
Consistent with their broad commercial applications, NdFeB magnets are used in a variety of defense end-uses.
As with total domestic consumption of NdFeB magnets, a precise total for defense-related demand is not possible. [TEXT REDACTED].
Given NdFeB magnets' usage in and importance to the performance of myriad military systems, and the United States' near one hundred percent reliance on imports of NdFeB magnets, the U.S. Government has taken several steps in recent years to mitigate this reliance and address potential supply disruptions. One such measure is legislation implemented through a Defense Federal Acquisition Regulation Supplement (DFARS) that restricts the use of foreign NdFeB magnets in the military supply chain from 2019.
The Department of Defense's (DoD) Office of Industrial Base Policy has fostered domestic production capacity across the NdFeB magnet value chain from mining to magnet manufacturing through the allocation of funding under DPA Title III and the Industrial Base Analysis and Sustainment (IBAS) programs. Other important DoD funding sources for rare earth supply chain research and scale-up include the National Defense Stockpile Program, the Rapid Innovation Fund, and the Small Business Innovation Research (SBIR) program.
Upstream in the NdFeB magnet value chain, DoD has funded the development of oxide separation capacity. In February 2021, Lynas USA LLC, a subsidiary of Australian mining firm Lynas Rare Earths, received $30.4 million to establish a facility to produce light rare earth oxides, including neodymium.
The U.S. Government also funded projects related to the NdFeB magnet value chain through the SBIR program.
In 2020 and 2021, SBIR awards directly related to neodymium were made to ten organizations—DoD units funded three of these, and DoE units funded seven. Projects included novel separation and metal reduction technologies, as well as recycling/reclaiming rare earths and magnets from end-of-life products and waste feedstocks. Additional projects focused on the development of electric motors that are free of rare earth elements or have reduced rare earth element content. If expanded to include SBIR awards related more broadly to rare earth elements, the total number of projects funded increases to 52 in 2020 and 2021 alone, and over 300 over the history of the SBIR program.
In one example, the Defense Logistics Agency—Strategic Materials is leveraging SBIR funding and Rapid Innovation Funding to accelerate the development of new rare earth processing technologies through a grant to Rare Earth Salts.
DoE has also provided funding related to the NdFeB magnet value chain. For example, DoE has advanced research on recovering rare earths from unconventional sources, including coal, coal byproducts, and other waste materials.
In April 2021, DoE, through the National Energy Technology Laboratory, announced $19 million in grants to support production of rare earth elements and critical minerals vital to manufacturing batteries, magnets, and other products important to the clean energy economy.
The Department of Defense, the Department of Homeland Security, the National Security Council, and the Director of National Intelligence have identified climate change as a threat to national security. Climate-fueled events and scarce resources create instability, heightened military tensions, and financial hazards which can lead to worsening conflicts between countries.
Although the United States currently lags many other countries in the percentage of vehicles sold that are electric, President Biden has set a goal that by 2030 half of all new vehicles sold will be electric.
The global transition to electric vehicles is expected to lead to a rapid increase in demand for NdFeB magnets. Although automobile manufacturers can use non-NdFeB magnet motors, up to 95 percent of electric vehicles use rare earth magnets in their traction drive motors.
In addition to traction drive motors, NdFeB magnets, often of lesser grades, are used in various other automotive systems in both electric and conventional vehicles, including motors for door locks, mirrors, seat positioning, power steering, alternators, suspension control, anti-lock brakes, water pumps, and loudspeakers. Most sources estimate that electric vehicle drive trains use between one and two kilograms (kgs) of NdFeB magnets, with other applications using smaller amounts of NdFeB magnets.
The developing electric vehicle industry in the United States, in addition to the global electric vehicle market, represents a valuable opportunity for current and potential NdFeB magnet manufacturers. In one extreme example, if all new vehicle sales in 2040 were electric vehicles—an estimated 125 million vehicles globally—the global electric vehicle industry alone would consume at least 156,000 tons of NdFeB magnets and 342,000 tons of total rare earth oxides.
Wind turbines, particularly offshore wind turbines, also represent a large growth market for NdFeB magnets. NdFeB magnets are used in wind turbines' permanent magnet synchronous generators, also referred to as direct drive generators. Although not all wind turbine systems require rare earth magnets, they are the preferred choice for offshore wind turbines due to reduced maintenance costs, generator efficiency, and generator weight (which allows for the construction of larger, higher capacity wind turbines).
At present, the United States has just seven offshore wind turbines in two operating projects.
The goal to expand offshore wind capacity is tied to the Biden Administration's broader efforts to transition to a clean energy economy. To meet DoE's target of 30 gigawatts of offshore wind power by 2030, the industry is projected to generate over 31,000 construction period and 13,400 operating period jobs.
As noted earlier in this report, the U.S. is highly dependent on imports for nearly all its direct demand for NdFeB magnets.
To analyze U.S. reliance on imports of NdFeB magnets, the Department examined imports of sintered NdFeB magnets (HTS 8505.11.0070) for the years 2016 to 2021 from the United States' top five import sources (as of 2021) by value, in raw numbers and by share of imports (
The Department also examined U.S. exports of sintered NdFeB magnets in total and to the top five destinations (as of 2021) for the same 2016 to 2021 period (
NdFeB magnets and constituent products, including rare earth elements, rare earth carbonates, rare earth oxides, metals, and alloys, are subject to general tariff rates and the special tariff rate (
The
Total global demand for NdFeB magnets was estimated at about 119,000 tons in 2020, of which sintered magnets account for over 93 percent of total demand and bonded magnets the remaining seven percent.
Total global demand for NdFeB magnets is expected to grow dramatically over the next decade, increasing from 119,000 tons in 2020 to 387,000 tons by 2030 and over 750,000 tons by 2050 in a net zero carbon emission scenario. This equates to an average annual growth rate of 12.5 percent through 2030 and 6.3 percent through 2050. Electric vehicles and offshore wind turbines will drive this growth and are projected to account for almost 30 percent and about 36 percent of NdFeB magnet demand, respectively, by 2030 as a result of the world's evolving clean energy goals. The push for energy efficiency in other sectors, including traditional NdFeB magnet applications such as consumer electronics and industrial motors, will also contribute to increased demand for NdFeB magnets. However, growth in these areas is expected to be more modest, with their share of total demand shrinking from almost 60 percent of total demand in 2020 to less than 25 percent of total demand in 2030.
The rapid growth in demand for NdFeB magnets is expected to strain the current global value chain. One market research firm forecasts that combined neodymium, praseodymium, and neodymium-praseodymium oxide shortages will rise to 21,000 tons by 2030 and 68,000 tons by 2035, while NdFeB alloy and powder shortages will reach 66,000 tons by 2030 and 206,000 tons by 2035.
The Department synthesized primary and secondary data on the global NdFeB magnet value chain's market conditions (
Table 7 provides a review of market share by country for the consolidated market segments of mining, separation, metallization, and alloying/magnet manufacture. As noted earlier, China has the largest share of global production, by a large margin, at every step of the NdFeB magnet value chain.
Russia is not a major direct participant in the NdFeB magnet value chain. In 2021 Russian production of rare earth elements was estimated at 2,700 tons, equal to about one percent of the global market.
One method to evaluate the exposure of the NdFeB magnet industry to Russia is to examine the effects of Russia's invasion of Ukraine on investor expectations using an event study.
This event study analysis supports market research that suggests the NdFeB magnet industry is not highly exposed to Russia.
To assess whether one firm was driving this result, the Department iteratively dropped each observation, resulting in a sample mean of .018 without Energy Fuels (not significant at p<.05), 0.025 without Lynas Rare Earths (not significant at p<.05), 0.024 without MP Materials (not significant at p<.05), and 0.037 without Neo Performance Materials (significant at p<.05). Neo Performance Materials' stock price did not experience as positive an abnormal return as the other three firms', suggesting that investors were relatively less optimistic about the effects of the invasion on Neo Performance Materials. This is consonant with market research expectations, because Neo Performance Materials sources some rare earths from Russia (along with Australia, China, and the United States) and therefore has more direct exposure to Russia than the other three firms.
This section covers U.S. production of NdFeB magnets and magnet components, including mixed rare earth oxides, rare earth carbonates, individual rare earth oxides, rare earth metals, and rare earth alloys, from 2017 to 2026.
Except for rare earths mining, the United States was not a major participant in the NdFeB magnet value chain from 2017 to 2021 and only seven firms participated in any step of the NdFeB magnet value chain over this period (
The Department forecasts U.S. industry growth starting in 2022, due to a combination of expected demand growth, U.S. Government and private sector interest in supply chain resiliency, and rising rare earths prices. Between 2022 and 2026, ten additional firms indicate they will enter the market while the seven original firms noted in the 2017 to 2021 period plan to continue, and in some cases expand, their operations. A total of 17 firms are expected to participate in the NdFeB magnet value chain by 2026 (
Between 2018 and 2021, U.S. production of NdFeB magnet-related rare earths increased by [TEXT REDACTED] (
Of the rare earths used in NdFeB magnets, neodymium and praseodymium account for [TEXT REDACTED] of the 2017 to 2026 market, with neodymium making up around [TEXT REDACTED] and praseodymium around [TEXT REDACTED]. Dysprosium production is slated to increase starting in [TEXT REDACTED] and will bring neodymium and praseodymium's combined market share down to [TEXT REDACTED] by 2026.
Between 2023 and 2026, U.S. rare earth carbonates production is expected to increase [TEXT REDACTED] (
Between 2023 and 2026, U.S. separated rare earth oxides production is expected to increase [TEXT REDACTED] (
Between 2023 and 2026, U.S. rare earth metals production is expected to increase by [TEXT REDACTED] (
Between 2023 and 2026, U.S. rare earth alloys production is expected to increase by [TEXT REDACTED] (
Between 2017 and 2022, no sintered NdFeB magnet production was recorded in the United States. [TEXT REDACTED], commercial-scale production is not expected until 2023. Between 2023 and 2026, U.S. sintered NdFeB magnet production is expected to increase [TEXT REDACTED] to over 14,000 tons (
[TEXT REDACTED].
On average, sintered NdFeB magnet production is expected to account for roughly 97 percent of aggregate U.S. NdFeB magnet production. Although occupying a small portion of the market, it is important to note that domestic bonded NdFeB magnet production existed during the 2017 to 2021 period. Between 2017 and 2021, bonded NdFeB magnet production increased [TEXT REDACTED] (
To better illuminate the plans, requirements, and challenges U.S. firms face in establishing production, the Department developed profiles of those firms that are expected to be major participants in the U.S. NdFeB magnet industry (
The Department used the data from its survey of the U.S. NdFeB magnet industry and estimates of U.S. NdFeB magnet demand to estimate import penetration for sintered and bonded NdFeB magnets from 2017 to 2026 (
As indicated in the earlier section on firm-level profiles, the facilities required to produce NdFeB magnets and components of NdFeB magnets are costly to establish. In meetings with industry stakeholders, company representatives emphasized the substantial investment requirements to establish U.S. capacity. MP Materials announced in 2019 that it was spending $200 million to establish a domestic processing and separation facility and announced in February 2022 plans to spend $700 million to establish a vertically integrated NdFeB magnet supply chain in the United States.
The Department's survey provides further evidence on the costs to establish U.S. production facilities. Respondents were asked to list all future facilities that would start production between 2022 and 2026.
Firms face considerable financial shortfalls when it comes to new facilities. Figure 15 shows the median and mean difference at the facility-level between the amount needed to reach full production and amount firms have allocated to reach full production, as well as the sum of differences over facilities, grouped by facility value chain step. The similarity between the median and mean differences between funds need and funds allocated suggest that there are few well-funded outliers. In addition, the differences between funds needed and funds allocated are similar to the facility costs in Figure 14, indicating that most firms have allocated little to no money for the construction of new facilities. The total funding needed to bring all planned facilities online is considerable but varies widely between value chain steps. The seven new sintered NdFeB magnet facilities, which are critical to achieving the ambitious production estimates discussed earlier, are expected to require over [TEXT REDACTED].
Data on firms' capital expenditures from 2017 to 2026 corroborate the significant financing needed to achieve production forecasts. From 2017 to 2020 annual capital expenditures were well under [TEXT REDACTED] annually, reflecting the fact that prior to 2021 the only active domestic value chain steps were mining and bonded NdFeB magnet
The sources of capital expenditure funding in 2021 indicate the potential need for additional sources of financing to cover anticipated outlays. Even in 2021, when aggregate industry capital expenditure is a comparatively low [TEXT REDACTED], over [TEXT REDACTED] of recorded spending was self-funded (
In addition to costly facilities, the production of NdFeB magnets and components of NdFeB magnets requires expensive critical equipment. 22 firms indicated 130 pieces of equipment that are critical to production in the Department's survey. Firms identified the most pieces of equipment for NdFeB magnet production [TEXT REDACTED] followed by alloy production [TEXT REDACTED]. Firms identified the fewest pieces of equipment for recycling rare earths [TEXT REDACTED] and mining [TEXT REDACTED].
The most cited source of equipment was the United States, followed by Japan, China, and Germany. The high degree of machinery sourcing from the United States may reflect the location of assembly rather than where machine components were produced. Industry participants indicated that the most sophisticated machinery relevant to NdFeB magnets come from Japan and Germany, with additional equipment sourced from China.
Mining equipment was on average the most expensive critical machinery, with a mean of over [TEXT REDACTED] (
In addition to cost, some industry representatives have indicated the potential for supply chain issues in the acquisition of necessary capital equipment.
Even within pieces of equipment there is considerable heterogeneity. [TEXT REDACTED]
The U.S. NdFeB magnet industry directly employs a relatively small number of individuals.
As mentioned earlier, the U.S. NdFeB magnet industry is emerging and many of the firms involved plan to expand production and enter other value chain steps. To better understand which occupations will likely be in demand, the Department compared employment by occupation between mature magnet firms and the current U.S. industry. Three mature magnet firms provided employment data in their responses to the Department's survey.
Industry stakeholders indicated to the Department a range of perspectives on employment challenges. For example, MP Materials stated that the United States “has limited skilled labor and human resources needed for the production of this high-technology product.”
Survey respondents were requested to indicate what labor market issues they faced, including the timeframe and the primary affected occupation. For U.S. producers, the primary workforce issues faced were finding qualified and experienced workers, followed by attracting workers to their location and finding U.S. citizens (
Qualitative survey responses provide further evidence of the NdFeB magnet industry's potential difficulties in attracting human capital. The lack of available and experienced high wage labor was a particularly common refrain. [TEXT REDACTED]
Firms that can find workers face competition and difficulties attracting them. [TEXT REDACTED] Many NdFeB magnet firms are located outside major urban centers, which can cause issues attracting talent. [TEXT REDACTED]
The Department's survey of the U.S. NdFeB magnet industry asked firms about whether they struggled to compete against imports. 29 firms—57 percent of the sample and 67 percent of current or planned U.S. NdFeB magnet value chain producers—responded affirmatively. The Department then asked the percentage of operating costs attributable to eight input conditions. Figure 23 shows the median cost for each input condition for all respondents, non-producers, current or planned U.S. producers, and foreign producers.
The Department also asked survey respondents to indicate which of 30 challenges affected their competitive position and to rank the top five challenges (
Qualitative explanations underscore foreign competition, in particular with China, as a major challenge for domestic production. Many respondents who cited foreign competition directly compete with Chinese firms, which they claim are unfairly advantaged through government policies, subsidies, and market manipulation. Several respondents noted that the lack of environmental regulations and enforcement in China allows Chinese magnet producers to undercut prices for NdFeB magnets. Others noted the near total domination that Chinese firms had throughout the NdFeB magnet supply chain, which enables China to set market prices. China is also mentioned in terms of input availability. Some firms indicate that there are few sources of feedstocks outside of China [TEXT REDACTED]. Chinese firms also compete with U.S. producers for inputs. [TEXT REDACTED]
Respondents were also likely to cite Chinese competition as the primary challenge to increasing their market share. One U.S. magnet integrator noted that China is a low-cost producer of NdFeB magnets and end-users often purchase from the cheapest source regardless of country of origin. Other respondents reiterated that Chinese suppliers are unfairly subsidized and because of their dominant position can set prices. A related factor cited by one U.S. producer is the higher cost of labor in the United States compared to foreign competitors. Another often-mentioned challenge to expanding operations and market share is accessing the necessary financing for capital investments. Finally, several respondents experienced challenges in developing a resilient supply chain for their operations, such as securing diverse sources for necessary feedstocks. Domestic sources are a particular challenge given the lack of U.S. production capacity in all stages of the NdFeB magnet value chain. Reflecting the more general challenges discussed earlier, Chinese competition, feedstocks, and capital are major barriers to expanding production.
Rare earths mining and processing can cause damage to the environment because it produces large amounts of hazardous and radioactive waste.
The Department used data from its survey of the U.S. NdFeB magnet industry, a previous industrial base assessment on rare earth elements, meetings with NdFeB magnet industry participants, and market research to assess the relationship between the NdFeB magnet value chain and environmental regulations. Based on these data, a preliminary picture emerged that although historically NdFeB magnet industry participants saw environmental factors as a constraint, the current NdFeB magnet industry is using new methods and technologies to reduce its environmental impact and sees these processes as enabling competition with China, even though weaker Chinese environmental regulations increase the price gap between Chinese and non-Chinese magnets.
In 2014 the Department conducted a survey under section 705 of the DPA of U.S. rare earth suppliers and product manufacturers to support a 2016 supply chain assessment on dysprosium, erbium, neodymium, terbium, and ytterbium called “U.S. Strategic Material Supply Chain Assessment: Select Rare Earth Elements” (“2016 Rare Earths Assessment”). Of the 160 respondents, 126 indicated they used one of the rare earths that make up NdFeB magnets—neodymium, praseodymium, terbium, or dysprosium—and 115 indicated they used neodymium.
These survey data suggest that in the early 2010s environmental factors constrained multiple steps in the U.S. rare earths value chain. 36 respondents (22.5 percent) indicated that environmental regulations/remediation had a current and/or future impact on their rare earth element-related business lines.
In contrast, the current U.S. NdFeB magnet industry sees environmental factors as a relatively minor concern and cites environmentally friendly technologies as a source of opportunity. The Department's survey of the U.S. NdFeB magnet industry asked firms to identify the primary challenges affecting their competitive positions and rank the top five from a list of 30 potential responses. Among the 16 current or future U.S. producers that provided responses, [TEXT REDACTED]. Restricting the sample to the top five challenges, environmental regulations are tied with four other issues for the seventh most cited challenge. [TEXT REDACTED] These data suggest that environmental regulations matter but are relatively less important in comparison to the other challenges faced by the U.S. NdFeB magnet industry.
Input cost data from the Department's survey of the U.S. NdFeB magnet industry lend support for the view that environmental regulations are minor in comparison to other factors. The Department's survey asked respondents to estimate the percentage of operating costs due to a series of inputs, including environmental regulations. The median response from current or planned U.S. producers regarding environmental regulations was [TEXT REDACTED], lower than sourcing feedstock material ([TEXT REDACTED]), labor ([TEXT REDACTED]), other ([TEXT REDACTED], most often described as operating or overhead costs), electricity ([TEXT REDACTED]), transportation costs ([TEXT REDACTED]), and taxes ([TEXT REDACTED]). Only VAT taxes/tariffs/trade duties ([TEXT REDACTED]) and export regulations ([TEXT REDACTED]) ranked lower.
Environmental regulations increase the price gap between Chinese and non-Chinese NdFeB magnets, but consonant with their minor contribution to U.S. firms' production costs their impact appears to be small relative to other factors.
Both upstream and downstream in the NdFeB magnet value chain, some firms see environmental factors as a competitive advantage and tout their small environmental footprints and new technologies that help minimize environmental waste.
Downstream in the value chain, Noveon highlighted its low environmental impact, [TEXT REDACTED].
NdFeB magnets were concurrently invented in 1983 by General Motors in the United States and by Sumitomo in Japan.
Hitachi has also defended its intellectual property rights in U.S. courts. In 2012, Hitachi filed a complaint with the United States International Trade Commission (U.S. ITC) against 29 manufacturers and importers of sintered rare earth magnets and products containing sintered rare earth magnets.
In conversations with industry participants Hitachi's ownership of sintered NdFeB magnet patents was characterized on a spectrum from a critical barrier to entry to a nonexistent risk.
The Department's survey of the U.S. NdFeB magnet industry supports the view that intellectual property does not pose a major barrier to NdFeB magnet production, although access to Hitachi's technology would facilitate domestic production. In response to the question, “Has your organization encountered difficulties in obtaining NdFeB Magnet related IP?” [TEXT REDACTED]. Intellectual property is unlikely to derail current production estimates but may pose constraints on growth and use.
In comparison to NdFeB magnets, neodymium oxide and metal are relatively standard products for which comparable price data are available. Neodymium oxide and metal prices have seen considerable shifts over the previous 20 years (
Although the neodymium oxide and metal price series appear to indicate high volatility, prices of neodymium and other rare earth elements used in NdFeB magnets are less volatile than other metals and materials. DoE estimated price volatility for the four key rare earth oxides used in NdFeB magnets (neodymium, praseodymium, dysprosium, and terbium), by analyzing changes in monthly average prices between January 2010 and June 2020, a period that includes the early 2010s price spike but not the more recent rise in prices. DoE found that price volatility was 0.1 for neodymium oxide, 0.09 for praseodymium oxide, 0.13 for dysprosium oxide, and 0.14 for terbium oxide, lower than the average of a set of 30 by-product metals and materials.
Industry representatives emphasize the distortionary effects of price volatility. [TEXT REDACTED]. The Chinese government has recently expressed concern about rising prices, calling on major Chinese rare earths producers to maintain a steady supply chain and reduce price increases.
Price increases also have the potential to change consumer behavior and lead to greater interest in substitutes and alternatives. [TEXT REDACTED].
Recycling NdFeB magnets or NdFeB magnet swarf, the waste produced by shaping magnets, represents a potentially significant and largely untapped source of rare earth material.
Separating NdFeB magnets from the products which house them is a major challenge of the recycling process. Firms that recycle magnets have limited visibility into the construction and design of products that use magnets, which makes disassembly difficult.
The complexities involved in NdFeB magnet separation increase recycling costs. In 2014 a company approached by Japanese magnet manufacturers found they could not dismantle rare earth elements from HDDs at a profit.
In theory, NdFeB magnet reuse is possible without dismantling assemblies and remanufacturing contained magnets because magnets do not lose much strength over their lifetime. However, NdFeB magnets are often produced and shaped for a specific end-use product, and it is difficult to change the properties of the manufactured magnets, such that reuse is generally uncommon.
Returning to the 2016 Rare Earths Assessment, 30 respondents indicated they recycled rare earth elements or rare earth element-related products, and 25 indicated they used recycled rare earth elements or rare earth element-related products. However, a number of these respondents do not operate in the NdFeB magnet value chain and their operations are unrelated to magnets. Other respondents explained that they sold material to be recycled or outsourced recycling operations, including to known magnet producers. [TEXT REDACTED] Some of the pessimistic responses reflect the contemporaneous state of technology. For example, [TEXT REDACTED]
The Department's survey of the U.S. NdFeB magnet industry presents a more encouraging picture of the potential contributions of recycled rare earths to the U.S. NdFeB magnet value chain. Survey participants included five current and potential recyclers: [TEXT REDACTED].
[TEXT REDACTED]
[TEXT REDACTED]
In addition to these firms, in February 2022 the Critical Materials Institute (CMI) announced it had partnered with TdVib of Boone, IA, to commercialize rare earth element recycling.
NdFeB magnet substitution can occur through several paths.
The U.S. Government has provided valuable funding for research on NdFeB magnet substitutes. In 2011, the Advanced Research Projects Agency—Energy (ARPA-E) funded 14 projects aimed at developing replacements for rare earth elements in electric vehicles and wind turbines through its Rare Earth Alternatives in Critical Technologies (REACT) Program.
In 2020, the Defense Advanced Research Projects Agency's Basic Energy Sciences division awarded a total of $20 million to five projects dealing with rare earth extraction.
The private sector has also actively pursued substitution research. Turntide Technologies manufactures motors using switch reluctance motors that do not use NdFeB magnets.
Iron-nitride magnets are a potential NdFeB magnet substitute with several attractive qualities.
Although iron-nitride has been known for many years, it has yet to be commercialized because of the difficulties involved in manufacturing.
Sintered NdFeB magnets used in critical infrastructure and high growth applications, such as electric vehicles and offshore wind turbines, require elevated temperature properties that necessitate the addition of heavy rare earths like dysprosium and terbium. Heavy rare earth deposits are even more concentrated in China than neodymium and, after recent Chinese industry consolidation, a single state-owned enterprise—China Rare Earth Group—will control most capacity.
MQ3 magnets, first developed by General Motors in 1985 and later commercialized by Magnequench in 1987, are a type of NdFeB magnet that may offer a reduced heavy rare earth element or heavy rare earth element-free alternative to sintered NdFeB magnets.
While comparable in performance metrics to sintered NdFeB magnets, MQ3 magnets use a smaller amount of heavy rare earth elements due to microstructural differences. As the grain size of NdFeB magnets' microstructure is reduced, the magnets' resulting coercivity increases due to higher domain wall pinning.
Extant research indicates that substituting MQ3 magnets for sintered NdFeB magnets could substantially reduce or even eliminate the use of heavy rare earth elements. In one study comparing equivalent MQ3 and sintered NdFeB magnets, dysprosium-free MQ3 magnets were equivalent to sintered NdFeB magnets with 3.43 percent dysprosium by weight.
Although the method to produce MQ3 magnets was first discovered in 1985, the current NdFeB magnet industry primarily produces bonded and especially sintered NdFeB magnets. One major reason for this equilibrium is that the processing costs for MQ3 magnets are higher than for sintered NdFeB magnets.
In summary, there are two different approaches which can be used to improve coercivity and resulting resistance to demagnetization at elevated temperature, one of which—MQ3 magnets—is less reliant on heavy rare earth elements. In sintered NdFeB magnets, heavy rare earths such as terbium and dysprosium are added which results in higher feedstock costs and an even greater reliance on Chinese supply chains. MQ3 magnets' smaller grain size enables manufacturers to reduce or eliminate heavy rare earth elements while maintaining comparable performance. Although MQ3 magnets' processing methods are more expensive than sintered NdFeB magnets', heavy rare earth element feedstock prices may make MQ3 magnets economically competitive. In addition, using less heavy rare earth elements would decrease dependence on China, which dominates global heavy rare earth element production even more than global light rare earth element production. MQ3 magnets are a potential substitute for sintered NdFeB magnets and would be particularly useful in reducing U.S. dependence on heavy rare earth elements.
Despite advances, most substitution technologies are still at least several years away from commercialization, which means they will be unable to satisfy growing demand for NdFeB magnets from green technology (
The Department's survey of the U.S. NdFeB magnet industry provides support for the view that current substitutes are of limited commercial viability. The survey asked producers of assemblies or systems containing NdFeB magnets to indicate whether magnet substitutes were available for their primary products, and if so, to identify the potential substitute and discuss the advantages and disadvantages of the substitute. 21 firms indicated 57 products in response. [TEXT REDACTED].
The relationship between NdFeB magnet component prices and NdFeB magnet imports further underscores the lack of commercially viable NdFeB magnet substitutes. If NdFeB magnet substitutes are commercially available, then end-users should be able to switch production to use NdFeB magnet substitutes. As a result, as NdFeB magnet prices rise demand should fall, and vice versa. To examine whether this is the case, the Department analyzed the relationship between neodymium oxide prices and NdFeB magnet imports. Neodymium oxide prices are a good proxy for NdFeB magnet prices because neodymium is the largest contributor to NdFeB magnet cost. NdFeB magnet imports are a relatively reliable indicator of direct demand because the United States is nearly one hundred percent dependent on imports.
In this section the Department discusses the key findings from its investigation into the effects of imports of NdFeB magnets on U.S. national security. These findings are based on data collected from an industry survey, industry meetings, extant U.S. Government research, and other sources, as discussed in earlier sections.
NdFeB magnets are critical to the functioning of numerous defense systems, including fighter aircraft and
NdFeB magnets are used in a broad range of products across virtually all 16 critical infrastructure sectors. NdFeB magnets are necessary and largely non-substitutable components of goods in multiple critical infrastructure sectors. NdFeB magnets are particularly important for the critical manufacturing and critical energy sectors, as they are key to the functioning of electric vehicle drive trains and offshore wind turbine generators. They also have an important role in the critical healthcare and public health sector, where they are used in MRI machines and other medical instruments, and the critical defense industrial base sector.
The Department previously determined that “national security” can be interpreted to include the general security and welfare of certain “critical industries.”
Total U.S.—and global—demand for NdFeB magnets is expected to grow significantly in the coming decades, driven by increased production of electric vehicles and offshore wind turbines. Under high growth scenarios, total domestic demand is expected to more than double from 2020 to 2030, growing from just over 16,000 tons to 37,000 tons, and more than quadruple from 2020 to 2050, increasing to almost 69,000 tons.
A key outstanding question is the extent to which firms will locate the production of assemblies that integrate NdFeB magnets, such as electric vehicle motors and wind turbine generators, in the United States. If firms elect to produce products containing NdFeB magnets overseas this will increase embedded U.S. demand for NdFeB magnets but not affect direct U.S. demand or contribute to a domestic market for NdFeB magnets. U.S. NdFeB magnet value chain participants are more likely to successfully establish and maintain production if they are proximate to their customers, due to transportation costs and turn times.
The substantial growth in total U.S. demand will increase U.S. dependence on imports of NdFeB magnets without the rapid development of a competitive U.S. NdFeB magnet industry. However, it also presents an opportunity to facilitate the formation of just such an industry. If a large enough proportion of the products that directly incorporate NdFeB magnets—such as electric vehicle drive trains—are manufactured in the United States and the price differential between U.S. and Chinese magnets can be sufficiently narrowed, domestic NdFeB magnet producers may benefit from a sizeable and stable source of demand.
The United States is currently one hundred percent dependent on imports of sintered NdFeB magnets and is highly dependent on imports of bonded NdFeB magnets. The United States does not currently possess the capacity to manufacture sintered NdFeB magnets and only makes a small amount of bonded NdFeB magnets. In addition, the United States does not produce rare earth oxides, NdFeB-related metals, or NdFeB alloys, such that current bonded NdFeB magnet manufacturers are dependent on imported feedstocks. The majority of direct U.S. NdFeB magnet demand is satisfied by imports from China. In 2021, China accounted for 75 percent of U.S. sintered NdFeB magnet imports by value, up from under 60 percent in 2016. Given substantial indirect demand, this may even underestimate the United States' overall dependence on China for NdFeB magnets. For example, up to 60 percent of essential civilian demand is satisfied through embedded imports.
U.S. allies are also dependent to varying degrees on China. Although the European Union and Japan operate in the downstream steps of the NdFeB magnet value chain, they are dependent on China for feedstock to produce metals, alloys, and magnets. Other U.S. allies, such as Australia, only operate in the upstream portions of the NdFeB magnet value chain. More broadly, China can shape global prices due to its dominance in all value chain steps and the increasing concentration of its domestic industry.
Multiple firms intend to establish domestic capacity at different steps of
The nascent U.S. NdFeB magnet industry faces significant barriers to achieve its production targets. In particular, the U.S. NdFeB magnet industry participants will need to compete with Chinese manufacturers, who benefit from favorable tax and tariff policies, low labor and energy costs, and comparatively relaxed environmental regulations, among other factors. Indeed, U.S. producers consistently cite foreign competition as a top challenge to their competitive position. Chinese competition is also often mediated by other major challenges such as labor costs and input availability.
In addition to Chinese competition, U.S. firms face financial and human capital constraints. NdFeB magnet facilities—and facilities at earlier value chain steps—are expensive, and U.S. firms have currently allocated almost no funds to establish planned facilities. For example, sintered NdFeB magnet facilities cost on average [TEXT REDACTED], but firms have on average allocated less than [TEXT REDACTED] for each facility. Further, the collapse of the U.S. NdFeB magnet industry in the 1990s means that planned U.S. NdFeB magnet producers struggle to find qualified and experienced workers, especially high wage employees such as materials scientists.
Finally, there is high uncertainty over demand for U.S. NdFeB magnets. Not only do a significant portion of end-users manufacture products overseas, but even domestic manufacturers may prefer to continue using less expensive Chinese NdFeB magnets. Ensuring that enough end-users integrate magnets into intermediate and final products in the United States will be crucial for the success of the U.S. NdFeB magnet industry. Planned U.S. NdFeB magnet industry participants may struggle to achieve production estimates, given these and other obstacles.
Based on the findings in this report, the Secretary concludes that the present quantities and circumstances of NdFeB magnet imports threaten to impair the national security as defined in section 232 of Trade Expansion Act of 1962, as amended.
Despite the heavy dependence of the United States on direct and indirect imports of NdFeB magnets, the Department currently recommends that the Administration not impose tariffs, quotas, or other import restrictions on NdFeB magnets or component products. Given the current severe lack of domestic production capability throughout the magnet supply chain, tariffs and quotas would have an adverse impact on consuming sectors and might incentivize businesses to move operations incorporating NdFeB magnets offshore. In both industry meetings and public comments, most representatives of consuming sectors oppose the imposition of trade restrictions for these reasons. As Dana, a manufacturer of electric motors, stated, tariffs “would potentially curtail any future plans to bring parts of its electric motor manufacturing to the U.S.”
The Department has identified several actions that would help to ensure reliable domestic sources of NdFeB magnets and lessen the risk that imports threaten the national security. These actions are not intended to be exhaustive or exclusive, and the Secretary recommends that the Administration pursue all proposed actions.
The national security of U.S. allies and partners is essential to U.S. national security, and both are undermined by allies' and partners' reliance on China with respect to the NdFeB magnet value chain. Australia relies on China to buy rare earth materials, while both Japan and the European Union rely on China to purchase rare earth oxides and metals to make NdFeB magnets. There is also broad reliance by U.S. allies on China for NdFeB magnets—[TEXT REDACTED].
Shared vulnerabilities highlight the value of current multilateral—as well as bilateral—engagements on critical minerals, which can help transition the United States and allies from reliance on a potential adversary and national security threat. Continued multilateral engagement through existing fora, such as the Conference on Critical Materials and Minerals, in concert with current bilateral engagements, including with Australia, Canada, and the European Union, will facilitate efficient coordination on supply chain resiliency issues across the full NdFeB magnet value chain. The United States should work with allies through these existing engagements to develop production at different steps of the value chain, encourage intellectual property licensing, and cooperate on foreign investment reviews, in addition to other actions.
The United States and allies should leverage burgeoning multilateral mechanisms to enhance focus on identifying the most cost-effective deposits, prioritizing the most commercially viable ones, and then pooling funding for production. The United States has one of the highest-grade deposits of rare earth elements in the world at Mountain Pass Mine in California. Round Top Mine in Texas, scheduled to begin production in 2023, may become a viable source of dysprosium. Meanwhile, Australia has some of the richest deposits of uranium and gallium, along with significant rare earth elements. Leveraging assets and comparative advantage amongst allies and partners will help develop a critical minerals supply chain in economically viable locations in a manner consistent with the United States' labor, environmental, equity, and other values.
In addition to funding market development, multilateral action should address technology sharing. While not cited as a critical barrier to entry, NdFeB magnet industry participants indicate intellectual property licensing would facilitate production. Industry participants are also researching NdFeB magnet substitutes and methods to reduce rare earths content that would increase supply chain resiliency, the commercialization of which should be promoted. Intellectual property licensing to firms from ally and partner countries should be encouraged and facilitated, especially when it reduces reliance on sourcing from non-allies. Allies and partners should reciprocate and respect all intellectual property. Emphasis should be placed on sharing technology that reduces the negative impacts of mining or separation, improves the extraction of rare earth elements from unconventional sources, fosters novel and effective recycling technologies, and develops effective magnet substitutes.
Coordinating foreign investment review mechanisms, which affect how quickly international capital can flow to priority facilities, should also be part of multilateral engagements. U.S. foreign investment law has exceptions for investors from certain countries, including important NdFeB magnet value chain participants such as Australia and Canada.
There are several established and relevant fora which can serve as venues for structured engagement with allies on these and other issues related to NdFeB magnets. For example, the Conference on Critical Materials and Minerals, which brings together Australia, Canada, the European Union, Japan, and the United States, is an important venue to regularly exchange information on policies for critical materials, research and development, and other efforts, and could be the site of further multilateral engagement.
The Department recommends that the Administration support the passage of H.R. 5033, the Rare Earth Magnet Manufacturing Production Tax Credit Act, or similar legislation.
In addition to a tax credit for NdFeB magnets, the Department recommends that the Administration support the development of tax credits for non-NdFeB magnets that can substitute for NdFeB magnets and upstream rare earth products including carbonates, oxides, metals, and alloys. NdFeB magnet substitute and upstream rare earth product tax credits would similarly improve cost competitiveness and facilitate the growth of U.S.-produced magnetic materials. As with a rare earth tax credit, any NdFeB magnet substitute and upstream rare earth product tax credits should include materials produced by U.S. allies.
As discussed earlier, the Department of Defense (DoD) has made several notable awards through the Defense Production Act (DPA) Title III program to firms in the NdFeB magnet value chain. These awards have largely focused on the development of oxide separation and sintered NdFeB magnet production facilities. Further DoD awards for alloying and metallization production could facilitate the development of a holistic domestic NdFeB magnet value chain. Alloy and especially metal production are currently anticipated to be weak links in the future U.S. NdFeB value chain. Based on the Department's survey of the U.S. NdFeB magnet industry, alloy and metal production facilities are also, on average, less expensive than domestic mining or magnet facilities. DoD DPA funding for alloy and metal facilities would be an efficient use of resources to strengthen the nascent NdFeB magnet value chain.
Eligible U.S. NdFeB magnet industry participants, including NdFeB magnet manufacturers and producers at upstream and downstream steps in the value chain, should be encouraged to apply for loans from the Export-Import Bank of the United States (EXIM). EXIM financing is another mechanism to help ease the financial constraints faced by the nascent U.S. NdFeB magnet industry. EXIM has two initiatives that are particularly relevant for the U.S. NdFeB magnet industry: the Make More in America Initiative and the China and Transformational Exports Program (CTEP).
CTEP is meant to help U.S. exporters facing competition from China and ensure that the United States leads in ten transformational export areas, including renewable energy, energy storage, and energy efficiency. It is highly probable that U.S. NdFeB magnet industry participants that seek to enter export markets will face considerable competition from Chinese firms, given that China is the global leader in the NdFeB magnet value chain and Chinese magnets are less expensive than their non-Chinese counterparts because of favorable tax rebates and subsidies, among other factors. NdFeB magnet industry participants should also be encouraged to apply for EXIM financing under CTEP.
As directed by the Bipartisan Infrastructure Law, the Department of Energy has allocated nearly $3 billion to boost domestic production of technologies critical to clean energy of the future, including electric vehicles. Although much of this funding is directed at electric vehicle battery-related technologies, a portion of it could be devoted to funding domestic NdFeB magnet production, as these are critical to clean energy and national security.
In addition to these existing funding sources, the Department recommends that the Administration support legislative action to develop resilient supply chains through the allocation of additional funding, such as the Supply Chain Resilience Program. Additional funding from such programs should support investment in domestic manufacturing in all steps of the NdFeB magnet value chain.
The investigation into NdFeB magnets focuses foremost on the national security. Under Title I of the Defense Production Act (DPA), the President is authorized to require preferential acceptance and performance of contracts or orders (other than contracts of employment) supporting certain approved national defense and energy programs.
Access to neodymium and NdFeB magnets is critical to the industrial base as a highly customizable component with a variety of uses. DoD, DoE, and DHS should use or continue to use their delegated authority under the DPAS to place priority ratings on contracts for programs related to or containing NdFeB magnets and magnet components. DPAS use ensures that approved national defense programs receive the appropriate priority in the marketplace. DPAS authorities could be particularly useful in ensuring that U.S. NdFeB magnet industry manufacturers are able to acquire critical equipment in a timely fashion. Across the industry, potential domestic producers face average lead times of around eight months for equipment, and for some market segments this increases to ten months for critical equipment. The Department's survey of the U.S. NdFeB magnet industry indicated the United States is the top source for equipment. DPAS could therefore be successfully deployed to shorten lead times and hasten the development of the U.S. NdFeB magnet industry. In addition, once sufficient domestic sources of feedstock are available, employing DPAS authorities could enhance the timeliness and stability of supply and increase the ability of U.S. NdFeB magnet firms to maintain production.
The Department recommends the Administration consider restrictions on exports of materials relevant to the NdFeB magnet value chain under the International Emergency Economic Powers Act (IEEPA). Export controls could address market distortions in the NdFeB magnet value chain that create substantial difficulties acquiring or face inflated prices for feedstocks from domestic sources due to competition with foreign consumers. [TEXT REDACTED].
The Strategic and Critical Minerals Stockpiling Act (50 U.S.C.§ 98
[TEXT REDACTED]. DoD has requested $253 million in new appropriations for the National Defense Stockpile Transaction Fund in the President's Budget Request for Fiscal Year 2023. These funds build towards the $1 billion funding goal established by the June 2021 White House Report “
The Department recommends that the Administration establish a forum under a lead U.S. Government agency to encourage information exchange and cooperation between emerging NdFeB magnet producers throughout the supply chain and NdFeB magnet end-users. As previously discussed, ensuring consistent domestic commercial demand is critical to the development of a U.S. NdFeB magnet industry. Industry stakeholders have cited uncertainty over both potential sources of domestic supply and consistent demand for domestic magnets as risks to the emerging U.S. NdFeB magnet value chain. This forum would provide additional assurance of domestic supply and demand, for example by promoting private sector offtake agreements using DPA Title VII. Japan's use of JOGMEC to establish definitive offtake agreements between overseas producers and Japanese consumers is a successful model the U.S. Government could emulate.
This forum could also provide a platform to resolve other issues relevant to the NdFeB magnet industry. For example, industry participants could discuss whether developing a market in futures and derivatives based on neodymium or other rare earths could increase price transparency and reduce price volatility or provide additional access to capital markets that could be used to finance capital-intensive projects. The Chinese rare earths industry is already considering such a marketplace.
The Department recommends that the Administration take legislative action to establish regulations and, working in collaborative with the private sector, voluntary consensus standards to promote the recovery, recycling, and reuse of NdFeB magnets. In particular, labelling requirements for end-of-life products would ensure recyclers know NdFeB magnet specifications. Uncertainty over magnet specifications is a significant barrier to recycling, so labelling would facilitate recycling.
The Department also recommends that the Administration leverage existing programs and assets to increase the demand for recycling. DLA runs a Strategic Material Recovery and Reuse Program, which allows the recovery of strategic and critical materials from excess materials made available by other Federal agencies.
Finally, the Department recommends that the Administration evaluate whether removing and processing tailings sites, for example of heavy mineral sands and coal tailings, could ameliorate environmental concerns at site locations.
In Executive Order 14057, “Catalyzing Clean Energy Industries and Jobs through Federal Sustainability”, the Biden Administration mandated that all federal agencies buy electric vehicles (in total about 600,000 car and trucks) by 2035 and that all 300,000 federal buildings be powered by wind, solar, or nuclear energy by 2030.
Consumer rebates are another mechanism to incentivize the domestic production of NdFeB magnets. The Department recommends that the Administration develop and implement a tax rebate for consumers who purchase electric vehicles that are certified to contain U.S. or U.S. ally origin content. This rebate would help compensate automobile manufacturers for the increased cost of using domestic or ally produced NdFeB magnets. Such a rebate need not be limited to NdFeB magnets but could include U.S. or U.S. ally origin content batteries as well.
The Department recommends that the Administration continue to fund research that seeks to reduce rare earth element content, and especially heavy rare earth element content, in NdFeB magnets, develop NdFeB magnet substitutes, and avoid the use of magnets, including NdFeB magnets, in end-use products. This includes support for research on MQ3 magnets, which could reduce or eliminate heavy rare earth contents, more efficient NdFeB magnets, potential non-NdFeB magnets such as iron-nitride magnets, and assemblies that obviate the need for NdFeB magnets in applications such as electric vehicle motors and wind turbine generators.
The Department recommends that the Administration use applicable programs to support the development of human capital as required by the nascent U.S. NdFeB magnet industry. The collapse of the U.S. NdFeB magnet industry in the 1990s hollowed out industry-specific knowledge and skills, such that the United States' stock of NdFeB magnet-related human capital is limited. Current and potential domestic producers indicated that finding qualified and experienced manufacturing engineers and scientists is an important constraint on their operations. Some firms also indicated that finding qualified and experienced production line workers is an issue. The U.S. Government, state governments, and local authorities should work with industry, labor, and educational institutions to develop skills relevant to NdFeB magnet production by creating and expanding training programs and scholarships. For example, the Department of Labor's Employment and Training Administration funding opportunities, such asthe Strengthening Community Colleges Training Grant, could be used to establish and enhance educational programs that teach NdFeB magnet-related skills.
In addition, eligible entities should be encouraged to apply for the Economic Development Administration's Public Works and Economic Adjustment Assistance programs.
The Department recommends that the Administration continue to monitor the NdFeB magnet value chain to ensure that U.S. and ally firms are not adversely impacted by non-market factors or unfair trade actions, such as intellectual property violations or dumping. As previously discussed, the U.S. NdFeB magnet industry disappeared in the 1990s and early 2000s in part because of Chinese policies such as tax rebates and subsidies as well as intellectual property infringement. To ensure that the nascent U.S. NdFeB magnet industry survives, the U.S. Government should remain cognizant of the health of the industry and the effects of Chinese competition. The Department and the Supply Chain Trade Task Force should periodically assess the health of the U.S. and global NdFeB magnet value chain to determine whether additional actions should be undertaken to counterbalance non-market factors or unfair trade practices.
On February 19, 2020, in the U.S. District Court for the Northern District of New York, Luc Emond (“Emond”) was convicted of violating 18 U.S.C. 554(a). Specifically, Emond was convicted of knowingly and willfully attempting to smuggle from the U.S. to Canada, a Sig Sauer P228 pistol kit and a AR-15 300 AAC 7.5” pistol kit, which were designated as defense articles on the United States Munitions List, without first obtaining the required license or written authorization from the Department of State. As a result of his conviction, the Court sentenced Emond to 10 months in prison, a fine of $3,000, and a $100 special assessment.
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS received notice of Emond's conviction for violating 18 U.S.C. 554 (a) and, as provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”), has provided notice and opportunity for Emond to make a written submission to BIS. 15 CFR 766.25.
Based upon my review of the record and consultations with BIS's Office of Exporter Services, including its Director, and the facts available to BIS, I have decided to deny Emond's export privileges under the Regulations for a period of five-years from the date of Emond's conviction. The Office of Exporter Services has also decided to revoke any BIS-issued licenses in which Emond had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export, reexport, or transfer (in-country) to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession, or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed, or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed, or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification, or testing.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Applicable February 7, 2023.
Melissa Porpotage, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1413.
On January 18, 2023, the U.S. Department of Commerce (Commerce) received a countervailing duty (CVD) petition concerning imports of tin mill products from the People's Republic of China (China) filed in proper form on behalf of Cleveland-Cliffs Inc. and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) (collectively, the petitioners), a domestic producer of tin mill products and a certified union, which represents the workers engaged in the production of tin mill products in the United States.
On January 23 and 31, and February 6, 2023, Commerce requested supplemental information pertaining to certain aspects of the Petition.
In accordance with section 702(b)(1) of the Tariff Act of 1930, as amended (the Act), the petitioners allege that the Government of China (GOC) is providing countervailable subsidies, within the meaning of sections 701 and 771(5) of the Act, to producers of tin mill products in China and that such imports are materially injuring, or threatening material injury to, the domestic industry producing in the United States. Consistent with section 702(b)(1) of the Act and 19 CFR 351.202(b), for those alleged programs on which we are initiating a CVD investigation, the Petition is supported by information reasonably available to the petitioners.
Commerce finds that the petitioners filed the Petition on behalf of the domestic industry because the petitioners are interested parties as defined in sections 771(9)(C) and (D) of the Act. Commerce also finds that the petitioners demonstrated sufficient industry support with respect to the initiation of the requested CVD investigation.
Because the Petition was filed on January 18, 2023, the period of investigation (POI) is January 1, 2022, through December 31, 2022.
The merchandise covered by this investigation is tin mill products from China. For a full description of the scope of this investigation,
On January 23 and 31, and February 6, 2023, Commerce requested information from the petitioners regarding the proposed scope to ensure that the scope language in the Petitions is an accurate reflection of the products for which the domestic industry is seeking relief.
As discussed in the
Commerce requests that any factual information that the parties consider relevant to the scope of the investigation be submitted during this time period. However, if a party subsequently finds that additional factual information pertaining to the scope of the investigation may be relevant, the party may contact Commerce and request permission to submit the additional information. All scope comments must also be filed simultaneously on the record of the concurrent AD investigations.
All submissions to Commerce must be filed electronically via Enforcement and Compliance's Antidumping Duty and Countervailing Duty Centralized Electronic Service System (ACCESS), unless an exception applies.
Pursuant to sections 702(b)(4)(A)(i) and (ii) of the Act, Commerce notified the GOC of the receipt of the Petition and provided it an opportunity for consultations with respect to the Petition.
Section 702(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 702(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (i) at least 25 percent of the total production of the domestic like product; and (ii) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 702(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, Commerce shall: (i) poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A); or (ii) determine industry support using a statistically valid sampling method to poll the “industry.”
Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the statute
Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation” (
With regard to the domestic like product, the petitioners do not offer a definition of the domestic like product distinct from the scope of the investigation.
In determining whether the petitioners have standing under section 702(c)(4)(A) of the Act, we considered the industry support data contained in the Petition with reference to the domestic like product as defined in the “Scope of the Investigation,” in the appendix to this notice. To establish industry support, the petitioners provided Cleveland-Cliffs' production of tin mill products in 2022 and estimated the 2022 production of the remaining U.S. producers of tin mill products.
On January 31, 2023, we received comments on industry support from United States Steel Corporation (U.S. Steel), a U.S. producer of tin mill products.
Our review of the data provided in the Petition, the First General Issues Supplement, the Second General Issues Supplement, the Petitioners Letter, and other information readily available to Commerce indicates that the petitioners have established industry support for the Petition.
Because China is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, section 701(a)(2) of the Act applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from China materially injure, or threaten material injury to, a U.S. industry.
The petitioners allege that imports of the subject merchandise are benefitting from countervailable subsidies and that such imports are causing, or threaten to cause, material injury to the U.S. industry producing the domestic like product. In addition, the petitioners allege that subject imports exceed the negligibility threshold provided for under section 771(24)(A) of the Act.
The petitioners contend that the industry's injured condition is illustrated by the significant volume of subject imports; declining market share; underselling and price depression and/or suppression; lost sales and revenues; and adverse impact on the domestic industry's employment variables and
Based upon the examination of the Petition and supplemental responses, we find that they meet the requirements of section 702 of the Act. Therefore, we are initiating a CVD investigation to determine whether imports of tin mill products from China benefit from countervailable subsidies conferred by the GOC. Based on our review of the Petition, we find that there is sufficient information to initiate a CVD investigation on all of the 20 alleged programs; however, we recommend only initiating on Valued Added-Tax (VAT) Rebates on Domestically Produced Equipment and Import Tariff and VAT Exemptions on Imported Equipment in Encouraged Industries with respect to the pre-2009 period. For a full discussion of the basis for our decision to initiate on each program,
The petitioners named 19 companies in China as producers and/or exporters of tin mill products.
In accordance with section 702(b)(4)(A) of the Act and 19 CFR 351.202(f), a copy of the public version of the Petition has been provided to the GOC via ACCESS. To the extent practicable, we will attempt to provide a copy of the public version of the CVD Petition to each exporter named in the CVD Petition, as provided under 19 CFR 351.203(c)(2).
Commerce will notify the ITC of its initiation, as required by section 702(d) of the Act.
The ITC will preliminarily determine, within 45 days after the date on which the Petition was filed, whether there is a reasonable indication that imports of tin mill products from China are materially injuring, or threatening material injury to, a U.S. industry.
Factual information is defined in 19 CFR 351.102(b)(21) as: (i) evidence submitted in response to questionnaires; (ii) evidence submitted in support of allegations; (iii) publicly available information to value factors under 19 CFR 351.408(c) or to measure the adequacy of remuneration under 19 CFR 351.511(a)(2); (iv) evidence placed on the record by Commerce; and (v) evidence other than factual information described in (i)-(iv). Section 351.301(b) of Commerce's regulations requires any party, when submitting factual information, to specify under which subsection of 19 CFR 351.102(b)(21) the information is being submitted
Parties may request an extension of time limits before the expiration of a time limit established under 19 CFR 351.301, or as otherwise specified by Commerce. In general, an extension request will be considered untimely if it is filed after the expiration of the time limit established under 19 CFR 351.301, or as otherwise specified by Commerce.
Any party submitting factual information in an AD or CVD proceeding must certify to the accuracy and completeness of that information.
Interested parties must submit applications for disclosure under administrative protective order in accordance with 19 CFR 351.305. Parties wishing to participate in this investigation should ensure that they meet the requirements of 19 CFR 351.103(d) (
This notice is issued and published pursuant to sections 702 and 777(i) of the Act, and 19 CFR 351.203(c).
The products within the scope of this investigation are tin mill flat-rolled products that are coated or plated with tin, chromium, or chromium oxides. Flat-rolled steel products coated with tin are known as tinplate. Flat-rolled steel products coated with chromium or chromium oxides are known as tin-free steel or electrolytic chromium-coated steel. The scope includes all the noted tin mill products regardless of thickness, width, form (in coils or cut sheets), coating type (electrolytic or otherwise), edge (trimmed, untrimmed or further processed, such as scroll cut), coating thickness, surface finish, temper, coating metal (tin, chromium, chromium oxide), reduction (single- or double-reduced), and whether or not coated with a plastic material.
All products that meet the written physical description are within the scope of this investigation unless specifically excluded. The following products are outside and/or specifically excluded from the scope of this investigation:
• Single reduced electrolytically chromium coated steel with a thickness 0.238 mm (85 pound base box) (±10%) or 0.251 mm (90 pound base box) (±10%) or 0.255 mm (±10%) with 770 mm (minimum width) (±1.588 mm) by 900 mm (maximum length if sheared) sheet size or 30.6875 inches (minimum width) (±
• Single reduced electrolytically chromium- or tin-coated steel in the gauges of 0.0040 inch nominal, 0.0045 inch nominal, 0.0050 inch nominal, 0.0061 inch nominal (55 pound base box weight), 0.0066 inch nominal (60 pound base box weight), and 0.0072 inch nominal (65 pound base box weight), regardless of width, temper, finish, coating or other properties.
• Single reduced electrolytically chromium coated steel in the gauge of 0.024 inch, with widths of 27.0 inches or 31.5 inches, and with T-1 temper properties.
• Single reduced electrolytically chromium coated steel, with a chemical composition of 0.005% max carbon, 0.030% max silicon, 0.25% max manganese, 0.025% max phosphorous, 0.025% max sulfur 0.070% max aluminum, and the balance iron, with a metallic chromium layer of 70-130 mg/m
• Bright finish tin-coated sheet with a thickness equal to or exceeding 0.0299 inch, coated to thickness of
• Electrolytically chromium coated steel having ultra flat shape defined as oil can maximum depth of
• Electrolytically tin coated steel having differential coating with 1.00 pound/base box equivalent on the heavy side, with varied coating equivalents in the lighter side (detailed below), with a continuous cast steel chemistry of type MR, with a surface finish of type 7B or 7C, with a surface passivation of 0.7 mg/square foot of chromium applied as a cathodic dichromate treatment, with coil form having restricted oil film weights of 0.3-0.4 grams/base box of type DOS-A oil, coil inside diameter ranging from 15.5 to 17 inches, coil outside diameter of a maximum 64 inches, with a maximum coil weight of 25,000 pounds, and with temper/coating/dimension combinations of: (1) CAT4 temper, 1.00/.050 pound/base box coating, 70 pound/base box (0.0077 inch) thickness, and 33.1875 inch ordered width; or (2) CAT5 temper, 1.00/0.50 pound/base box coating, 75 pound/base box (0.0082 inch) thickness, and 34.9375 inch or 34.1875 inch ordered width; or (3) CAT5 temper, 1.00/0.50 pound/base box coating, 107 pound/base box (0.0118 inch) thickness, and 30.5625 inch or 35.5625 inch ordered width; or (4) CADR8 temper, 1.00/0.50 pound/base box coating, 85 pound/base box (0.0093 inch) thickness, and 35.5625 inch ordered width; or (5) CADR8 temper, 1.00/0.25 pound/base box coating, 60 pound/base box (0.0066 inch) thickness, and 35.9375 inch ordered width; or (6) CADR8 temper, 1.00/0.25 pound/base box coating, 70 pound/base box (0.0077 inch) thickness, and 32.9375 inch, 33.125 inch, or 35.1875 inch ordered width.
• Electrolytically tin coated steel having differential coating with 1.00 pound/base box equivalent on the heavy side, with varied coating equivalents on the lighter side (detailed below), with a continuous cast steel chemistry of type MR, with a surface finish of type 7B or 7C, with a surface passivation of 0.5 mg/square foot of chromium applied as
• Tin-free steel coated with a metallic chromium layer between 100-200 mg/m
• Tin-free steel laminated on one or both sides of the surface with a polyester film, consisting of two layers (an amorphous layer and an outer crystal layer), that contains no more than the indicated amounts of the following environmental hormones: 1 mg/kg BADGE (BisPhenol—A Di-glycidyl Ether), 1 mg/kg BFDGE (BisPhenol—F Di-glycidyl Ether), and 3 mg/kg BPA (BisPhenol—A).
The merchandise subject to this investigation is currently classified in the Harmonized Tariff Schedule of the United States (HTSUS), under HTSUS subheadings 7210.11.0000, 7210.12.0000, 7210.50.0020, 7210.50.0090, 7212.10.0000, and 7212.50.0000 if of non-alloy steel and under HTSUS subheadings 7225.99.0090, and 7226.99.0180 if of alloy steel. Although the subheadings are provided for convenience and customs purposes, the written description of the scope of the investigation is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Applicable February 7, 2023.
Yang Jin Chun (Canada), Emily Halle or Samuel Frost (the People's Republic of China (China)), George McMahon or Carolyn Adie (Germany); Jacob Saude (the Republic of Korea (Korea)), Brittany Bauer (the Netherlands), Elfi Blum (Taiwan), Alice Maldonado or Ann Marie Caton (the Republic of Turkey (Turkey)), and Charles DeFilippo (the United Kingdom), AD/CVD Operations, Offices II, V, VI, and VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-5760, (202) 482-0176 or (202) 482-8180, (202) 482-1167 or (202) 482-6250, (202) 482-0981, (202) 482-3860, (202) 482-0197, (202) 482-4682 or (202) 482-2607, and (202) 482-3797, respectively.
On January 18, 2023, the U.S. Department of Commerce (Commerce) received antidumping duty (AD) petitions concerning imports of tin mill products from Canada, China, Germany, the Netherlands, Korea, Taiwan, Turkey, and the United Kingdom, filed in proper form on behalf of Cleveland-Cliffs Inc. and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (the petitioners), a domestic producer of tin mill products and a certified union, which represents the workers engaged in the production of tin mill products in the United States.
On January 23 and 31, and February 6, 2023, Commerce requested supplemental information pertaining to certain aspects of the Petitions.
In accordance with section 732(b) of the Tariff Act of 1930, as amended (the Act), the petitioners allege that imports of tin mill products from Canada, China, Germany, the Netherlands, Korea, Taiwan, Turkey, and the United Kingdom are being, or are likely to be, sold in the United States at less than fair value (LTFV) within the meaning of section 731 of the Act, and that imports of such products are materially injuring, or threatening material injury to, the tin mill products industry in the United States. Consistent with section 732(b)(1) of the Act, the Petitions are accompanied by information reasonably available to the petitioners supporting their allegations.
Commerce finds that the petitioners filed the Petition on behalf of the domestic industry, because the petitioners are interested parties, as defined in sections 771(9)(C) and (D) of the Act.
Because the Petitions were filed on January 18, 2023, pursuant to 19 CFR 351.204(b)(1), the period of investigation (POI) for the Canada, Germany, Netherlands, Korea, Taiwan, Turkey, and United Kingdom AD investigations is January 1, 2022, through December 31, 2022. Because China is a non-market economy (NME) country, pursuant to 19 CFR 351.204(b)(1), the POI for the China AD investigation is July 1, 2022, through December 31, 2022.
The products covered by these investigations are tin mill products from Canada, China, Germany, Korea, the Netherlands, Taiwan, Turkey, and the United Kingdom. For a full description of the scope of these investigations,
On January 23 and 31, and February 6, 2023, Commerce requested further information and clarification from the petitioners regarding the proposed scope to ensure that the scope language in the Petitions is an accurate reflection of the products for which the domestic industry is seeking relief.
As discussed in the
Commerce requests that any factual information that parties consider relevant to the scope of the investigations be submitted during that period. However, if a party subsequently finds that additional factual information pertaining to the scope of the investigations may be relevant, the party may contact Commerce and request permission to submit the additional information. All such submissions must be filed simultaneously on the records of the concurrent AD and CVD investigations.
All submissions to Commerce must be filed electronically using Enforcement and Compliance's Antidumping Duty and Countervailing Duty Centralized Electronic Service System (ACCESS), unless an exception applies.
Commerce is providing interested parties an opportunity to comment on the appropriate physical characteristics of tin mill products to be reported in response to Commerce's AD questionnaires. This information will be used to identify the key physical characteristics of the subject merchandise in order to report the relevant factors of production (FOP) or costs of production (COP) accurately, as well as to develop appropriate product comparison criteria where appropriate.
Subsequent to the publication of this notice, Commerce intends to release a proposed list of physical characteristics and product-comparison criteria, and interested parties may provide any information or comments that they feel are relevant to the development of an accurate list of physical characteristics. Specifically, they may provide comments as to which characteristics are appropriate to use as: (1) general product characteristics; and (2) product comparison criteria. We note that it is not always appropriate to use all product characteristics as product comparison criteria. We base product comparison criteria on meaningful commercial differences among products. In other words, although there may be some physical product characteristics utilized by manufacturers to describe tin mill products, it may be that only a select few product characteristics take into account commercially meaningful physical characteristics. In addition, interested parties may comment on the order in which the physical characteristics should be used in matching products. Generally, Commerce attempts to list the most important physical characteristics first and the least important characteristics last.
In order to consider the suggestions of interested parties in developing and issuing the AD questionnaires, Commerce intends to establish a deadline for relevant comments and submissions at the time it releases the proposed list of physical characteristics and product-comparison criteria. All comments and submissions to Commerce must be filed electronically using ACCESS, as explained above, on the record of each of the AD investigations.
Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (i) at least 25 percent of the total production of the domestic like product; and (ii) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 732(c)(4)(D) of the Act provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, Commerce shall: (i) poll the industry or rely on other information in order to determine if there is support for the petition, as required by subparagraph (A); or (ii) determine industry support using a statistically valid sampling method to poll the “industry.”
Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether a petition has the requisite industry support, the Act directs Commerce to look to producers and workers who produce the domestic like product. The U.S. International Trade Commission (ITC), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both Commerce and the ITC must apply the same statutory definition regarding the domestic like product,
Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation” (
With regard to the domestic like product, the petitioners do not offer a definition of the domestic like product distinct from the scope of the investigations.
In determining whether the petitioners have standing under section 732(c)(4)(A) of the Act, we considered the industry support data contained in the Petitions with reference to the domestic like product as defined in the “Scope of the Investigations,” in the appendix to this notice. To establish industry support, the petitioners provided Cleveland-Cliffs' production of tin mill products in 2022 and estimated the 2022 production of the remaining U.S. producers of tin mill products.
On January 31, 2023, we received comments on industry support from United States Steel Corporation (U.S. Steel), a U.S. producer of tin mill products.
Our review of the data provided in the Petitions, the First General Issues Supplement, the Second General Issues Supplement, the Petitioners Letter, and other information readily available to Commerce indicates that the petitioners have established industry support for the Petitions.
The petitioners allege that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the imports of the subject merchandise sold at LTFV. In addition, the petitioners allege that subject imports exceed the negligibility threshold provided for under section 771(24)(A) of the Act.
The petitioners contend that the industry's injured condition is illustrated by the significant volume of subject imports; declining market share; underselling and price depression and/or suppression; lost sales and revenues; and adverse impact on the domestic industry's employment variables and profitability.
The following is a description of the allegations of sales at LTFV upon which Commerce based its decision to initiate
For Canada, China, Germany, the Netherlands, Taiwan, Turkey, and the United Kingdom, the petitioners based export price (EP) on the POI average unit values (AUVs) derived from official U.S. import data for imports of tin mill products produced in and exported from each country. For the Netherlands, Taiwan, and Turkey, the petitioners also based EP on month- and port-specific AUVs derived from official import data and tied to ship manifest data obtained from Datamyne. For Korea, the petitioners based EP on month- and port-specific AUVs derived from official import data and tied to ship manifest data obtained from Datamyne alone. The petitioners made certain adjustments to U.S. price to calculate a net ex-factory U.S. price, where applicable.
For Canada, Germany, Korea, the Netherlands, Taiwan, Turkey, and the United Kingdom, the petitioners were unable to obtain home market prices for tin mill products produced and sold in the subject countries. Therefore, for these countries, the petitioners based NV on AUVs of publicly-available export data for exports of tin mill products from the subject countries to third countries.
Commerce considers China to be an NME country.
The petitioners claim that Turkey is an appropriate surrogate country for China because Turkey is a market economy country that is at a level of economic development comparable to that of China and is a significant producer of identical merchandise.
Interested parties will have the opportunity to submit comments regarding surrogate country selection and, pursuant to 19 CFR 351.301(c)(3)(i), will be provided an opportunity to submit publicly available information to value FOPs within 30 days before the scheduled date of the preliminary determination.
Because information regarding the volume of inputs consumed by Chinese producers/exporters was not reasonably available, the petitioners used product-specific consumption rates from a U.S. producer of tin mill products as a surrogate to value Chinese manufacturers' FOPs.
As noted above, the petitioners demonstrated that the third country export AUVs for Canada, Germany, Korea, the Netherlands, Taiwan, Turkey, and the United Kingdom were below COP. Accordingly, the petitioners based NV on CV.
In calculating the cost of manufacturing, the petitioners relied on the production experience and input consumption rates of a U.S. producer of tin mill products, valued using publicly-available information applicable to each respective country.
Based on the data provided by the petitioners, there is reason to believe that imports of tin mill products from Canada, China, Germany, Korea, the Netherlands, Taiwan, Turkey, and the United Kingdom, are being, or are likely to be, sold in the United States at LTFV. Based on comparisons of EP to NV in accordance with sections 772 and 773 of the Act, the estimated dumping margins for tin mill products for each of the countries covered by this initiation are as follows: (1) Canada—79.59 percent; (2) China—122.52 percent; (3) Germany—70.15 percent; (4) Korea—13.28 to 110.50 percent; (5) the Netherlands—125.10 to 296.04 percent; (6) Taiwan—46.76 to 59.61 percent; (7) Turkey—87.73 to 97.21 percent; and (8) the United Kingdom—111.92 percent.
Based upon the examination of the Petitions and supplemental responses, we find that they meet the requirements of section 732 of the Act. Therefore, we are initiating AD investigations to determine whether imports of tin mill products from Canada, China, Germany, Korea, the Netherlands, Taiwan, Turkey, and the United Kingdom are being, or are likely to be, sold in the United States at LTFV. In accordance with section 733(b)(1)(A) of the Act and 19 CFR 351.205(b)(1), unless postponed, we will make our preliminary determinations no
In the Petitions, the petitioners identified one company in Canada as a producer/exporter of tin mill products (
Accordingly, Commerce intends to individually examine all known producers/exporters in the investigations from these countries (
In the Petitions, the petitioners identified three companies in Korea as producers/exporters of tin mill products and three companies in Turkey as producers/exporters of tin mill products.
On February 2, 2023, Commerce released CBP data on imports of tin mill products from Korea and Turkey under administrative protective order (APO) to all parties with access to information protected by APO and indicated that interested parties wishing to comment on CBP data must do so within three business days of the publication date of the notice of initiation of these investigations.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305(b). Instructions for filing such applications may be found on Commerce's website at
In the Petitions, the petitioners named 19 companies in China as producers and/or exporters of tin mill products.
In addition, Commerce will post the Q&V questionnaires along with filing instructions on Commerce's website at
Responses to the Q&V questionnaire must be submitted by the relevant Chinese producers/exporters no later than 5:00 p.m. ET on February 21, 2023, which is two weeks from the signature date of this notice. All Q&V questionnaire responses must be filed electronically via ACCESS. An electronically-filed document must be received successfully, in its entirety, by ACCESS no later than 5:00 p.m. ET on the deadline noted above.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305(b). Instructions for filing such applications may be found on Commerce's website at
In order to obtain separate rate status in an NME investigation, exporters and producers must submit a separate rate application.
Commerce will calculate combination rates for respondents that are eligible for a separate rate in an NME investigation. The Separate Rates and Combination Rates Bulletin states:
{w}hile continuing the practice of assigning separate rates only to exporters, all separate rates that {Commerce} will now assign in its NME Investigation will be specific to those producers that supplied the exporter during the period of investigation. Note, however, that one rate is calculated for the exporter and all of the producers which supplied subject merchandise to it during the period of investigation. This practice applies both to mandatory respondents receiving an individually calculated separate rate as well as the pool of non-investigated firms receiving the {weighted average} of the individually calculated rates. This practice is referred to as the application of “combination rates” because such rates apply to specific combinations of exporters and one or more producers. The cash-deposit rate assigned to an exporter will apply only to merchandise both exported by the firm in question
In accordance with section 732(b)(3)(A) of the Act and 19 CFR 351.202(f), copies of the public version of the AD Petitions have been provided to the governments of Canada, China, Germany, the Netherlands, Korea, Taiwan, Turkey, and the United Kingdom via ACCESS. To the extent practicable, we will attempt to provide a copy of the public version of the AD Petitions to each exporter named in the AD Petitions, as provided under 19 CFR 351.203(c)(2).
Commerce will notify the ITC of its initiation, as required by section 732(d) of the Act.
The ITC will preliminarily determine, within 45 days after the date on which the AD Petitions were filed, whether there is a reasonable indication that imports of tin mill products from Canada, China, Germany, the Netherlands, Korea, Taiwan, Turkey, and/or the United Kingdom, are materially injuring, or threatening material injury to, a U.S. industry.
Factual information is defined in 19 CFR 351.102(b)(21) as: (i) evidence submitted in response to questionnaires; (ii) evidence submitted in support of allegations; (iii) publicly available information to value factors under 19 CFR 351.408(c) or to measure the adequacy of remuneration under 19 CFR 351.511(a)(2); (iv) evidence placed on the record by Commerce; and (v) evidence other than factual information described in (i)-(iv). Section 351.301(b) of Commerce's regulations requires any party, when submitting factual information, to specify under which subsection of 19 CFR 351.102(b)(21) the information is being submitted
Section 773(e) of the Act addresses the concept of particular market situation (PMS) for purposes of CV, stating that “if a particular market situation exists such that the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade, the administering authority may use another calculation methodology under this subtitle or any other calculation methodology.” When an interested party submits a PMS allegation pursuant to section 773(e) of the Act, Commerce will respond to such a submission consistent with 19 CFR 351.301(c)(2)(v). If Commerce finds that a PMS exists under section 773(e) of the Act, then it will modify its dumping calculations appropriately.
Neither section 773(e) of the Act, nor 19 CFR 351.301(c)(2)(v), sets a deadline for the submission of PMS allegations and supporting factual information. However, in order to administer section 773(e) of the Act, Commerce must receive PMS allegations and supporting factual information with enough time to consider the submission. Thus, should an interested party wish to submit a PMS allegation and supporting new factual information pursuant to section 773(e) of the Act, it must do so no later than 20 days after submission of a respondent's initial response to section D of the AD questionnaire.
Parties may request an extension of time limits before the expiration of a time limit established under 19 CFR 351.301, or as otherwise specified by Commerce. In general, an extension request will be considered untimely if it is filed after the expiration of the time limit established under 19 CFR 351.301. For submissions that are due from multiple parties simultaneously, an extension request will be considered untimely if it is filed after 10:00 a.m. ET on the due date. Under certain circumstances, Commerce may elect to specify a different time limit by which extension requests will be considered untimely for submissions which are due
Any party submitting factual information in an AD or CVD proceeding must certify to the accuracy and completeness of that information.
Interested parties must submit applications for disclosure under APO in accordance with 19 CFR 351.305. Parties wishing to participate in these investigations should ensure that they meet the requirements of 19 CFR 351.103(d) (
This notice is issued and published pursuant to sections 732(c)(2) and 777(i) of the Act, and 19 CFR 351.203(c).
The products within the scope of these investigations are tin mill flat-rolled products that are coated or plated with tin, chromium, or chromium oxides. Flat-rolled steel products coated with tin are known as tinplate. Flat-rolled steel products coated with chromium or chromium oxides are known as tin-free steel or electrolytic chromium-coated steel. The scope includes all the noted tin mill products regardless of thickness, width, form (in coils or cut sheets), coating type (electrolytic or otherwise), edge (trimmed, untrimmed or further processed, such as scroll cut), coating thickness, surface finish, temper, coating metal (tin, chromium, chromium oxide), reduction (single- or double-reduced), and whether or not coated with a plastic material.
All products that meet the written physical description are within the scope of these investigations unless specifically excluded. The following products are outside and/or specifically excluded from the scope of these investigations:
• Single reduced electrolytically chromium coated steel with a thickness 0.238 mm (85 pound base box) (±10%) or 0.251 mm (90 pound base box) (±10%) or 0.255 mm (±10%) with 770 mm (minimum width) (±1.588 mm) by 900 mm (maximum length if sheared) sheet size or 30.6875 inches (minimum width) (±
• Single reduced electrolytically chromium- or tin-coated steel in the gauges of 0.0040 inch nominal, 0.0045 inch nominal, 0.0050 inch nominal, 0.0061 inch nominal (55 pound base box weight), 0.0066 inch nominal (60 pound base box weight), and 0.0072 inch nominal (65 pound base box weight), regardless of width, temper, finish, coating or other properties.
• Single reduced electrolytically chromium coated steel in the gauge of 0.024 inch, with widths of 27.0 inches or 31.5 inches, and with T-1 temper properties.
• Single reduced electrolytically chromium coated steel, with a chemical composition of 0.005% max carbon, 0.030% max silicon, 0.25% max manganese, 0.025% max phosphorous, 0.025% max sulfur 0.070% max aluminum, and the balance iron, with a metallic chromium layer of 70-130 mg/m
• Bright finish tin-coated sheet with a thickness equal to or exceeding 0.0299 inch, coated to thickness of
• Electrolytically chromium coated steel having ultra flat shape defined as oil can maximum depth of
• Electrolytically tin coated steel having differential coating with 1.00 pound/base box equivalent on the heavy side, with varied coating equivalents in the lighter side (detailed below), with a continuous cast steel chemistry of type MR, with a surface finish of type 7B or 7C, with a surface passivation of 0.7 mg/square foot of chromium applied as a cathodic dichromate treatment, with coil form having restricted oil film weights of 0.3-0.4 grams/base box of type DOS-A oil, coil inside diameter ranging from 15.5 to 17 inches, coil outside diameter of a maximum 64 inches, with a maximum coil weight of 25,000 pounds, and with temper/coating/dimension combinations of: (1) CAT4 temper, 1.00/.050 pound/base box coating, 70 pound/base box (0.0077 inch) thickness, and 33.1875 inch ordered width; or (2) CAT5 temper, 1.00/0.50 pound/base box coating, 75 pound/base box (0.0082 inch) thickness, and 34.9375 inch or 34.1875 inch ordered width; or (3) CAT5 temper, 1.00/0.50 pound/base box coating, 107 pound/base box (0.0118 inch) thickness, and 30.5625 inch or 35.5625 inch ordered width; or (4) CADR8 temper, 1.00/0.50 pound/base box coating, 85 pound/base box (0.0093 inch) thickness, and 35.5625 inch ordered width; or (5) CADR8 temper, 1.00/0.25 pound/base box coating, 60 pound/base box (0.0066 inch) thickness, and 35.9375 inch ordered width; or (6) CADR8 temper, 1.00/0.25 pound/base box coating, 70 pound/base box (0.0077 inch) thickness, and 32.9375 inch, 33.125 inch, or 35.1875 inch ordered width.
• Electrolytically tin coated steel having differential coating with 1.00 pound/base box equivalent on the heavy side, with varied coating equivalents on the lighter side (detailed below), with a continuous cast steel chemistry of type MR, with a surface finish of type 7B or 7C, with a surface passivation of 0.5 mg/square foot of chromium applied as a cathodic dichromate treatment, with ultra flat scroll cut sheet form, with CAT5 temper with 1.00/0.10 pound/base box coating, with a lithograph logo printed in a uniform pattern on the 0.10 pound coating side with a clear protective coat, with both sides waxed to a level of 15-20 mg/216 sq. inch, with ordered dimension combinations of (1) 75 pound/base box (0.0082 inch) thickness and 34.9375 inch x 31.748 inch scroll cut dimensions; or (2) 75 pound/base box (0.0082 inch) thickness and 34.1875 inch x 29.076 inch scroll cut dimensions; or (3) 107 pound/base box (0.0118 inch) thickness and 30.5625 inch x 34.125 inch scroll cut dimension.
• Tin-free steel coated with a metallic chromium layer between 100-200 mg/m
• Tin-free steel laminated on one or both sides of the surface with a polyester film, consisting of two layers (an amorphous layer and an outer crystal layer), that contains no more than the indicated amounts of the following environmental hormones: 1 mg/kg BADGE (BisPhenol—A Di-glycidyl Ether), 1 mg/kg BFDGE (BisPhenol—F Di-glycidyl Ether), and 3 mg/kg BPA (BisPhenol—A).
The merchandise subject to these investigations is currently classified in the Harmonized Tariff Schedule of the United States (HTSUS), under HTSUS subheadings 7210.11.0000, 7210.12.0000, 7210.50.0020, 7210.50.0090, 7212.10.0000, and 7212.50.0000 if of non-alloy steel and under HTSUS subheadings 7225.99.0090, and 7226.99.0180 if of alloy steel. Although the subheadings are provided for convenience and customs purposes, the written description of the scope of the investigations is dispositive.
National Institute of Standards and Technology (NIST).
Notice of open meetings.
The Internet of Things (IoT) Advisory Board will meet Tuesday, March 7, 2023; Tuesday, April 18, 2023 and Wednesday, April 19, 2023; and Tuesday, May 16, 2023 and Wednesday, May 17, 2023 from 11:00 a.m. until 5:00 p.m., Eastern Time. All sessions will be open to the public.
The meetings will be held on Tuesday, March 7, 2023; Tuesday, April 18, 2023 and Wednesday, April 19, 2023; and Tuesday, May 16, 2023 and Wednesday, May 17, 2023 from 11:00 a.m. until 5:00 p.m., Eastern Time.
The meetings in March and May will be virtual meetings via Webex webcast hosted by the National Cybersecurity Center of Excellence (NCCoE) at NIST. The meeting in April 2023 will be hybrid with in-person seating at the NCCoE as well as a virtual option via Webex webcast, also hosted by the NCCoE. Please note registration instructions under the
Barbara Cuthill, Information Technology Laboratory, National Institute of Standards and Technology, Telephone: (301) 975-3273, Email address:
Pursuant to the Federal Advisory Committee Act, as amended, 5 U.S.C. app., notice is hereby given that the IoT Advisory Board will hold open meetings on Tuesday, March 7, 2023 Tuesday, April 18, 2023, Wednesday, April 19, 2023, Tuesday, May 16, 2023 and Wednesday, May 17, 2023 from 11:00 a.m. until 5:00 p.m., Eastern Time. All sessions will be open to the public. The IoT Advisory Board is authorized by section 9204(b)(5) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-283) and advises the IoT Federal Working Group convened by the Secretary of Commerce pursuant to section 9204(b)(1) of the Act on matters related to the Federal Working Group's activities. Details regarding the IoT Advisory Board's activities are available at
The agenda for the March meeting is expected to focus on establishing consensus on the outline of the IoT Advisory Board's report and data gathering framework.
The agendas for the April and May meetings will focus on discussion of specific focus areas for the report cited in the legislation and the charter:
In addition, the IoT Advisory Board may discuss other elements called for in the report:
• whether adequate spectrum is available to support the growing Internet of Things and what legal or regulatory barriers may exist to providing any spectrum needed in the future;
• policies, programs, or multi-stakeholder activities that—
○ promote or are related to the privacy of individuals who use or are affected by the Internet of Things;
○ may enhance the security of the Internet of Things, including the security of critical infrastructure;
○ may protect users of the Internet of Things; and
○ may encourage coordination among Federal agencies with jurisdiction over the Internet of Things.
Note that agenda items may change without notice. The final agendas will be posted on the IoT Advisory Board web page:
Each IoT Advisory Board meeting agenda will include a period, not to exceed sixty minutes, for submitted comments from the public to be presented. Submitted comments from the public will be selected on a first-come, first-served basis and limited to five minutes per person for oral presentation if requested by the commenter. For the April meeting, the commenter needs to specify if they plan to be in-person at the meeting or want to provide their comments virtually. Both options will be available in April.
Members of the public who wish to expand upon their submitted statements, those who had wished to submit a comment but could not be accommodated on the agenda, and those who were unable to attend the meeting via webinar are invited to submit written statements. In addition, written statements are invited and may be submitted to the IoT Advisory Board at any time. All written statements should be directed to the IoT Advisory Board Secretariat, Information Technology Laboratory by email to:
For attendance in person at the hybrid meeting in April, in-person attendance is limited to 50 and will be on a first-come, first-served basis. Registration will close for in-person attendance on April 11, 2023 at 5:00 p.m. EST.
National Institute of Standards and Technology, Department of Commerce.
Notice of open meeting.
The National Institute of Standards and Technology (NIST) is hosting a public workshop to inform an update of the ANSI/NIST-ITL standard, “Data Format for the Interchange of Fingerprint, Facial & Other Biometric Information.” This event will be completely virtual and occur February 21-23, 2023, from 9:00 a.m.-4:00 p.m. Eastern Standard Time. The purpose of this workshop is to solicit recommendations to identify and pursue updates needed to the above-referenced standard.
The workshop will take place February 21-23, 2023 from 9:00 a.m.-4:00 p.m. Eastern Standard Time. Subject Matter Expert (SME) working group meetings will occur on February 22-23, 2023.
This meeting will be held virtually, and additional participation information and logistics will be provided once registration is completed.
Diane Stephens at
Law enforcement and related criminal justice agencies, as well as identity management organizations, procure equipment and systems intended to facilitate the determination of the personal identity of a subject or verify the identity of a subject using biometric information. To effectively exchange identity data across jurisdictional lines or between dissimilar systems made by different manufacturers, a standard is needed to specify a common format for the data exchange.
Biometric data refers to a digital or analog representation of a behavioral or physical characteristic of an individual that can be used by an automated system to distinguish an individual as belonging to a subgroup of the entire population or, in many cases, can be used to uniquely establish or verify the identity of a person (compared to a claimed or referenced identity). Biometric modalities specifically included in this standard are: fingerprints, plantars (footprints), palm prints, facial images, DNA and iris images. Identifying characteristics that may be used manually to establish or verify the identity of an individual are included in the standard. These identifying characteristics include scars, (needle) marks, tattoos, and certain characteristics of facial photos, iris images and images of other body parts. Latent friction ridge prints (fingerprint, palm print and plantars) are included in this standard and may be used in either an automated system or forensically (or both).
NIST's Information Technology Laboratory (ITL) led the development of this American National Standards Institute (ANSI) approved American National Standard using the NIST Canvass Method to demonstrate evidence of consensus. NIST, as the Editor of the ANSI/NIST-ITL Standard, is soliciting recommendations and/or presentations to highlight specific updates the community of interest may want included in the next update of this document. Hence, NIST is hosting a public workshop to update the ANSI/NIST-ITL 1-2001 Update: 2015 standard, “Data Format for the Interchange of Fingerprint, Facial & Other Biometric Information” (NIST Special Publication 500-290 Edition 3 (2015)). This event will be completely virtual and occur February 21-23, 2023, from 9:00 a.m.-4:00 p.m. Eastern Standard Time. Federal, industry, and academic stakeholders and interested parties who wish to participate in this workshop should please use this link to register:
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; request for public comments.
During a meeting of the Scientific and Technical Advisory Committee (STAC) under the Protocol to the Cartagena Convention on Specially Protected Areas and Wildlife (SPAW Protocol), held virtually on January 30-February 1, 2023, 24 animal species were nominated to be added to the Annexes of the SPAW Protocol. The Department of State and National Marine Fisheries Service (NMFS) solicit
Comments must be received by March 16, 2023.
You may submit comments on the recommendations to add the 24 species to the Annexes of the SPAW Protocol, identified by NOAA-NMFS-2023-0017, by the following method:
•
Kristen Koyama, (301) 427-8456;
The SPAW Protocol is a protocol to the Convention for the Protection and Development of the Marine Environment of the Wider Caribbean Region (Cartagena Convention or Convention). There is also a protocol to the Convention addressing land-based sources of pollution and a protocol addressing regional cooperation on oil pollution preparedness and response. The SPAW Protocol was adopted in 1990 and entered into force in 2000. The United States ratified the SPAW Protocol in 2003. There are currently 18 countries that are Parties to the SPAW Protocol from throughout the Wider Caribbean Region.
Participants at the January 2023 meeting of the STAC to the SPAW Protocol included representatives from: Barbados, Belize, Colombia, Dominican Republic, France, Guyana, Honduras, the Netherlands, Nicaragua, Panama, Saint Lucia, Trinidad and Tobago, the United States of America, and Venezuela. Representatives of several non-governmental organizations also attended as observers.
The U.S. delegation included representatives from the U.S. Department of State and NOAA's National Marine Fisheries Service (NMFS) and National Ocean Service. Additional information and meeting documents can be obtained at
The Cartagena Convention is a regional agreement for the protection and development of the marine environment of the wider Caribbean. The Convention was adopted in 1983 and entered into force in 1986. The United States ratified the Convention in 1984. The Convention area includes the marine environment of the Gulf of Mexico, the Caribbean Sea and the adjacent areas of the Atlantic Ocean south of lat. 30° N and within 200 nautical miles (nmi) of the Atlantic coasts of the Parties. The United States' responsibility within this Convention area includes: U.S. waters off of Puerto Rico, the U.S. Virgin Islands, and peninsular Florida, including the Atlantic coast; the waters off of a number of islands including coastal barrier islands and the Florida Keys; and the Gulf of Mexico waters under U.S. jurisdiction. The SPAW Protocol provides that each Party may designate related terrestrial areas over which they have sovereignty and jurisdiction (including watersheds) to be covered by the SPAW Protocol. The United States has not designated any terrestrial areas under the SPAW Protocol and “does not intend to designate a terrestrial area under the Protocol unless requested to do so by an interested state or territory . . .” (Senate Executive Report 107-8).
The SPAW Protocol includes three Annexes. Plant species subject to the highest levels of protection are listed in Annex I, and animal species subject to the highest levels of protection are listed in Annex II. Plants and animals subject to some management, but lesser protections than those afforded to species listed in Annexes I or II, are listed in Annex III.
Annexes I (flora) and II (fauna) are to include endangered and threatened species, or subspecies, or their populations as well as rare species. The SPAW Protocol describes rare species as those “that are rare because they are usually localized within restricted geographical areas or habitats or are thinly scattered over a more extensive range and which are potentially or actually subject to decline and possible endangerment or extinction.”
Under Article 11(1), for fauna listed in Annex II, Parties “shall ensure total protection and recovery to the species . . . by prohibiting: (i) the taking, possession or killing (including, to the extent possible, the incidental taking, possession or killing) or commercial trade in such species, their eggs, parts or products; [and] (ii) to the extent possible, the disturbance of such species, particularly during periods of breeding, incubation, estivation or migration, as well as other periods of biological stress.”
Also under Article 11(1), for Annex III species, the SPAW Protocol states: “Each Party shall adopt appropriate measures to ensure the protection and recovery of the species of flora and fauna listed in Annex III and may regulate the use of such species in order to ensure and maintain their populations at the highest possible levels.” Therefore, some regulated harvest may be permitted for species on Annex III. The protective provisions of this Annex are not intended to be more restrictive than the provisions of Annexes I and II.
The United States ratified the SPAW Protocol, including Annexes, subject to certain reservations, including the following with respect to Article 11(1): “The United States does not consider itself bound by Article 11(1) of the [SPAW] Protocol to the extent that United States law permits the limited taking of flora and fauna listed in Annexes I and II which is incidental, or for the purpose of public display, scientific research, photography for educational or commercial purposes, or rescue and rehabilitation.”
The United States has not designated any terrestrial area under the SPAW Protocol. As the United States explained at the time the SPAW Protocol was ratified, “The United States does not plan to designate terrestrial area under the Protocol since no state or territory has identified a need or desire to designate terrestrial area . . . .” (Senate Treaty Document 103-5). In addition, “Several terrestrial species,
Annex I contains a total of 53 plant species. All plant species on Annex I are either: (1) listed under the U.S.
Annex II currently contains 117 species and 3 groups of species, including all sea turtles and all marine mammals in the region. Most of these animal species are either: (1) listed under the ESA or the Marine Mammal Protection Act (16 U.S.C. 1361
Annex III currently contains 43 species of plants and 42 species of animals in addition to species of corals, mangroves, and sea-grasses that occur in the region.
The plant and animal species included on each Annex can be found here:
Article 11(4) of the SPAW Protocol details the requirements for amending the Annexes and states, in part, that a Party may submit a nomination of a species for inclusion in or deletion from the Annexes; that the Party shall submit supporting documentation; and that the SPAW STAC shall review the nomination. At the January 2023 meeting, the SPAW STAC reviewed the species proposed by Parties for listing under the SPAW Protocol and made recommendations to the twelfth SPAW Conference of the Parties (COP12) meeting, expected to be held in April 2023. The STAC recommended that the oceanic whitetip shark and the Lesser Antillean iguana be uplisted from Annex III to Annex II, and that parrotfish (
Six species nominated to be added to Annex II at the January 2023 meeting fall under the jurisdiction of NMFS: the oceanic whitetip shark (
The Lesser Antillean iguana (
The Department of State and NMFS solicit comments and information that will inform the United States' consideration of the potential listing of these species in the SPAW Annexes.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of hybrid meeting.
The North Pacific Fishery Management Council (Council) Bering Sea Fishery Ecosystem Plan Climate Change Taskforce (BSFEP CC) will meet March 1, 2023 through March 2, 2023.
The meeting will be held on Wednesday, March 1, 2023, from 9 a.m. to 5 p.m. and on Thursday, March 2, 2023, from 9 a.m. to 12 p.m. Pacific Time.
The meetings will be a hybrid meeting. The in-person component of the meeting will be held at the Alaska Fisheries Science Center in the room 2039, 7600 Sand Point Way NE, Building 4, Seattle, WA 98115, or join online through the link at
Dr. Diana Stram, Council staff;
The agenda will include: (a) review changes to climate readiness synthesis from the SSC; (b) discuss concept of soliciting stakeholder input on climate resilient metrics; (c) review ongoing process for incorporating climate information into council process and future plans; (d) discuss and recommend agenda, format and goals and objectives for scenario planning workshop; (e) work plan for 2023-2024; and (f) other business. The agenda is subject to change, and the latest version will be posted at
You can attend the meeting online using a computer, tablet, or smart phone; or by phone only. Connection information will be posted online at:
Public comment letters will be accepted and should be submitted electronically to
United States Patent and Trademark Office, Department of Commerce.
Request for comments; extension of comment period.
The United States Patent and Trademark Office (USPTO) is extending the comment period for the notice titled “Request for Comments on USPTO Initiatives to Ensure the Robustness and Reliability of Patent Rights” that was published in the
The comment period for the notice published at 87 FR 60130, which was extended at 87 FR 66282 on November 3, 2022, is further extended. Comments are due by February 28, 2023.
For reasons of government efficiency, comments must be submitted through the Federal eRulemaking Portal at
Visit the Federal eRulemaking Portal for additional instructions on providing comments via the portal. If electronic submission of comments is not feasible due to a lack of access to a computer and/or the internet, please contact the USPTO using the contact information below (at
Linda Horner, Administrative Patent Judge, at 571-272-9797; June Cohan, Senior Legal Advisor, Office of Patent Legal Administration, Office of the Deputy Commissioner for Patents, at 571-272-7744; or Raul Tamayo, Senior Legal Advisor, Office of Patent Legal Administration, Office of the Deputy Commissioner for Patents, at 571-272-7728.
On October 4, 2022, the USPTO published a notice titled “Request for Comments on USPTO Initiatives to Ensure the Robustness and Reliability of Patent Rights” to seek initial public comments on proposed initiatives directed at bolstering the robustness and reliability of patents to incentivize and protect new and nonobvious inventions while facilitating the broader dissemination of public knowledge, which will, in turn, promote innovation and competition.
Comments previously submitted to the docket through the Federal eRulemaking Portal do not need to be resubmitted. Any comments sent directly to USPTO after the close of the previous deadline of February 1, 2023, must be submitted through the Federal eRulemaking Portal before the newly extended deadline to be given full consideration. All other information and instructions to commenters provided in the October 4, 2022, notice remain unchanged.
United States Patent and Trademark Office, Department of Commerce.
Request for comments.
The United States Patent and Trademark Office (USPTO) plays an important role in incentivizing and protecting innovation, including innovation enabled by artificial intelligence (AI), to ensure continued U.S. leadership in AI and other emerging technologies (ET). In June 2022, the USPTO announced the formation of the AI/ET Partnership, which provides an opportunity to bring stakeholders together through a series of engagements to share ideas, feedback, experiences, and insights on the intersection of intellectual property and AI/ET. To build on the AI/ET Partnership efforts, the USPTO is seeking stakeholder input on the current state of AI technologies and inventorship issues that may arise in view of the advancement of such technologies, especially as AI plays a greater role in the innovation process. As outlined in sections II to IV below, the USPTO is pursuing three main avenues of engagement with stakeholders to inform its future efforts on inventorship and promoting AI-enabled innovation: a series of stakeholder engagement sessions; collaboration with academia through scholarly research; and a request for written comments to the questions identified in section IV. The USPTO encourages stakeholder engagement through one or more of these avenues.
Submissions to the special issue of the “Journal of the Patent and Trademark Office Society” may be made directly to the journal at
For reasons of Government efficiency, comments must be submitted through the Federal eRulemaking Portal at
Visit the Federal eRulemaking Portal website (
Matthew Sked, Senior Legal Advisor, Office of Patent Legal Administration, at 571-272-7627. Inquiries can also be sent to
In August 2019, the USPTO issued a request for public comments on patenting AI inventions. Among the various policy questions raised in the notice, the USPTO requested comments on several issues involving inventorship, such as the different ways a natural person can contribute to the conception of an AI invention and whether current laws and regulations involving inventorship need to be revised to consider contributions from entities other than natural persons.
Subsequently, in June 2022, the USPTO held its inaugural AI/ET Partnership meeting. During a panel discussion on “Inventorship and the Advent of Machine Generated Inventions,” there was a discussion among the panelists about AI's increasing role in innovation. Although there was consensus that AI cannot “conceive” of inventions, some panelists contended that AI is merely a tool like any other tool used in the inventive process, while others pointed to situations in which AI systems can output patentable inventions or contribute at the level of a joint inventor. Details and a recording of the inaugural AI/ET Partnership event are available at
While the USPTO was exploring the contours of inventorship law with respect to AI generated inventions, the USPTO received applications asserting that an AI machine was the inventor. On April 22, 2020, the USPTO issued a pair of decisions denying petitions to name Device for Autonomous Bootstrapping of Unified Sentience (DABUS), an AI system, as the inventor. The USPTO's decision explained that under current U.S. patent laws, inventorship is limited to a natural person(s). The USPTO's decision was upheld on September 2, 2021 in a decision from the United States District Court for the Eastern District of Virginia.
In addition, there is a growing consensus that AI is playing a greater role in the innovation process (
In the wake of the
The USPTO will hold stakeholder engagement sessions regarding inventorship and AI-enabled innovation. Information about these sessions will be announced in the
The USPTO also seeks to foster increased academic engagement on inventorship and AI-enabled innovation. Universities and academic researchers play a multifaceted role in illuminating AI's role in innovation. Many of the technical breakthroughs that underpin AI's potential ability to contribute to the inventive process are inspired by work in university research labs. Legal and policy scholars from those same institutions can help explore the resulting implications from an intellectual property perspective. The USPTO encourages universities to support research and related academic initiatives—particularly those that foster interdisciplinary collaboration between AI technical researchers, legal scholars, and other contributors—that can help address open questions in this area, such as the ones posed in section IV of this notice, from a scholarly perspective. When appropriate, the USPTO will consider opportunities to engage and collaborate with such academic initiatives via the AI/ET Partnership.
The USPTO welcomes novel scholarship that can inform its future efforts as to inventorship and AI-enabled innovation. Recognizing the value of a diversity of perspectives, the USPTO invites both descriptive and normative contributions from a variety of disciplines, including but not limited to computer science, law, public policy, economics, applied mathematics, and cognitive science. The “Journal of the Patent and Trademark Office Society” plans to publish a special issue focused on inventorship and AI-enabled innovation. Submissions for this special issue may be made directly to the journal at
The USPTO invites written responses from the public to the following questions:
1. How is AI, including machine learning, currently being used in the invention creation process? Please provide specific examples. Are any of these contributions significant enough to rise to the level of a joint inventor if they were contributed by a human?
2. How does the use of an AI system in the invention creation process differ from the use of other technical tools?
3. If an AI system contributes to an invention at the same level as a human who would be considered a joint inventor, is the invention patentable under current patent laws? For example:
a. Could 35 U.S.C. 101 and 115 be interpreted such that the Patent Act only requires the listing of the natural person(s) who invent(s), such that inventions with additional inventive contributions from an AI system can be patented as long as the AI system is not listed as an inventor?
b. Does the current jurisprudence on inventorship and joint inventorship, including the requirement of conception, support the position that only the listing of the natural person(s) who invent(s) is required, such that inventions with additional inventive contributions from an AI system can be patented as long as the AI system is not listed as an inventor?
c. Does the number of human inventors impact the answer to the questions above?
4. Do inventions in which an AI system contributed at the same level as a joint inventor raise any significant ownership issues? For example:
a. Do ownership rights vest solely in the natural person(s) who invented or do those who create, train, maintain, or own the AI system have ownership rights as well? What about those whose information was used to train the AI system?
b. Are there situations in which AI-generated contributions are not owned by any entity and therefore part of the public domain?
5. Is there a need for the USPTO to expand its current guidance on inventorship to address situations in which AI significantly contributes to an invention? How should the significance of a contribution be assessed?
6. Should the USPTO require applicants to provide an explanation of contributions AI systems made to inventions claimed in patent applications? If so, how should that be implemented, and what level of contributions should be disclosed? Should contributions to inventions made by AI systems be treated differently from contributions made by other (
7. What additional steps, if any, should the USPTO take to further incentivize AI-enabled innovation (
8. What additional steps, if any, should the USPTO take to mitigate harms and risks from AI-enabled innovation? In what ways could the USPTO promote the best practices outlined in the
9. What statutory changes, if any, should be considered as to U.S. inventorship law, and what consequences do you foresee for those statutory changes? For example:
a. Should AI systems be made eligible to be listed as an inventor? Does allowing AI systems to be listed as an inventor promote and incentivize innovation?
b. Should listing an inventor remain a requirement for a U.S. patent?
10. Are there any laws or practices in other countries that effectively address inventorship for inventions with significant contributions from AI systems?
11. The USPTO plans to continue engaging with stakeholders on the intersection of AI and intellectual property. What areas of focus (
United States Patent and Trademark Office, Department of Commerce.
Notice.
To continue to support the acceleration of innovations in the fight against COVID-19 during the public health emergency, the United States Patent and Trademark Office (USPTO or Office) is extending the modified COVID-19 Prioritized Examination Pilot Program, which provides prioritized examination of certain patent applications. Requests that are compliant with the pilot program's requirements and are filed on or before May 11, 2023, will be accepted.
The COVID-19 Prioritized Examination Pilot Program is extended as of February 14, 2023, to run until May 11, 2023.
Raul Tamayo, Senior Legal Advisor, Office of Patent Legal Administration (571-272-77285,
In 2020, the USPTO published a notice on the implementation of the COVID-19 Prioritized Examination Pilot Program.
Since the COVID-19 Track One Notice, the USPTO has modified the pilot program by removing the limit on the number of patent applications that could receive prioritized examination and extending the pilot program five times through notices published in the
As of January 9, 2023, 364 patents had issued from applications granted prioritized status under the pilot program. The average total pendency for those applications was 356 days. The shortest pendency from filing date to issue date for those applications was 75 days.
The USPTO is further extending the pilot program by setting the expiration date as May 11, 2023. The extension aligns with the January 30, 2023, announcement by the White House that it plans to extend the public health emergency to May 11, 2023, and then end it on that date. See
Following the expiration of this extension, the pilot program will be terminated in favor of the Office dedicating its resources to its other prioritized examination programs. Patent applicants interested in expediting the prosecution of their patent application may instead seek to use the Prioritized Examination (Track One) Program. Patent applications accorded prioritized examination under the pilot program will not lose that status merely because the application is still pending after the date the pilot program is terminated but will instead retain prioritized examination status until that status is terminated for one or more reasons, as described in the COVID-19 Track One Notice.
The Track One Program permits an applicant to have a patent application advanced out of turn (accorded special status) for examination under 37 CFR 1.102(e) if the applicant timely files a request for prioritized (Track One) examination accompanied by the appropriate fees and meets the other conditions of 37 CFR 1.102(e).
The Track One Program does not have the restrictions of the COVID-19 Prioritized Examination Pilot Program regarding the types of inventions for which special status may be sought, as the Track One Program does not require a connection to any particular technology. Moreover, under the Track One Program, an applicant can avoid delays associated with the determination of whether a patent application presents a claim that covers a product or process related to COVID-19 and whether the product or process is subject to an applicable FDA approval for COVID-19 use.
88 FR 8262, February 8, 2023.
1:00 p.m. EST, Wednesday, February 15, 2023.
The place of the meeting has changed. This meeting will now take place virtually. The meeting time and date, Closed status, and matters to be considered, as previously announced, remain unchanged.
Christopher Kirkpatrick, 202-418-5964.
Consumer Product Safety Commission.
Notice.
As required by the Paperwork Reduction Act of 1995 (PRA), the Consumer Product Safety Commission (CPSC) announces that the CPSC has submitted to the Office of Management and Budget (OMB) a request for extension of approval of a collection of information for the Publicly Available Consumer Product Safety Information Database, previously under OMB Control No. 3041-0146. On December 8, 2022, the CPSC published a notice in the
Written comments on this request for extension of approval of information collection requirements should be submitted by March 16, 2023.
Submit comments about this request by email:
For further information, or a copy of the supporting statement, contact: Cynthia Gillham, Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814; (301) 504-7791, or by email to:
Section 212 of the Consumer Product Safety Improvement Act of 2008 (CPSIA) added to the Consumer Product Safety Act (CPSA) a new section 6A, which requires the CPSC to establish and maintain a publicly available, searchable database (Database) on the safety of consumer products and other products or substances regulated by the CPSC. Among other things, section 6A requires the CPSC to collect reports of harm from the public for potential publication in the publicly available Database, and to collect and publish comments from manufacturers about reports of harm.
In a proposed rule published on May 24, 2010 (75 FR 29156), the CPSC announced that a proposed collection of information in conjunction with the Database, called the Publicly Available Consumer Product Safety Information Database, had been submitted to OMB for review and clearance under 44 U.S.C. 3501-3520. The CPSC issued a final rule on the Database on December 9, 2010 (75 FR 76832). The final rule interprets various statutory requirements in section 6A of the CPSA pertaining to the information to be included in the Database. The final rule also establishes provisions regarding submitting reports of harm; providing notice of reports of harm to manufacturers; publishing reports of harm and manufacturer comments in the Database; and dealing with confidential and materially inaccurate information.
OMB approved the collection of information for the Database under control number 3041-0146. OMB's most recent extension of approval, issued on March 31, 2020, will expire on March 31, 2023. Accordingly, the CPSC is seeking an extension of approval of this collection of information.
One individual commenter stated that this collection of information is necessary for general consumer safety, but that the public lacks knowledge of the Database. The commenter states that CPSC should prioritize a campaign regarding the existence and purpose of the Database to benefit consumers. The commenter states that the burden estimates could be reduced through automated and electronic collection techniques, and that these options should be explored, but that CPSC must maintain data quality. CPSC appreciates the commenter's feedback and generally agrees with the commenter's statements. CPSC is not making any changes to the burden estimates for this information collection based on this comment.
The primary purpose of this information collection is to populate the publicly searchable Database of consumer product safety information mandated by section 6A of the CPSA. The Database information collection has four components: reports of harm, manufacturer comments, branding information, and the Small Batch Manufacturer Registry (SBMR).
A manufacturer or private labeler may request that the CPSC designate information in a report of harm as confidential. Such a request may be made using the business portal, by email, by mail, or by fax. Additionally, any person or entity reviewing a report of harm or comment from a manufacturer or private labeler, either before or after publication in the Database, may request that the report or comment, or portions of the report or comment, be excluded from the
We estimate the burden of this collection of information as follows:
Based
We had previously estimated the time associated with the electronic and telephone submission of reports of harm at 12 and 10 minutes, respectively; and because we have had no indication that these estimates are not appropriate or accurate, we used those figures for present purposes as well. We estimate that the time associated with a paper or PDF form would be 20 minutes, on average.
To estimate the costs for submitting reports of harm, we multiplied the estimated total burden hours associated with reports of harm (1,304 hours + 229 hours + 366 hours = 1,899 hours) by an estimated total compensation for all workers in private industry of $38.61 per hour,
To estimate the burden associated with submitting a general comment regarding a report of harm through the business portal, we averaged the burden provided by each company within each group, and then we calculated a weighted average from the three groups, weighting each group by the proportion of comments received from that group. We found that the average time to submit a general comment regarding a report of harm is 117 minutes, based on the data in Table 3 (((15 minutes + 45 minutes + 30 minutes + 15 minutes)/4 companies)*.31 + ((105 minutes + 45 minutes + 150 minutes + 15 minutes)/4 companies)*.39 + ((240 minutes + 60 minutes + 480 minutes)/3 companies)*.30 = 117 minutes).
Registered businesses generally submit comments through the CPSC website. Unregistered businesses submit comments by mail, email, or fax. We estimate that submitting comments via mail, email, or fax takes a little longer because often, we must ask businesses to amend their submissions to include the required certifications. Thus, we estimated that, on average, comments submitted by mail, email, or fax take 30 minutes longer than comments submitted through the CPSC website (117 minutes + 30 minutes = 147 minutes).
The submission of a claim of materially inaccurate information is a relatively rare event for all respondents, so we averaged all responses together. Eight of the businesses contacted had submitted claims of materially inaccurate information. We found that the average time to submit a claim that a report of harm contains a material inaccuracy is 165 minutes ((30 minutes + 90 minutes + 45 minutes + 90 minutes + 60 minutes + 660 minutes + 45 minutes + 300 minutes)/8 companies = 165 minutes).
Registered businesses generally submit claims of materially inaccurate information through the business portal. Unregistered businesses submit such claims by mail, email, or fax. We estimate that submitting claims via mail, email, or fax takes a little longer because we often must ask businesses to amend their submission to include the required certifications. Thus, we estimate that, on average, claims submitted by mail, email, or fax take 30 minutes longer than those submitted through the CPSC website (165 minutes + 30 minutes = 195 minutes).
The submission of a claim of confidential information is another relatively rare event for all respondents, so we averaged all responses together. Five of the businesses contacted had submitted claims of confidential information. We found that the average time to submit a claim that a report of harm contains confidential information through the CPSC website is 42 minutes ((45 minutes + 15 minutes + 60 minutes + 30 minutes + 60 minutes)/5 companies = 42 minutes).
Registered businesses generally submit confidential information claims through the business portal. Unregistered businesses submit confidential information claims by mail, email, or fax. We estimate that submitting claims by mail, email, or fax takes a little longer because often, we must ask businesses to amend their submission to include the required certifications. Thus, we estimate that a confidential information claim submitted by mail, email, or fax would take 30 minutes longer than those submitted through the CPSC website (42 minutes + 30 minutes = 72 minutes).
For voluntary brand identification, we estimate that a response would take 10 minutes, on average. Most responses consist only of the brand name and a product description. In many cases, a business will submit multiple entries in a brief period of time, and we can see from the date and time stamps on these records that an entry often takes less than 2 minutes. CPSC staff enters the same data in a similar form, based on our own research, and that experience was also factored into our estimate.
For small batch manufacturer identification, we estimate that a response would take 10 minutes, on average. The form consists of three check boxes and the information should be readily accessible to the respondent.
The responses summarized in Table 2 are generally submitted by manufacturers. To avoid underestimating the cost associated with the collection of this data, we assigned the higher hourly wage associated with a manager or professional in goods-producing industries to these tasks. To estimate the cost of manufacturer submissions, we multiplied the estimated total burden hours in Table 2 (5,125 hours), by an estimated total compensation for a manager or professional in goods-producing industries of $72.15 per hour,
Therefore, the total estimated annual cost to respondents is $443,089 ($73,320 burden for reports of harm + $369,769 burden for manufacturer submissions = $443,089).
We estimate the annualized cost to the CPSC to be $981,516. This figure is based on the costs for four categories of work for the Database: Reports of Harm, Materially Inaccurate Information Claims, Manufacturer Comments, and Small Batch Identification. Each category is described below. No government cost is associated with firms' voluntary brand identification because this information is entered directly into the Database by the manufacturer with no processing required by the government. The information assists the government in directing reports of harm to the correct manufacturer. Because we only have one request to treat information as confidential in FY 2022, we included the government's time to process this claim with the claims of materially inaccurate information.
The Reports of Harm category also includes sending consent requests for reports when necessary, processing that consent when received, determining whether a product is out of CPSC's jurisdiction, and confirming that pictures and attachments do not have any personally identifiable information. The Reports of Harm category also entails notifying manufacturers or private labelers when one of their products is reported, completing a risk of harm determination form for every report eligible for publication, referring some reports to a subject matter expert within the CPSC for a determination whether the reports meet the requirement of having a risk of harm, and determining whether a report meets all the statutory and regulatory requirements for publication. Detailed costs are:
We estimate the annualized cost to the CPSC of $958,533, by adding the four categories of work related to the Database summarized in Tables 4 through 7 (Reports of Harm ($789,459) + MII Claims ($79,632) + Manufacturer Comments ($13,320) + Small Batch Identification ($76,122) = $958,533).
This information collection renewal request is based on an estimated 7,024 burden hours per year for the Database, which represents a decrease of 6,319 hours since this collection of information was last approved by OMB in 2019. Total burden from reports of harm decreased by 4,647 hours (from 6,546 to 1,899), and total burden for manufacturer's submission decreased by 1,672 hours, from 6,797 to 5,125.
Declines in total burden hours are attributed primarily to a decline in the number of reports of harm submitted by mail, email, and fax. In addition, CPSC staff has identified an error in the 2019 update for this control number that increased the estimated burden; the error involved inclusion of death certificates collected by CPSC staff in the number of reports of harm submitted for the Database by mail, email, and fax. Finally, for this update there was a decrease in small batch manufacturer activity.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Neil Hedlund at
This 36(b)(5)(C) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 21-0I.
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This transmittal reports the addition of non-MDE follow-on support for the C-17 fleet to include aircraft and engine hardware and software modification and support; contractor logistics support, with further participation in the Globemaster III Integrated Sustainment Program (GISP), Globemaster III Sustainment Contract (G3SC), Material Improvement Program (MIP), and Over and Above (O&A).
The total value of new non-MDE follow-on support is $170 million. This results in a revised total non-MDE value of $470 million. The total case value will increase to $470 million.
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National Security Agency, Department of Defense (DoD).
Notice of intent.
The National Security Agency hereby gives notice of its intent to grant Ad Astra Integrity Measurement Systems, Inc. a revocable, non-assignable, exclusive, license to practice the following Government-Owned invention as described and claimed in United States Patent Number (USPN), 8,326,579, Method and system for program execution integrity measurement; and USPN, 7,904,278, Method and system for program execution integrity measurement.
Anyone wishing to object to the grant of this license has until March 1, 2023 to file written objections including evidence and argument that establish that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR 404.7.
Written objections are to be filed with the National Security Agency Technology Transfer Program, 9800 Savage Road, Suite 6843, Fort George G. Meade, MD 20755-6843.
Linda L. Burger, Director, Technology Transfer Program, 9800 Savage Road, Suite 6843, Fort George G. Meade, MD 20755-6843, telephone (443) 634-3518.
The prospective exclusive license will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR 404.7. The patent rights in these inventions have been assigned to the United States Government as represented by the National Security Agency.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Neil Hedlund at
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 21-42 with attached Policy Justification and Sensitivity of Technology.
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Also included are AN/APR-39 Radar Signal Detecting Sets; AN/AVR-2B Laser Detecting Sets; AN/APX-123A Identification Friend or Foe (IFF) transponders; IDM-401 Improved Data Modems; Link-16 Small Tactical Terminal KOR-24-A; Improved Countermeasure Dispensing System (ICMD); AN/ARN-149 (V)3 Automatic Direction Finders; Doppler ASN-157 Doppler Radar Velocity Sensors; AN/APN-209 Radar Altimeters Common Core (RACC); AN/ARN-153 Tactical Air Navigation Set (TACAN); AN/PYQ-10(C) Simple Key Loader; M230E1 + M139 AWS Automatic Gun; M261 Rocket Launchers; M299 missile launchers; 2.75 inch rockets; 30mm rounds; High Explosive Warhead for airborne 2.75 rockets, inert; MK66-4 2.75 inch rocket High Explosive warhead M151 fuze M423 motor; MK66-4 2.75 inch rocket warhead M274 motor; MK66-4 2.75 inch rocket motor; M151HE 2.75 inch warhead; Manned-Unmanned Teaming-2 (MUMT-X) video receivers; Manned-Unmanned Teaming-2 (MUMT-X) Air-Air-Ground kits; training devices; communication systems; helmets; simulators; generators; transportation and organization equipment; spare and repair parts; support equipment; tools and test equipment; technical data and publications; personnel training and training equipment; U.S. Government and contractor technical assistance; technical and logistics support services; and other related elements of program and logistical support.
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* As defined in Section 47(6) of the Arms Export Control Act.
The Government of Australia has requested to buy twenty-nine (29) AH-64E Apache attack helicopters; sixty-four (64) T700-GE 701D engines (58 installed, 6 spares); twenty-nine (29) AN/ASQ-170 Modernized Target Acquisition and Designation Sight/AN/AAR-11 Modernized Pilot Night Vision Sensors (M-TADS/PNVS); sixteen (16) AN/APG-78 Fire Control Radars (FCR) with Radar Electronic Units; twenty-nine (29) AN/APR-48B Modernized Radar Frequency Interferometers (MRFI); seventy (70) Embedded Global Positioning Systems with Inertial Navigation Systems plus Multi-Mode Receiver (EGI+MMR) (58 installed, 12 spares); thirty-five (35) AAR-57 Common Missile Warning Systems (CMWS) (29 installed, 6 spares); seventy (70) AN/ARC-231A Very High Frequency/Ultra High Frequency (VHF/UHF) radios (58 installed, 12 spares); eighty-five (85) AGM-114R Hellfire missiles; twenty-nine (29) M36E8 Hellfire Captive Air Training Missiles (CATM); and two thousand (2,000) Advanced Precision Kill Weapon System Guidance Sections (APKWS-GS). Also included are AN/APR-39 Radar Signal Detecting Sets; AN/AVR-2B Laser Detecting Sets; AN/APX-123A Identification Friend or Foe (IFF) transponders; IDM-401 Improved Data Modems; Link-16 Small Tactical Terminal KOR-24-A; Improved Countermeasure Dispensing System (ICMD); AN/ARN-149 (V)3 Automatic Direction Finders; Doppler ASN-157 Doppler Radar Velocity Sensors; AN/APN-209 Radar Altimeters Common Core (RACC); AN/ARN-153 Tactical Air Navigation Set (TACAN); AN/PYQ-10(C) Simple Key Loader; M230E1 + M139 AWS Automatic Gun; M261 Rocket Launchers; M299 missile launchers; 2.75 inch rockets; 30mm rounds; High Explosive Warhead for airborne 2.75 rockets, inert; MK66-4 2.75 inch rocket High Explosive warhead M151 fuze M423 motor; MK66-4 2.75 inch rocket warhead M274 motor; MK66-4 2.75 inch rocket motor; M151HE 2.75 inch warhead; Manned-Unmanned Teaming-2 (MUMT-X) video receivers; Manned-Unmanned Teaming-2 (MUMT-X) Air-Air-Ground kits; training devices; communication systems; helmets; simulators; generators; transportation and organization equipment; spare and repair parts; support equipment; tools and test equipment; technical data and publications; personnel training and training equipment; U.S. Government and contractor technical assistance; technical and logistics support services; and other related elements of program and logistical support. The total estimated value is $3.5 billion.
The proposed sale will improve Australia's capability to meet current and future threats, and will enhance interoperability with U.S. forces and other allied forces. Australia will use the enhanced capability to strengthen its homeland defense and provide greater security for its critical infrastructure. Australia will have no difficulty absorbing these Apache aircraft into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The prime contractors involved in this program will be Boeing, Mesa, AZ; and Lockheed Martin, Orlando, FL. The purchaser typically requests offsets. Any offset agreement will be defined in negotiations between the purchaser and the contractor(s).
Implementation of this proposed sale will require the assignment of eight (8) contractor representatives to Australia.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
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1. The AH-64E Apache Attack Helicopter is the Army's advanced attack helicopter equipped for performing close air support, anti-armor, and armed reconnaissance missions. The aircraft contains the following sensitive communications and target identification equipment, navigation equipment, aircraft survivability equipment, displays, and sensors:
a. The AN/ARC-231 Ultra High Frequency (UHF) radio is a software defined radio for military aircraft that provides two-way multi-mode voice and data communications. It provides joint service standard line of sight (LOS), HAVE QUICK, SATURN, and SINCGARS electronic counter-counter measures (ECCM), along with integrated waveform satellite communications (SATCOM).
b. The AN/APX-123A Identify Friend-or-Foe (IFF) digital transponder set provides pertinent platform information in response to an IFF interrogator. The digital transponder provides cooperative Mark XII IFF capability using full diversity selection, as well as Mode Select (Mode S) capability. In addition, transponder operation provides interface capability with the aircraft's Traffic Collision and Avoidance System (TCAS). The transponder receives pulsed radio frequency interrogation signals in any of six modes (1, 2, 3/A, S, and 5), decodes the signals, and transmits a pulsecoded reply. The Mark XII IFF operation includes Selective Identification Feature (SIF) Modes 1, 2, 3/A and C, as well as secure cryptographic Mode 5 operational capability.
c. Link 16 Datalink is a military tactical data link network. Link 16 provides aircrews with enhanced situational awareness and the ability to exchange target information to Command and Control (C2) assets via Tactical Digital Information Link-Joint (TADIL-J). Link 16 can provide a range of combat information in near-real time to U.S. and allies' combat aircraft and C2 centers. The AH-64E uses the Harris Small Tactical Terminal (SIT) KOR-24A to provide Airborne and Maritime/Fixed Station (AMF) Small Airborne Link 16 Terminal (SALT) capability. The SIT is the latest generation of small, two-channel, Link 16 and VHF/UHF radio terminals. While in flight, the SIT provides simultaneous communication, voice or data, on two key waveforms.
d. The AN/APR-39 Radar Warning Receiver Signal Detecting Set is a system that provides warning of a radar directed air defense threat and allows appropriate countermeasures. This is the 1553 databus compatible configuration.
e. The AN/AVR-2B Laser Warning Set is a passive laser warning system that receives, processes and displays threat information resulting from aircraft illumination by lasers on the aircraft's multi-functional display.
f. The AAR-57 Common Missile Warning System (CMWS) detects energy emitted by threat missile in-flight, evaluates potential
g. The AH-64E uses two EAGLE+MMR embedded GPS/Inertial navigation systems with Multi-Mode Receiver. The EAGLE+MMR is a self-contained, all-attitude navigation system with embedded GPS receiver, controlled via MIL-STD-1553B controller, providing output navigation and GPS timing data to support ADS-B out and other platform systems. The EAGLE's EGI unit houses a 24 channel GPS receiver which is capable of operating in either Standard Positioning Service (SPS) C/A-code (non-encrypted) or Precise Positioning Service (PPS) Y-code (encrypted). The Eagle + MMR is pending aircraft testing and air worthiness rating (AWR) approval, with flight tests anticipated to start in April 2021. AWR approval is expected prior to the proposed sale to Australia.
h. The AN/ASQ-170 Modernized Target Acquisition and Designation Sight/AN/AAQ-11 Pilot Night Vision Sensor (MTADS/PNVS) provides day, night, limited adverse weather target information, as well as night navigation capabilities. The PNVS provides thermal imaging that permits nap-of-the-earth flight to, from, and within the battle area, while TADS provides the co-pilot gunner with search, detection, recognition, and designation by means of Direct View Optics (DVO), television, and Forward Looking Infrared (FLIR) sighting systems that may be used singularly or in combinations.
i. The AN/APR-48B Modernized Radar Frequency Interferometer (M-RFI) is an updated version of the passive radar detection and direction finding system. It utilizes a detachable UDM on the M-RFI processor, which contains the Radar Frequency (RF) threat library.
j. The AN/APG-78 Longbow Fire Control Radar (FCR) with Radar Electronics Unit (REU) is an active, low-probability of intercept, millimeter wave radar. The active radar is combined with a passive Radar Frequency Interferometer (RFI) mounted on top of the helicopter mast. The FCR Ground Targeting Mode detects, locates, classifies and prioritizes stationary or moving armored vehicles, tanks and mobile air defense systems as well as hovering helicopters, helicopters, and fixed wing aircraft in normal flight. If desired, the radar data can be used to refer targets to the regular electro-optical Modernized Target Acquisition and Designation Sight (MTADS).
k. The Manned-Unmanned Teaming X (MUM-Tx) data link system provides cross-platform communication and teaming between Apache, unmanned aerial systems (UAS), and other interoperable aircraft and ground platforms. It provides the ability to display real-time UAS sensor information and MTADs full motion video feeds across MUM-T equipped platforms and ground stations.
l. The M299 Missile Launcher, commonly known as the Longbow Hellfire Launcher (LBHL), is a four rail launcher designed to carry the complete family of AGM-114 Hellfire missiles.
m. The AGM-114R Hellfire is a semi-active laser guided missile with a multi-purpose warhead that can engage and defeat both high and heavily armored targets, personnel, bunkers, caves and urban structures.
n. The Hellfire M36E9 Captive Air Training Missile (CATM) is a flight-training missile that consists of a functional guidance section coupled to an inert missile bus. It functions like a tactical missile during captive carry on the aircraft, absent launch capability, making it suitable for training the aircrew in simulated Hellfire missile target acquisition and lock.
o. The M261 2.75 Inch Rocket Launcher is a nineteen tube, three zone rocket launcher utilized on heavy attack aircraft. It is used to fire the Hydra 70 2.75 inch rocket, an unguided, fin-stabilized air-to-ground rocket that utilizes a variety of warhead and fuze combinations to achieve a range of effects.
p. The AGR-20A Advanced Precision Kill Weapons System (APWKS) is a conversion of the 2.75 inch Hydra 70 rocket which adds a laser guidance kit to enable precision targeting.
2. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. A determination has been made that the Government of Australia can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
5. All defense articles and services listed in this transmittal are authorized for release and export to the Government of Australia.
Under Secretary of Defense for Personnel and Readiness, Department of Defense (DoD).
Notice of Federal Advisory Committee meeting.
The DoD is publishing this notice to announce that the following Federal Advisory Committee meeting of the Defense Advisory Committee for the Prevention of Sexual Misconduct (DAC-PSM) will take place.
DAC-PSM will hold a meeting open to the public on Thursday, March 2, 2023 from 1:00 p.m. to 5:00 p.m. (EST).
The meeting may be accessed by videoconference. Information for accessing the videoconference will be provided after registering. (Pre-meeting registration is required. See guidance in
Dr. Suzanne Holroyd, Designated Federal Officer (DFO), (571) 372-2652 (voice),
This meeting is being held under the provisions of chapter 10 of title 5 U.S.C. (commonly known as the Federal Advisory Committee Act (FACA) (5 U.S.C. app.)), section 552b(c) of title 5 U.S.C. (commonly known as the Government in the Sunshine Act), and sections 102-3.140 and 102-3.150 of 41 CFR.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Neil Hedlund at
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 21-53 with attached Policy Justification and Sensitivity of Technology.
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Also included are Enhanced Producibility Basic Skills Trainers; missile simulation rounds; Security Assistance Management Directorate (SAMD) Technical Assistance; Tactical Aviation and Ground Munitions (TAGM) Project Office Technical Assistance; contractor lifecycle support; spares manuals; batteries/chargers; gunner training; ammunition officer training; OCONUS Modified Level 2 Maintenance Training; System
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* As defined in Section 47(6) of the Arms Export Control Act.
The Government of Thailand has requested to buy three hundred (300) Javelin FGM-148 Missiles; and fifty (50) Javelin Command Launch Units (CLU). Also included are Enhanced Producibility Basic Skills Trainers; missile simulation rounds; Security Assistance Management Directorate (SAMD) Technical Assistance; Tactical Aviation and Ground Munitions (TAGM) Project Office Technical Assistance; contractor lifecycle support; spares manuals; batteries/chargers; gunner training; ammunition officer training; OCONUS Modified Level 2 Maintenance Training; System Inspection and Check Out (SICO); and other related elements of logistical and program support. The total estimated cost is $83.5 million.
This proposed sale will contribute to the foreign policy and national security objectives of the United States by improving the security of a Major Non-NATO Ally in Southeast Asia. The Javelin Weapon System will replace the obsolete 106mm Recoilless Rifles that the Royal Thai Army (RTA) acquired as part of the Military Assistance Program (MAP) from the Vietnam era. This proposed sale will allow the RTA to modernize their light anti-tank capability and maintain its current force posture, as well as enhance interoperability with the U.S. during operations and training exercises. Thailand is a strategic partner committed to contributing to regional security.
The proposed sale will improve Thailand's capability to meet current and future threats by improving Thailand's long-term defense capacity to defend its sovereignty and territorial integrity. Thailand will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The prime contractors will be Raytheon/Lockheed Martin Javelin Joint Venture of Orlando, Florida, and Tucson, Arizona. Offsets have not been included. Any offset agreements will be defined in negotiations between the purchaser and the contractor(s).
Implementation of this proposed sale will not require the assignment of U.S. Government or contractor representatives to Thailand.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The Javelin Weapon System is a medium-range, man portable, shoulder-launched, fire and forget, anti-tank system for infantry, scouts, and combat engineers. It may also be mounted on a variety of platforms including vehicles, aircraft and watercraft. The system weighs 49.5 pounds and has a maximum range in excess of 2,500 meters. The system is highly lethal against tanks and other systems with conventional and reactive armors. The system possesses a secondary capability against bunkers.
2. Javelin's key technical feature is the use of fire-and-forget technology, which allows the gunner to fire and immediately relocate or take cover. Additional special features are the top attack and/or direct fire modes, an advanced tandem warhead and imaging infrared seeker, target lock-on before launch, and soft launch from enclosures or covered fighting positions. The Javelin missile also has a minimum smoke motor, thus decreasing its detection on the battlefield.
3. The Javelin Weapon System is comprised of two major tactical components, which are a reusable Command Launch Unit (CLU) and a round contained in a disposable launch tube assembly. The CLU incorporates an integrated day-night sight that provides a target engagement capability in adverse weather and countermeasure environments. The CLU may also be used in a stand-alone mode for battlefield surveillance and target detection. The CLU's thermal sight is a second generation Forward Looking Infrared (FLIR) sensor. To facilitate initial loading and subsequent updating of software, all on-board missile software is uploaded via the CLU after mating and prior to launch.
4. The missile is autonomously guided to the target using an imaging infrared seeker and adaptive correlation tracking algorithms. This allows the gunner to take cover or reload and engage another target after firing a missile. The missile has an advanced tandem warhead and can be used in either the top attack or direct fire modes (for target undercover). An onboard flight computer guides the missile to the selected target.
5. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
6. If a technologically advanced adversary were to obtain knowledge of the specific hardware or software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
7. A determination has been made that Thailand can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This proposed sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
8. All defense articles and services listed in this transmittal are authorized for release and export to the Government of Thailand.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Neil Hedlund at
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 21-37 with attached Policy Justification and Sensitivity of Technology.
(i)
(ii)
(iii)
Also included is one (1) Harpoon Intermediate Level maintenance station; spare and repair parts, support, and test equipment; publications and technical documentation; personnel training; U.S. Government and contractor technical, engineering, and logistics support services; and other related elements of logistics and program support.
(iv)
(v)
(vi)
(vii)
(viii)
*As defined in Section 47(6) of the Arms Export Control Act.
The Government of India has requested to buy one (1) Harpoon Joint Common Test Set (JCTS). Also included is one (1) Harpoon Intermediate Level maintenance station; spare and repair parts, support, and test equipment; publications and technical documentation; personnel training; U.S. Government and contractor technical, engineering, and logistics support services; and other related elements of logistics and program support. The estimated total cost is $82 million.
This proposed sale will support the foreign policy and national security of the United States by helping to strengthen the U.S.-Indian strategic relationship and to improve the security of a major defensive partner, which continues to be an important force for political stability, peace, and economic progress in the Indo-Pacific and South Asia region.
This proposed sale will improve India's capability to meet current and future threats by providing India with flexible and efficient Harpoon missile maintenance capabilities to ensure maximum force readiness. India will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be The Boeing Company, St. Louis, MO. There are no known offset agreements proposed in connection with this potential sale. Any offset agreement required by India will be defined in negotiations between the purchaser and the contractor(s).
Implementation of this proposed sale will require the assignment of one (1) U.S. contractor representative to India for a duration of one (1) year to support technical reviews, support, and oversight.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The Harpoon Joint Common Test Set (JCTS) is used to maintain all configurations of the Harpoon missile. India seeks to establish a Harpoon Intermediate Level Weapon Station via an acquisition of a JCTS that can test their current inventory, as well as up to a BLK IIU Harpoon Missile. The elements listed below being conveyed by the proposed sale are considered sensitive. These elements are used to test and verify the ability of the Harpoon missile to engage hostile targets under a wide range of operations, tactical, and environmental conditions:
2. The highest level of classification of defense articles, components, and services included in this potential sale is CONFIDENTIAL.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. A determination has been made that India can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
5. All defense articles and services listed in this transmittal have been authorized for release and export to the Government of India.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Neil Hedlund at
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 21-48 with attached Policy Justification and Sensitivity of Technology.
(i)
(ii)
(iii)
Also included are Enhanced Producibility Basic Skills Trainers; Missile Simulation Rounds; Security Assistance Management Directorate Technical Assistance; Tactical Aviation and Ground Munitions Project Office Technical Assistance; other associated equipment and services; and other related elements of logistical and program support.
(iv)
(v)
(vi)
(vii)
(viii)
*As defined in Section 47(6) of the Arms Export Control Act.
The Government of Georgia has requested to buy eighty-two (82) Javelin FGM-148 Missiles; and forty-six (46) Javelin Command Launch Units (CLU). Also included are Enhanced Producibility Basic Skills Trainers; Missile Simulation Rounds; Security Assistance Management Directorate Technical Assistance; Tactical Aviation and Ground Munitions Project Office Technical Assistance; other associated equipment and services; and other related elements of logistical and program support. The estimated total cost is $30 million.
This proposed sale will support the foreign policy and national security of the United States by improving the security of Georgia which is a strategic partner and a key contributor to security and stability the region. The Javelin system will help Georgia build its long-term defense capacity to defend its sovereignty and territorial integrity in order to meet its national defense requirements.
The proposed sale will improve Georgia's capability to meet current and future threats by increasing its anti-armor capacity. Georgia will have no difficulty absorbing these weapons into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The prime contractors will be Raytheon/Lockheed Martin Javelin Joint Venture of Orlando, Florida, and Tucson, Arizona. However, these articles are being provided from U.S. Army stock. There are no known offset agreements proposed in conjunction with this potential sale.
Implementation of this proposed sale will not require the assignment of any U.S. Government or contractor representatives to Georgia.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The Javelin Weapon System is a medium-range, man portable, shoulder-launched, fire and forget, anti-tank system for infantry, scouts, and combat engineers. It may also be mounted on a variety of platforms including vehicles, aircraft and watercraft. The system weighs 49.5 pounds and has a maximum range in excess of 2,500 meters. The system is highly lethal against tanks and other systems with conventional and reactive armors. The system possesses a secondary capability against bunkers.
2. Javelin's key technical feature is the use of fire-and-forget technology, which allows the gunner to fire and immediately relocate or take cover. Additional special features are the top attack and/or direct fire modes, an advanced tandem warhead and imaging infrared seeker, target lock-on before launch, and soft launch from enclosures or covered fighting positions. The Javelin missile also has a minimum smoke motor, thus decreasing its detection on the battlefield.
3. The Javelin Weapon System is comprised of two major tactical components, which are a reusable Command Launch Unit (CLU) and a round contained in a disposable launch tube assembly. The CLU incorporates an integrated day-night sight that provides a target engagement capability in adverse weather and countermeasure environments. The CLU may also be used in a stand-alone mode for battlefield surveillance and target detection. The CLU's thermal sight is a second generation Forward Looking Infrared (FLIR) sensor. To facilitate initial loading and subsequent updating of software, all on-board missile software is uploaded via the CLU after mating and prior to launch.
4. The missile is autonomously guided to the target using an imaging infrared seeker and adaptive correlation tracking algorithms. This allows the gunner to take cover or reload and engage another target after firing a missile. The missile has an advanced tandem warhead and can be used in either the top attack or direct fire modes (for target undercover). An onboard flight computer guides the missile to the selected target.
5. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
6. If a technologically advanced adversary obtains knowledge of the specific hardware and software elements, the information could be used to develop countermeasures or equivalent systems that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
7. A determination has been made that Georgia can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This proposed sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
8. All defense articles and services listed in this transmittal have been authorized for release and export to the Government of Georgia.
Institute of Education Sciences (IES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a new information collection request (ICR).
Interested persons are invited to submit comments on or before April 17, 2023.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Thomas Wei, (646) 428-3892.
The Department, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
On November 10, 2022, Wyoming Interstate Company LLC. (WIC) filed an application in Docket No. CP23-14-000 requesting authorization pursuant to Section 7(b) of the Natural Gas Act to abandon certain natural gas pipeline facilities. The proposed project is known as the Diamond Mountain Abandonment Project (Project) and consists of WIC's proposal to abandon in-place a compressor station and associated equipment and facilities in Uintah County, Utah. According to WIC, the proposed abandonment is due to the decline of natural gas production in the Uintah basin, and the absence of bids submitted during open season. WIC would continue to operate the existing mainline block valve at the compressor station site after the abandonment.
On November 24, 2022, the Federal Energy Regulatory Commission (Commission or FERC) issued its Notice of Application for the Project. Among other things, that notice alerted agencies issuing federal authorizations of the requirement to complete all necessary reviews and to reach a final decision on a request for a federal authorization within 90 days of the date of issuance of the Commission staff's environmental document for the Project.
This notice identifies Commission staff's intention to prepare an environmental assessment (EA) for the Project and the planned schedule for the completion of the environmental review.
If a schedule change becomes necessary, additional notice will be provided so that the relevant agencies are kept informed of the Project's progress.
The Project is located in Uintah County, Utah. Proposed work includes disconnecting piping from compressor units, draining oil and coolant from the turbines, draining water from the domestic and heating systems, disconnecting power, removing applicable station valves and the turbine surge valve. WIC would complete all work within the existing gravel station yard and would access the station from the existing facility access roads. No ground disturbing activities are proposed. WIC would remove and repurpose components of the abandoned facility for use at other Kinder Morgan affiliate pipelines.
On January 27, 2023, the Commission issued a
To date, there are no cooperating agencies in the preparation of the EA.
In order to receive notification of the issuance of the EA and to keep track of formal issuances and submittals in specific dockets, the Commission offers a free service called eSubscription. This service provides automatic notification of filings made to subscribed dockets, document summaries, and direct links to the documents. Go to
Additional information about the Project is available from the Commission's Office of External Affairs at (866) 208-FERC or on the FERC website (
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection.
a.
b. Project No.: 5596-020.
c.
d.
e.
f.
g.
h.
i.
j.
The Commission strongly encourages electronic filing. Please file scoping comments using the Commission's eFiling system at
The Commission's Rules of Practice require all intervenors filing documents with the Commission to serve a copy of that document on each person on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
k. This application is not ready for environmental analysis at this time.
l. The current license for the Bedford Hydroelectric Project (Bedford Project) authorizes the following project facilities: (1) a 9- to 17-foot-high concrete gravity dam with a 1,680-foot-long concrete spillway; (2) a 57-acre impoundment with a storage capacity of 350 acre-feet at the normal maximum pool elevation of 627.7 feet North American Vertical Datum of 1988 (NAVD 88); (3) a 1,200-foot-long, 180-foot-wide, 16-foot-deep power canal; (4) a power canal headgate composed of three 21.6-foot-wide, 15.9-foot-high steel gates; (5) a 49.1-foot-wide, 29.47-foot-high steel trashrack with a clear bar spacing of 3.5 inches; (6) a 55-foot-long, 80-foot-wide powerhouse; (7) a 65-foot-long, 120-foot-wide tailrace; (8) two 2.5-megawatt (MW) turbine-generator units with a total capacity of 5.0 MW; (9) a 120-foot-long, 4-kilovolt (kV) transmission line; (10) one 4.16/23 kV, 5-megavolt-ampere (MVA) step-up transformer at the project substation, serving as the point of interconnection with the Town of Bedford's power grid; and (11) appurtenant facilities.
The Bedford Project is operated in run-of-river mode. The average annual generation is estimated to be 113,377 megawatt-hours.
m. In addition to publishing the full text of this notice in the
n. You may also register online at
o.
Copies of SD1 outlining the subject areas to be addressed in the NEPA document were distributed to the parties on the Commission's mailing list and the applicant's distribution list. Copies of SD1 may be viewed on the web at
Take notice that during the month of January 2023, the status of the above-captioned entities as Exempt Wholesale Generators or Foreign Utility Companies became effective by operation of the Commission's regulations. 18 CFR 366.7(a) (2021).
Take noticey that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is planning to submit an information collection request (ICR), “Application for Registration and Pesticide Report for Pesticide-Producing and Device-Producing Establishments” (EPA ICR No. 0160.12, OMB Control No. 2070-0078) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. Before doing so, EPA is soliciting public comments on specific aspects of the proposed information collection as described below. This is a proposed extension of the ICR, which is currently approved through September 30, 2023. An Agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
Comments must be submitted on or before April 17, 2023.
Submit your comments, referencing Docket ID No. EPA-HQ-OECA-2011-0824, online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Michelle Yaras, Office of Compliance, Monitoring, Assistance, and Media Programs Division, Pesticides, Waste & Toxics Branch (2225A), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 564-4153; email:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the PRA, EPA is soliciting comments and information to enable it to: (i) evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology,
FIFRA Section 7(c) requires that any producer operating an establishment registered under Section 7 report to the Administrator within 30 days after it is registered, and annually thereafter by March 1st for certain pesticide or device production and sales or distribution information. The producers must report which types and amounts of pesticides, active ingredients, or devices are currently being produced, were produced during the past year, sold or distributed in the past year. The supporting regulations at 40 CFR part 167 provide the requirements and time schedules for submitting production information. EPA Form 3540-16, Pesticide Report for Pesticide-Producing and Device-Producing Establishments, is used to collect the pesticide production information required by Section 7(c) of FIFRA.
Establishment registration information, collected on EPA Form 3540-8, is a one-time requirement for all pesticide-producing and device-producing establishments. Pesticide and device production information, reported on EPA Form 3540-16, is required to be submitted within 30 days after the company is notified of their pesticide-producing or device-producing establishment number, and annually thereafter on or before March 1st. Pesticide-producing and device-producing establishments optionally can electronically enter and submit their establishment registration information and pesticide production information through EPA's Central Data Exchange (CDX).
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.” The Commission may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written comments and recommendations for the proposed information collection should be submitted on or before March 16, 2023.
Comments should be sent to
For additional information or copies of the information collection, contact Nicole Ongele at (202) 418-2991. To view a copy of this information collection request (ICR) submitted to OMB: (1) go to the web page
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
Federal Housing Finance Agency.
Notice of a new system of records.
In accordance with the requirements of the Privacy Act of 1974, as amended, (Privacy Act), the Federal Housing Finance Agency (FHFA or Agency) is establishing FHFA-30, “Advisory Committee Manager System” (System). This system of records allows FHFA to collect and maintain records submitted to or obtained by FHFA in connection with seeking, choosing, managing, or ending membership on FHFA advisory committees created pursuant to the Federal Advisory Committee Act (FACA).
In accordance with 5 U.S.C. 552a(e)(4) and (11), this system of records will go into effect without further notice on February 14, 2023, unless otherwise revised pursuant to comments received. Comments must be received on or before March 16, 2023. FHFA will publish a new notice if the effective date is delayed in order for the Agency to review the comments or if changes are made based on comments received.
Submit comments to FHFA, identified by “No. 2023-N-2,” using any one of the following methods:
•
•
•
•
Stacy Easter, Privacy Act Officer,
FHFA seeks public comments on a new system of records and will take all comments into consideration.
FHFA will make all comments timely received available for examination by the public through the electronic comment docket for this notice, which is located on the FHFA website at
This notice informs the public of FHFA's proposal to establish and maintain a new system of records. This notice satisfies the Privacy Act requirement that an agency publishes a system of records notice in the
As required by the Privacy Act, 5 U.S.C. 552a(r), and pursuant to section 7 of Office of Management and Budget (OMB) Circular No. A-108, “
In accordance with the Privacy Act of 1974, 5 U.S.C. 552a, FHFA proposes two new routine uses for this system, in addition to the general routine uses applicable to this system and described below. First, FHFA may disclose information to the Library of Congress, OMB, Executive Office of the President, or General Services Administration, when necessary and relevant to FHFA's management of the advisory committee, including FHFA's consideration of applicants for membership on an advisory committee, or to comply with any obligations to report information about advisory committees. This use is compatible with the purpose of the collection, which is to administer advisory committees in accordance with the Federal Advisory Committee Act. Second, FHFA may disclose information from this system to the public to inform the public about the identity and qualifications of individuals selected to serve as members of advisory committees. As one of the purposes of the Federal Advisory Committee Act is
The information in this system of records will be used by FHFA for storing and reviewing application materials submitted by applicants for membership on FHFA advisory committees/subcommittees, choosing members for FHFA advisory committees based on those application materials, managing membership on such FHFA committees, including but not limited to membership termination, and conducting required oversight and compliance over FHFA advisory committee appointments and actions. The new system of records is described in detail below.
Advisory Committee Manager System, FHFA-30.
Unclassified.
Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC 20219, and any alternate work site used by employees of FHFA, including FHFA-authorized cloud service provider (Amazon Web Service, which is Federal Risk and Authorization Management Program (FedRAMP) authorized).
Samuel Frumkin, Advisory Committee Management Officer, Division of Housing Mission and Goals, (202) 649-4108, Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC 20219.
Federal Advisory Committee Act (Pub. L. 92-463, 5 U.S.C. chapter 10); 12 U.S.C. 4511(b)(2); 12 U.S.C. 4513(a)(2)(B); 44 U.S.C. 3101; 41 CFR part 102-3 (Federal Advisory Committee Management); and OMB Circular A-135, Management of Federal Advisory Committees (Oct. 5, 1994).
1. To collect and maintain information on FHFA past, present, and proposed advisory committee/subcommittee members subject to the FACA.
2. To identify the most qualified applicants and ensure balanced advisory committees/subcommittees.
3. To advise, inform, and provide input and recommendations to the FHFA Director.
4. To conduct required oversight and compliance over FHFA advisory committee/subcommittee appointments and actions.
Individuals covered by this System are:
1. Individuals who apply to be on a committee/subcommittee and will be considered for committee/subcommittee appointment;
2. Individuals currently serving on a committee/subcommittee;
3. Individuals selected or serving as alternate members on a committee/subcommittee; and
4. Individuals who previously served on a committee/subcommittee.
Records maintained in this System may contain information from members of the general public who submit applications for membership on FHFA advisory committees/subcommittees, including but not limited to the following: names; places and dates of birth (DOBs); business and personal mailing addresses, email addresses, and telephone numbers; educational history, degrees, and certifications; affiliated companies or organizations; employment history and related information; any foreign activities or interests; and any other information collected to determine if an individual is qualified to serve on an advisory committee/subcommittee as well as to describe committee/subcommittee appointments, all activities, and any related expenses.
Information is obtained directly from the individual applicants or from other individuals or entities submitting information in support of, for, or on behalf of an applicant via the resumes and related materials submitted to FHFA in seeking membership on FHFA advisory committees/subcommittees.
In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act, these records and information contained therein may specifically be disclosed outside of FHFA as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows, to the extent such disclosures are compatible with the purposes for which the information was collected:
(1) To appropriate agencies, entities, and persons when: (a) FHFA suspects or has confirmed that there has been a breach of the system of records; (b) FHFA has determined that as a result of a suspected or confirmed breach there is a risk of harm to individuals, FHFA (including its information systems, programs, and operations), the Federal Government, or national security; and (c) the disclosure made to such agencies, entities, and persons as reasonably necessary to assist with FHFA's efforts to (i) respond to a suspected or confirmed breach or (ii) prevent, minimize, or remedy harm caused by such breach.
(2) To a federal agency or federal entity, when FHFA determines information from this system of records is reasonably necessary to assist the recipient agency or entity in: (a) responding to a suspected or confirmed breach or (b) preventing, minimizing, or remedying the risk of harm to individuals, the recipient agency or entity (including its information systems, programs, and operations), the Federal Government, or to national security, resulting from a suspected or confirmed breach.
(3) When there is an indication of a violation or potential violation of law (whether civil, criminal, or regulatory in nature, and whether arising by general statute or particular program statute or by regulation, rule or order issued pursuant thereto), the relevant records in the system of records may be referred, as a routine use, to the appropriate agency (
(4) To any individual during the course of any inquiry or investigation conducted by FHFA, or in connection with civil litigation, if FHFA has reason to believe the individual to whom the record is disclosed may have further information about the matters related thereto, and those matters appeared to be relevant and necessary at the time to the subject matter of the inquiry.
(5) To a Congressional office in response to an inquiry from the Congressional office made at the request of and on behalf of the Congressional Offices' constituents included in the system.
(6) To the Office of Management and Budget, Department of Justice (DOJ), Department of Labor, Office of Personnel Management, Equal Employment Opportunity Commission, Office of Special Counsel, Merit Systems Protection Board, or other federal agencies to obtain advice regarding statutory, regulatory, policy, and other requirements related to fair lending oversight.
(7) To appropriate third parties contracted by FHFA to facilitate mediation or other dispute resolution procedures or programs.
(8) To outside counsel contracted by FHFA, the U.S. Department of Justice (DOJ), (including United States Attorney Offices), or other federal agencies conducting litigation or in proceedings before any court, adjudicative or administrative body, when it is relevant and necessary to the litigation and one of the following is a party to the litigation or has an interest in such litigation:
a. FHFA;
b. Any employee of FHFA in their official capacity;
c. Any employee of FHFA in their individual capacity for whom DOJ or FHFA has agreed to represent the employee; or
d. The United States or any agency thereof, is a party to the litigation or has an interest in such litigation, and FHFA determines that the records are both relevant and necessary to the litigation.
(9) To the National Archives and Records Administration or other federal agencies pursuant to records management inspections being conducted under the authority of 44 U.S.C. 2904 and 2906.
(10) To an agency, organization, or individual for the purpose of performing audit or oversight operations as authorized by law, but only such information as relevant and necessary to such audit or oversight functions.
(11) To federal agencies for fair lending and fair housing research, investigation, supervision, and enforcement purposes.
(12) To the Library of Congress, Executive Office of the President, Office of Management and Budget, or General Services Administration when necessary in the administration of FHFA's advisory committee(s), including complying with reporting obligations.
(13) To the public, when FHFA deems it necessary to inform the public of advisory committee membership qualifications or activities.
Records are maintained in electronic format. Electronic records are stored on FHFA's secured network, FHFA-authorized cloud service providers and FHFA-authorized contractor networks located within the Continental United States; or in vendor Cloud Service Offerings certified under FedRAMP.
Records will be retrieved by an individual's name.
Records are retained and disposed of in accordance with FHFA's Comprehensive Records Schedule (CRS) Item 6.2.01-06, as applicable. Comprehensive Record Schedule, Item 6.2 (N1-543-11-1, approved on 01/11/2013).
Electronic records are protected by controlled access procedures. Only FHFA staff who are permitted to perform the selection and review functions required for forming FHFA advisory committees or whose official duties otherwise require access, are allowed to view, administer, and control these records. Non-FHFA personnel will not have or be granted access to these records. Records will be stored on the FHFA General Support System (GSS) and protected by Microsoft Office 365 Multi-Tenant and Supporting Services and the Microsoft Azure Cloud, both of which are authorized by FedRAMP at the Moderate Impact Level.
See “Notification Procedures” Below.
See “Notification Procedures” Below.
Individuals seeking notification of any records about themselves contained in this System should address their inquiry to the Privacy Act Officer, via email to
None.
None.
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the applications are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551-0001, not later than March 1, 2023.
A. Federal Reserve Bank of Richmond (Brent B. Hassell, Assistant Vice President) 701 East Byrd Street, Richmond, Virginia 23219. Comments can also be sent electronically to or
1.
Board of Governors of the Federal Reserve System.
Office of Human Resource Management, Division of Human Capital Policy and Programs, General Services Administration (GSA).
Notice of request for comments regarding a request for a new OMB clearance.
Under the provisions of the Paperwork Reduction Act, the Regulatory Secretariat Division will be submitting to the Office of Management and Budget (OMB) a request to review and approve a new information collection requirement.
Submit comments on or before April 17, 2023.
Submit comments identified by Information Collection 3090-XXXX; Overseas Employment Agreement; GSA Form 5040 to:
Submit comments via the Federal eRulemaking portal by searching for “Information Collection 3090-XXXX; Overseas Employment Agreement; GSA Form 5040”. Select the link “Submit a Comment” that corresponds with “Information Collection 3090-XXXX; Overseas Employment Agreement; GSA Form 5040”. Follow the instructions provided at the “Submit a Comment” screen. Please include your name, company name (if any), and “Information Collection 3090-XXXX; Overseas Employment Agreement; GSA Form 5040” on your attached document. If your comment cannot be submitted using
Colin C. Bennett, Human Resources Specialist, Office of Human Resources Management, Division of Human Capital Policy and Programs, at telephone 240-418-6822 or via email to
The General Services Administration routinely hires, reassigns, promotes or transfers Federal employees to duty stations in foreign areas (
In order to more effectively memorialize the agency costs incurred, and the appointee's (or employee's) resulting service obligation, GSA has re-developed its existing form GSA 5040. The intent is for this form to be used: (1) as an information collection device to memorialize compensation, foreign allowance, and travel and transportation benefits provided, and (2) as an enforceable service agreement for PCS travel and transportation costs, pursuant to the Federal Claims Collection Act of 1966 and the Debt Collection Act Amendments of 1996 (see further 31 U.S.C. 3711 et. seq.)
Public comments are particularly invited on: Whether this collection of information is necessary, whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is publishing a list of information collections that have been approved by the Office of
JonnaLynn Capezzuto, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-3794,
The following is a list of FDA information collections recently approved by OMB under section 3507 of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507). The OMB control number and expiration date of OMB approval for each information collection are shown in table 1. Copies of the supporting statements for the information collections are available on the internet at
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or the Agency) has determined the regulatory review period for ALIQOPA and is publishing this notice of that determination as required by law. FDA has made the determination because of the submission of applications to the Director of the U.S. Patent and Trademark Office (USPTO), Department of Commerce, for the extension of a patent which claims that human drug product.
Anyone with knowledge that any of the dates as published (see the
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Beverly Friedman, Office of Regulatory Policy, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6250, Silver Spring, MD 20993, 301-796-3600.
The Drug Price Competition and Patent Term Restoration Act of 1984 (Pub. L. 98-417) and the Generic Animal Drug and Patent Term Restoration Act (Pub. L. 100-670) generally provide that a patent may be extended for a period of up to 5 years so long as the patented item (human drug or biologic product, animal drug product, medical device, food additive, or color additive) was subject to regulatory review by FDA before the item was marketed. Under these acts, a product's regulatory review period forms the basis for determining the amount of extension an applicant may receive.
A regulatory review period consists of two periods of time: a testing phase and an approval phase. For human drug products, the testing phase begins when the exemption to permit the clinical investigations of the drug becomes effective and runs until the approval phase begins. The approval phase starts with the initial submission of an application to market the human drug product and continues until FDA grants permission to market the drug product. Although only a portion of a regulatory review period may count toward the actual amount of extension that the Director of USPTO may award (for example, half the testing phase must be subtracted as well as any time that may have occurred before the patent was issued), FDA's determination of the length of a regulatory review period for a human drug product will include all of the testing phase and approval phase as specified in 35 U.S.C. 156(g)(1)(B).
FDA has approved for marketing the human drug product, ALIQOPA (copanlisib dihydrochloride) indicated for treatment of adult patients with relapsed follicular lymphoma who have received at least two prior systemic therapies. Subsequent to this approval, the USPTO received patent term restoration applications for ALIQOPA (U.S. Patent Nos. 7,511,041 and RE46856) from Bayer Intellectual Property GmbH and the USPTO requested FDA's assistance in determining the patents' eligibility for patent term restoration. In a letter dated May 13, 2019, FDA advised the USPTO that this human drug product had undergone a regulatory review period and that the approval of ALIQOPA represented the first permitted commercial marketing or use of the product. Thereafter, the USPTO requested that FDA determine the product's regulatory review period.
FDA has determined that the applicable regulatory review period for ALIQOPA is 3,004 days. Of this time, 2,821 days occurred during the testing phase of the regulatory review period, while 183 days occurred during the approval phase. These periods of time were derived from the following dates:
1.
2.
3.
This determination of the regulatory review period establishes the maximum potential length of a patent extension. However, the USPTO applies several statutory limitations in its calculations of the actual period for patent extension. In its applications for patent extension, this applicant seeks 1,594 or 692 days of patent term extension.
Anyone with knowledge that any of the dates as published are incorrect may submit either electronic or written comments and, under 21 CFR 60.24, ask for a redetermination (see
Submit petitions electronically to
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Submit written comments (including recommendations) on the collection of information by March 16, 2023.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
Domini Bean, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
This information collection supports implementation of section 519(f) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 360i(f)), requiring the establishment of a unique device identification (UDI) system by FDA. Medical device labeling requirements governed by section 502 of the FD&C Act (21 U.S.C. 352) provide that every medical device and every device package bear a unique device identifier. Implementing regulations are found in part 801, subpart B (21 CFR part 801, subpart B) (Labeling Requirements for UDI), including provisions for exceptions from UDI requirements (21 CFR 801.30). Applicable regulations are also found in part 821 (21 CFR part 821) (Medical Device Tracking Requirements); 21 CFR part 822 (Postmarket Surveillance); part 814 (21 CFR part 814) (Premarket Approval of Medical Devices); and part 820 (21 CFR part 820) (Quality System Regulations), as well as regulations pertaining to in vitro device labeling, biological device product labeling, or any article subject to the device labeling provisions in section 502 of the FD&C Act. Products not in compliance with requirements set forth in the applicable statutory and regulatory authorities may be subject to enforcement action by FDA.
For operational efficiency, we are revising the information collection to include burden that may be attributable to activities associated with provisions found in part 830 (21 CFR part 830), currently approved in OMB control number 0910-0720 and established through rulemaking on September 24, 2013 (0910-AG31). The regulations define relevant terms, identify specific data requirements, and incorporate global standards applicable to the use and discontinuation of a UDI. The regulations also provide for FDA accreditation of an issuing agency (21 CFR 830.110) and explain associated information collection activities including the establishment, maintenance, and disclosure of records. Finally, the regulations provide for administration of the Global UDI Database (GUDID) (part 830, subpart E), which specifies data that must be submitted to FDA to be made publicly available. Users of the GUDID will be able to use the device identifier portion of the UDI to query descriptive data about a specific device. The GUDID may be accessed on our website at
In the
Our figures are based on economic analysis from previous Agency rulemaking. We assume most burden associated with activities applicable to satisfying UDI requirements as prescribed by part 830 is accounted for in currently approved information collections. For example, information collection associated with medical device tracking provisions in part 821 is currently approved in OMB control number 0910-0442; information collection associated with premarket approval of medical devices (part 814) is currently approved in OMB control number 0910-0231. Similarly, information collection associated with our quality system regulation (part 820)
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In compliance with the requirement for opportunity for public comment on proposed data collection projects of the Paperwork Reduction Act of 1995, HRSA announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, HRSA seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments on this ICR should be received no later than April 17, 2023.
Submit your comments to
To request more information on the proposed project or to obtain a copy of the data collection plans and draft instruments, email
Although some program forms vary from program to program (see program-specific burden charts below), required forms generally include: a program application, academic and non-academic letters of recommendation, the authorization to release information, and the acceptance/verification of good academic standing report. The NHHSP is not seeking to change or add any forms or documentation.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
National Institutes of Health, HHS.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995 to provide opportunity for public comment on proposed data collection projects, the National Institutes of Health (NIH) will publish periodic summaries of proposed projects to be submitted to the Office of Management and Budget (OMB) for review and approval.
Comments regarding this information collection are best assured of having their full effect if received within 60 days of the date of this publication.
To obtain a copy of the data collection plans and instruments, submit comments in writing, or request more information on the proposed project, contact: Mikia Currie, Chief, Project Clearance Branch (PCB), Office of Policy and Extramural Research Administration (OPERA), Office of the Director (OD), Office of Extramural Research (OER), NIH, 6705 Rockledge Drive, Bethesda, Maryland 20892, MSC 7980, or call non-toll-free number (301) 435-0941 or email your request, including your address to:
Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires: written comments and/or suggestions from the public and affected agencies are invited to address one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the function of the agency, including whether the information will have practical utility; (2) The accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (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 those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
OMB approval is requested for 3 years. There are no costs to respondents other than their time. The total estimated annualized burden hours are 18,584.
National Institutes of Health, HHS.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995 to provide opportunity for public comment on proposed data collection projects, the Center for Scientific Review (CSR) National Institutes of Health will publish periodic summaries of proposed projects to be submitted to the Office of Management and Budget (OMB) for review and approval.
Comments regarding this information collection are best assured of having their full effect if received within 60 days of the date of this publication.
To obtain a copy of the data collection plans and instruments, submit comments in writing, or request more information on the proposed project, contact: Dr. Hope Cummings, Project Clearance Liaison, Center for Scientific Review, NIH, Room 907-M, 6701 Rockledge Drive, Bethesda, Maryland 20892 or call non-toll-free number (301) 402-4706 or Email your request, including your address to:
Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires: written comments and/or suggestions from the public and affected agencies are invited to address one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the function of the agency, including whether the information will have practical utility; (2) The accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (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 those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
The CSR Early Career Reviewer program was developed to identify and train qualified scientists who are early in their scientific careers and who have not had prior CSR review experience. The goals of the program are to expose these early career scientists to the peer review experience so that they become more competitive as applicants as well as to enrich the existing pool of NIH reviewers. Currently, the online application software, the Early Career Reviewer Application and Vetting System, is accessed online by applicants to the Early Career Reviewer Program who provide information such as their name, contact information, a description of their areas of expertise, their study section preferences, and their professional Curriculum Vitae. This Information Collection Request (ICR) is to revise the Early Career Reviewer Application and Vetting System by removing several socio-demographic questions.
OMB approval is requested for 3 years. There are no costs to respondents other than their time. The total
Office of the Assistant Secretary for Housing—Federal Housing Commissioner, Department of Housing and Urban Development, HUD.
Request for information.
Through this Request for Information (RFI), the Federal Housing Administration (FHA) seeks public input regarding barriers to the use of the FHA 203(k) Rehabilitation Mortgage Insurance Program (203(k) Program) by lenders and consumers. Information provided in response to this RFI will allow FHA to identify barriers that limit the origination of 203(k) insured mortgages and lender participation in the program and consider opportunities to enhance the 203(k) Program to support HUD's goal of increasing the available supply of affordable housing in underserved communities.
Comments are requested on or before April 17, 2023. Late-filed comments will be considered to the extent practicable.
Interested persons are invited to submit comments responsive to this RFI. Copies of all comments submitted are available for inspection and downloading at
To receive consideration as public comments, comments must be submitted through one of the two methods specified below. All submissions must refer to the above docket number and title. Commenters are encouraged to identify the number of the specific question or questions to which they are responding. Responses should include the name(s) of the person(s) or organization(s) filing the comment; however, because any responses received by HUD will be publicly available, responses should not include any personally identifiable information or confidential commercial information.
1. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at
HUD strongly encourages commenters to submit their feedback and recommendations electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a response, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through the
2. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0500.
Elissa Saunders, Director, Office of Single Family Program Development, Department of Housing and Urban Development, 451 7th Street SW, Room 9266, Washington, DC 20410-0500; telephone number 202-402-2378 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit:
The Department of Housing and Urban Development (HUD) is committed to the advancement of its mission
The 203(k) Program is used to finance the rehabilitation of an existing one-to-four unit structure
The 203(k) Program is an important tool for community and neighborhood revitalization and the expansion of homeownership opportunities for owner-occupant homebuyers.
There are two types of 203(k) Rehabilitation Mortgages: Standard 203(k) Mortgage and the Limited 203(k) Mortgage. The Standard 203(k) Mortgage Insurance Program may be used for remodeling and major repairs, has a minimum repair cost of $5,000, and requires the use of a 203(k) Consultant. The Limited 203(k) Mortgage Insurance Program is used for minor remodeling and non-structural repairs, has a maximum repair cost of $35,000, except for properties located in Qualified Opportunity Zones
A 203(k) Mortgage may also be used in conjunction with any of FHA's energy efficient programs including the Energy Efficient Mortgages (EEM), Weatherization, and Solar and Wind Technologies programs to finance the costs of energy efficient improvements to an existing Property at the time of purchase or refinance, or to upgrade such energy efficient improvements to exceed the established residential building code for New Construction.
The purpose of this RFI is to solicit information regarding barriers to the origination of mortgages under the FHA 203(k) Program and to obtain feedback on ways FHA could improve its policies and programs to expand the preservation, renovation, and expansion of housing through its rehabilitation mortgage programs and policies.
HUD welcomes all comments relevant to expanding the 203(k) Program. HUD is particularly interested in receiving input from interested parties on the questions below.
1. What information can you provide regarding ways in which the FHA 203(k) Program does or does not meet the needs of borrowers seeking to renovate or rehabilitate their homes?
2. What policies or processes governing the 203(k) Program could be streamlined, modified, or eliminated to enhance your experience with the 203(k) Program?
3. How could FHA increase participation in the 203(k) Program?
4. The Standard 203(k) Program relies on a 203(k) Consultant to determine if a property meets the requirements of the program. What changes would you recommend to FHA's 203(k) Consultant requirements to enhance the program while ensuring a subject property would, after improvements, meet FHA's Minimum Property Requirements (MPR) or Minimum Property Standards (MPS)?
5. What methods would you recommend HUD use to increase stakeholders' awareness about FHA's 203(k) Program?
6. Supporting local authorities' efforts to preserve and expand single-family housing is an important goal of HUD's strategic plan. Please describe how HUD could better support local authorities' efforts to increase the stock of available and affordable single family housing using the 203(k) Program, especially in underserved communities. What role could the program play in improving the supply of available housing in underserved communities?
7. How can the 203(k) Program or other energy efficiency programs (Weatherization, Solar and Wind Technologies, and FHA's EEM) better align with existing federal, state, or local energy efficiency programs?
8. What state or local regulations impact the use of FHA's 203(k) Program?
9. The 203(k) Program parameters limit the types of eligible properties and improvements. Please describe any rehabilitation needs not served or underserved due to the existing program requirements and how could the 203(k) Program be enhanced to address those needs.
10. The 203(k) Program is currently underutilized by nonprofits and governmental entities. What type of changes would encourage more nonprofits and governmental entities to increase their participation in the program?
11. What are the benefits or drawbacks to re-opening the 203(k) Program to other parties that acquire and rehabilitate distressed single-family properties in underserved communities?
12. What technology solutions could improve the availability of, or facilitate, the 203(k) Program?
13. Currently, HUD-approved housing counseling agencies provide advice about FHA-insured loans to potential and current homeowners. Should housing counseling agencies play a more significant role in educating consumers about the FHA 203(k) program?
14. What are the advantages and disadvantages of the 203(k) Program compared to other sources of rehabilitation financing? Are there changes to the program you recommend in light of these?
15. Are there any requirements of the 203(k) program that might restrict utilization by any underserved groups of borrowers and what changes could HUD make to the program to encourage more utilization by these groups?
Office of the Assistant Secretary for Public and Indian Housing (PIH), HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comment from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.
Interested persons are invited to submit comments regarding this proposal.
Written comments and recommendations for the proposed information collection can be sent within 60 days of publication of this notice to
Interested persons are also invited to submit comments regarding this proposal by name and/or OMB Control Number and can be sent to: Colette Pollard, Reports Management Officer, REE, Department of Housing and Urban Development, 451 7th Street SW, Room 4176, Washington, DC 20410-5000; telephone 202-402-3400 (this is not a toll-free number) or email at
Erica Mahoney, Office of Policy, Programs and Legislative Initiatives, PIH, Department of Housing and Urban Development, 451 7th Street SW, (L'Enfant Plaza, Room 2206), Washington, DC 20410; telephone 202-402-4109, (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit
This notice informs the public that HUD is seeking approval from OMB for the information collection described in section A.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(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 those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comment in response to these questions.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. chapter 35.
Fish and Wildlife Service, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the U.S. Fish and Wildlife Service (Service), are proposing to renew an information collection with revisions.
Interested persons are invited to submit comments on or before April 17, 2023.
Send your comments on the information collection request (ICR) by one of the following methods (please reference 1018-0078 in the subject line of your comments):
•
•
•
Madonna L. Baucum, Service Information Collection Clearance Officer, by email at
In accordance with the Paperwork Reduction Act (PRA, 44 U.S.C. 3501
As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this 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) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
• Human beings;
• The interests of agriculture, horticulture, and forestry; or
• Wildlife or the wildlife resources of the United States.
Implementation and enforcement of the Lacey Act are the responsibility of
We use three forms to collect this Title 50 Certifier application information:
• FWS Form 3-2273 (Title 50 Certifying Official Form)—New applicants and those seeking recertification as a title 50 certifying official provide information so that we can assess their qualifications.
• FWS Form 3-2274 (Title 50 Certification Form)—Certifying officials use this form to affirm the health status of the fish or fish reproductive products to be imported.
• FWS Form 3-2275 (Title 50 Importation Request Form)—We use the information on this form to track and control importations and to ensure the safety of shipments.
With this renewal, we propose to modify Forms 3-2274 and 3-2275 to add fields to collect email addresses and contact numbers with each submission. We do not plan to revise Form 3-2273, which already collects this information. We also plan to begin publishing, with OMB approval, the results of this information collection for Form 3-2273 on a publicly accessible, Service-managed web page to inform importers of Certified Signing Officials by country of origin.
The public may request copies of any form contained in this information collection by sending a request to the Service Information Collection Clearance Officer (see
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Fish and Wildlife Service, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the U.S. Fish and Wildlife Service (Service), are proposing a new information collection in use without Office of Management and Budget (OMB) approval.
Interested persons are invited to submit comments on or before April 17, 2023.
Send your comments on the information collection request (ICR) by one of the following methods (please reference 1018-CITES in the subject line of your comments):
•
•
•
Madonna L. Baucum, Service Information Collection Clearance Officer, by email at
In accordance with the Paperwork Reduction Act (PRA, 44 U.S.C. 3501
As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this 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) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
As one of the largest and oldest environmental treaties in the world, CITES is a key conservation tool for the protection of 35,000 plant and animal species. Currently 183 countries have agreed to implement the Convention. However, realizing the full conservation impact of CITES remains challenging and is highly dependent on each country's financial and technical capacity. Even when a Party has the political will and desire to implement CITES, it may not have the resources, systems, or personnel to effectively follow the Conventions' mandate, such as evaluating permit applications or enforcing laws. This creates inequity between countries in how the Convention is implemented, with serious downstream impacts such as the degradation of wild populations and ecosystems, often resulting in negative implications for communities living among wildlife.
To help develop the technical expertise necessary to effectively implement CITES, the International University of Andalucía (UNIA) has offered a unique master's degree program entitled “The Management and Conservation of Species in Trade: The International Framework” (also known as the “CITES Master's Course”). The program, which was established in 1997, provides high-quality training focusing on the scientific foundations, techniques and mechanisms of CITES implementation. Approximately 400 students have graduated from the program, many becoming leaders in CITES and global policy.
Recognizing the important potential offered through UNIA's CITES Master's Course, the Service provides scholarships to support wildlife professionals interested in furthering their CITES expertise by partaking in the CITES Master's Course, with a focus on countries most vulnerable to illegal and unsustainable wildlife trade. The competitive scholarships cover costs for tuition, lodging, and supplies, provide an opportunity for the scholars to participate in the CITES Conference of the Parties, and offer technical and financial research support.
The Service collaborates with the Department of Interior's International Technical Assistance Program (DOI-ITAP) through an interagency agreement to manage the numerous logistics associated with the scholarships. Scholarships support cohorts of students from Latin America, the Caribbean, and Central and East Africa. The Service and DOI-ITAP staff solicit recommendations from relevant CITES authorities, NGOs, and U.S. Government agencies working in those countries to select top candidates for the scholarships. Recommendations are provided through direct communication with project leads, most often via email communication. Project leads review application packages submitted by candidates for the program.
We choose candidates based on certain criteria such as the quality of their application, their present or future contribution to their country's CITES work, and their demonstration of a lasting commitment to wildlife conservation and CITES implementation. Selected candidates then follow a separate application process for acceptance into the International University of Andalucía CITES Master's Course. Although scholarship activities aid the candidates to assemble and submit application materials the University, the U.S. Government does not influence who is accepted into the graduate program.
We ask the successful scholars accepted into the master's program to assist in project monitoring and evaluation by responding to periodic assessment surveys throughout the
Course enrollees are asked to complete pre- and post-training assessments which collects the following information:
• Trainee information, to include:
• Trainee's assessment of training—Questions provide participants an opportunity to offer feedback on their training to help inform how we can improve project activities and goals.
• Potential effect of training on the trainee's job—Questions provide an opportunity for participants to share how the technical training provided through the scholarships may open professional opportunities.
• Knowledge of biodiversity and CITES—Questions are designed to measure the impact of training by quantifying changes in each participant's knowledge of biodiversity and CITES between pre- and post-training assessments.
• Capacity to apply knowledge on biodiversity and CITES—Questions are designed to measure the impact in training by quantifying changes in knowledge between pre- and post-training assessments.
The Service will use the information collected to ensure project activities are meeting high project standards and are achieving intended outcomes. In addition, information collected for project outreach and communication will be used to inform the public on project outcomes and to garner interest in future scholarship opportunities.
The public may request copies of the application form contained in this information collection by sending a request to the Service Information Collection Clearance Officer in
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Fish and Wildlife Service, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the U.S. Fish and Wildlife Service (Service), are proposing a new information collection in use without Office of Management and Budget (OMB) approval.
Interested persons are invited to submit comments on or before March 16, 2023.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Madonna L. Baucum, Service Information Collection Clearance Officer, by email at
In accordance with the Paperwork Reduction Act (PRA, 44 U.S.C. 3501
On August 12, 2022, we published in the
As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this 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) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
• National Wildlife Refuge System Administration Act (16 U.S.C. 668dd and 668ee, as amended);
• American Indian Religious Freedom Act (Public Law 95-341);
• Indian Self-Determination and Education Assistance Act (Public Law 93-638, as amended);
• Surplus Range Animals (50 CFR 30.1);
• Disposition of Surplus Range Animals (50 CFR 30.2);
• Native American Policy of the U.S. Fish and Wildlife Service (510 FW 1);
• Fenced Animal Management policy (701 FW 8); and
• Collections, Donations, and Disposals policy (701 FW 5).
In 2020, the U.S. Department of the Interior (DOI) Bison Working Group published the
The
Periodic reduction in the size of Service bison herds is required to remain within the ecological carrying capacity of Service lands. Live bison capture and removal assist in the restoration of bison to Tribal lands, support the efforts of States and other conservation organizations, and ensure that the ecological needs of other species are met on refuges of limited size. To support maximum conservation of genetic diversity within and across Service herds, selection of young bison available for donation is coordinated across all refuges. From the surplus bison made available for donation from refuges, requests will be prioritized for bison restoration and conservation purposes.
We propose Form 3-2555, “Bison Donations Request Form,” to request surplus bison. Respondents will generally be from Tribal governments and intertribal organizations, although we do expect to receive a small number of requests from States and private sector organizations (nonprofit and educational/research organizations). The request form provides details governing the protocol and collects the following information:
• Name of requesting Tribe, intertribal organization, State, or private sector organization.
• Documentation that the proposed project or program meets the definition of a conservation herd.
• Demonstration of the educational contribution of the donation to increasing public knowledge and appreciation of the wildlife values of bison (for educational and research organizations only).
• Total number (or percentage of total donation request) of bison and purpose of request:
• Signature of requesting Tribe, intertribal organization, State, or private sector organization official.
In addition to completion of Form 3-2555, recipients of donated bison must inform the Service of the destination State for donated bison no fewer than 30 days prior to a scheduled bison capture operation, to allow the Service time to meet interstate transport regulatory testing requirements. Recipients of donated bison must also inform the Service of the destination physical address for donated bison no fewer than 10 days prior to scheduled bison loadout, to facilitate timely completion of required interstate veterinary permit applications and veterinary inspection certificates.
The public may download a copy of the proposed Form 3-2555 from the ICR on at
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
National Invasive Species Council, Interior.
Notice of public meeting.
Pursuant to the provisions of the Federal Advisory Committee Act, notice is hereby given that the Invasive Species Advisory Committee (ISAC) will meet as indicated below.
The Invasive Species Advisory Committee will convene by Zoom virtual platform on Monday, March 6, 2023, 1:00 p.m.-3:00 p.m.; Tuesday, March 7, 2023, 1:00 p.m.-5:00 p.m.; and Wednesday, March 8, 2023, 1:00 p.m.-5:00 p.m.
The final agenda will be available on the National Invasive Species Council (NISC) website at least 48 hours in advance of the meeting at
For information concerning attending the ISAC meeting, submitting written comments to the ISAC, or requesting to address the ISAC, contact Kelsey Brantley, NISC Operations Director and ISAC Coordinator, National Invasive Species Council Staff, telephone (202) 577-7012; fax: (202) 208-4118, or email
Individuals in the United States who are deaf, deafblind, hard of hearing, or have a speech disability may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications relay services. Individuals outside the United States should use the relay services offered within their country to make international calls to the point-of-contact in the United States.
The purpose of the ISAC is to provide advice to the NISC, as authorized by Executive Orders 13112 and 13751, on a broad array of issues related to preventing the introduction of invasive species and providing for their control and minimizing the economic, ecological, and human health impacts that invasive species cause. NISC is co-chaired by the Secretary of the Interior, the Secretary of Agriculture, and the Secretary of Commerce. The duty of NISC is to provide national leadership regarding invasive species issues.
The purpose of the virtual meetings is to convene the full ISAC to orient new members to NISC and their role in ISAC, receive updates from NISC member agencies regarding ongoing priority activities; and start deliberations on select issues warranting ISAC advice to NISC.
The final agenda, records, and other reference documents for discussion during the meeting will be available for public viewing as they become available, but no later than 48 hours prior to the start of the meeting at
Interested members of the public may provide either oral or written comments to ISAC for consideration. Oral comments may be given during designated times as specified in the meeting agenda. Written comments must be submitted by email to Kelsey Brantley (see
Depending on the number of people who want to comment during the time available, the length of individual oral comments may be limited. Requests to address the ISAC during the meeting will be accommodated in the order the requests are received. Individuals who wish to expand upon their oral statements, or those who had wished to speak but could not be accommodated on the agenda, may submit written comments to Kelsey Brantley (see
All comments will be made part of the public record and will be electronically distributed to all ISAC members. Detailed minutes of the meeting will be available for public inspection within 90 days of the meeting.
Bureau of Land Management, Interior.
Notice of realty action.
The Bureau of Land Management (BLM), Humboldt River Field Office, has examined certain public lands in Humboldt County,
Submit written comments regarding this R&PP application and proposed classification on or before March 31, 2023. Comments may be mailed, or hand delivered to the BLM office address below, or faxed to (775) 623-1740. The BLM will not consider comments received via telephone calls or email.
Mail written comments to: Kathleen Rehberg, 5100 East Winnemucca Boulevard, Winnemucca, NV 89445. Detailed information including but not limited to, a proposed development and management plan and documentation relating to compliance with applicable environmental and cultural resource laws, is available for review during business hours, (7:30 a.m. to 4:30 p.m. Mountain Time), Monday through Friday, except during Federal holidays, at the Humboldt River Field Office, 5100 East Winnemucca Boulevard, Winnemucca, NV 89445 or online at
Jenifer Barnett, Realty Specialist, Humboldt River Field Office, telephone at 775-623-1500, email at
Humboldt County currently operates a public shooting range that was patented pursuant to the Act of September 19, 1964 (43 U.S.C. 1421-1427) and recently applied for approximately 240 acres of adjoining public lands to expand the operation. The expansion would add a rifle range up to 1,000-yards, a buffer area, and an extended safety zone. The R&PP patent will include provisions consistent with 43 U.S.C. 869-2(b)(6), 43 CFR 2743.2-1(e), and BLM IM 2008-074, all of which require that under no circumstances will the land revert to the U.S. if it has “been used for solid waste disposal or for any other purpose . . . that may result in the disposal, placement, or release of any hazardous substance.”
The lands examined and identified as suitable for conveyance under the R&PP Act are legally described as:
The area described contains 240 acres, according to the official plats of the surveys on file with the BLM.
Humboldt County is a political subdivision of the State of Nevada, and is, therefore, a qualified applicant under the R&PP Act. Humboldt County has not applied for more than the 6,400-acre limitation for recreation uses in a year. Humboldt County has submitted a statement describing the proposed use of the land in compliance with the regulations at 43 CFR 2741.4(b).
The lands are not needed for any Federal purposes. Conveyance of the lands for recreational or public purposes use is consistent (or in conformance) with the Winnemucca District Resource Management Plan (2015), as amended, and would be in the national interest.
All interested parties will receive a copy of this notice once it is published in the
Upon publication of this notice in the
The conveyance of the land, when issued, will be subject to the following terms, conditions, and reservations:
1. A right-of-way thereon for ditches and canals constructed by the authority of the United States Act of August 30, 1890 (43 U.S.C. 945).
2. Provisions of the R&PP Act and to all applicable regulations of the Secretary of the Interior, including 43 U.S.C. 869-2(b)(6), 43 CFR 2743.2-1(e), and BLM IM 2008-074, all of which require that under no circumstances will the land revert to the U.S. if it has “been used for solid waste disposal or for any other purpose . . . that may result in the disposal, placement, or release of any hazardous substance.”
3. A limited reverter clause that may cause the land to revert to the United States if, at the end of 5 years after the date of conveyance, the land is not being used in accordance with the approved plan of development.
4. All mineral deposits in the land so patented, and the right to prospect for, mine, and remove such deposits from the same under applicable law and regulations as established by the Secretary of the Interior are reserved to the United States, together with all necessary access and exit rights.
5. Lease or conveyance of the parcel is subject to valid existing rights.
6. An appropriate indemnification clause protecting the United States from claims arising out of the lessee's/patentee's use, occupancy, or occupations on the leased/patented lands.
7. Any other reservations that the authorized officer determines appropriate to ensure public access and proper management of Federal lands and interests therein.
Interested persons may submit comments involving the suitability of the land for development of a shooting range. Comments on the classification are restricted to whether the land is physically suited for the proposal, whether the use will maximize the future use or uses of the land, whether the use is consistent with local planning and zoning, or if the use is consistent with State and Federal programs.
Interested persons may submit comments regarding the specific use and management proposed in the application and plan of development, whether the BLM followed proper administrative procedures in reaching the decision, or any other factor not directly related to the suitability of the lands for a shooting range.
Any adverse comments will be reviewed as protests by the BLM Nevada State Director who may sustain, vacate, or modify this realty action. In the absence of any adverse comments, the classification will become effective on April 17, 2023. The lands will not be offered for conveyance until after the classification becomes effective.
Before including your address, phone number, email address, or other personal identifying information in your comment, be advised that your entire comment—including your personal identifying information—may be made publicly available at any time. While
On the basis of the record
The Commission instituted these reviews on February 1, 2022 (87 FR 5503) and determined on May 9, 2022, that it would conduct full reviews (87 FR 29878, May 17, 2022). Notice of the scheduling of the Commission's reviews and of a public hearing to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the
The Commission made these determinations pursuant to section 751(c) of the Act (19 U.S.C. 1675(c)). It completed and filed its determinations in these reviews on February 8, 2022. The views of the Commission are contained in USITC Publication 5402 (February 2023), entitled
By order of the Commission.
10:00 a.m., February 16, 2023.
Board Room, 7th Floor, Room 7B, 1775 Duke Street (All visitors must use Diagonal Road Entrance), Alexandria, VA 22314-3428.
This meeting will be open to the public.
1. Federal Credit Union Loan Interest Rate Ceiling.
2. NCUA Rules and Regulations, Chartering and Field of Membership.
3. NCUA Rules and Regulations, Cyber Incident Notification Requirements for Federally Insured Credit Unions.
Melane Conyers-Ausbrooks, Secretary of the Board, Telephone: 703-518-6304.
National Science Foundation.
Submission for OMB review; comment request.
The National Science Foundation (NSF) has submitted the following information collection requirement to OMB for review and clearance under the Paperwork Reduction Act of 1995. This is the second notice for public comment; the first was published in the
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Suzanne H. Plimpton, Reports Clearance Officer, National Science Foundation, 2415 Eisenhower Avenue, Alexandria, Virginia 22314; telephone (703) 292-7556; or send email to
Copies of the submission may be obtained by calling 703-292-7556. NSF may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number, and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
NSF is requesting OMB approval for the NSF to collect information from past and present participants and partners in NSF partnership programs. The information collection will enable the Evaluation and Assessment Capability (EAC) Section within NSF to garner quantitative and qualitative information that will be used to inform programmatic improvements related to partnership models at NSF including partnerships between NSF and other entities and funding opportunities that require or encourage partnerships between grantees. This information collection, which entails collecting information from relevant NSF grantees and partners, is in accordance with the Agency's commitment to improving service delivery as well as the Agency's strategic goal to “advance the capability of the Nation to meet current and future challenges.”
Please submit one copy of your comments by only one method. All submissions received must include the agency name and collection name identified above for this information collection. Commenters are strongly encouraged to transmit their comments electronically via email. Comments, including any personal information provided become a matter of public record. They will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request.
Nuclear Regulatory Commission.
Renewal of existing information collection; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) invites public comment on the renewal of Office of Management and Budget (OMB) approval for an existing collection of information. The information collection is entitled, NRC Form 212, “Qualifications Investigation Professional, Technical, and Administrative Positions.”
Submit comments by April 17, 2023. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal rulemaking website:
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
David C. Cullison, Office of the Chief Information Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-2084; email:
Please refer to Docket ID NRC-2022-0133 when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. All comment submissions are posted at
If you are requesting or aggregating comments from other persons for submission to the OMB, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that comment submissions are not routinely edited to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the NRC is requesting public comment on its intention to request the OMB's approval for the information collection summarized below.
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The NRC is seeking comments that address the following questions:
1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility? Please explain your answer.
2. Is the estimate of the burden of the information collection accurate? Please explain your answer.
3. Is there a way to enhance the quality, utility, and clarity of the information to be collected?
4. How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology?
For the Nuclear Regulatory Commission.
In accordance with the purposes of Sections 29 and 182b of the Atomic Energy Act (42 U.S.C. 2039, 2232(b)), the Advisory Committee on Reactor Safeguards (ACRS) will hold meetings on March 2-3, 2023. The Committee will be conducting meetings that will include some Members being physically present at the NRC while other Members participate remotely. Interested members of the public are encouraged to participate remotely in any open sessions via MS Teams or via phone at 301-576-2978, passcode 112492970#. A more detailed agenda including the MSTeams link may be found at the ACRS public website at
Procedures for the conduct of and participation in ACRS meetings were published in the
An electronic copy of each presentation should be emailed to the cognizant ACRS staff at least one day before the meeting.
In accordance with Subsection 10(d) of Public Law 92-463 and 5 U.S.C. 552b(c), certain portions of this meeting may be closed, as specifically noted above. Use of still, motion picture, and television cameras during the meeting may be limited to selected portions of the meeting as determined by the Chairman. Electronic recordings will be permitted only during the open portions of the meeting.
ACRS meeting agendas, meeting transcripts, and letter reports are available through the NRC Public Document Room (PDR) at
Pursuant to the Commission's regulations,
This proceeding involves an application seeking a twenty-year license renewal of Facility Operating License Nos. NPF-87 and NPF-89, which currently authorize Vistra Operations Company LLC to operate Comanche Peak Nuclear Power Plant, Units 1 and 2, until, respectively, February 8, 2030, and February 2, 2033. In response to a notice published in the
The Board is comprised of the following Administrative Judges:
All correspondence, documents, and other materials shall be filed in accordance with the NRC E-Filing rule.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend Exchange Rule 531 to provide for the new “Liquidity Taker Event Report—Resting Simple Orders”.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set
The Exchange proposes to amend Exchange Rule 531 to provide for the new “Liquidity Taker Event Report—Resting Simple Orders” (the “Report”).
Like for the existing reports, the Exchange believes the additional data points from the matching engine outlined below for the proposed Report may also help Members gain a better understanding about their interactions with the Exchange. The Exchange believes the proposed Report will provide Members with an opportunity to learn more about better opportunities to access liquidity and receive better execution rates. The proposed Report will increase transparency and democratize information so that all firms that subscribe to the Report have access to the same information on an equal basis, even for firms that do not have the appropriate resources to generate a similar report regarding interactions with the Exchange. Like the existing reports, none of the components of the proposed Report include real-time market data.
Members generally would use a liquidity accessing order if there is a high probability that it will execute against an order resting on the Simple Order Book. Like the existing reports, the proposed Report would identify by how much time an order that may have been marketable missed an execution but would focus on a later timeframe than the existing reports. The proposed Report will provide greater visibility into the missed trading execution, which will allow Members to optimize their models and trading patterns to yield better execution results.
Like the existing reports, the proposed Report will be a Member-specific report and will help Members to better understand by how much time a particular order missed executing against a specific resting order, thus allowing that Member to determine whether it wants to invest in the necessary resources and technology to mitigate missed executions against certain resting orders on the Simple Order Book. Like the existing reports, the Exchange proposes to provide the Report on a T+1 basis. As further described below, the proposed Report will be specific and tailored to the Member that is subscribed to the Report and any data included in the Report that relates to a Member other than the Member receiving the Report will be anonymized.
The Exchange proposes to provide the proposed Report in response to additional Member demand for data concerning the timeliness of their incoming orders and executions against certain resting orders that have been resting on the Simple Order Book for at least 200 microseconds and within 200 microseconds of receipt of the first attempt to execute against the resting order after the initial 200 microsecond time period has expired. Certain Members that subscribe to the existing reports have requested the same information as the Simple Order report but for the later timeframe described herein so that they can better understand the timeliness of their incoming orders and efficacy of their attempts to execute against resting liquidity on the Exchange's Simple Order Book. The purpose of the proposed Report is to provide Members the necessary data in a standardized format on a T+1 basis to those that subscribe to the Report on an equal basis.
Proposed Exchange Rule 531(c) would provide that the Report is a daily report that provides a Member (“Recipient Member”) with its liquidity response time details for executions of an order resting on the Book, where that Recipient Member attempted to execute against such resting order within an extended timeframe that meets certain criteria described below.
The content of the proposed Report is basically identical to that of the existing Liquidity Taker Event Report for Simple Orders described under Exchange Rule 531(a) with two differences. The first difference is the timeframe of the proposed Report mentioned above and described in more detail below. The second difference is that, unlike the existing Liquidity Taker Event Report for Simple Orders, the proposed Report would not include the time difference between the time the resting order was received by the Exchange and the time the first response that executes against the resting order was received by the Exchange. Each of these differences are described below. All other aspects of the proposed Report are identical to the existing Liquidity Taker Event Report for Simple Orders described under Exchange Rule 531(a).
Like current paragraph (a)(1) of Exchange Rule 531 for the existing Liquidity Taker Event Report for Simple Orders, proposed paragraph (c)(1) of Rule 531 would describe the content of the proposed Report and delineate which information would be provided regarding the resting order,
Exchange Rule 531(a)(1)(ii)(D) provides that the existing Liquidity Taker Event Report for Simple Orders also includes the time difference between the time the resting order was received by the Exchange and the time the first response that executes against the resting order was received by the Exchange. The proposed Report would not include the same information because that timeframe could be for an extended period of time since the proposed Report focuses on orders that have been resting on the Simple Order Book for longer than 200 microseconds and, therefore, the Exchange believes is less likely to be valuable to the Recipient Member.
The timeframe covered by the proposed Report is the primary difference between it and the existing Liquidity Taker Event Report for Simple Orders. The existing Liquidity Taker Event Report for Simple Orders provides data for executions and contra-side responses that occurred within 200 microseconds of the time the resting order was received by the Exchange. Meanwhile, the proposed Report would include the same data as the Liquidity Taker Event Report for Simple Orders but would focus on executions and contra-side responses that occurred after 200 microseconds of the time the resting order was received by the Exchange, and within 200 microseconds of receipt of any Member's first attempt to execute against the resting order after the initial 200 microsecond time period has expired. More specifically, the resting order must rest on the Simple Order Book for at least 200 microseconds and once that initial 200 microsecond period has passed, a Member must then submits an order to attempt to execute against that resting order. This event starts a second 200 microsecond period within which the proposed Report would include data on executions and contra-side responses submitted by the Recipient Member to execute against that resting order.
For example, Member A submits an order that is posted to the Simple Order Book. 200 microseconds passes and Member A's order remains posted to the Simple Order Book. Then Member B enters a marketable order to execute against Member A's resting order, starting the second 200 microsecond window. Within this next 200 microsecond window, Member C sends a marketable order to execute against Member A's resting Order. Because Member B's order is received by the Exchange before Member C's order, Member B's order executes against
The above timeframe would be codified under proposed paragraph (c)(2) of Rule 531 which would provide that the proposed Report would include the data set forth under Rule 531(c)(1) described above for executions and contra-side responses that occurred (i) after 200 microseconds of the time the resting order was received by the Exchange and (ii) within 200 microseconds of receipt of the first attempt to execute against the resting order after the initial 200 microsecond time period under (c)(2)(i) of this paragraph has expired.
Like current paragraph (a)(3) of Exchange Rule 531 for the existing Liquidity Taker Event Report for Simple Orders, proposed paragraph (c)(3) of Exchange Rule 531 would provide that the proposed Report will only include trading data related to the Recipient Member and, subject to the proposed paragraph (4) of Rule 531(c) described below, will not include any other Member's trading data other than that listed in paragraphs (1)(i) and (ii) of Exchange Rule 531(c) described above.
Like current paragraph (a)(4) of Exchange Rule 531 for the existing Liquidity Taker Event Report for Simple Orders, proposed paragraph (c)(4) of Rule 531 would specify that the proposed Report will contain historical data from the prior trading day and will be available after the end of the trading day, generally on a T+1 basis.
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The timeframe covered by the proposed Report is the primary difference between it and the existing Liquidity Taker Event Report for Simple Orders. However, this difference only pertains to the timeframe covered by each report, with each report containing the exact same data fields with one exception described here. The existing Liquidity Taker Event Report for Simple Orders provides data for executions and contra-side responses that occurred within 200 microseconds of the time the resting order was received by the Exchange. Meanwhile, the proposed Report would basically include the same data as the Liquidity Taker Event Report for Simple Orders but would focus on executions and contra-side responses that occurred after 200 microseconds of the time the resting order was received by the Exchange and one additional difference. The one difference is that unlike the existing Liquidity Taker Event Report for Simple Orders, the proposed Report would not include the time difference between the time the resting order and first response that executes against the resting order are received by the Exchange. Each report focuses on 200 microsecond windows with the existing Report's window starting at the time of receipt of the resting order and the proposed Report's window starting with the first attempt to execute against the resting order after the order was resting on the Simple Order Book for at least 200 microseconds.
The Exchange believes the proposed Report will serve to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general protect investors and the public interest because it will benefit investors by facilitating their prompt access to the value added information that is included in the proposed Report. The proposed Report will allow Members to access information regarding their trading activity that they may utilize to evaluate their own trading behavior and order interactions.
Like the existing Liquidity Taker Event Report for Simple Orders, the proposed Report is designed for Members that are interested in gaining insight into latency in connection with orders that failed to execute against an order resting on the Exchange's Simple Order Book by providing those Members data to analyze by how much time their order may have missed an execution against a contra-side order resting on the Book. The Exchange believes that providing this optional latency data to interested Members is consistent with facilitating transactions in securities, removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest because it provides greater visibility into the latency of Members' incoming orders. Members may use this data to optimize their models and trading patterns in an effort to yield better execution results by calculating by how much time their order may have missed an execution.
Like the existing Liquidity Taker Event Report for Simple Orders, the proposed Report is designed to offer latency information in a systematized way and standardized format to any Member that chooses to subscribe to the proposed Report. As a result, the proposal will make latency information for liquidity-seeking orders available in an equalized manner and will increase transparency, particularly for Recipient Members that may not have the expertise to generate the same information on their own. The proposed Report may better enable Recipient Members to increase the fill rates for their liquidity-seeking orders. At the same time, as is also discussed above, the Report is designed to prevent a Recipient Member from learning other Members' sensitive trading information. The Report would not be a real-time market data product, as it would provide only historical trading data for the previous trading day, generally on a T+1 basis. In addition, the data in the Report regarding incoming orders that failed to execute would be specific to the Recipient Member's orders, and other information in the proposed Report regarding resting orders and executions would be anonymized if it relates to a Member other than the Recipient Member.
The proposed Report generally contains three buckets of information,
Specifically, the first bucket of information contained in the Report for the resting order includes the time the resting order was received by the Exchange, the symbol, unique reference number assigned at the time of receipt, side (buy or sell), and the displayed price and size of the resting order. Further, the symbol, origin type, side (buy or sell), and displayed price and size are also available either via OPRA or the Exchange's proprietary data feeds. The first bucket of information also indicates whether the Recipient Member is an Affiliate of the Member that entered the resting order. This data field will not indicate the identity of the Member that entered the resting order and would simply allow the Recipient Member to better understand the scenarios in which it may execute against the orders of its Affiliates.
The second bucket of information contained in the Report regards the execution of the resting order and includes the PBBO and ABBO at the time of execution. These data points are also available either via OPRA or the Exchange's proprietary data feeds. The second bucket of information will also indicate whether the response was entered by the Recipient Member. This data point is simply provided as a convenience. If not entered by the Recipient Member, this data point will be left blank so as not to include any identifying information about other Member activity. The second bucket of information also includes the size, as well as the time and type of first response that executes against the resting order. These data points would assist the Recipient Member in analyzing by how much time their order may have missed an execution against a contra-side order resting on the Book. Unlike the existing Liquidity Taker Event Report for Simple Orders, the proposed Report would not include the time difference between the time the resting order and first response that executes against the resting order are received by the Exchange. The proposed Report would not include this data point because the Exchange understands Recipient Members may not find it useful due to the fact that the proposed Report focuses on orders that have been resting on the Simple Order Book for longer than 200 microseconds. Therefore, the Exchange does not propose to include this data point as a means to streamline the proposed Report and remove unnecessary data.
The third bucket of information is about the Recipient Member's response(s) and the time their response(s) is received by the Exchange. This includes the time difference between the time the first response that executes against the resting order was received by the Exchange and the time of each response sent by the Recipient Member, regardless of whether it executed or not. As above, this data point would assist the Recipient Member in analyzing by how much time their order may have missed an execution against a contra-side order resting on the Book. This bucket would also include the size and type of each response submitted by the Recipient Member, the Recipient Member identifier, and a response reference number which is selected by the Recipient Member. Each of these data points are unique to the Recipient Member and should already be known by Recipient Member even if not included in the Report.
Like the existing Liquidity Taker Event Report for Simple Orders, the Exchange proposes to provide the Report on a voluntary basis and no Member will be required to subscribe to the Report. The Exchange notes that there is no rule or regulation that requires the Exchange to produce, or that a Member elect to receive, the Report. It is entirely a business decision of each Member to subscribe to the Report. The Exchange proposes to offer the Report as a convenience to Members to provide them with additional information regarding trading activity on the Exchange on a delayed basis after the close of regular trading hours. A Member that chooses to subscribe to the Report may discontinue receiving the Report at any time if that Member determines that the information contained in the Report is no longer useful.
In summary, the proposed Report will help to protect a free and open market by providing additional data (offered on an optional basis) to the marketplace and by providing investors with greater choices.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The Exchange believes that the proposed Report will enhance competition
In this instance, the proposed rule change to offer the optional Report is in response to Member interest and requests for such information, including from some Members that subscribe to the existing Liquidity Taker Event Report for Simple Orders. The Exchange does not believe the proposed Report will have an inappropriate burden on intra-market competition between Recipient Members and other Members who do not receive the Report. As discussed above, the first two buckets of information included in the Report contain information about the resting order and the execution of the resting order, both of which are generally available to Members that choose not to receive the Report from other public sources, such as OPRA and the Exchange's proprietary data feeds. The third bucket of information is about the Recipient Member's response and the time their response is received by the Exchange, information which the Recipient Member would be able to obtain without receiving the Report. Additionally, some Members may already be able to derive a substantial amount of the same data that is provided by some of the components based on their own executions and algorithms.
In sum, if the proposed Report is unattractive to Members, Members will opt not to receive it. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Members or competing order execution venues to maintain their competitive standing in the financial markets.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PEARL-2023-01. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) proposes to amend fees for the Cboe Silexx platform. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend fees for the Cboe Silexx platform (“Cboe Silexx”), effective February 1, 2023. By way of background, the Silexx platform consists of a “front-end” order entry and management trading platform (also referred to as the “Silexx terminal”) for listed stocks and options that supports both simple and complex orders, and a “back-end” platform which provides a connection to the infrastructure network. From the Silexx platform (
In 2020, the Exchange made a new version of the Silexx platform available, Cboe Silexx, which supports the trading of non-FLEX Options
The Exchange has established a fee structure for Cboe Silexx, based on Login IDs and set forth in the Silexx Fees Schedule.
The Exchange proposes to amend the fees for Cboe Silexx and update the Silexx Fees Schedule to reflect the new fees. Particularly, the Exchange proposes to adopt a monthly fee of $399 per Login ID for the first 8 Login IDs (
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange believes that its proposed fees are reasonable and appropriate, because even as amended, they remain competitive with similar products available throughout the market, including other available platform versions on Silexx and a similar front-end order entry system offered by Nasdaq ISE (
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change will not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it relates to an optional platform. The proposed fee amendments will apply to similarly situated participants uniformly, as described in detail above. As discussed, the use of the platform continues to be completely voluntary and market participants will continue to have the flexibility to use any entry and management tool that is proprietary or from third-party vendors, and/or market participants may choose any executing brokers to enter their orders. The Cboe Silexx platform is not an exclusive means of trading, and if market participants believe that other products, vendors, front-end builds, etc. available in the marketplace are more beneficial than the Cboe Silexx platform, they may simply use those
The Exchange does not believe that the proposed rule changes will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed change applies only to Cboe Options. Additionally, Cboe Silexx is similar to types of products that are widely available throughout the industry, including from some exchanges, at similar prices. To the extent that the proposed changes make Cboe Options a more attractive marketplace for market participants at other exchanges, such market participants are welcome to become Cboe Options market participants.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend Exchange Rule 531 to provide for the new “Liquidity Taker Event Report—Resting Simple Orders”.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Exchange Rule 531 to provide for the new “Liquidity Taker Event Report—Resting Simple Orders” (the “Report”).
Like for the existing reports, the Exchange believes the additional data points from the matching engine outlined below for the proposed Report may also help Members gain a better understanding about their interactions with the Exchange. The Exchange believes the proposed Report will provide Members with an opportunity to learn more about better opportunities to access liquidity and receive better execution rates. The proposed Report will increase transparency and democratize information so that all firms that subscribe to the Report have access to the same information on an equal basis, even for firms that do not have the appropriate resources to generate a similar report regarding interactions with the Exchange. Like the existing reports, none of the components of the proposed Report include real-time market data.
Members generally would use a liquidity accessing order if there is a high probability that it will execute against an order resting on the Simple Order Book. Like the existing reports, the proposed Report would identify by how much time an order that may have been marketable missed an execution but would focus on a later timeframe than the existing reports. The proposed Report will provide greater visibility into the missed trading execution, which will allow Members to optimize their models and trading patterns to yield better execution results.
Like the existing reports, the proposed Report will be a Member-specific report and will help Members to better understand by how much time a particular order missed executing against a specific resting order, thus allowing that Member to determine whether it wants to invest in the necessary resources and technology to mitigate missed executions against certain resting orders on the Simple Order Book. Like the existing reports, the Exchange proposes to provide the Report on a T+1 basis. As further described below, the proposed Report will be specific and tailored to the Member that is subscribed to the Report and any data included in the Report that relates to a Member other than the Member receiving the Report will be anonymized.
The Exchange proposes to provide the proposed Report in response to additional Member demand for data concerning the timeliness of their incoming orders and executions against certain resting orders that have been resting on the Simple Order Book for at least 200 microseconds and within 200 microseconds of receipt of the first attempt to execute against the resting order after the initial 200 microsecond time period has expired. Certain Members that subscribe to the existing reports have requested the same information as the Simple Order report but for the later timeframe described herein so that they can better understand the timeliness of their incoming orders and efficacy of their attempts to execute against resting liquidity on the Exchange's Simple Order Book. The purpose of the proposed Report is to provide Members the necessary data in a standardized format on a T+1 basis to those that subscribe to the Report on an equal basis.
Proposed Exchange Rule 531(c) would provide that the Report is a daily report that provides a Member (“Recipient Member”) with its liquidity response time details for executions of an order resting on the Book, where that Recipient Member attempted to execute against such resting order within an extended timeframe that meets certain criteria described below.
The content of the proposed Report is basically identical to that of the existing Liquidity Taker Event Report for Simple Orders described under Exchange Rule 531(a) with two differences. The first difference is the timeframe of the proposed Report mentioned above and described in more detail below. The second difference is that, unlike the existing Liquidity Taker Event Report for Simple Orders, the proposed Report would not include the time difference between the time the resting order was received by the Exchange and the time the first response that executes against the resting order was received by the Exchange. Each of these differences are described below. All other aspects of the proposed Report are identical to the existing Liquidity Taker Event Report for Simple Orders described under Exchange Rule 531(a).
Like current paragraph (a)(1) of Exchange Rule 531 for the existing Liquidity Taker Event Report for Simple Orders, proposed paragraph (c)(1) of Rule 531 would describe the content of the proposed Report and delineate which information would be provided regarding the resting order,
Exchange Rule 531(a)(1)(ii)(D) provides that the existing Liquidity Taker Event Report for Simple Orders also includes the time difference between the time the resting order was received by the Exchange and the time the first response that executes against the resting order was received by the Exchange. The proposed Report would not include the same information because that timeframe could be for an extended period of time since the proposed Report focuses on orders that have been resting on the Simple Order Book for longer than 200 microseconds and, therefore, the Exchange believes is less likely to be valuable to the Recipient Member.
The timeframe covered by the proposed Report is the primary difference between it and the existing Liquidity Taker Event Report for Simple Orders. The existing Liquidity Taker Event Report for Simple Orders provides data for executions and contra-side responses that occurred within 200 microseconds of the time the resting order was received by the Exchange. Meanwhile, the proposed Report would include the same data as the Liquidity Taker Event Report for Simple Orders but would focus on executions and contra-side responses that occurred after 200 microseconds of the time the resting order was received by the Exchange, and within 200 microseconds of receipt of any Member's first attempt to execute against the resting order after the initial 200 microsecond time period has expired. More specifically, the resting order must rest on the Simple Order Book for at least 200 microseconds and once that initial 200 microsecond period has passed, a Member must then submits an order to attempt to execute against that resting order. This event starts a second 200 microsecond period within which the proposed Report would include data on executions and contra-side responses submitted by the Recipient Member to execute against that resting order.
For example, Member A submits an order that is posted to the Simple Order Book. 200 microseconds passes and Member A's order remains posted to the Simple Order Book. Then Member B enters a marketable order to execute against Member A's resting order, starting the second 200 microsecond window. Within this next 200 microsecond window, Member C sends a marketable order to execute against Member A's resting Order. Because Member B's order is received by the Exchange before Member C's order, Member B's order executes against Member A's resting order. The proposed Report would provide Member C the data points necessary for that firm to calculate by how much time they
The above timeframe would be codified under proposed paragraph (c)(2) of Rule 531 which would provide that the proposed Report would include the data set forth under Rule 531(c)(1) described above for executions and contra-side responses that occurred (i) after 200 microseconds of the time the resting order was received by the Exchange and (ii) within 200 microseconds of receipt of the first attempt to execute against the resting order after the initial 200 microsecond time period under (c)(2)(i) of this paragraph has expired.
Like current paragraph (a)(3) of Exchange Rule 531 for the existing Liquidity Taker Event Report for Simple Orders, proposed paragraph (c)(3) of Exchange Rule 531 would provide that the proposed Report will only include trading data related to the Recipient Member and, subject to the proposed paragraph (4) of Rule 531(c) described below, will not include any other Member's trading data other than that listed in paragraphs (1)(i) and (ii) of Exchange Rule 531(c) described above.
Like current paragraph (a)(4) of Exchange Rule 531 for the existing Liquidity Taker Event Report for Simple Orders, proposed paragraph (c)(4) of Rule 531 would specify that the proposed Report will contain historical data from the prior trading day and will be available after the end of the trading day, generally on a T+1 basis.
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.
The timeframe covered by the proposed Report is the primary difference between it and the existing Liquidity Taker Event Report for Simple Orders. However, this difference only pertains to the timeframe covered by each report, with each report containing the exact same data fields with one exception described here. The existing Liquidity Taker Event Report for Simple Orders provides data for executions and contra-side responses that occurred within 200 microseconds of the time the resting order was received by the Exchange. Meanwhile, the proposed Report would basically include the same data as the Liquidity Taker Event Report for Simple Orders but would focus on executions and contra-side responses that occurred after 200 microseconds of the time the resting order was received by the Exchange and one additional difference. The one difference is that unlike the existing Liquidity Taker Event Report for Simple Orders, the proposed Report would not include the time difference between the time the resting order and first response that executes against the resting order are received by the Exchange. Each report focuses on 200 microsecond windows with the existing Report's window starting at the time of receipt of the resting order and the proposed Report's window starting with the first attempt to execute against the resting order after the order was resting on the Simple Order Book for at least 200 microseconds.
The Exchange believes the proposed Report will serve to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general protect investors and the public interest because it will benefit investors by facilitating their prompt access to the value added information that is included in the proposed Report. The proposed Report will allow Members to access information regarding their trading activity that they may utilize to evaluate their own trading behavior and order interactions.
Like the existing Liquidity Taker Event Report for Simple Orders, the proposed Report is designed for Members that are interested in gaining insight into latency in connection with orders that failed to execute against an order resting on the Exchange's Simple Order Book by providing those Members data to analyze by how much time their order may have missed an execution against a contra-side order resting on the Book. The Exchange believes that providing this optional latency data to interested Members is consistent with facilitating transactions in securities, removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest because it provides greater visibility into the latency of Members' incoming orders. Members may use this data to optimize their models and trading patterns in an effort to yield better execution results by calculating by how much time their order may have missed an execution.
Like the existing Liquidity Taker Event Report for Simple Orders, the proposed Report is designed to offer latency information in a systematized way and standardized format to any Member that chooses to subscribe to the proposed Report. As a result, the proposal will make latency information for liquidity-seeking orders available in an equalized manner and will increase transparency, particularly for Recipient Members that may not have the expertise to generate the same information on their own. The proposed Report may better enable Recipient Members to increase the fill rates for their liquidity-seeking orders. At the same time, as is also discussed above, the Report is designed to prevent a Recipient Member from learning other Members' sensitive trading information. The Report would not be a real-time market data product, as it would provide only historical trading data for the previous trading day, generally on a T+1 basis. In addition, the data in the Report regarding incoming orders that failed to execute would be specific to the Recipient Member's orders, and other information in the proposed Report regarding resting orders and executions would be anonymized if it relates to a Member other than the Recipient Member.
The proposed Report generally contains three buckets of information, each of which are identical to the same buckets of information contained in the existing Liquidity Taker Event Report
Specifically, the first bucket of information contained in the Report for the resting order includes the time the resting order was received by the Exchange, the symbol, unique reference number assigned at the time of receipt, side (buy or sell), and the displayed price and size of the resting order. Further, the symbol, origin type, side (buy or sell), and displayed price and size are also available either via OPRA or the Exchange's proprietary data feeds. The first bucket of information also indicates whether the Recipient Member is an Affiliate of the Member that entered the resting order. This data field will not indicate the identity of the Member that entered the resting order and would simply allow the Recipient Member to better understand the scenarios in which it may execute against the orders of its Affiliates.
The second bucket of information contained in the Report regards the execution of the resting order and includes the MBBO and ABBO at the time of execution. These data points are also available either via OPRA or the Exchange's proprietary data feeds. The second bucket of information will also indicate whether the response was entered by the Recipient Member. This data point is simply provided as a convenience. If not entered by the Recipient Member, this data point will be left blank so as not to include any identifying information about other Member activity. The second bucket of information also includes the size, as well as the time and type of first response that executes against the resting order. These data points would assist the Recipient Member in analyzing by how much time their order may have missed an execution against a contra-side order resting on the Book. Unlike the existing Liquidity Taker Event Report for Simple Orders, the proposed Report would not include the time difference between the time the resting order and first response that executes against the resting order are received by the Exchange. The proposed Report would not include this data point because the Exchange understands Recipient Members may not find it useful due to the fact that the proposed Report focuses on orders that have been resting on the Simple Order Book for longer than 200 microseconds. Therefore, the Exchange does not propose to include this data point as a means to streamline the proposed Report and remove unnecessary data.
The third bucket of information is about the Recipient Member's response(s) and the time their response(s) is received by the Exchange. This includes the time difference between the time the first response that executes against the resting order was received by the Exchange and the time of each response sent by the Recipient Member, regardless of whether it executed or not. As above, this data point would assist the Recipient Member in analyzing by how much time their order may have missed an execution against a contra-side order resting on the Book. This bucket would also include the size and type of each response submitted by the Recipient Member, the Recipient Member identifier, and a response reference number which is selected by the Recipient Member. Each of these data points are unique to the Recipient Member and should already be known by Recipient Member even if not included in the Report.
Like the existing Liquidity Taker Event Report for Simple Orders, the Exchange proposes to provide the Report on a voluntary basis and no Member will be required to subscribe to the Report. The Exchange notes that there is no rule or regulation that requires the Exchange to produce, or that a Member elect to receive, the Report. It is entirely a business decision of each Member to subscribe to the Report. The Exchange proposes to offer the Report as a convenience to Members to provide them with additional information regarding trading activity on the Exchange on a delayed basis after the close of regular trading hours. A Member that chooses to subscribe to the Report may discontinue receiving the Report at any time if that Member determines that the information contained in the Report is no longer useful.
In summary, the proposed Report will help to protect a free and open market by providing additional data (offered on an optional basis) to the marketplace and by providing investors with greater choices.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The Exchange believes that the proposed Report will enhance competition
In this instance, the proposed rule change to offer the optional Report is in response to Member interest and requests for such information, including from some Members that subscribe to the existing Liquidity Taker Event Report for Simple Orders. The Exchange does not believe the proposed Report will have an inappropriate burden on intra-market competition between Recipient Members and other Members who do not receive the Report. As discussed above, the first two buckets of information included in the Report contain information about the resting order and the execution of the resting order, both of which are generally available to Members that choose not to receive the Report from other public sources, such as OPRA and the Exchange's proprietary data feeds. The third bucket of information is about the Recipient Member's response and the time their response is received by the Exchange, information which the Recipient Member would be able to obtain without receiving the Report. Additionally, some Members may already be able to derive a substantial amount of the same data that is provided by some of the components based on their own executions and algorithms.
In sum, if the proposed Report is unattractive to Members, Members will opt not to receive it. Accordingly, the
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend the MIAX Fee Schedule (the “Fee Schedule”).
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Section 1)a)iii) of the Fee Schedule to modify the Priority Customer Rebate Program (“PCRP”)
The proposed changes will be effective on February 1, 2023.
The Exchange's Fee Schedule provides for a Priority Customer Rebate Program, under which a Priority Customer
Currently, Members and their Affiliates that qualify for the PCRP and execute Priority Customer simple orders in MIAX Select Symbols receive the following rebates: (i) $0.00 per contract in Tier 1; (ii) $0.10 per contract in Tier 2; (iii) $0.20 per contract in Tier 3; and (iv) $0.24 in Tier 4. The Exchange now proposes to reduce the rebate provided in Tier 3 from $0.20 to $0.18. The purpose of adjusting the Tier 3 rebate is for business and competitive reasons.
Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex order
Currently, Members and their Affiliates that qualify for the PCRP that execute cPRIME Agency Orders with a maximum leg size equal to or less than 1,000 contracts receive $0.10 per contract in Tier 1 through Tier 4, or $0.12 in Tier 4 provided certain criteria is satisfied as denoted by footnote “**”.
The Exchange now proposes to provide that all cPRIME Agency Orders will be eligible for the per contract credit described in the Per Contract Credit for cPRIME Agency Order table by removing the maximum leg size requirement from that table. The Exchange also proposes to rename this table as the cPRIME Agency Order Break-up Table for clarity. Therefore, the Exchange proposes to remove the credit amounts for the per contract credits listed in the Per Contract Credit for cPRIME Agency Order column of the standard PCRP table in Section 1)a)iii) of the Fee Schedule. The Exchange then proposes to direct market participants to the proposed “cPRIME Agency Order Break-Up Table,” which can be found in the Fee schedule below the standard PCRP table, by inserting the sentence, “See cPRIME Agency Order Break-up Table Below” in each row for the “Per Contract Credit for cPRIME Agency Order” in the standard PCRP table. Accordingly, with the proposed changes, all cPRIME Agency Orders that qualify for the PCRP that are submitted to the Exchange would be eligible for the per contract credit based upon the order break-up percentage as described in the above mentioned table. The Exchange conducted an internal analysis of fees and rebates associated with cPRIME Agency Orders and the proposed changes are being made for business and competitive reasons.
As a result of the aforementioned proposed change, the Exchange also proposes to remove the following footnote “*” to the above mentioned table and to amend footnote “**” to clarify the operation of the per contract credit described in the footnote and to also amend footnote “***” to remove the maximum leg size requirement to accurately reflect the operation of the table.
The Exchange currently provides a cPRIME break-up credit of $0.25 per contract in Penny Classes
The Exchange believes that its proposal to amend its Fee Schedule is consistent with section 6(b) of the Act
The Exchange believes its proposal provides for the equitable allocation of reasonable dues and fees and is not unfairly discriminatory for the following reasons. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is one of 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, no single exchange has more than approximately 12-13% of the market share of executed volume of multiply-listed equity and exchange-traded fund (“ETF”) options trades as of January 26, 2023, for the month of January 2023.
The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue use of certain categories of products, in response to fee changes. For example, on March 1, 2019, the Exchange filed with the Commission an immediately effective filing to decrease certain credits assessable to Members pursuant to the PCRP.
Accordingly, competitive forces constrain the Exchange's transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. In response to the competitive environment, the Exchange offers specific rates and credits in its fees schedule, like those of other options exchanges' fees schedules, which the Exchange believes provides incentives to Members to increase order flow of certain qualifying orders.
The Exchange believes that the PCRP itself is reasonably designed because it incentivizes providers of Priority Customer order flow to send that Priority Customer order flow to the Exchange in order to receive a credit in a manner that enables the Exchange to improve its overall competitiveness and strengthen its market quality for all market participants. The PCRP, which provides increased incentives in certain tiers in high volume select symbols, is also reasonably designed to increase the competitiveness of the Exchange with other options exchanges that also offer increased incentives (
The Exchange believes that its proposal to amend the rebate provided for Priority Customer Orders in MIAX Select Symbols in Tier 3 is consistent with section 6(b)(4) of the Act
The Exchange believes that its proposal to provide a per contract credit for all cPRIME Agency Orders based upon the order break-up percentage will continue to encourage Priority Customer order flow to auctions. Increased Priority Customer order flow benefits all market participants because it continues to attract liquidity to the Exchange by providing more trading opportunities. This attracts Market Makers and other liquidity providers, thus, facilitating price improvement in the auction process, signaling additional corresponding order flow from other market participants, and, as a result, increasing liquidity on the Exchange.
The Exchange believes that its proposal is consistent with section 6(b)(4) of the Act
The Exchange's proposal to provide a per contract credit to eligible cPRIME Agency Orders based upon the order break-up percentage is consistent with section 6(b)(4) of the Act
In addition, the Exchange believes that its proposal is consistent with section 6(b)(5) of the Act
The Exchange believes that providing rebates for Priority Customers that submit cPRIME Agency Orders is equitable and not unfairly discriminatory because the proposed rebate schedule will apply equally to all cPRIME Agency Orders for Priority Customers. The Exchange believes that the application of the rebate is equitable and not unfairly discriminatory because, as stated above, Customer order flow enhances liquidity on the Exchange, in turn providing more trading opportunities and attracting other market participants, thus, facilitating tighter spreads, increased order flow and trading opportunities to the benefit of all market participants. Moreover, the options industry has a long history of providing preferential pricing to Priority Customer Orders, and the Exchange's current fees schedule currently does so in many places, as does the fee structure of at least one other exchange.
As noted above, the Exchange operates in a highly competitive market. The Exchange is only one of several options venues to which market participants may direct their order flow, and it represents a small percentage of the overall market. The Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory in that competing options exchanges offer similar fees and credits in connection with similar price improvement auctions.
The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and self-regulatory organization (“SRO”) revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
The Exchange believes that the ever-shifting market shares among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue or reduce use of certain categories of products, in response to transaction and non-transaction fee changes. Accordingly, competitive forces constrain the Exchange's transaction fees and rebates, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange believes the proposal reflects a reasonable and competitive pricing structure which will continue to incentivize market participants to direct Priority Customer Orders to the Exchange, which the Exchange believes will enhance liquidity and market quality on the exchange to the benefit of all Members.
For the reasons discussed above, the Exchange submits that the proposal satisfies the requirements of sections 6(b)(4) and 6(b)(5) of the Act
In accordance with section 6(b)(8) of the Act,
The Exchange does not believe that its proposal will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed changes will apply uniformly to all eligible Priority Customers. The Exchange believes that this proposal will continue to encourage Members to submit cPRIME Agency Orders for Priority Customers, which will increase liquidity and benefit all market participants by providing more trading opportunities and tighter spreads. The Exchange notes the fact that preferential pricing to Priority Customers is a long-standing options industry practice. The proposed rebate changes serve to enhance Priority Customer order flow to the Exchange's Price Improvement Mechanism, which, as a result, facilitates increased liquidity and execution opportunities to the benefit of all market participants.
Additionally, the Exchange does not believe its proposal to reduce the Tier 3 rebate for MIAX Select Symbols will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed change will apply uniformly to all similarly situated participants.
The Exchange also does not believe that its proposal will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because, as noted above, at least one other competing options exchange
Accordingly, the Exchange believes that the proposed changes will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it will continue to encourage order flow, which provides greater volume and liquidity, benefiting all market participants by providing more trading opportunities and tighter spreads.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act,
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”)
The MSRB filed with the Commission a proposed rule change to create a new rule, MSRB Rule G-46, on duties of solicitor municipal advisors (“Proposed Rule G-46”) and amend MSRB Rule G-8, on books and records (“Proposed Amended Rule G-8”) (together, the “proposed rule change”). The MSRB requests that the proposed rule change be approved with an implementation date to be announced by the MSRB in a regulatory notice published no later than one month following the Commission approval date, which implementation date shall be no later than twelve months following the Commission approval date.
The text of the proposed rule change is available on the MSRB's website at
In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
There are two broad categories of municipal advisors—those that provide certain advice to or on behalf of a municipal entity or obligated person and those that undertake certain solicitations of a municipal entity or obligated person on behalf of certain third-party financial professionals.
While the Exchange Act
As discussed below, MSRB data suggests that the number of municipal advisors that engage in solicitations that may subject them to Proposed Rule G-46 comprise a relatively small percentage of the municipal advisors that are registered with the MSRB. However, notwithstanding the relatively small size of such solicitation market, the MSRB believes that it is important that the fundamental protections extended to the municipal entity and obligated person clients of other MSRB regulated entities are also extended to the municipal entities and obligated persons with whom solicitor municipal advisors interact. For example, as noted in the SEC Final MA Rule Adopting Release, the solicitation of public pension plans in connection with investment advisory services has been subject to multiple SEC enforcement
From a practical perspective, any registered municipal advisor is permitted to act as both a solicitor municipal advisor and a non-solicitor municipal advisor. However, anecdotally, the MSRB understands that relatively few non-solicitor municipal advisors also act as solicitor municipal advisors.
A solicitor municipal advisor often first communicates with a staff member of the solicited entity (
A solicitor municipal advisor typically initially will solicit a financial intermediary or an investment consultant (collectively “intermediary”) who is hired by the solicited entity to conduct searches and identify appropriate investment managers to meet a municipal entity's specific need.
Proposed Rule G-46 would establish the core standards of conduct and duties of “solicitor municipal advisors” (as defined below) when engaging in solicitation activities that would require them to register with the SEC and the MSRB as municipal advisors. The proposed rule also would codify certain statements in an MSRB notice issued in 2017 pertaining to the application of MSRB rules to solicitor municipal advisors.
In summary, the core provisions of Proposed Rule G-46 generally would:
• Set forth definitions for terms used in the proposed rule;
• Require solicitor municipal advisors to provide to their solicitor clients full and fair disclosure in writing of all of their material conflicts of interest and material legal or disciplinary events;
• Require solicitor municipal advisors to document their relationships in writing(s), deliver such writing(s) to their solicitor clients, and set forth certain minimum content that must be included in such writing(s);
• Prohibit solicitor municipal advisors from making a representation that the solicitor municipal advisor knows or should know is either materially false or misleading regarding the capacity, resources or knowledge of the solicitor client and require solicitor municipal advisors to have a reasonable basis for any material representations it makes to a solicited entity regarding the capacity, resources or knowledge of the solicitor client;
• Require solicitor municipal advisors to disclose to solicited entities material facts about the solicitation, including but not limited to an obligation to disclose:
○ Information about the solicitor municipal advisor's role and compensation;
○ The solicitor municipal advisor's material conflicts of interest;
○ Information regarding the solicitor client (
• Set forth a dual disclosure standard with respect to required disclosures to solicited entities:
○ Generally, disclosures would be required to be made in writing and delivered:
At the time of the first communication to a solicited entity (or in the case of an indirect solicitation, the first communication to an intermediary of the solicited entity) on behalf of a specific solicitor client; and
If the solicitation results in a solicited entity engaging a solicitor client for investment advisory services or municipal advisory services, again at the time that engagement documentation between the solicitor client and the solicited entity is delivered to the solicited entity or promptly thereafter. Such disclosures may be provided by either the solicitor client or the solicitor municipal advisor, but must be made to an official of the solicited entity that, among other things, the solicitor municipal advisor (or, the solicitor client if the solicitor client provides such disclosures) reasonably believes has the authority to bind the solicited entity by contract; and
• Expressly prohibit solicitor municipal advisors from: delivering an inaccurate invoice for fees or expenses and making payments for the purpose of obtaining or retaining an engagement to perform municipal advisory activities subject to exceptions specified in the rule.
Supplementary material to Proposed Rule G-46 generally would:
• Provide additional explanation regarding the MSRB's expectations with respect to the reasonable basis a solicitor municipal advisor must have for certain of its representations;
• Explain the relationship between a solicitor municipal advisor's fair dealing obligations and a federal fiduciary duty for municipal advisors;
• Explain the relationship between a municipal advisor's obligations under Proposed Rule G-46 and Rule G-42; and
• Provide additional explanation applicable to a solicitor municipal advisor's obligation to document its compensation arrangement and make related disclosures.
Provided below is a more detailed description of Proposed Rule G-46.
Proposed Rule G-46(a) would set forth a set of definitions for terms used in the rule. It would define the terms “compensation,”
Proposed Rule G-46(a)(iii) generally would define the term “solicitation” to mean a direct or indirect communication with a municipal entity or obligated person made by a solicitor municipal advisor, for direct or indirect compensation, on behalf of a municipal advisor or investment adviser that does not control, is not controlled by, or is not under common control with the solicitor municipal advisor for the purpose of obtaining or retaining an engagement by a municipal entity or obligated person of a municipal advisor for or in connection with municipal financial products or the issuance of municipal securities or of an investment adviser to provide investment advisory services to or on behalf of a municipal entity; provided, however, that it does not include excluded communications, as defined in Proposed Rule G-46(a)(ii). This definition is consistent with the defined term “solicitation of a municipal entity or obligated person” under Section 15B(e)(9) of the Exchange Act,
Proposed Rule G-46(a)(iv) generally would define the term “solicited entity” to mean any municipal entity or obligated person (as those terms are defined in Section 15B(e)(8) and (e)(10) of the Exchange Act
Proposed Rule G-46(a)(v) generally would define the term “solicitor client” to mean the municipal advisor or investment adviser on behalf of whom the solicitor municipal advisor undertakes a solicitation within the meaning of Sections 15B(e)(4)(A)(ii) and (e)(9) of the Act
Proposed Rule G-46(a)(vi) generally would define the term “solicitor municipal advisor” to mean, for purposes of the rule, a municipal advisor within the meaning of Section 15B(e)(4) of the Act
Proposed Rule G-46(b) would require a solicitor municipal advisor to provide
The proposed rule sets forth an alternative to providing a narrative description of any such legal or disciplinary events by permitting solicitor municipal advisors to reference such information in certain other publicly available information if the conditions specified in the rule are met. As a result, solicitor municipal advisors that are also registered broker-dealers or investment advisers would be permitted to identify the specific type of event and make specific reference to the relevant portions of the solicitor municipal advisor's Form BD or Form ADV if the solicitor municipal advisor provides detailed information specifying where the client may electronically access such forms.
Proposed Rule G-46(c) would require a solicitor municipal advisor to evidence each of its solicitor relationships by a writing or writings created and delivered to the solicitor client prior to, upon or promptly after the establishment of the solicitor relationship. The writing(s) would be required to be dated and include, at a minimum:
• A description of the solicitation activities to be engaged in by the solicitor municipal advisor on behalf of the solicitor client (including the scope of the agreed-upon activities and a statement that the scope of the solicitation is anticipated to include the solicitation of municipal entities and/or obligated persons);
• The terms and amount of the compensation to be received by the solicitor municipal advisor for such activities;
• The date, triggering event, or means for the termination of the relationship, or, if none, a statement that there is none; and
• Any terms relating to withdrawal from the relationship.
The proposed obligation to document the relationship is generally consistent with a non-solicitor municipal advisor's obligation to document its municipal advisory relationship with a client under Rule G-42(c).
The MSRB understands that a solicitor may be asked to solicit a broad range of entities on behalf of a client of the solicitor. These entities may include municipal entities, obligated persons and corporate entities that are not obligated persons. While the solicitation of municipal entities and obligated persons generally would require compliance with Proposed Rule G-46 (to the extent the solicitation would make the solicitor a “municipal advisor”), the solicitation of an entity that is not a municipal entity or an obligated person would not require such compliance. In order to promote certainty as to the applicable regulatory scheme for any engagement, the MSRB believes that it is imperative for any engagement to be documented in a writing that clearly indicates whether the solicitation of municipal entities and/or obligated persons is anticipated. Information pertaining to termination of the relationship or withdrawal from the relationship will similarly assist both solicitor clients and examination and enforcement authorities in understanding the scope of an engagement.
Supplementary Material .04 would provide additional guidance with respect to the obligation to document the terms and the amount of compensation to be received. Specifically, it provides that the documentation(s) must clearly describe the structure of the compensation arrangement and the amount of compensation paid or to be paid. For example, a solicitor municipal advisor that will be paid on the basis of a flat or fixed fee would be required to disclose the amount of the flat fee, if known and/or calculable at the time of the documentation. If the precise dollar amount is not known at the time, the documentation should disclose how such compensation will be calculated. As another example, if the compensation arrangement calls for a percentage of fees collected from the referred clients, then the documentation should state so and describe what that percentage is.
Proposed Rule G-46(d)(i) expressly would prohibit a solicitor municipal advisor from making a representation that the solicitor municipal advisor knows or should know is either materially false or materially misleading due to the omission of a material fact about the capacity, resources or knowledge of the solicitor client. This prohibition is similar to a prohibition applicable to non-solicitor municipal advisors under Rule G-42 except that, unlike with Rule G-42, the prohibition for solicitor municipal advisors would not be limited to representations that occur in response to requests for proposals or qualifications or in oral presentations to a client or prospective client for the purpose of obtaining or retaining an engagement for the solicitor client.
Proposed Rule G-46(d)(ii) would require a solicitor municipal advisor to have a reasonable basis for any material representations it makes to a solicited entity regarding the capacity, resources or knowledge of the solicitor client. The MSRB believes that solicited entities should be entitled to rely on the material representations made by solicitor municipal advisors, as regulated financial professionals hired for the purpose of soliciting business on behalf of their clients, with respect to the qualifications of their clients. The MSRB further believes that such representations should have some reasonable basis.
Supplementary Material .01 would provide guidance on compliance with the reasonable-basis standard. Specifically, this supplementary material would state that while a solicitor municipal advisor must have a reasonable basis for the representations described in Proposed Rule G-46(d), the solicitor municipal advisor is not required to actively seek out every piece of information that may be relevant to such representations. It further provides an example to help illustrate this point.
Proposed Rule G-46(e) would require a solicitor municipal advisor to disclose to any solicited entity all material facts about the solicitation in the manner specified in section (f) of the proposed rule. This would include an obligation to disclose certain information pertaining to the solicitor municipal advisor's: (i) role and compensation; (ii) conflicts of interest; and (iii) client.
• The solicitor municipal advisor's name;
• The solicitor client's name;
• The type of business being solicited (
• The material terms of the solicitor municipal advisor's compensation arrangement, including a description of the compensation provided or to be provided, directly or indirectly, to the solicitor municipal advisor for such solicitation; and
• Payments made by the solicitor municipal advisor to another solicitor municipal advisor to facilitate the solicitation.
Supplementary Material .04 would provide additional guidance with respect to the obligation to disclose the material terms of the solicitor municipal advisor's compensation arrangement. Specifically, it would provide that Proposed Rule G-46(e)(i)(D) would require disclosure of at least the same information as that required by Proposed Rule G-46(c)(ii), to the extent material. However, Proposed Rule G-46(e)(i)(D) also may require the disclosure of additional information, depending on the facts and circumstances. For example, if the solicitor municipal advisor receives indirect compensation for the solicitation, information pertaining to the indirect compensation also must be disclosed.
Additionally, the solicitor municipal advisor would be required to disclose the following statements:
• In connection with its solicitation activities as a municipal advisor, a solicitor municipal advisor does not owe a fiduciary duty under Section 15B(c)(i) of the Exchange Act or MSRB rules to the entities that it solicits and is not required by those provisions to act in the best interests of such entities without regard to the solicitor municipal advisor's own financial or other interests. However, in connection with such solicitation activities, a solicitor municipal advisor is required to deal fairly with all persons, including both solicited entities and the solicitor municipal advisor's clients; and
• A solicitor municipal advisor's primary role is to solicit the solicited entity on behalf of certain third-party regulated entities and the solicitor municipal advisor will be compensated for its solicitation services by the solicitor municipal advisor's client.
These statements draw from analogous disclosures that underwriters must make to their issuer clients pursuant to Rule G-17
Supplementary Material .02 would expound on the relationship between Proposed Rule G-46 and the fair dealing obligation under Rule G-17 and includes similar discussion regarding application of the federal fiduciary duty to a solicitor municipal advisor's solicitations of solicited entities. However, it specifies that solicitor municipal advisors may be subject to fiduciary or other duties under state or other laws and that nothing in Proposed Rule G-46 shall be deemed to supersede any more restrictive provision of state or other laws applicable to municipal advisory activities. Finally, Supplementary Material .02 includes a cross reference to Supplementary Material .03 and would remind solicitor municipal advisors that, to the extent they also engage in non-solicitor municipal advisory activity, the requirements of Rule G-42 will apply with respect to such activity and a federal fiduciary duty will apply with respect to the municipal entity clients of the municipal advisor.
• The type of information that is generally available on Form MA (in the case of a municipal advisor client) or Form ADV, Part 2 (in the case of an investment adviser client); and
• A description of how the solicited entity can obtain a copy of the solicitor client's Form MA or Form ADV, Part 2, as applicable.
These requirements are designed to help ensure that, at any early stage, solicited entities are directed to important written information about the entities the solicitor municipal advisor represents—including, but not limited to, information about the disciplinary history of the solicitor municipal advisor's clients. However, it does not require solicitor municipal advisors to obtain a copy of these documents and provide them to their solicited entities, nor does it require a solicitor municipal advisor to disclose any specific information about the client that is included in such forms.
Proposed Rule G-46(f) would provide that any disclosures required under section (e) of the proposed rule (pertaining to disclosures to solicited entities) must be made in writing. The proposed rule also would provide for a dual-disclosure requirement, such that solicitations that result in a solicited entity engaging a solicitor client would receive the requisite disclosures twice. Specifically, they would receive the disclosures once at the time of the first communication giving rise to the solicitation and again at the time that engagement documentation pertaining to the solicited entity's engagement of the solicitor client is delivered (or promptly thereafter).
The second set of disclosures may be provided by either the solicitor client or the solicitor municipal advisor. The MSRB believes that this flexibility would permit, for example, a solicitor municipal advisor's investment adviser client to provide the solicitor's disclosures to the solicited entity at the time that the investment adviser enters into an engagement with the solicited entity.
The MSRB believes that this dual or bifurcated approach would help ensure that the person that is initially solicited receives this key information in time to consider it in connection with the initial solicitation. However, because such person(s) may not have the authority to bind the solicited entity by contract (particularly where such person is an intermediary between the solicitor and the solicited entity), the MSRB would require that the disclosures are provided again at the time of the engagement between the solicited entity and the solicitor client (or promptly thereafter). The MSRB believes that any risk associated with the first disclosures not being passed on to a knowledgeable person with the authority to bind the solicited entity in contract would be mitigated by requiring that the disclosures are provided again at the time of the engagement—this time, to someone who does have such authority. Additionally, the MSRB understands that solicitations may sometimes span years. Particularly in such instances, the MSRB believes that it is important that the solicited entity receives the disclosures again at the time of the solicitor client's engagement with the solicited entity.
Proposed Rule G-46(g) expressly would prohibit a solicitor municipal advisor from:
• Delivering an invoice for fees or expenses for municipal advisory activities that is materially inaccurate in its reflection of the activities actually performed or the personnel that actually performed those activities; and
• Making payments for the purpose of obtaining or retaining an engagement to perform municipal advisory activities, subject to three specified exceptions discussed further below.
• Payments to an affiliate for a direct or indirect communication with a municipal entity or obligated person on behalf of the solicitor municipal advisor where such communication is made for the purpose of obtaining or retaining an engagement to perform municipal advisory activities;
• Reasonable fees paid to another municipal advisor registered as such with the Commission and the MSRB for making a communication for the purpose of obtaining or retaining an engagement to perform municipal advisory activities; and
• Payments that are permissible “normal business dealings” as described in Rule G-20, on gifts, gratuities, non-cash compensation and expenses of issuance.
These specified prohibitions are modeled on similar prohibitions applicable to non-solicitors under MSRB Rule G-42(e)(i) and to a lesser degree would align with certain prohibitions applicable to underwriters under the G-17 Underwriter's Guidance.
Proposed Rule G-46 would set forth four supplementary material sections:
• Providing additional explanation regarding the MSRB's expectations with respect to the reasonable basis a solicitor municipal advisor must have for the representations described in Proposed Rule G-46(d);
• Explaining the relationship between a solicitor municipal advisor's fair dealing obligations and the applicability of a federal fiduciary duty for municipal advisors;
• Explaining the relationship between a municipal advisor's obligations under Proposed Rule G-46 and Rule G-42; and
• Providing additional detail regarding a solicitor municipal advisor's compensation documentation and disclosure obligations.
Supplementary Material .03 explains that municipal advisors should be mindful that one may be, simultaneously, both a solicitor municipal advisor for purposes of Proposed Rule G-46 and a non-solicitor municipal advisor for purposes of Rule G-42. For example, a municipal advisor may provide “advice” as defined in Rule G-42 to a municipal entity (the “advisory engagement”) and separately may act as a solicitor municipal advisor with respect to that same municipal entity or another municipal entity as contemplated in Proposed Rule G-46 (the “solicitor municipal advisor engagement”). As a result, the municipal advisor would be subject to Rule G-42 with respect to the advisory engagement and would be subject to Proposed Rule G-46 with respect to the solicitor municipal advisor engagement. Municipal advisors should evaluate the activity undertaken with respect to each engagement to determine which rule governs and ensure the written supervisory procedures required under Rule G-44 reflect such.
Proposed amendments to Rule G-8 would add specific recordkeeping obligations designed to help facilitate and document compliance with Proposed Rule G-46. Specifically, they would add new subsection (viii)
• Evidence that the disclosures required by Proposed Rule G-46(b) were made in the manner required by that section;
• A copy of each writing or writings required by Proposed Rule G-46(c);
• Documentation substantiating the solicitor municipal advisor's reasonable basis for believing its representations as described in Proposed Rule G-46(d) (
• Evidence that the disclosures required by Proposed Rule G-46(e) were made in the manner described in Proposed Rule G-46(f) (
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2) of the Exchange Act,
Section 15B(b)(2)(C) of the Exchange Act
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Exchange Act
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Exchange Act
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Exchange Act
The proposed rule change also would protect municipal entities and obligated persons by better aligning the obligations owed by solicitor municipal advisors to their clients with those applicable to non-solicitor municipal advisors to their clients under Rule G-42. Like non-solicitor municipal advisors, solicitor municipal advisors would be required to: disclose their material conflicts of interest;
Section 15B(b)(2)(L)(iv) of the Exchange Act
The MSRB also believes that the proposed rule change is consistent with Section 15B(b)(2)(G) of the Exchange Act,
Section 15B(b)(2)(C) of the Act
Furthermore, Section 15B(b)(2)(L)(iv) of the Act
The purpose of amending Rule G-8 and proposing Proposed Rule G-46 would be to codify certain statements on the obligations of solicitor municipal advisors currently outlined in the G-17 Excerpt for Solicitor Municipal Advisors. Further, Proposed Rule G-46 would better align the duty and obligations of solicitor municipal advisors with those for underwriters under Rule G-17, for non-solicitor municipal advisors under Rule G-42, and for solicitors that undertake certain solicitations on behalf of investment advisers under the SEC's investment adviser regime.
The core standards applicable to non-solicitor municipal advisors and underwriters under MSRB Rule G-42 and Rule G-17 are highlighted in a standalone rule for non-solicitor municipal advisors and a standalone interpretation that was filed with and approved by the SEC, respectively. In contrast, the G-17 Excerpt for Solicitor Municipal Advisors was issued in a notice that largely summarized existing rules and obligations applicable to solicitor municipal advisors and the standards set forth in the G-17 Excerpt for Solicitor Municipal Advisors were not as robust as the standards set forth in the proposed rule change. The proposed rule change is intended to enhance the consistency of regulatory standards and should therefore remove burdens to competition by providing clear expectations for all solicitor municipal advisors.
In conjunction with Proposed Rule G-46, the proposed amendments to Rule G-8 would add specific language relating to solicitor municipal advisors, which would facilitate recordkeeping compliance associated with Proposed Rule G-46 and help ensure solicitor municipal advisor accountability.
In contrast to the regulation of underwriters and non-solicitor municipal advisors, the MSRB currently does not have any explicit standards regarding documentation of a solicitor municipal advisor's engagement. Nor does it have express standards regarding solicitor municipal advisor disclosures of conflicts of interest. The MSRB believes that a Proposed Amended Rule G-8 and a codified Proposed Rule G-46 would result in informed, clearer regulatory standards and expectations for all solicitor municipal advisors, which would not impose a burden on competition because the rule would apply to all solicitor municipal advisors equally. In addition, Proposed Amended Rule G-8 and Proposed Rule G-46 would better align the obligations imposed on solicitor municipal advisors with those applicable to non-solicitor municipal advisors under Rule G-42, underwriters under the G-17 Underwriter's Guidance, and investment advisers or their promoters under the IA Marketing Rule.
For all solicitor municipal advisors, the evaluation baseline is Rule G-17 which applies to all municipal advisors (solicitor and non-solicitor alike) and requires municipal advisors to deal fairly with all persons and not engage in any deceptive, dishonest, or unfair practice and the G-17 Excerpt for Solicitor Municipal Advisors which applies to solicitor municipal advisors. Another baseline for consideration is the IA Marketing Rule
The MSRB also evaluated reasonable alternative regulatory approaches. In one alternative, the MSRB would create a new Rule G-46 for solicitor municipal advisors, but the text of the rule would state that solicitors should follow the SEC's IA Marketing Rule. The main benefit of this would be to completely harmonize between MSRB and SEC rules for solicitor municipal advisors who solicit municipal entities and obligated persons for investment advisory services. However, this alternative would reduce alignment with MSRB Rule G-42 for solicitor municipal advisors who are also non-solicitor municipal advisors and are obligated to comply with Rule G-42. Since all municipal advisors are permitted to engage in both solicitation activity and non-solicitation activity, the MSRB deems Proposed Rule G-46 superior to this alternative as it would be a tailored rule for solicitor municipal advisors that aligns with Rule G-42 where appropriate and aligns with the IA Marketing Rule where appropriate. Therefore, the MSRB believes that the approach taken in Proposed Rule G-46 for solicitor municipal advisors is warranted under the Exchange Act.
The main benefit of Proposed Amended Rule G-8 and Proposed Rule G-46 would be to codify certain statements and provide clarification on regulatory obligations for solicitor municipal advisors with regard to their duties. By aligning Proposed Rule G-46 with Rule G-42, Rule G-17 and the IA Marketing Rule
For example, Proposed Rule G-46 would make clear the types of disclosures that a solicitor municipal advisor would be expected to make to solicited entities in order to ensure that such entities have access to material information to inform their decisions pertaining to whether to retain the solicitor municipal advisor's client(s). This information also would assist these solicited entities in evaluating the solicitor municipal advisor's potential conflicts of interest associated with making such solicitations. Additionally, by codifying much of the G-17 Excerpt for Solicitor Municipal Advisors with additional requirements, Proposed Rule G-46 expressly would prohibit solicitor municipal advisors from making certain false or materially misleading representations about their clients and would require them to have a reasonable basis for similar representations in order to help ensure the protection of the municipal entities and obligated persons solicited by such solicitor municipal advisors.
Furthermore, the codification of certain existing requirements and the expansion of those standards in the proposed rule change would enhance transparency for the recipients of the new disclosures that would be required by the proposed rule change and promote clearer regulatory obligations for solicitor municipal advisors. The proposed rule change also would provide protection for municipal entities and obligated persons of solicitations, further promoting fair dealings between the market participants. As mentioned above, the additional requirements also would align some of the obligations imposed on solicitor municipal advisors with those applicable to non-solicitor municipal advisors under Rule G-42 and underwriters under the G-17 Underwriter's Guidance as well as those applicable to certain endorsements and testimonials in connection with certain investment adviser advertisements under the SEC's investment adviser regime. This alignment would level the playing field by applying somewhat similar obligations for different regulated entities and increasing the efficiency for regulatory entities tasked with examining and enforcing such requirements and regulated entities seeking compliance. In particular, Proposed Rule G-46 would require solicitor municipal advisors to document their relationships in writing to the solicitor client, which would be instrumental in assisting examining authorities and other regulators to determine the relevant regulatory regime applicable to a solicitor municipal advisor's solicitation.
The MSRB acknowledges that solicitor municipal advisors likely would incur costs, relative to the baseline state, to meet the standards of conduct and duties contained in the proposed rule change. These changes may include the one-time upfront costs related to setting up and/or revising policies and procedures, as well as the ongoing costs such as compliance costs associated with maintaining and updating disclosures. Solicitor municipal advisors also may have additional costs associated with additional record-keeping.
For the upfront costs, it is possible that solicitor municipal advisors may need to seek the appropriate advice of in-house or outside legal and compliance professionals to revise policies and procedures in compliance with Proposed Amended Rule G-8 and Proposed Rule G-46. Solicitor municipal advisors also may incur costs related to standards of training in preparation for the implementation of Proposed Amended Rule G-8 and Proposed Rule G-46. Assuming solicitor municipal advisors currently already have policies and procedures in place in relation to the G-17 Excerpt for Solicitor Municipal Advisors, the upfront costs for Proposed Amended Rule G-8 and Proposed Rule G-46 should be incremental. Furthermore, the upfront costs may be lower for solicitor municipal advisors that are also non-solicitor municipal advisors as they presumably are already complying with similar Rule G-8 and Rule G-42 requirements. Similarly, such costs may be lower for solicitor municipal advisors who are soliciting on behalf of investment advisory business and therefore presumably are already complying with the IA Marketing Rule.
For the ongoing costs, solicitor municipal advisors may incur compliance costs related to each solicitation, including costs pertaining to creating and maintaining books and records. Firms may have to make changes to their current recordkeeping practices in order to satisfy the additional requirements of Proposed Amended Rule G-8 and Proposed Rule G-46 for the specific disclosures to a solicited entity as outlined above, such as the creation of disclosures for all material information regarding the role and compensation of the solicitor municipal advisor; documentation of the relationship between a solicitor municipal advisor and its solicitor client; disclosure of material conflicts of interest; and certain payments made by a solicitor municipal advisor to another solicitor municipal advisor.
Table 1 below shows the number of solicitor municipal advisory firms registered with the MSRB as of the end of January 2022. The table groups together solicitor municipal advisor only firms (meaning those firms that indicated to the MSRB that they engage in solicitation activity only and not non-solicitation municipal advisory activity) and separately groups together those solicitor municipal advisor firms that indicated to the MSRB in Form A-12 that they engage in both solicitation and non-solicitation municipal advisory activities (
Table 2 illustrates preliminary estimates for both the upfront and ongoing compliance costs assuming implementation of Proposed Amended Rule G-8 and Proposed Rule G-46 for each solicitor municipal advisory firm in its respective group who chooses to continue their solicitation business practice in the future state.
As previously
The MSRB believes that Proposed Amended Rule G-8 and Proposed Rule G-46 would neither impose a burden on competition nor hinder capital formation, as the proposed rule changes bring a similar regulatory regime to solicitor municipal advisors that currently exists for non-solicitor municipal advisors under Rule G-8 on
At present, the MSRB is unable to quantitatively evaluate the magnitude of the efficiency gains or losses, but believes the overall benefits accumulated over time for market participants would outweigh the upfront costs of revising policies and procedures and ongoing compliance and recordkeeping costs by solicitor municipal advisors.
Finally, the proposed rule change would apply equally to all solicitor municipal advisors. Therefore, the MSRB does not expect that Proposed Amended Rule G-8 and Proposed Rule G-46 would impose a burden on competition with respect to solicitor municipal advisory services, as the upfront costs are expected to be relatively minor for all solicitor municipal advisory firms while the ongoing costs are expected to be proportionate to the size and business activities of each solicitor municipal advisory firm. In fact, the proposed rule change may relieve a burden on competition. Therefore, the MSRB believes the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.
The MSRB solicited comment on the proposed rule change in two requests for comment. The MSRB first sought comment on a draft of Rule G-46 in a request for comment that was published in March 2021 (the “First Request for Comment”).
The MSRB received three comment letters in response to the First Request for Comment
As described above, Proposed Rule G-46 would establish the core standards of conduct and duties of solicitor municipal advisors when engaging in certain solicitation activities. The proposed rule also would codify certain statements from the G-17 Excerpt for Solicitor Municipal Advisors and add additional requirements that would better align some of the obligations imposed on solicitor municipal advisors with those applicable to: non-solicitor municipal advisors under Rule G-42; underwriters under Rule G-17; and certain solicitations undertaken on behalf of third-party investment advisers under the IA Marketing Rule.
Commenters were supportive of harmonization efforts between the standards set forth in the requests for comment and those applicable to other regulated entities. In response to the First Request for Comment, commenters urged even more harmonization with those standards,
The MSRB made a number of refinements to draft Rule G-46, as reflected in the proposed rule change. Key changes are discussed in the context of the MSRB's summary of comments and responses thereto below.
In the First Request for Comment, the MSRB did not specifically include any draft text regarding the application of a fiduciary duty to solicitor municipal advisors. However, the MSRB sought comment as to whether such a statement would be helpful to solicited entities. Commenters generally supported adding a clear statement to the rule text indicating that solicitor municipal advisors do not owe a federal fiduciary duty to either their clients or the municipal entities and obligated persons that they solicit.
In response, in the Second Request for Comment, the MSRB revised draft Rule G-46 to add additional supplementary material to the draft rule. This supplementary material expressly stated that solicitor municipal advisors must comply with their fair dealing obligations pursuant to Rule G-17 on fair dealing, but that they do not owe a fiduciary duty to their municipal entity and obligated person clients in connection with their solicitation activities. The MSRB also revised the draft rule text to require a similar disclosure to be provided to the solicitor municipal advisor's solicited entities. The substance of this supplementary material as well as the draft disclosure requirement also are reflected in the proposed rule change.
In response to the First Request for Comment, draft rule text set forth standards regarding solicitor municipal advisor representations to solicited entities. Commenters generally urged the MSRB to narrow these draft standards.
In the Second Request for Comment, the MSRB revised the draft rule text accordingly and in a manner that is consistent with the standard set forth in
The rule text in the First Request for Comment did not include a section setting forth specific conduct that would expressly be prohibited. One commenter suggested that the MSRB add such language to the rule and that such prohibitions could largely be drawn from the specifically prohibited conduct under Rule G-42.
In response to the Second Request for Comment, one commenter stated that the provision to prohibit excessive compensation should be excluded noting, in part, the challenges in determining the appropriate compensation a solicitor municipal advisor should earn. In the alternative, this commenter suggested that the MSRB should provide guidance as to how excessive compensation should be determined.
In the First Request for Comment, draft Rule G-46 proposed to require solicitor municipal advisors to document their relationship and would have required such documentation to include relatively limited content—in part to align with standards under the IA Marketing Rule.
In response to the Second Request for Comment, while one commenter stated that the draft text of draft Rule G-46 adequately captured the description of the compensation arrangement,
The proposed rule change currently reflects a new Supplementary Material .04, which provides additional detail regarding written disclosures pertaining to a solicitor's compensation. This supplementary material is designed to inform a solicitor municipal advisor's compliance with both its documentation obligation under Proposed Rule G-46(c)(ii) and its disclosure obligation under Proposed Rule G-46(e)(i)(D).
In the First Request for Comment, the MSRB proposed to require solicitor municipal advisors to disclose to solicited entities certain: role and compensation disclosures; conflicts disclosures; and solicitor client disclosures. Commenters did not oppose a draft obligation to make such disclosures but suggested that the MSRB modify them in some respects. One commenter suggested that the MSRB could better align the types of required disclosures with those required by non-solicitors under Rule G-42.
Commenters also suggested that the MSRB align the timing and manner of required disclosures with the standards set forth under Rule G-42
In the Second Request for Comment, the MSRB revised the timing and manner of such disclosures in response to comments received and also sought comment as to whether disclosures should be permitted to be provided orally, consistent with the IA Marketing Rule.
In response to these comments, the proposed rule change currently reflects a slightly modified approach as compared to that set forth in the Second Request for Comment. As discussed above, a solicitor municipal advisor would be expected to provide the first set of disclosures for a solicited entity to the person actually solicited. For indirect solicitations, the second set of disclosures must be presented to an official of the solicited entity. However, the proposed rule change expressly provides that an intermediary would be permitted to pass such disclosures on to such official. After reviewing the comments received, the MSRB determined to retain the requirement that all disclosures be provided in writing.
The MSRB believes that it is important that all solicited entities receive consistent role disclosures from the solicitor municipal advisors that solicit them. Accordingly, the proposed rule change requires solicitor municipal advisors to use identical language in connection with their role disclosures. The MSRB also believes that as registered municipal advisors, solicitor municipal advisors have been required to keep appropriate books and records in order to show compliance with other relevant MSRB rules and that they can leverage similar processes and experiences to determine what evidence would establish that disclosures were made in the manner required by the proposed rule change. If compliance resources would assist solicitor municipal advisors in their compliance efforts, the MSRB is prepared to produce such resources as solicitor municipal advisors begin to implement new policies and procedures to comply with Proposed Rule G-46, if approved by the Commission.
Commenters asked the MSRB to provide guidance on certain areas relevant to the definition of a municipal advisor, including when the solicitation of an obligated person would cause one to be a solicitor municipal advisor as well as when the solicitation of an intermediary of a municipal entity would cause one to be a solicitor municipal advisor.
The MSRB believes that the more appropriate regulator to whom to direct such comments may be the Commission. Commenters may wish to consult the Commission's set of Frequently Asked Questions pertaining to registration as a municipal advisor.
One commenter emphasized the importance of creating a level playing field between dealers and municipal advisors, noting that under Rule G-38, on solicitation of municipal securities business, dealers are currently prohibited from providing payment to unaffiliated persons for a solicitation of municipal securities business on behalf of the dealer.
As described above, Exchange Act Sections 15B(e)(4) and 15B(e)(9)
In response to commenters and as discussed above, the proposed rule change would extend a similar prohibition (and related narrow exception) to solicitor municipal advisors. Because registered municipal advisors are permitted to engage in both solicitation and non-solicitation municipal advisory activities, the MSRB believes that this is the appropriate approach to harmonization among regulated entities. The MSRB notes that, unlike dealers, municipal advisors owe their municipal entity clients a fiduciary duty, which may mitigate any potential risk associated with municipal advisor use of third-party solicitors. As a result, the MSRB believes that the current approach taken in the proposed rule change represents an appropriate approach to protecting municipal entities and obligated persons.
In the First Request for Comment, the MSRB proposed to include the books and records obligations relevant to draft Rule G-46 in the text of draft Rule G-46 itself. In the Second Request for Comment, the MSRB explained that it proposed to take a similar approach with respect to future MSRB rules or rule amendments. A number of commenters opposed this standard and urged the MSRB to move the relevant books and records requirements into Rule G-8, on books and records, as regulated entities are more accustomed to consulting that rule to identify their relevant books and records obligations.
In the First Request for Comment and the Second Request for Comment, the MSRB did not propose a safe harbor for inadvertent solicitations. One commenter recommended that the MSRB consider such a safe harbor provision, modeled off of the safe harbor provision in Rule G-42.
In the First Request for Comment and the Second Request for Comment, the MSRB inquired whether a municipal advisor client should be required to make a bona fide effort to ascertain whether the solicitor municipal advisor has provided to solicited entities the required disclosures related to a municipal advisor client. The MSRB also sought comment as to whether there would be value to solicited entities receiving disclosures regarding the payments made by one solicitor municipal advisor to another to facilitate a solicitation.
With respect to the bona fide effort requirement, commenters were not supportive of such a requirement
One commenter suggested that reference to obligated persons should be removed from the definitions of solicitor municipal advisor and solicited entity, noting that they are not relevant for the purposes of the activity in which solicitors typically engage.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
For the Commission, pursuant to delegated authority.
Pursuant to the provisions of section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend the MIAX Pearl Options Fee Schedule (the “Fee Schedule”).
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees set forth in Section 1(a) of the Fee Schedule that apply to the MIAX Pearl Market Maker
The Exchange currently assesses transaction rebates and fees to all market participants which are based upon the total monthly volume executed by the Member
The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees set forth in Section 1(a) of the Fee Schedule that apply to the MIAX Pearl Market Maker origin, to modify the volume threshold for the alternative Volume Criteria in Tier 2. The Market Maker origin currently provides an alternative volume criteria in Tier 2, which is based upon the total monthly volume executed by a MIAX Pearl Market Maker collectively in SPY/QQQ/IWM options on the Exchange, expressed as a percentage of total consolidated national volume in SPY/QQQ/IWM options.
The Exchange now proposes to modify the threshold for the alternative volume criteria in Tier 2 from 0.75% to 0.55% of total consolidated national monthly volume in SPY/QQQ/IWM options. With the proposed change, a Market Maker will be able to reach the alternative Volume Criteria in Tier 2 if the Market Maker's total executed monthly volume, not including Excluded Contracts, in SPY/QQQ/IWM options on MIAX Pearl is above 0.55% of total consolidated national monthly volume in SPY/QQQ/IWM options. The Exchange is not modifying the calculation method for a Market Maker to reach the alternative volume criteria in Tier 2, only the threshold percentage. The Exchange proposes to make the corresponding change to the volume threshold percentage described in the explanatory paragraph for the alternative volume criteria for Tier 2 that is below the tables in Section 1(a) of the Fee Schedule.
The purpose of this proposed change is for business and competitive reasons. In order to attract order flow, the Exchange initially set its volume threshold for the alternative volume criteria in Tier 2 at a meaningful low level.
The proposed change will be effective beginning February 1, 2023.
The Exchange believes that its proposal to amend its Fee Schedule is consistent with section 6(b) of the Act
The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, as of January 26, 2023, no single exchange has more than approximately 12-13% equity options market share for the month of January 2023.
The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can discontinue or reduce use of certain categories of products and services, terminate an existing membership or determine to not become a new member, and/or shift order flow, in response to transaction fee changes. For example, on February 28, 2019, the Exchange filed with the Commission a proposal to increase Taker fees in certain Tiers for options transactions in certain Penny classes for Priority Customers and decrease Maker rebates in certain Tiers for options transactions in Penny classes for Priority Customers (which fee was to be effective March 1, 2019).
The Exchange believes its proposal to decrease the threshold for the alternative volume criteria in Tier 2 from 0.75% to 0.55% of total consolidated national monthly volume in SPY/QQQ/IWM options is reasonable, equitably allocated and not unfairly discriminatory because the reduced threshold percentage should attract additional SPY/QQQ/IWM option order flow from Market Makers, which will benefit all Exchange participants by providing more trading opportunities and tighter spreads.
The Exchange believes its proposal is reasonable, equitable and not unfairly discriminatory because all similarly situated market participants in the same origin type (MIAX Pearl Market Makers) are subject to the same tiered Maker rebates and access to the Exchange is offered on terms that are not unfairly discriminatory. The Exchange believes its proposal will incentivize Market Makers to increase their posted liquidity in SPY/QQQ/IWM options to the benefit of the entire market, which will increase order flow sent to the Exchange, benefiting all market participants through increased liquidity, tighter markets and order interaction.
The Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed change should continue to encourage the provision of liquidity in SPY/QQQ/IWM options that enhances the quality of the Exchange's market and increases the number of trading opportunities on the Exchange for all participants who will be able to compete for such opportunities. The proposed rule changes should enable the Exchange to continue to attract and compete for order flow with other exchanges. However, this competition does not create an undue burden on competition but rather offers all market participants the opportunity to receive the benefit of competitive pricing.
The proposed change to the threshold criteria for the alternative volume criteria in Tier 2 for the Market Maker origin is intended to keep the Exchange's rebates highly competitive with those of other exchanges, and to encourage liquidity and should enable the Exchange to continue to attract and compete for order flow with other exchanges. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its rebates and fees to remain competitive with other exchanges and to attract order flow. The Exchange believes that the proposed rule changes reflect this competitive environment because the proposal modifies the Exchange's fees in a manner that encourages market participants to continue to provide liquidity and to send order flow to the Exchange.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act,
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
The Sarbanes-Oxley Act of 2002 (“SOX” or the “Act”) provides that the Securities and Exchange Commission (the “Commission”) may recognize, as generally accepted for purposes of the securities laws, any accounting principles established by a standard-setting body that meets certain criteria.
On April 25, 2003, the Commission issued a policy statement concluding that the Financial Accounting Standards Board (“FASB”) and its parent organization, the Financial Accounting Foundation (“FAF”), satisfied the criteria for an accounting standard-setting body under the Act, and recognizing the FASB's financial accounting and reporting standards as “generally accepted” under section 108 of the Act.
Section 109 of SOX provides that, in addition to the accounting support fee, the standard-setting body can have additional sources of revenue for its activities, such as earnings from sales of publications, provided that each additional source of revenue shall not jeopardize, in the judgment of the Commission, the actual or perceived independence of the standard setter. In this regard, the Commission also considered the interrelation of the operating budgets of the FAF, the FASB, and the Governmental Accounting Standards Board (“GASB”), the FASB's sister organization, which sets accounting standards used by state and local government entities. The Commission has been advised by the FAF that neither the FAF, the FASB, nor the GASB accept contributions from the accounting profession.
The Commission understands that the Office of Management and Budget (“OMB”) has determined the FASB's spending of the 2023 accounting support fee is sequestrable under the Budget Control Act of 2011.
After its review, the Commission determined that the 2023 annual accounting support fee for the FASB is consistent with section 109 of the Act. Accordingly,
By the Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”)
The MSRB filed with the Commission a proposed rule change consisting of amendments to MSRB Rule G-40, on advertising by municipal advisors. Specifically, the proposed rule change consists of amendments to MSRB Rule G-40 to (i) permit municipal advisors to use testimonials in advertisements, subject to certain conditions; (ii) specify additional supervisory obligations with respect to the use of testimonials; (iii) modify the definition of municipal advisory client to better align with MSRB Rule G-38, on solicitation of municipal securities business; (iv) specify the obligation to keep a record of any payment for a testimonial; and (v) create a conforming obligation under MSRB Rule G-8, on books and records to be made by brokers, dealers, municipal securities dealers and municipal advisors, to include records to correspond with the current obligation under MSRB Rule G-40 to maintain records relating to the supervision of advertisements as well as the proposed obligation to maintain records of any payments for a testimonial (together “the proposed rule change”). The MSRB requests that the proposed rule change be approved with an implementation date to be announced by the MSRB in a regulatory notice published no later than one month following the Commission approval date, which implementation date shall be no later than three months following the Commission approval date.
The text of the proposed rule change is available on the MSRB's website at
In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
Consistent with the MSRB's strategic goal to modernize the MSRB Rulebook, the proposed rule change would amend MSRB Rule G-40 to allow municipal advisors to use testimonials in certain circumstances, which would better align MSRB Rule G-40 with, to the extent appropriate, the principles of MSRB Rule G-21, on advertising by brokers, dealers or municipal securities, as well as Rule 206(4)-1
In recognition of the fact that municipal advisors bear similarities with both brokers, dealers and municipal securities dealers (collectively and individually, “dealers”) and investment advisers and to promote regulatory consistency for regulated entities dually registered as a dealer and as a municipal advisor, or as an investment adviser registered with the SEC, the MSRB established advertising standards for municipal advisors in 2018.
MSRB Rule G-40 is designed to protect municipal entities, obligated persons and the general public by requiring a municipal advisor's advertisement to adhere to specific content standards based on the principles of fair dealing and good faith. An advertisement is generally defined in MSRB Rule G-40 to include any material published or used in any electronic or other public media, or any written or electronic promotional literature distributed or made generally available to municipal entities, obligated persons, municipal advisory clients or the public, including any notice, circular, report, market letter, form letter, telemarketing script, seminar text, press release concerning the services of the municipal advisor or the engagement of a municipal advisory client or reprint, or any excerpt of the foregoing or of a published article.
In establishing MSRB Rule G-40, the MSRB determined to prohibit municipal advisors, directly or indirectly, from publishing, circulating or distributing any advertisement which refers, directly or indirectly, to any testimonial of any kind concerning the municipal advisor or concerning the advice, analysis, report or other service rendered by the municipal advisor.
In establishing MSRB Rule G-40, the MSRB also sought, to the extent practicable, to harmonize with its existing rule governing the advertisements of dealers, MSRB Rule G-21. While not identical, the two MSRB rules are analogous in that they both are based on principles of fair dealing and maintain rigorous content standards. However, MSRB Rule G-40 currently prohibits a municipal advisor from using a testimonial in an advertisement. This prohibition is based in part on the fiduciary duty that a non-solicitor municipal advisor (as opposed to a dealer) owes its municipal entity clients.
MSRB Rule G-21 permits a dealer to use a testimonial in an advertisement if certain conditions are met. Specifically, if a dealer's advertisement contains a testimonial, then the person providing the testimonial concerning a technical aspect of investing must have the knowledge and experience to form a valid opinion.
In establishing MSRB Rule G-40 in 2018, the MSRB recognized that the Commission was considering modernizing the Initial IA Advertising Rule and noted that it would monitor developments related to the testimonial ban.
The Modernized IA Marketing Rule requires advertisements that include testimonials or endorsements to provide disclosures of certain information.
In addition, disclosure of the material terms of any compensation arrangement and a description of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the advisers' relationship with such person and/or any compensation arrangement must be provided to the recipient(s) of the testimonial.
In light of the Commission's adoption of the Modernized IA Marketing Rule, the MSRB has conducted a review of MSRB Rule G-40 and is filing the proposed rule change to promote regulatory consistency among regulated entities subject to a fiduciary standard. The proposed rule change would permit municipal advisors to use testimonials in advertisements, subject to certain conditions, as discussed below.
To promote regulatory consistency, where practicable, among MSRB Rule G-40, MSRB Rule G-21, and the SEC's Modernized IA Marketing Rule, proposed amended MSRB Rule G-40 would permit the use of testimonials subject to disclosures and other tailored conditions. The proposed rule change would not only align MSRB Rule G-40 with the analogous requirements for dealers under MSRB Rule G-21, but, because municipal advisors have a fiduciary duty to their clients, the proposed rule change would also include certain provisions, tailored to apply to municipal advisors, which align with the SEC's Modernized IA Marketing Rule. Specifically, the proposed rule change would amend the content standards under MSRB Rule G-40(a)(iv) to permit municipal advisors to use testimonials in advertisements subject to certain conditions; amend the supervisory obligations under MSRB Rule G-40(c) to specify additional supervisory obligations with respect to the use of testimonials; modify the definition of municipal advisory client; and amend MSRB Rule G-8 to include records to correspond with the current obligation under MSRB Rule G-40 to maintain records relating to the supervision of advertisements.
MSRB Rule G-40 currently prohibits the use of testimonials in advertisements by municipal advisors.
If a municipal advisor's advertisement contains a testimonial of any kind concerning the municipal advisor or concerning the advice, analysis, report, or other service rendered by the municipal advisor, the person making the testimonial would be required to have the knowledge and experience to form a valid opinion.
If an advertisement contains a testimonial concerning the municipal advisor or concerning the advice, analysis, report, or other service rendered by the municipal advisor, that advertisement must include, clearly and prominently, disclosures designed to reduce the risk that the use of a testimonial in an advertisement could be misleading. First, the testimonial must include a clear and prominent disclosure that the person providing the testimonial is a current municipal advisory client or, if not currently a municipal advisory client, the timeframe, denoted by calendar year(s), during which the person was a municipal advisory client.
The testimonial would also be required to include clear and prominent disclosures that the testimonial may not be representative of the experience of other clients,
Finally, the testimonial also would be required to include, clearly and prominently, a brief statement of any material conflicts of interest on the part of the person providing the testimonial resulting from the municipal advisor's relationship with such person. Recognizing the fiduciary duty owed by municipal advisors to their municipal entity clients, the MSRB considered the obligations of registered investment advisers, who, like municipal advisors, are subject to a fiduciary standard in determining the disclosures that would be appropriate for municipal advisors when using testimonials in advertisements. This disclosure obligation parallels a disclosure obligation required of registered investment advisers under SEC Rule 206(4)-1(b)(1)(iii). The MSRB believes that a brief statement of any material conflicts of interest on the part of the person providing the testimonial resulting from the municipal advisor's relationship with such person would result in information that informs the likely recipients of the advertisement (
There are two broad categories of municipal advisors
To avoid this concern and to avoid creating complexity in MSRB Rule G-40 by establishing different standards for
The first condition would require a solicitor municipal advisor to conclude, based on the exercise of reasonable diligence, that the municipal advisor or investment adviser who will provide the testimonial is currently registered with the Commission. The MSRB believes requiring a solicitor municipal advisor to determine that the municipal advisor or investment adviser providing the testimonial is registered with the Commission would establish a reasonable basis to believe that the entity providing the testimonial would not be the subject of a “disqualifying Commission action” or “disqualifying event” as those terms are defined in SEC Rule 206(4)-1(e)(3) and (4).
The second condition would require a solicitor municipal advisor that compensates a municipal advisor or investment adviser, directly or indirectly, more than $1000 in total value in cash or non-cash compensation during the preceding 12 months, to have a written agreement with the municipal advisor or investment adviser.
MSRB Rule G-40 currently requires that each advertisement subject to the requirements of the rule be approved in writing by a municipal advisor principal, as defined in MSRB Rule G-3(e)(i), prior to first use. The proposed rule change would broaden these supervisory obligations to require, with respect to an advertisement that includes a testimonial, that such approval be based on a reasonable belief that the testimonial complies with the requirements of proposed MSRB Rule G-40(a)(iv)(G). The MSRB believes this additional supervisory obligation is appropriate in allowing municipal advisors the use of testimonials in advertisements. This obligation would be consistent with the oversight obligation under the Modernized IA Marketing Rule that requires an investment adviser to have a reasonable basis for believing that a testimonial complies with the requirements of SEC Rule 206(4)-1.
MSRB Rule G-40(a)(iii) currently defines “municipal advisory client,” for purposes of MSRB Rule G-40, to include either: a municipal entity or obligated person for whom the municipal advisor engages in municipal advisory activities, as defined in MSRB Rule G-42(f)(iv); or a broker, dealer, municipal securities dealer, municipal advisor, or investment adviser (as defined under section 202 of the Investment Advisers Act of 1940) on behalf of whom the municipal advisor undertakes a solicitation of a municipal entity or obligated person, as defined in Rule 15Ba1-1(n), 17 CFR 240.15Ba1-1(n), under the Act.
MSRB Rule G-40 currently requires that each municipal advisor make and keep current in a separate file, records of all advertisements.
The MSRB believes that specifying these recordkeeping requirements would provide more certainty for municipal advisors with respect to their recordkeeping obligations. In addition, with the application of existing MSRB Rule G-9, which requires that municipal advisors generally preserve the books and records described in Rule G-8(h) for a period of not less than five years, the proposed amendments to MSRB Rule G-8(h) would provide examining authorities beneficial information to assist in evaluating a municipal advisor's compliance with MSRB Rule G-40.
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2) of the Exchange Act,
Section 15B(b)(2)(C) of the Exchange Act
The MSRB believes the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act
The MSRB believes that the proposed rule change would help prevent fraudulent and manipulative acts and practices. The proposed rule change does not alter the standards that advertisements be based on the principles of fair dealing and good faith, be fair and balanced, and provide a sound basis for evaluating the facts and that the advertisements do not include any false, exaggerated, unwarranted, promissory or misleading statement or claim. As a result, the MSRB believes that permitting municipal advisors to use only testimonials that are consistent with these standards would help ensure that MSRB Rule G-40 continues to prevent fraudulent and manipulatives acts and practices.
Proposed MSRB Rule G-40 also would protect municipal entities, obligated persons and the public interest. It would do so by ensuring that recipients of any advertisement containing a testimonial have the necessary context to evaluate the testimonial because the proposed rule change would only permit the use of testimonials if certain conditions are met, including that specified disclosures are made. Since municipal entities and obligated persons are the likely recipients of municipal advisor's testimonials, the MSRB believes that the requisite disclosures would help ensure that the proposed rule change would not result in an erosion of protection for municipal entities, obligated persons and the public interest.
The MSRB also believes that the proposed rule change would promote just and equitable principles of trade by aligning the advertising rule for municipal advisors, to the extent practicable, with the advertising rules for dealers and for investment advisers. This serves to provide regulatory consistency for entities that may be dually registered, for example as a municipal advisor and an investment adviser, and therefore promotes compliance with the advertising rules, which in turn serves to help prevent fraudulent and manipulative practices and protect municipal entities, obligated persons, and the public interest. Additionally, the MSRB believes that the proposed rule change may remove impediments to a free and open municipal securities market by permitting municipal advisors to also use testimonials in advertisements, which could improve competition among municipal advisors by allowing another method for advertising.
In addition, the proposed rule change would foster coordination with persons engaged in regulating transactions in municipal securities. The amendments to MSRB Rule G-40 would more tightly align the content standards for MSRB Rule G-40 with the content standards of the SEC's Modernized IA Marketing
Section 15B(b)(2)(L)(iv) of the Exchange Act
Additionally, the MSRB sought to harmonize standards, where applicable, between those applicable to solicitor municipal advisors, non-solicitor municipal advisors, dealers, and registered investment advisers such that those regulated entities that engage in conduct that would make them two or more of the above could leverage some of their existing processes to comply with relevant obligations under a comparable regulatory framework. Moreover, the MSRB believes that permitting municipal advisors to use a testimonial in an advertisement would be particularly helpful for small municipal advisors to highlight the services provided to other municipal advisory clients.
The MSRB also believes that the proposed rule change is consistent with Section 15B(b)(2)(G) of the Exchange Act,
Section 15B(b)(2)(C) of the Exchange Act
In accordance with the Board's policy on the use of economic analysis in rulemaking, the Board has reviewed proposed amended MSRB Rule G-40 and proposed amended MRB Rule G-8.
As part of the MSRB's strategic goal to modernize the MSRB Rulebook, the MSRB proposes to amend MSRB Rule G-40 on advertising by municipal advisors to permit municipal advisors to use testimonials in advertisements. As MSRB Rule G-40 is currently written, municipal advisors are prohibited from using testimonials. This was due to the MSRB modeling MSRB Rule G-40 on the original 1961 Initial IA Advertising Rule specifying that using a testimonial by an investment adviser would constitute a fraudulent, deceptive, or manipulative act, practice, or course of action. In December 2020, the SEC amended Rule 206(4)-1, establishing the Modernized IA Marketing Rule and reversed the prior ban on the use of testimonials for traditional referral and solicitation activity, subject to certain conditions.
For the reasons discussed above, the proposed amendments to MSRB Rule G-40 are intended to align MSRB Rule G-40's provision governing the use of testimonials by municipal advisors to the analogous requirements under the SEC's Modernized IA Marketing Rule, by prohibiting the use of testimonials in an advertisement unless a municipal advisor complies with disclosure and oversight provisions. The proposed amendments to MSRB Rule G-40 are intended to promote regulatory consistency for regulated entities dually registered as a dealer and as a municipal advisor, or as an investment adviser with the SEC and as a municipal advisor. Because municipal advisors have a fiduciary duty to their clients, the MSRB believes the associated requirements for using testimonials as part of the advertising, which are meant to protect potential issuer clients from misleading advertisements of municipal advisors, would ensure the proposed amendments to MSRB Rule G-40 would not result in an erosion of protections for issuers, obligated persons and other market participants.
To evaluate the potential impact of amending MSRB Rule G-40 and MSRB Rule G-8, a baseline or baselines must be established as a point of reference to compare the expected future state with the proposed change to MSRB Rule G-40 and MSRB Rule G-8. The economic impact of the proposed change is generally viewed as the difference between the baseline state and the expected state. The baseline is the current iteration of MSRB Rule G-40 and MSRB Rule G-8.
The MSRB has considered reasonable alternatives where applicable when considering the costs, benefits, and impact of a proposed amendment. One alternative would be to merge MSRB Rule G-40 with MSRB Rule G-21 on advertising for dealers. Consolidating advertising requirements for dealers and municipal advisors would provide the benefit of holding both groups to the same standards, including the usage of testimonials in advertisements. However, dealers and municipal advisors provide vastly different services because, unlike dealers, most municipal advisors have a fiduciary duty to their clients. As a result, the MSRB believes that there is a need for a separate municipal advisor advertising rule.
As another alternative, the MSRB considered harmonizing MSRB Rule G-40 with FINRA Rule 2210(2)(6) on communications with the public, including the usage of testimonials. Harmonizing with FINRA rules would provide a benefit to dually registered entities with FINRA and the MSRB. This position has previously been proposed by SIFMA in response to MSRB's SEC filing on creating MSRB Rule G-40.
The MSRB believes that the proposed amendments to MSRB Rule G-40 and MSRB Rule G-8, in aggregate, would benefit municipal advisors by allowing testimonials in their advertisements subject to certain requirements, which would provide municipal advisors another marketing method to solicit potential clients, subject to certain conditions. In addition, the proposed amendments to MSRB Rule G-40 and MSRB Rule G-8 would potentially reduce the compliance burden for regulated entities dually registered as a dealer and as a municipal advisor, or as an investment adviser with the SEC and as a municipal advisor by aligning MSRB Rule G-40 with the SEC's Modernized IA Marketing Rule, as well as with MSRB Rule G-21 as related to the usage of testimonials in advertisements.
The ability to provide testimonials in advertisements may benefit municipal advisors by allowing municipal advisors to show satisfied clients or other individuals willing to endorse their business practices. In addition, the MSRB believes the associated requirements for using testimonials as part of an advertisement, which are meant to protect potential issuer clients and obligated persons of municipal advisors, would help ensure the proposed amendments to MSRB Rule G-40 and MSRB Rule G-8 would not result in an erosion of protection for issuers, obligated persons and other market participants.
The MSRB believes that the proposed amendments to MSRB Rule G-40 and MSRB Rule G-8 would impose minor costs on municipal advisors. Municipal advisors would incur the upfront costs related to updating policies and procedures on using testimonials in advertising, which would be a one-time effort only. In addition, on an ongoing basis, there would be minor compliance costs to assure municipal advisors' adherence to the disclosure requirements and supervisory obligations when using testimonials in advertisements, which would likely be greater than the current ongoing compliance costs of ensuring no testimonial is included in an advertisement. If a municipal advisor opts to use testimonials in advertisements, there would also be a cost from the resultant recordkeeping obligations, recognizing that absent proposed amendments to MSRB Rule G-8, municipal advisors are subject to SEC recordkeeping requirements to make and keep records of all written communications received, and originals
The MSRB estimates that the annual costs for fulfilling the requirements associated with the use of testimonials in advertisements would be no more than $400 per municipal advisor per year, assuming each municipal advisor would use approximately five testimonials per year, based on the SEC's 2019 estimated ongoing costs for investment advisers using testimonials and endorsements.
The proposed amendments to MSRB Rule G-40 and MSRB Rule G-8 would be applicable to all municipal advisors and would help ensure that all regulated entities dually registered as a dealer and as a municipal advisor, or as an investment adviser with the SEC and as a municipal advisor, are subject to consistent standards on the use of testimonials in advertisements. The proposed amendments to MSRB Rule G-40 and MSRB Rule G-8 would therefore promote efficiency in the marketplace.
The MSRB believes that proposed amended MSRB Rule G-40 and MSRB Rule G-8 would not impose an unnecessary or inappropriate regulatory burden on small municipal advisory firms, as the potential benefits from using testimonials in advertising would be applicable to all municipal advisors and should be proportionate to each municipal advisory firm's business activities. The proposed amendments to MSRB Rule G-40 and MSRB Rule G-8 therefore should not negatively affect competition and capital formation; it may improve competition among municipal advisors by allowing another method for advertising. The MSRB believes that permitting municipal advisors to use a testimonial in an advertisement would be particularly helpful for small municipal advisors to highlight the services provided to other municipal advisory clients.
Written comments were neither solicited nor received on the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
For the Commission, pursuant to delegated authority.
U.S. Small Business Administration.
Amendment 2.
This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of California (FEMA-4683-DR), dated 01/26/2023.
Issued on 02/06/2023.
Submit completed loan applications to: U.S. Small Business Administration, Processing and
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
The notice of the President's major disaster declaration for Private Non-Profit organizations in the State of California, dated 01/26/2023, is hereby amended to establish the incident period for this disaster as beginning 12/27/2022 and continuing through 01/31/2023.
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Amendment 6.
This is an amendment of the Presidential declaration of a major disaster for the State of California (FEMA-4683-DR), dated 01/14/2023.
Issued on 02/06/2023.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
The notice of the President's major disaster declaration for the State of California, dated 01/14/2023, is hereby amended to establish the incident period for this disaster as beginning 12/27/2022 and continuing through 01/31/2023.
All other information in the original declaration remains unchanged.
9:00 a.m. CT on February 16, 2023.
Marriott Shoals Conference Center, 10 Hightower Place, Florence, Alabama.
Open.
The TVA Board of Directors will hold a public meeting on February 16, 2023, at the Marriott Shoals Conference Center, 10 Hightower Place, Florence, Alabama.
The meeting will be called to order at 9:00 a.m. CT to consider the agenda items listed below. TVA management will answer questions from the news media following the Board meeting.
On February 15, at the Marriott Shoals Conference Center, the public may comment on any agenda item or subject at a board-hosted public listening session which begins at 2:00 p.m. CT and will last until 4:00 p.m. Preregistration is required to address the Board.
For more information: Please call Jim Hopson, TVA Media Relations at (865) 632-6000, Knoxville, Tennessee. Anyone who wishes to comment on any of the agenda in writing may send their comments to: TVA Board of Directors, Board Agenda Comments, 400 West Summit Hill Drive, Knoxville, Tennessee 37902.
Federal Aviation Administration (FAA), DOT.
Notice of public meeting.
This notice announces a public meeting for input to Changed Product Rule (CPR) International Authorities Working Group (IAWG) recommendations. The purpose of the public meeting is for the FAA to present information on and receive public input on the CPR IAWG recommendations.
The meeting will be held on Tuesday, February 28, 2023, from 9:00 a.m. to 4:00 p.m. Eastern Time. Requests to attend the meeting must be received by Monday, February 20, 2023. Requests for accommodations to a disability must be received by Monday, February 20, 2023. Materials to be presented during the meeting must be received no later than Monday, February 20, 2023. The FAA will accept input on the IAWG recommendations until March 17, 2023.
The meeting will be held at The General Aviation Manufacturers Association, 1400 K Street NW, Suite 801, Washington, DC 20005 and virtually. Members of the public who wish to participate in the meeting must RSVP by emailing
Meeting minutes, transcripts, and other information will be available in the public docket at
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Sue McCormick, Manager, Strategic Policy for Systems Standards, AIR-619, Strategic Policy Management Branch, Policy and Innovation Division, Aircraft Certification Service, Federal Aviation Administration, 26805 East 68th Avenue, Denver, CO 80249, telephone (206) 231-3242, email
The FAA issued a notice in the
A copy of the International Authorities Working Group (IAWG) Changed Product Rule (CPR) Recommendations can be downloaded at:
At the meeting, the agenda will solicit input on each of the recommendations from the IAWG report in the following manner:
Recommendations applicable to § 21.101 of title 14, Code of Federal Regulations (14 CFR), significant changes to include eliminating impractical exceptions, combining impractical and does not contribute materially to the level of safety exceptions, additional design requirements and conditions, definition of baseline product, cumulative effect and related changes, proposed revisions to § 21.101, and removing secondary changes.
Continue discussion on recommendations applicable to § 21.101 significant changes to include the use of system safety methodologies, documentation of certification basis on certificates and recommendations applicable to § 21.19: Substantial Changes. Input that is supported by data, especially quantifiable data, on use of the CPR process is highly encouraged.
The final meeting agenda will be posted on the FAA website
The purpose of the public meeting is for the FAA to hear the public's views and obtain information relevant to the CPR IAWG recommendations. The FAA will consider comments made at the public meeting as well as comments submitted to the docket.
The meeting will be open to the public on a first-come, first served basis, as space is limited. The FAA will make every effort to accommodate all persons wishing to attend. Persons wishing to attend this one-time meeting in person are requested to register in advance, due to limited space. Please confirm your attendance with the person listed in the
Members of the press, in addition to registering for this event, must also RSVP by emailing
The U.S. Department of Transportation is committed to providing equal access to this meeting for all participants. If you need alternative formats or services because of a disability, such as sign language, interpretation, or other ancillary aids, please contact the person listed in the
Federal Aviation Administration (FAA), DOT.
Notice of petition for exemption received.
This notice contains a summary of a petition seeking relief from specified requirements of Federal Aviation Regulations. The purpose of this notice is to improve the public's awareness of, and participation in, the FAA's exemption process. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition.
Comments on this petition must identify the petition docket number and must be received on or before March 6, 2023.
Send comments identified by docket number FAA-2022-1802 using any of the following methods:
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Deana Stedman, AIR-612, Federal Aviation Administration, 2200 South 216th Street, phone and fax 206-231-3187, email
This notice is published pursuant to 14 CFR 11.85.
Federal Highway Administration (FHWA), Department of Transportation (DOT).
Notice of limitations on claims for judicial review of action by FHWA and other Federal agencies.
This notice announces actions taken by FHWA and other Federal agencies that are final. This final agency action relates to the construction of the Rome-Cartersville Development Corridor in Bartow County. The FHWA's Finding of No Significant Impact (FONSI) provides details on the Selected Alternative for the proposed improvements.
By this notice, FHWA is advising the public of the final agency actions subject to 23 U.S.C. 139(
Notice is hereby given that FHWA has taken a final agency action by issuing a FONSI for the following highway project in the State of Georgia: the Rome-Cartersville Development Corridor Project located in Bartow County, Georgia. The proposed project will improve travel conditions for automobiles and trucks between US 411/US 41 and I-75 in Bartow County by constructing a new location four-lane highway between US 411/US 41 and I-75, constructing a new full-diamond interchange that will replace the existing overpass on Old Grassdale Road at I-75, constructing roundabout intersection controls, and relocating the existing connection with Busch Drive. The route will continue back on existing Old Grassdale Road, ending approximately 0.5-mile northeast of I-75. The purpose of the project is to improve connectivity for commuters and truck traffic needing I-75 access from within Floyd and Bartow counties. The project is included in the Cartersville-Bartow Metropolitan Planning Organization (CB-MPO) Transportation Improvement Program (TIP) as project number CB-512.
The FHWA's action, related actions by other Federal agencies, and the laws under which such actions were taken are described in the Environmental Assessment (EA) approved on August 2, 2022, and the FONSI issued on February 8, 2023, and other documents in the project file. The EA, FONSI, and other project records are available for review by contacting FHWA or the Georgia Department of Transportation at the addresses provided above. The EA and FONSI can also be reviewed and downloaded from the project website at
This notice applies to all Federal agency decisions as of the issuance date of this notice and all laws under which such actions were taken, including but not limited to:
Office of Foreign Assets Control, Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of seven individuals that have been placed on OFAC's Specially Designated Nationals and Blocked Persons List based on OFAC's determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these individuals are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
See
OFAC: Andrea Gacki, Director, tel.: 202-622-2490; Associate Director for Global Targeting, tel.: 202-622-2420; Assistant Director for Licensing, tel.: 202-622-2480; Assistant Director for Regulatory Affairs, tel.: 202-622-4855; or the Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490.
The Specially Designated Nationals and Blocked Persons List and additional information concerning OFAC sanctions programs are available on OFAC's website (
On February 9, 2023, OFAC determined that the property and interests in property subject to U.S. jurisdiction of the following individuals are blocked under the relevant sanctions authority listed below.
1. ISKRITSKY, Mikhail (a.k.a. “Mty”; a.k.a. “Tropa”), Moscow, Russia; DOB 05 Nov 1981; nationality Russia; Email Address
Designated pursuant to section l(a)(iii)(B) of Executive Order 13694 of April 1, 2015, “Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities”, 80 FR 18077, 3 CFR, 2015 Comp., p. 297, as amended by Executive Order 13757 of December 28, 2016, “Taking Additional Steps to Address the National Emergency With Respect to Significant Malicious Cyber-Enabled Activities”, 82 FR 1, 3 CFR, 2016 Comp., p. 659 (E.O. 13694, as amended) for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
2. KARYAGIN, Valentin Olegovich (a.k.a. “Globus”), Volgograd, Russia; DOB 19 Apr 1992; nationality Russia; Email Address
Designated pursuant to section l(a)(iii)(B) of E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
3. MIKHAILOV, Maksim Sergeevich (a.k.a. “Baget”), Sevastopol, Ukraine; DOB 29 Jul 1976; nationality Ukraine; Gender Male (individual) [CYBER2].
Designated pursuant to section l(a)(iii)(B) of E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
4. PLESHEVSKIY, Dmitry (a.k.a. “Iseldor”), Zelenograd, Russia; DOB 30 Jul 1992; nationality Russia; Email Address
Designated pursuant to section l(a)(iii)(B) of E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
5. SEDLETSKI, Valery (a.k.a. SEDLETSKI, Valery Veniaminovich; a.k.a. “Strix”), Rostov, Russia; DOB 29 Jul 1974; nationality Russia; Gender Male (individual) [CYBER2].
Designated pursuant to section l(a)(iii)(B) of E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
6. VAKHROMEYEV, Ivan Vasilyevich (a.k.a. VAKROMEEV, Ivan Vasilievich; a.k.a. “Mushroom”), Naro-Fominsk, Russia; DOB 29 Dec 1988; nationality Russia; Email Address
Designated pursuant to section l(a)(iii)(B) of E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
7. KOVALEV, Vitaly Nikolayevich (a.k.a. KOVALEV, Vitaliy; a.k.a. “Ben”; a.k.a. “Bentley”), Russia; DOB 23 Jun 1988; nationality Russia; Gender Male (individual) [CYBER2].
Designated pursuant to section l(a)(iii)(B) of E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, an activity described in section 1(a)(ii) of E.O. 13694, as amended.
Office of Foreign Assets Control, Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC's Specially Designated Nationals and Blocked Persons List (SDN List) based on OFAC's determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
See
OFAC: Andrea Gacki, Director, tel.: 202-622-2490; Associate Director for Global Targeting, tel.: 202-622-2420; Assistant Director for Licensing, tel.: 202-622-2480; Assistant Director for Regulatory Affairs, tel.: 202-622-4855; or the Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490.
The SDN List and additional information concerning OFAC sanctions programs are available on OFAC's website (
On February 9, 2023, OFAC determined that the property and interests in property subject to U.S. jurisdiction of the following persons are blocked under the relevant sanctions authorities listed below.
Internal Revenue Service, Department of Treasury.
Notice of charter renewal.
The Charter for the Internal Revenue Service Advisory Council (IRSAC), has been renewed for two years beginning October 14, 2022, in accordance with the Federal Advisory Committee Act (FACA).
Stephanie Burch at (202) 317-4219, or send an email to
Notice is hereby given that the charter for the Internal Revenue Service Advisory Council (IRSAC) has been renewed for two years beginning October 14, 2022, in accordance with the Federal Advisory Committee Act (FACA), 5 U.S.C., App. 2.
The purpose of the IRSAC is to provide an organized public forum for discussion of relevant tax administration issues between Internal Revenue Service (IRS) officials and representatives of the public.
The IRSAC proposes enhancements to IRS operations, recommends administrative and policy changes to improve taxpayer service, compliance and tax administration, discusses relevant information reporting issues, addresses matters concerning tax-exempt and government entities and conveys the public's perception of professional standards and best practices for tax professionals.
Conveying the public's perception of IRS activities to Internal Revenue Service officials, the IRSAC is comprised of individuals representing a cross-section of the taxpaying public with substantial, disparate experience in tax preparation for individuals, small businesses and/or large, multi-national corporations; information reporting; tax-exempt and government entities; digital services; and professional standards of tax professionals.
February 16, 2023, 12:00 p.m. to 3:00 p.m., Eastern time.
This meeting will be accessible via conference call and via Zoom Meeting and Screenshare. Any interested person may call (i) 1-929-205-6099 (US Toll) or 1-669-900-6833 (US Toll), Meeting ID: 912 2942 8303, to listen and participate in this meeting. The website to participate via Zoom Meeting and Screenshare is
This meeting will be open to the public.
The Unified Carrier Registration Plan Education and Training Subcommittee (the “Subcommittee”) will continue its work in developing and implementing the Unified Carrier Registration Plan and Agreement. The subject matter of this meeting will include:
The Subcommittee Chair will welcome attendees, call the meeting to order, call roll for the Subcommittee,
The UCR Executive Director will verify the publication of the meeting notice on the UCR website and distribution to the UCR contact list via email followed by the subsequent publication of the notice in the
The Subcommittee Agenda will be reviewed, and the Subcommittee will consider adoption.
➢ Subcommittee action only to be taken in designated areas on agenda.
Draft minutes from the December 8, 2022, Subcommittee meeting will be reviewed. The Subcommittee will consider action to approve.
The Subcommittee will review assigned questions from the Audit Training 2 video modules to ensure accuracy of updates to the modules.
The Subcommittee Chair will review a draft version and seek comments.
The Subcommittee Chair will review a draft version and seek comments.
The Subcommittee will identify key reports generated in the NRS system for module consideration.
The Subcommittee Chair will call for any other items Subcommittee members would like to discuss.
The Subcommittee Chair will adjourn the meeting.
The agenda will be available no later than 5:00 p.m. Eastern time, February 8, 2023 at:
Elizabeth Leaman, Chair, Unified Carrier Registration Plan Board of Directors, (617) 305-3783,
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, 5 U.S.C. 10, that the Advisory Committee on the Readjustment of Veterans will hold a meeting virtually. The meeting will begin, and end as follows, and is open to the public:
The purpose of the Committee is to advise the Department of Veterans Affairs (VA) regarding the provision by VA of benefits and services to assist Veterans in the readjustment to civilian life. In carrying out this duty, the Committee shall take into account the needs of Veterans who served in combat theaters of operation. The Committee assembles, reviews, and assesses information relating to the needs of Veterans readjusting to civilian life and the effectiveness of VA services in assisting Veterans in that readjustment.
The Committee, comprised of 13 subject matter experts, advises the Secretary, through the VA Readjustment Counseling Service, on the provision by VA of benefits and services to assist Veterans in the readjustment to civilian life. In carrying out this duty, the Committee assembles, reviews, and assesses information relating to the needs of Veterans readjusting to civilian life and the effectiveness of VA services in assisting Veterans in that readjustment, specifically taking into account the needs of Veterans who served in combat theaters of operation.
On March 7, 2023, the agenda will include review of the 23rd report, a calendar forecast and discussion over subject matter experts to consider presenting at the next full committee meeting. For public members wishing to join the meeting, please use the following Microsoft Teams link:
No time will be allotted for receiving oral comments from the public; however, the committee will accept written comments from interested parties on issues outlined in the meeting agenda or other issues regarding the readjustment of Veterans. Parties should contact Mr. Richard Barbato via email at
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, 5 U.S.C. 10, that a meeting of VA's National Academic Affiliations Council (NAAC) will be held March 22, 2023-March 23, 2023, at the Orlando VA Health Care System, 13800 Veterans Way, Orlando, FL 32827. The meeting sessions will begin and end as follows:
The meetings are open to the public, except when the NAAC is conducting tours of VA facilities. Tours of VA facilities are closed to protect Veterans' privacy and personal information, in accordance with 5 U.S.C. Sec. 552b(c)(6).
The purpose of the NAAC or “Council” is to advise the Secretary on matters affecting partnerships between VA and its academic affiliates.
On March 22, 2023, the Council will convene an open session from 9:00 a.m. to 12:30 p.m. EST. The agenda will include a presentation on Innovative Academic Relationships: A National Perspective. The Council will also have a presentation from VISN 8 and Orlando VA Health Care System on Academic Relationships and Accomplishments and receive updates from the Diversity and Inclusion Subcommittee, the Strategic Academic Advisory Council (SAAC), and VA's Electronic Health Record Modernization Work Group related to education and research. In the afternoon, the Council will begin the closed portion of the meeting from 12:30 p.m. to 3:00 p.m. EST, as it tours the Orlando VA Health Care System. Tours of VA facilities are closed to protect Veterans' privacy and personal information, in accordance with 5 U.S.C. Sec. 552b(c)(6). The Council will reconvene at 3:00 p.m. for discussions and recommendations. The meeting will adjourn day one at 4:00 p.m.
On March 23, 2023, at 12:00 p.m. EST, the Council will reconvene for day two. The day two agenda includes a panel discussion with Orlando VA Health Care System leadership and trainees related to Diversity in Trainee Recruitment and Retention. The Council will have a question-and-answer session, followed by Council discussions and recommendations. The Council will receive public comments from 1:15 p.m. to 1:30 p.m. EST and will adjourn the meeting at 1:45 p.m. EST.
Interested persons may attend and present oral statements to the Council. A sign-in sheet for those who want to give comments will be available at the meeting. Individuals who speak are invited to submit a 1-2-page summary of their comments at the time of the meeting for inclusion in the official meeting record. Oral presentations will be limited to five minutes or less, depending on the number of participants. Interested parties may also provide written comments for review by the Council prior to the meeting, or at any time via email to
Office of the Deputy Secretary, HUD.
Final rule.
This final rule revises HUD regulations to implement parts of the Housing Opportunity Through Modernization Act of 2016 (HOTMA). In addition to amending regulations for HUD's public housing and Section 8 programs, this final rule revises the program regulations for several other HUD programs. HUD did this in the interest of aligning its requirements across its programs or because the underlying program statute required HUD to make the revisions. These include the regulations for HUD's Community Development Block Grants, HOME Investment Partnerships, Housing Trust Fund, Housing Opportunities for Persons With AIDS, Supportive Housing for the Elderly (Section 202), and Supportive Housing for Persons with Disabilities (Section 811) programs. Since HUD and other Federal agencies may use the regulations revised as part of this rulemaking in the calculation of income for other programs or activities, the public should be aware that the effects of this rulemaking are not limited to the programs listed in this rule and preamble.
This final rule is effective January 1, 2024, except for the amendments to §§ 5.520(d), 5.628(a), 960.102(b), 960.206(b), 960.253, 960.257(a) and (d), 960.261, 960.507, 960.509, 960.600, 960.601(b), 964.125(a), 966.4(a) and (l), which are effective March 16, 2023.
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The mailing address for each office contact is Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410.
On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130 Stat. 782). HOTMA makes numerous changes to statutes governing HUD programs, including sections 3, 8, and 16 of the United States Housing Act of 1937 (42 U.S.C. 1437
On November 29, 2016 (81 FR 85996), HUD published a
On January 18, 2017, HUD published a proposed rule (82 FR 5458) that made multiple HOTMA provisions for the Housing Choice Voucher (HCV) program, unrelated to sections 102, 103, and 104, effective and solicited public comment on HUD's implementation methods. The conforming regulatory changes for the HCV program provisions implemented by the January 18, 2017,
Many of the statutory provisions in HOTMA are intended to streamline administrative processes and reduce burdens on PHAs and owners of housing assisted by Section 8 programs. Sections 102, 103, and 104 of HOTMA require that HUD make changes to its regulations and take other actions—some of which will also reduce burdens on PHAs and private owners once implemented.
On September 17, 2019 (84 FR 48820), HUD published a proposed rule to update its regulations according to HOTMA's statutory mandate and to implement the provisions of Sections 102, 103, and 104 of HOTMA that require rulemaking. Additional details about the proposed rule may be found at 84 FR 48820 (September 17, 2019). That proposed rule has additional information on the proposed regulatory changes and how they relate to HOTMA. In addition, on December 4, 2020 (85 FR 78295), HUD re-opened public comment on specific provisions dealing with families whose income rises above the new cap for residing in public housing. This final rule follows the publication of the September 17, 2019, proposed rule and considers the public comments received, including public comments received in response to HUD's December 4, 2020, notice re-opening public comments.
Because a variety of programs use these definitions, HUD offers the following chart showing which programs (other than the public housing and Section 8 programs) are affected by various changes to the income regulatory provisions in 24 CFR part 5:
HUD edits the definition of “earned income” in § 5.100. In this final rule, HUD expands the proposed definition of “earned income” to explain that “transfer payments” (which are not included in earned income) mean payments made or income received in which no goods or services are being paid for, such as welfare, social security, and governmental subsidies for certain benefits.
The proposed rule definition of “earned income” in § 5.100 largely mirrored the definition of “earned income” currently in § 984.103; however, unlike the definition of “earned income” in § 984.103, the proposed rule did not specify that “funds deposited in or accrued interest on the FSS program escrow account established by a PHA on behalf of a participating family” is excluded from “earned income.” In the context of both the proposed rule and in this final rule, HUD determined it would be inappropriate to define Family Self-Sufficiency (FSS) escrow deposits as either earned or unearned income because FSS participants do not actually receive FSS escrow funds until the PHA disburses the funds to the family in accordance with FSS requirements. Income earned on amounts placed in a family's FSS account are excluded from family income pursuant to a new exclusion at 24 CFR 5.609(b)(27). Additionally, the value of FSS accounts is excluded by 24 CFR 5.603 from the calculation of net family assets.
HUD has also added the corresponding definition of “unearned income” in § 5.100. The definition of unearned income specifies that the term is broad, encompassing any annual income, as calculated under § 5.609, that is not earned income. The definition of “Real property” in § 5.100 is also slightly modified from the proposed rule to have the same meaning as real property as provided under the State law in which the property is located.
HUD is revising the definition “medical expenses” in § 5.603 to be “health and medical care expenses” consistent with the language used in HOTMA. HUD is also revising the definition to reflect the Internal Revenue Service (IRS) definition of the term and provide additional clarity without using the term to define itself. In addition, this final rule then adds “long-term care premiums” as an example of what is included in the definition of health and medical care expenses. The prior regulation in § 5.603(b) specifically included “medical insurance premiums” as an example of health and medical care expenses, and the proposed rule did not propose to alter this existing example of what counts as health and medical care expenses. In this final rule, HUD is adding a reference to long-term care in the regulatory language to conform with existing practices and policies and to add clarity. For example, the HUD Handbook
HUD also amends the definition of “net family assets” in § 5.603 in response to questions and requests for clarification submitted in public comments. Initially, HUD clarifies that net family assets do not include the value of all non-necessary items of personal property with a total combined value of $50,000 or less, as adjusted annually by an inflationary factor. HUD will issue guidance for PHAs, owners, and grantees to determine whether an item is a “necessary item of personal property” or whether the value of the item should be included in calculating the value of all non-necessary items of personal property for the $50,000 threshold. In addition, HUD is specifying that because negative equity in real property does not preclude a family from selling the property, negative equity alone does not justify excluding such a property from net family assets. The definition of “net family assets” also excludes Federal tax refunds or refundable tax credits for a period of 12 months after receipt by the family. HUD adds this language to align with 26 U.S.C. 6409, which states that any Federal tax refund (or advance payment with respect to a refundable credit) made to any individual “shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual” for benefits or assistance under any Federal program or State or local program financed with Federal funds. HUD also clarifies the definition of “net family assets” to provide that in cases where a trust fund has been established and the trust is not revocable by, or under the control of, any member of the family or household, the trust fund is not a family asset and the value of the trust is not included in the calculation of net family assets, so long as the fund continues to be held in a trust that is not revocable by, or under the control of, any member of the family or household. Finally, as explained later in this preamble, HUD excludes from the calculation of “net family assets” the value of any “baby bond” account created, authorized, or funded by Federal, State, or local government.
As a result of adding a new income exclusion for “nonrecurring income” (see below), HUD is including definitions for “day laborer,” “independent contractor,” and “seasonal worker” in § 5.603, all of which are referenced in the new income exclusion. HUD expects that adding these new definitions will help PHAs and owners better determine what income must be included when determining the family's rent for the upcoming year by narrowing the definition of nonrecurring income.
In § 5.603, HUD is amending the definition of “foster adults” from what was proposed. HUD also adds a definition of “foster child” and is revising the definition of “dependent.” These definitions provide additional details on the characteristics of foster adults and foster children for purposes of determining members of a household. However, while foster adults and foster children are members of the household (and therefore will be considered when determining appropriate unit size and utility allowance), they are not considered members of the family for purposes of determining either annual and adjusted income or net family assets, nor are the assets of foster adults or foster children taken into consideration for purposes of the asset limitations in HUD programs covered by these definitions.
These revised definitions will result in a change in the treatment of foster children and foster adults residing in units assisted under Multifamily Housing programs because the Office of Multifamily Housing Programs has treated foster children and foster adults as family members. In finalizing this rule, HUD determined that, because the definition of “family” applies to all 1937 Act programs, it was necessary to clarify for HUD programs covered by this rule that a foster child or adult is a member of the household but not a member of the assisted family (similar to a live-in aide). HUD also determined that there are practical considerations that weigh in favor of this clarification across all programs. For example, § 5.403 states that “a child who is temporarily away from the home because of placement in foster care is considered a member of the family.” If an assisted family temporarily housed this foster child and counted the child as a member of their family, then the child would be considered a family member of two assisted families at the same time.
HUD will update its existing Multifamily Housing guidance on foster families, including chapter 3 of the Multifamily Occupancy Handbook, to conform with this final rule. Upon the effective date of this final rule, these regulations supersede conflicting Multifamily Housing guidance.
This final rule updates the definition of “family” in § 5.403. The definition in this final rule incorporates revisions made to the 1937 Act by the Fostering Stable Housing Opportunities provisions of the Consolidated Appropriations Act, 2021,
Specifically, youth who are between the ages of 18 and 24, who have either left foster care or will leave foster care within 90 days, and who are homeless or at risk of becoming homeless at age 16 or older, will be considered “single persons” for the purposes of Section 8 and public housing under the 1937 Act. Currently, HUD's regulations at § 5.403 do not include this separate category of eligible youth within the definition of “family.” This final rule updates this definition. Because HUD has no discretion regarding this modification, HUD believes this is an appropriate conforming change to incorporate into the final rule.
HOTMA amended the 1937 Act with new and expanded provisions related to families who are residing in public housing units while being over the newly created over-income (OI) limit for that program. HUD is including in this final rule additional definitions related to such families to facilitate the use of consistent terminology throughout provisions in the regulations:
This final rule also updates an outdated citation in the definition of “Income” in § 570.3. The definition of income in that section incorporates three separate definitions of “income” and allows Community Development Block Grant program grantees and Section 108 Loan Guarantee program borrowers to choose which definition to use to determine whether a family or household is low- or moderate-income. One option available to grantees is the definition of annual income “as defined under the Section 8 Housing Assistance Payments program at 24 CFR 813.106[.]” However, the Section 8 Housing Assistance Payments program was incorporated into part 5 in 1996, and the definition of “Annual Income” was moved from § 813.106 to § 5.609. Therefore, this citation is out of date. HUD has allowed grantees to use the definition at § 5.609 despite the outdated citation because it is the clear definition applicable “under the Section 8 Housing Assistance Payments program.” This final rule updates the citation from § 813.106 to § 5.609. Because grantees are already authorized to use the definition under § 5.609, this change is technical in nature and will not affect grantees in a substantive manner. Therefore, HUD believes this is an appropriate technical correction to incorporate into the final rule.
HUD also adds cross-references to certain newly added and revised definitions described in part 5 to parts 92 (HOME Program), 93 (HTF Program), and 891 (Section 202 and Section 811 Programs) for consistency across HUD programs.
Subpart F of part 5 addresses the common definitions and provisions addressing income for multiple HUD programs. In this final rule, HUD is further revising § 5.601 to remove references to the Rent Supplement program (Rent Supp) and Rental Assistance Program (RAP), because all contracts assisted under those programs have either expired or, pursuant to the authority provided under HUD's Rental Assistance Demonstration program, been converted to Section 8 contracts.
HUD is revising the definition of annual income in § 5.609(a) for clarity. In paragraph (a)(1), HUD relies on the definition of excluded income under § 5.609(b) to provide the scope of what is included in income. In addition, HUD is modifying paragraph (a)(2) to specify that when net family assets are valued over $50,000 (as adjusted by inflation) and actual returns cannot be calculated, imputed returns are included in income. All actual returns that can be calculated continue to be included in income.
This final rule makes changes from what was proposed to the exclusions from income in § 5.609(b). Changes to the exclusions related to foster children and adults, financial aid, and distributions from trusts are discussed elsewhere within this preamble. The remaining changes are discussed here.
In § 5.609(b)(1), HUD is including the corollary to the specification in the definition of income that imputed returns for net family assets valued over $50,000 are included as income. In § 5.609(b)(1), imputed returns for net family assets valued at or below $50,000 are explicitly excluded from income. PHAs, owners, and grantees are therefore not required to calculate and may not include imputed returns as family income when a family's net family assets are valued at or below $50,000 (as such amount is annually adjusted by an inflationary factor). Actual returns from net family assets continue to be included in income.
In this final rule, HUD revises § 5.609(b)(2) to exclude from income various types of trust distributions. For an irrevocable trust or a revocable trust outside the control of the family or household excluded from the definition of net family assets under § 5.603(b), the final rule excludes from income distributions of the principal or corpus of the trust, and distributions of income from the trust when the distributions are used to pay the costs of health and medical care expenses for a minor. For a revocable trust or a trust that is under the control of the family or household, any distributions from the trust are excluded from income, except that any actual income earned by the trust, regardless of whether it is distributed, shall be considered income to the family at the time it is received. Please see the discussion elsewhere in this preamble (section III. On public comments and HUD's responses, Section “E. Trust Distributions” under the header “Income Exclusions”) for a detailed discussion of distributions of income or principal from trusts. HUD is also modifying § 5.609(b)(3) to remove references to income from foster children and adults and to incorporate the new defined term “earned income.” This has the effect of continuing to specifically exclude earned income of all children under the age of 18 within assisted households. This income is currently excluded under 24 CFR 5.609(c)(1) of HUD's income regulations and will remain excluded under this final rule.
Section 5.609(b)(4) excludes from income payments received for the care of foster children or adults, and the proposed rule proposed language expanding the exclusion to State kinship or guardianship care payments. In this final rule, HUD is clarifying that the exclusion should also apply to
Section 5.609(b)(5) excludes from income insurance payments and settlements for personal or property loss. In this final rule, HUD is clarifying that these payments and settlements include, but are not limited to, “payments through health insurance, motor vehicle insurance, and workers' compensation.” HUD believes that explicitly including these examples will help address questions about what is covered by this exclusion.
In this final rule, HUD excludes “income earned by, government contributions to, and distributions from `baby bond' accounts created, authorized, or funded by Federal, State, or local government” from income in § 5.609(b)(10). HUD also revised 24 CFR 5.603 to exclude the “value of any `baby bond' account created, authorized, or funded by Federal, State, or local government” from the calculation of net family assets. HUD makes these revisions in recognition of the fact that “baby bonds” (money held in trust by the government for children until they are adults) are being authorized in various States and localities in an effort to combat the wealth gap and address systemic poverty. In this final rule, HUD makes other revisions to the proposed § 5.609(b)(10). Specifically, § 5.609(b)(10) now excludes “income and distributions from” rather than the ambiguous “amounts from” any Coverdell education savings account under Section 530 of the Internal Revenue Code of 1986 or any qualified tuition program under Section 529 of such Code.
The proposed rule at § 5.609(b)(10) excluded from annual income any amounts from ABLE accounts under section 529A of the Internal Revenue Code of 1986. With this exclusion, HUD intended to codify a mandatory income exclusion in the Achieving Better Life Experience (ABLE) Act (Pub. L. 113-295). However, HUD has since determined that the income exclusion in the proposed rule did not comply with the statutorily mandated income exclusion and was also inconsistent with Notice PIH 2019-09/H-2019-06 (issued April 26, 2019),
In § 5.609(b)(12)(iv), incremental earnings and benefits from various specific employment training programs are excluded from income. In the proposed rule, HUD inadvertently omitted Federal and Tribal employment training programs from the list of income exclusions and included only State and local employment training programs. Therefore, in this final rule, HUD is adding language to also exclude payments from training programs funded by HUD or qualifying Federal, State, Tribal, or local employment training programs (including training programs not affiliated with a local government) and payments from training of a family member as resident management staff from the family's income.
In this final rule, HUD is revising the wording of the income exclusions of earned income of dependent full-time students (§ 5.609(b)(14)) and of adoption assistance payments (§ 5.609(b)(15)) to provide greater clarity as to the amount excluded. In both cases, the amount excluded from income was intended to be the amount in excess of the dependent deduction in § 5.611 (understanding that under HOTMA the dependent deduction will be adjusted annually for inflation). Under the proposed rule, rather than simply identifying the amount of the dependent full-time student's earned income that was specifically excluded from income, HUD identified the amount of the dependent full-time student's earned income that “shall be considered income” (which was the amount equal to the dependent deduction). HUD is revising both § 5.609(b)(14) and § 5.609(b)(15) to explicitly state that the income exclusion is the earned income in excess of the amount of the deduction for a dependent in § 5.611. Since the dependent deduction under § 5.611 provides for this annual adjustment, HUD believes that the intended purpose of the regulation will be better understood as a result of the revisions in the final rule.
Section 5.609(b)(19) excludes payments to keep family members with disabilities living at home. In the proposed rule, HUD proposed to exclude only payments from State Medicaid-managed care systems to keep a family member who has any disability (not just a developmental disability) living at home. The intent behind these changes was both to expand the existing exclusion to include those with a disability other than a developmental disability and to clarify the types of payments that are excluded from income. Many States provide benefits to individuals with a variety of disabilities, which allow such individuals to remain at home rather than reside in institutional settings such as hospitals, nursing homes, or other institutional or segregated settings, and there was no reason to limit the exclusion to persons with a certain type of disability.
The proposed rule also removed the qualifying language regarding such payments to “offset the cost of services and equipment provided.” HUD is aware that payments under these programs are not limited to reimbursement of specific services and equipment in order to keep a family member with a disability living at home.
In response to public comments that State Medicaid agencies provide in-home supports through a range of delivery structures, such as fee-for-services, not just managed care, HUD is expanding the language in the final rule to exclude all payments from State Medicaid agencies for in-home supports. Federal Medicaid rules allow States to cover a wide range of institutional and home and community-based long-term services and supports (LTSS), but the type of services, populations covered, and delivery models differ substantially across States based on their individual Medicaid program structure.
Additionally, in response to public comments pointing out that there are similar payments from States that are not connected to Medicaid, HUD is expanding the language in the final rule to also exclude payments from or authorized by State agencies for States that use a source of funding other than Medicaid to provide for in-home support.
HUD is also adding payments made or authorized by a Federal agency for this purpose so as not to inadvertently make such payments ineligible for this exclusion. HUD will issue guidance to
Public commenters also described how in many cases the government agency directly pays the person providing the services. For instance, an adult providing personal care services for a parent or other family member with a disability could receive direct payments from the State agency for performing those services. HUD is adding language in the final rule that amounts paid directly to a member of the assisted family by the State Medicaid agency (including through a managed care entity) or other State or Federal agency (or other entities authorized by the agencies to make such payments) to enable a family member who has a disability who wishes to remain living in the assisted unit, under the applicable terms and conditions for the family member to be eligible for such payments, are excluded from the family's income. This income exclusion applies only to payments to the family member for caregiving services for another member of the family residing in the assisted unit. For example, payments to the family member for caregiving services for someone who is not a member of the assisted family (such as for a relative that resides elsewhere) are not excluded from income. Furthermore, if the agency was making payments for caregiving services to the family member for not only another member of the assisted family but also for a person outside of the assisted family, only the payments attributable to the caregiving services for the caregiver's assisted family member would be excluded from income.
HUD is revising § 5.609(b)(20), which excludes loan proceeds from income. The revisions specify that the exclusion also covers amounts disbursed to or on behalf of a borrower, or loan proceeds received by a third party instead of the family. Examples of loan proceeds excluded by this new definition can include payments from student loans, car loans, or amounts received from a Home Equity Conversion Mortgage (if the assisted family is in a program that allows for assistance to homeowners
In § 5.609(b)(21), HUD is modifying the exclusion of payments received by Tribal members resulting from mismanagement of assets held in trust by the United States. In addition to using the term “Tribal member” instead of “Indian persons,” § 5.609(b)(21) now covers payments excluded from income under Federal law other than the Internal Revenue Code. These payments were always required to be excluded under HUD income exclusion requirements because they are excluded from income for eligibility and determining the amount of assistance under Federal law, but they are now explicitly referenced in § 5.609(b)(21).
HUD also simplified § 5.609(b)(22), which addresses income exclusions required by other Federal statutes. Rather than distributing notices updating the list to PHAs, the final rule commits HUD to publishing the notice in the
Section 5.609(b)(23) excludes “gap” payments made pursuant to 49 CFR part 24. These are a form of relocation assistance payments made to displaced persons under the Uniform Relocation and Real Property Acquisition Policies Act of 1970, as amended (42 U.S.C. 4601
In the proposed rule, HUD proposed removing the exclusion of “temporary, nonrecurring or sporadic income.” This was the result of much confusion over what exactly the exclusion covered. However, after reviewing public comments and additional consideration, HUD has realized the utility of including a broad exemption for income that a family may have received previously but does not anticipate for the coming year. This is particularly needed because under HOTMA, PHAs and owners are to use the family's income from the previous year in making an income determination for the upcoming year, with adjustments as the PHA or owner determines necessary to reflect current income. Therefore, HUD is restoring, in § 5.609(b)(24) of this final rule, a general exclusion of “nonrecurring income.” To address some of the issues that have arisen under the previous broad exemption, HUD is defining nonrecurring income as income that will not be repeated in the coming year, based on information that the family provides. The exclusion also specifically states that income earned as an independent contractor, day laborer, or seasonal worker does not count as “nonrecurring” income.
Additionally, to address other forms of sporadic income that would have been excluded under the previous blanket exclusion, HUD is including additional information on what “nonrecurring income” consists of and offering specific examples: payments from the U.S. Census Bureau for work on the decennial Census or the American Community Survey that is less than 180 days and does not result in a permanent position; direct Federal or State payments intended for economic stimulus or recovery; amounts received directly by the family as a result of State or Federal refundable tax credits or refunds at the time they are received; gifts for holidays, birthdays, or significant life events or milestones; non-monetary, in-kind donations from food banks or similar organizations; and lump-sum additions to assets such as lottery or other contest winnings.
Under 26 U.S.C. 6409, Federal tax refunds are excluded from the calculation of income for Federal programs. HUD is therefore adding Federal refundable tax credits and Federal tax refunds at the time they are received to the exclusions from annual income at § 5.609(b)(24)(iv), as they are a form of nonrecurring income that is specifically excluded from family income by statute. Until this rulemaking, refunds of State taxes have not been specifically identified as excluded from a family's annual income in HUD's regulations. HUD is clarifying that this is a form of nonrecurring income that must be excluded from a family's annual income. HUD is now excluding amounts directly received by the family as a result of State refundable tax credits or State tax refunds at the time that they are received in § 5.609(b)(24)(iii).
HUD notes that the reason why the passages at § 5.609(b)(24)(iii) and (iv) read as refundable tax credits or tax refunds “at the time they are received” is because a family's annual income may have already included the amounts the family received in the year that the taxes were paid. In those instances, the refund of taxes paid does not represent any new or additional money paid to the family. Moreover, there are some forms of refundable tax credits that may be provided to a family in advance of filing taxes. In order to avoid any confusion and to ensure that PHAs and owners are not counting the same income more than once, HUD has added the modifier “at the time they are received” for the exclusion of both Federal and State refundable tax credits and refunds.
HUD has used the current exclusion in § 5.609(c)(3) to exclude from income lump-sum additions to assets that the family may have received as a result of a resolution of a civil rights matter. This may include amounts received as a result of litigation or other actions, such as conciliation agreements, voluntary compliance agreements, consent orders, other forms of settlement agreements, or administrative or judicial orders under the Fair Housing Act, Title VI of the Civil Rights Act, section 504 of the Rehabilitation Act (Section 504), the Americans with Disabilities Act, or any other civil rights or fair housing statute or requirement. HUD does not intend to change the practice of excluding this income, but because there has been confusion, HUD is adding a new income exclusion in § 5.609(b)(25) that broadly excludes from income any amounts the family may receive from civil rights settlements or judgments regardless of how the settlement or judgment is structured. This reflects the fact that sometimes settlements or judgments of this nature are not lump-sum payments but instead may have a payment schedule.
HUD is also adding at § 5.609(b)(25) language stating that back pay received by the family pursuant to a civil rights settlement or judgment is excluded from income. HUD believes it would be unfair to treat back pay received by a family pursuant to a civil rights settlement or judgment differently than other amounts received under such settlements or judgments. The treatment of back pay is different from the future payments the family receives as a result of the raise or promotion under the terms of the civil rights settlement or judgment, which would be included in income.
While these civil rights settlement or judgment amounts are excluded from income, the settlement or judgment amounts will generally be counted toward the family's net family assets (
Income generated on the settlement or judgment amount after it has become a net family asset is not excluded from income. For example, if the family received a settlement or back pay and deposited the money in an interest-bearing savings account, the interest from that account would be income at the time the interest is received. As an example, consider a family with no net family assets that receives a civil rights settlement in the amount of $20,000. Upon receiving the settlement, the family's assets increased to $20,000, but the $20,000 settlement is not included in the family's income. At the family's next income examination, any actual income earned from the $20,000 (
Furthermore, if a civil rights settlement or judgment increases the family's net family assets such that they exceed $50,000 (as annually adjusted by an inflationary factor), then income will be imputed on the net family assets pursuant to 24 CFR 5.609(a)(2) in this final rule. If the imputed income, which HUD considers unearned income, increases the family's annual adjusted income by ten percent or more, then an interim reexamination of income will be required unless the addition to the family's net family assets occurs within the last 3 months of the family's income certification period and the PHA or owner chooses not to conduct the examination.
Finally, a large addition to net family assets may impact the family's eligibility for public housing or Section 8 assistance if the net family assets exceed $100,000 (as annually adjusted by an inflationary factor) per 24 CFR 5.618.
In this final rule, HUD adds new income exclusions at § 5.609(b)(26) and (b)(27). Section 5.609(b)(26) excludes income received from any account under a retirement plan recognized as such by the IRS, including individual retirement arrangements (IRAs), employer retirement plans, and retirement plans for self-employed individuals. However, any distribution of periodic payments from these retirement accounts shall be income at the time they are received by the family. This revision aligns with, and clarifies, HUD's current policy regarding the treatment of income earned and distributions from retirement accounts. For example, current § 5.609(b)(4) states that income includes the full amount of periodic amounts received by retirement funds and pensions. A new income exclusion at § 5.609(b)(27) excludes income earned on amounts placed in a family's FSS account. This exclusion is consistent with how HUD currently treats income earned on FSS accounts. The exclusion does not address distributions from a family's FSS account, because such distributions (either as a final or interim distribution under the terms of the Contract of Participation) will be excluded from income under § 5.609(b)(24)(vii) as a lump-sum addition to net family assets.
With these revisions and additions, HUD intends to exclude from income sources of funds that cannot be relied upon to pay for a family's housing needs, while providing additional clarity to PHAs and owners about what funds must still be considered income, given the broad definition contained in HOTMA.
In § 5.609(b)(28), HUD is codifying the current requirements for considering self-employment income and income from the operation of a business, which are currently codified in § 5.609(b)(2). Under § 5.609(b)(28), gross income that a family member receives through self-employment or operation of a business is excluded from a family member's income, as gross income is not reflective of the costs of operating a business of being self-employed. Instead, HUD is requiring that the net income from the operation of a business be considered income in § 5.609(b)(28)(i). As provided by currently codified § 5.609(b)(2), HUD does not consider expenditures for business expansion of amortization of capital indebtedness to be deductible when determining the new income from a business. An allowance for depreciation of assets used in a business or profession may be deducted, based on a straight-line depreciation, as provide in IRS regulations, as is the case under the current rule. Under § 5.609(b)(28)(ii), HUD shall consider the withdrawal of cash or assets from the operation of a business to be income except to the extent that such withdrawal is to reimburse the family member for cash or assets that the family has invested in the operation of the business. This treatment is no different than the current treatment under the regulations and represents a continuation of existing policy.
HOTMA mandates the exclusion of certain earned income for full-time dependent students and grant-in-aid, or scholarship amounts for such students. Although not required by the HOTMA statute, the proposed rule proposed the previous exclusion of financial aid, which also codified the treatment of financial assistance under longstanding appropriations act provisions for Section 8 families (including persons over the age of 23 with dependent children). However, the proposed rule was still not entirely clear regarding what constitutes financial assistance. Furthermore, the proposed rule did not codify a Federally mandated income exclusion in section 479B of the Higher Education Act of 1965 (20 U.S.C.
Therefore, in this final rule, in § 5.609(b)(9), HUD codifies the Federally mandated income exclusion in section 479B of the HEA. HUD also expands on the proposed regulatory language, calling upon interpretations of the previous regulatory text, IRS definitions, and relevant statutory language. Section 5.609(b)(9) includes two income exclusions related to assistance provided to students. First, § 5.609(b)(9)(i) excludes any assistance that section 479B of the HEA requires to be excluded from a family's income. Second, § 5.609(b)(9)(ii) excludes student financial assistance, not otherwise excluded by § 5.609(b)(9)(i), for tuition, books, and supplies, room and board, and other fees required and charged to a student by an institution of higher education.
Section 5.609(b)(9)(i) addresses the mandatory income exclusion in section 479B of the HEA, which states “[n]otwithstanding any other provision of law, student financial assistance received under this title, or under Bureau of Indian Affairs student assistance programs, shall not be taken into account in determining the need or eligibility of any person for benefits or assistance, or the amount of such benefits or assistance, under any Federal, State, or local program financed in whole or in part with Federal funds.” Under Section 701 of Division FF of Public Law 116-260, entitled “FAFSA Simplification Act,” Section 479B of the HEA has been modified slightly to exclude student financial assistance under the Bureau of Indian Education (instead of the Bureau of Indian Affairs) and to expand the forms of excluded income to include income earned in employment and training programs under Section 134 of the Workforce Innovation and Opportunity Act (WIOA) (29 U.S.C. 3174
Section 479B of the HEA requires that all assistance under Title IV of the HEA (as well as Bureau of Indian Affairs student financial assistance), even assistance provided to students in excess of tuition and required fees or charges, be excluded from HUD income calculations. However, for more than a decade, enacted on a year-by-year basis, HUD appropriations have included a provision that has created an exception to section 479B for Section 8 income calculations. For example, the FY2022 Appropriations Act (Pub. L. 117-103) states that, “[f]or purposes of determining the eligibility of a person to receive assistance under Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), any financial assistance (in excess of amounts received for tuition and any other required fees and charges) that an individual receives under the Higher Education Act of 1965 (20 U.S.C. 1001
Although the proposed rule sought to codify this appropriations requirement, HUD has since determined that it does not have the authority to publish a rule that contradicts section 479B of the HEA without explicit statutory authority.
For any funds from a year where HUD's appropriations acts include Section 8 student financial assistance limitations similar to those in FY2022, those limitations will still apply with respect to Section 8 participants, even if the appropriations contradict section 479B of the HEA. As discussed directly below, any student financial assistance that is not excluded pursuant to § 5.609(b)(9)(i) is subject to § 5.609(b)(9)(ii). Thus, a PHA or owner must perform the calculation for a Section 8 student head of household or spouse who is either 23 and under or without dependent children in 5.609(b)(ii)
Section 5.609(b)(9)(ii) of the final rule recognizes that student financial assistance can take a variety of forms and come from a variety of sources to both full and part-time students. For example, HUD considered that not all assistance provided to students is assistance provided under Title IV of the HEA or through the Bureau of Indian Affairs. The final rule provides that student financial assistance, for purposes of § 5.609(b)(9)(ii), means a grant or scholarship received from the Federal government, a State, Tribal, or local government, a private foundation registered as a nonprofit under 26 U.S.C. 501(c)(3), a business entity (such as a corporation, general partnership, limited liability company, limited partnership, joint venture, business trust, public benefit corporation, or nonprofit entity), or an institution of higher education. A grant would include a qualified tuition remission, reduction, waiver, or reimbursement (
The language included in the final rule is also intended to clarify that student financial assistance excluded from income under § 5.609(b)(9)(ii) must be for educational expenses and does not include payments obtained through work study, money from friends or family, or funds that exceed the actual education expenses to the student. Amounts received under work study may still be excluded under § 5.609(b)(9)(i) (if provided pursuant to Title IV of the HEA) or § 5.609(b)(14) (to the extent that the work study is being performed by a dependent full-time student). Loan proceeds for educational expenses, though considered student financial assistance if provided under a loan program in Title IV of the HEA, are not considered student financial assistance for purposes of § 5.609(b)(9)(ii) and are already excluded from income under § 5.609(b)(20). In addition, HUD is adding language in § 5.609(b)(9)(ii)(D) that states if student financial assistance is paid to the student, the responsible entity (as defined in §§ 5.100 and 5.603) must verify that the assistance meets the requirements in the paragraph.
HUD sought in this final rule to craft regulatory text that provides for the consistent treatment of students receiving student financial assistance, as defined in § 5.609(b)(9)(ii). HUD's goal in this regard was primarily to provide for the equitable treatment of such students. The current regulation, consistent with Section 8 appropriations limitations, provides that financial assistance in excess of amounts received for tuition and any other required fees and charges (hereafter “excess” amounts) was excluded from income to an individual unless the individual was a Section 8 participant who was either age 23 or under or without dependents.
In the final rule, such “excess” amounts are not considered student financial assistance to be excluded from income under § 5.609(b)(9)(ii). Though the change will have the effect of eliminating an income exclusion for certain families (
Specifically, the final rule provides at § 5.609(b)(9)(ii)(B)(
The final rule includes a new paragraph at § 5.609(b)(9)(ii)(E) that explains how to determine the amount of assistance that exceeds these actual covered costs when the student is receiving assistance excluded from income under section 479B of the HEA as well as student financial assistance from other sources. As noted earlier, all assistance under section 479B of the HEA is excluded from income, regardless of whether those amounts exceed the actual covered costs described above. The new paragraph at § 5.609(b)(9)(ii)(E) provides that when determining the amount of assistance in excess of actual covered costs, as required under § 5.609(b)(9)(ii)(B)(
If the amount of assistance excluded under section 479B of the HEA exceeds the student's actual covered costs, then all of the amounts received from all other grants or scholarships the student is receiving from other sources would be in excess of actual covered costs and would not be considered student
On the other hand, if the amount of assistance excluded under section 479B of the HEA is less than the student's actual covered costs, then some or all of the other scholarships and grants would be excluded from income. The amount that HUD considers student financial assistance under § 5.609(b)(9)(ii) excluded from income is the lower of either (1) the total amount of scholarships and grants the student received that are not excluded under section 479B of the HEA or (2) the amount by which the student's actual covered costs exceeds the assistance the student received that is excluded under section 479B of the HEA. For example, assume a student received $15,000 in assistance from assistance excluded under 479B of the HEA and another $5,000 from a scholarship not excluded under section 479B of the HEA. The entire $15,000 excluded under section 479B of the HEA is excluded from income. If the student's actual covered costs are $22,000, then the entire amount of the $5,000 scholarship that is not excluded under section 479B of the HEA would also be student financial assistance that is excluded from income, as the amount of the scholarship combined with the assistance excluded under section 479B of the HEA ($20,000) is still less than the student's actual covered costs ($22,000). But if the student's actual covered costs are only $18,000, the amount of the scholarship that is considered student financial assistance under § 5.609(b)(9)(ii) and excluded from income would be $3,000. This is because the $3,000 by which the student's actual covered cost exceeds the assistance excluded under section 479B ($18,000-$15,000) is less than the scholarship amount that is not excluded under 479B of the HEA ($5,000). Consequently, the amount of that scholarship that is in excess of the student's actual covered costs ($2,000) is not student financial assistance and is not excluded under § 5.609(b)(9)(ii).
This final rule revises the provision in § 5.609(c)(3) that states that PHAs and owners may, but are not required to, use income calculation information from other programs or agencies to determine a family's income prior to applying deductions under § 5.611. Based on suggestions received in public comments, HUD adds the following to the list of means-tested forms of public assistance that PHAs and owners may rely upon: the Low-Income Housing Credit (LIHTC); the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); and Supplemental Security Income (SSI). In addition to these specific forms of public assistance, HUD is including other HUD programs, other means-tested forms of Federal public assistance for which HUD establishes a memorandum of understanding, and other means-tested forms of Federal public assistance that HUD may announce through a
In response to questions received in public comments, HUD is also adding regulatory language specifying how PHAs or owners that choose to use income determinations from other programs are to verify the information. PHAs or owners are to use third-party verification, which must include the tenant's family size and composition and state the family's annual income. The verification must also be dated within the time frame specified for the type of verification, including within the previous 12-month period for purposes of the specified means-tested forms of Federal public assistance. If the PHA or owner cannot obtain the required third-party verification, or if the family disputes the determination, the PHA or owner must calculate the family's annual income using the methods established in § 5.609(c)(1) and (2) or in the applicable program regulations.
This final rule clarifies that PHAs administering the public housing, HCV, and Section 8 moderate rehabilitation programs are authorized to adopt additional deductions under HOTMA in accordance with the terms and conditions at § 5.611(b). Additionally, the final rule states that only PHAs, not owners that happen to also be PHAs, may adopt additional deductions. The proposed rule stated that permissive deductions could be adopted when a PHA is an owner in the Section 8 project-based rental assistance (PBRA) program, but HUD has since determined that such a policy would not comport with HOTMA. Even if a PHA owns a PBRA property, it does so as any other PBRA owner, and without any special status conveyed upon it just because it is a PHA. Thus, because HOTMA permits only PHAs, and not owners, to adopt additional deductions, HUD concludes that a PBRA owner that is a PHA is precluded from adopting permissive deductions at a PBRA property.
This final rule updates § 5.611(b) to explain how permissive deductions are established under each applicable program and splits § 5.611(b)(1) into paragraphs (i) and (ii) for the public housing and the applicable Section 8 programs (HCV, moderate rehabilitation, and moderate rehabilitation Single-Room Occupancy (SRO) programs), respectively.
HUD is also adding additional language clarifying how HUD will ensure compliance with the amended 1937 Act's requirement that permissive deductions not “materially increase Federal expenditures.” PHAs can respond to community needs by using a wide range of permissive deductions, including permissive deductions to provide incentives to work. However, given the statutory requirement that permissive deductions may not materially increase Federal expenditures, HUD does not want to reduce funding for all PHAs by factoring in permissive deductions prior to allocating PHA Operating Funds or Section 8 funds. Therefore, HUD will not be revising the public housing Operating Fund formula to account for any decrease in PHA revenue attributable to implementing permissive deductions in accordance with § 5.611. The subsidy costs attributable to permissive deductions will not be taken into consideration in determining the PHA's HCV renewal funding or moderate rehabilitation funding. When establishing permissive deductions, PHAs are still subject to Federal nondiscrimination requirements, including the obligation to provide reasonable accommodations that may be necessary for households with family members with disabilities.
These permissive deductions impact the calculation of the family's adjusted income that is then used to determine the Total Tenant Payment (TTP), which is then used to calculate the tenant rent in the public housing and moderate rehabilitation programs and the family share in the HCV program. Permissive deductions do not affect the family's annual income and consequently have
As discussed in section III of this preamble, HUD received numerous comments on the structure and form of hardship exemptions for unreimbursed health and medical care and reasonable attendant care and auxiliary apparatus expenses and child care expenses in § 5.611(c). HUD therefore is revising the language in this final rule to provide additional clarity and to ease burdens on families experiencing financial hardships, including reorganizing the financial hardship exemption sections from what was included in the proposed rule. Hardship exemptions for unreimbursed health and medical care and reasonable attendant care and auxiliary apparatus expenses are now defined in § 5.611(c). Hardship exemptions for child care expenses are now defined in § 5.611(d). Finally, hardship policy requirements are now described in § 5.611(e).
The final rule provides two types of hardship exemptions to the new ten percent threshold for unreimbursed health and medical care expenses (for elderly and disabled families) and reasonable attendant care and auxiliary apparatus expenses (for families that includes a person with disabilities).
The first category, defined in § 5.611(c)(1), is for families eligible for and taking the unreimbursed health and medical care expenses and reasonable attendant care and auxiliary apparatus expenses deduction in effect prior to this final rule. The second category, defined in § 5.611(c)(2), is for families that can demonstrate that the family's health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses increased, or the family's financial hardship is a result of a change in circumstances that would not otherwise trigger an interim reexamination.
HUD is adding this second category in the final rule in recognition that the change from the three percent threshold to the new ten percent threshold for unreimbursed health and medical care expenses and/or reasonable attendant care and auxiliary apparatus expenses may result in financial hardship for families, including those families who were not receiving the deduction or may not even have been receiving housing assistance at the time this rule went into effect. For example, a family may have had health and medical care and reasonable attendant care and auxiliary apparatus expenses that did not exceed three percent on the effective date of the rule, but their health and medical care expenses may have subsequently increased although those expenses do not exceed the now effective ten percent threshold. This family may receive temporary hardship relief if their health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses exceed 5 percent of the family's income, as discussed in detail below. Another example is a case where the family's health and medical care expenses and reasonable attendant care and auxiliary apparatus expenses have not increased, but the family has had a decrease in income or increase in other expenses that has resulted in the family's financial hardship. In such a circumstance the family may receive temporary hardship relief if their health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses exceed 5 percent of the family's income. The second category may also include families that either qualified under the first category but have exhausted the relief in that exemption or have chosen to apply for relief under the second category before completing the transition to the ten percent threshold in accordance with the terms and conditions discussed below, so long as they independently qualify under § 5.611(c)(2).
Under the first category at § 5.611(c)(1), the responsible entity must deduct eligible expenses exceeding 5 percent of the family's income for the first year. The second year, the responsible entity must deduct expenses exceeding 7.5 percent of the family's annual income. However, beginning with the third year, the responsible entity must deduct only the expenses that exceed ten percent of the family's annual income, unless the family qualifies for a new exemption under the other eligible category of health and medical care and reasonable attendant care and auxiliary apparatus expense hardships defined in § 5.611(c)(2).
Under the second category defined in § 5.611(c)(2), a family may also qualify for hardship exemptions for health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses if the family can demonstrate that the family's applicable health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses increased or the family's financial hardship is a result of a change in circumstances (as defined by the responsible entity). For these families, the responsible entity deducts the eligible expenses in excess of 5 percent of the family's income for a period of up to 90 days. Responsible entities may extend such exemptions for additional 90-day periods at their discretion, based on the family's circumstances. As in the proposed rule, a responsible entity may also terminate the hardship exemption if the responsible entity determines that the family no longer needs the exemption.
In some circumstances, a family that is still receiving the health and medical care and reasonable attendant care and auxiliary apparatus expense hardship relief under the first category (a family that was receiving the health and medical care and/or reasonable attendant care and auxiliary apparatus expense deduction on the effective date of the rule and is transitioning to the new ten percent threshold) may request relief under the second category of hardship relief. During the second year of the transition, the responsible entity deducts expenses exceeding 7.5 percent of the family's annual income if they are obtaining relief under § 5.611(c)(1). If the family can demonstrate that the family's applicable health and medical care and/or reasonable attendant care and auxiliary apparatus expenses increased or the family's financial hardship is a result of a change in circumstances (as defined by the responsible entity) other than the transition to the higher threshold under the hardship relief policy of § 5.611(c)(1), the family may be granted hardship relief under the second category of hardship relief in § 5.611(c)(2). In this case, the responsible entity would deduct expenses exceeding 5 percent of the family's annual income instead of 7.5 percent. However, § 5.611(c)(2) provides relief only for a period of up to 90 days (unless extended by the responsible entity at their discretion), and a family granted hardship relief under the second category is no longer eligible for relief under the first category, as per § 5.611(c)(1)(D). In other words, at the end of the relief period for the second category that is defined in § 5.611(c)(2), the family would be subject to the regular health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses deduction threshold of ten percent, regardless of whether they fully transitioned to the ten percent threshold under § 5.611(c)(1) before receiving hardship relief under the second category.
HUD reminds responsible entities that they must comply with the Health Insurance Portability and Accountability Act (HIPAA) (Pub. L. 104-191, 110 Stat. 1936) and the Privacy Act of 1974 (Pub. L. 93-579, 88 Stat. 1896) when requesting documentation to determine eligibility
HUD also includes language in § 5.611(d) creating a 90-day time frame for the hardship exemption to the child care income deduction in this final rule. Responsible entities may extend the hardship for additional 90-day periods if the family demonstrates to the responsible entity's satisfaction that the family is unable to pay their rent because of loss of the child care expense deduction, and the child care expense is still necessary even though the family member is no longer employed or furthering his or her education. The 90-day time frame for the child care hardship in § 5.611(d) is similar to the 90-day time frame for the second hardship exemption for health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses and is also consistent with the 90-day length of time provided for minimum rent hardship exemptions under § 5.630(b)(2). As in the proposed rule, responsible entities may also terminate the hardship exemption if the responsible entity determines that the family no longer needs the exemption. HUD believes that this 90-day term is fairer to families than the proposed rule's reliance on the family's next regular reexamination, where the applicability of the child care hardship exemption could vary significantly in length depending on when the event requiring the child care hardship occurred in relationship to the effective date of the family's next regular reexamination.
For example, assume a family no longer qualifies for the child care deduction because the child care is no longer necessary to enable a member of the family to be employed or to further his or her education. The family member who was employed has left their job in order to provide uncompensated care to an elderly friend who is severally ill and lives across town. Under the proposed rule, the length of time that the hardship exception for the child care deduction could continue (assuming the need continued to exist) would depend on the timing of the next regular reexamination. Under the final rule, the hardship exemption and the resulting alternative adjusted income calculation must remain in place for a period of up to 90 days, regardless of the relationship of the timing of the circumstance to the need for the hardship exemption and the next regular reexamination. In addition, the final rule provides that responsible entities have the discretion to extend the hardship exemption for additional 90-day periods based on family circumstances.
In what is § 5.611(e) in this final rule, HUD has included the proposed provisions related to how responsible entities are to establish hardship policies and requirements for notifying families, which are moved but largely unchanged from what was included in the proposed rule. In addition to correcting some cross citations that have changed, the only difference is that HUD has revised the provision to reflect that hardship exemptions are either phased (§ 5.611(c)(1)) or expire within 90 days (§ 5.611(c)(2) and (d)), rather than at the next regular income reexamination, or when the responsible entity determines the hardship exemption is no longer necessary.
HOTMA specifically includes actual income from assets in the definition of income. Therefore, any actual income received must be counted as family income. In § 5.609(a)(2) of this final rule, HUD clarifies the regulatory language regarding income from assets to help PHAs and owners determine what income from assets should be included in the family's annual income, while also minimizing the burden on PHAs, owners, and families. This final rule includes language in § 5.609(a)(2) to indicate that the imputed return on assets of a combined value of more than $50,000 must be calculated if no actual income can be computed. In addition, if the actual income can be computed for some assets, but not all assets, housing providers must compute the actual income for those assets, calculate the imputed income for all remaining assets where the actual income cannot be computed, and combine both amounts to account for assets of a combined value of over $50,000.
Per requirements in HOTMA, § 5.618 creates a restriction on the eligibility of a family to receive assistance if the family owns real property that is suitable for occupancy by the family as a residence or has assets in excess of $100,000, as adjusted annually in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers. The proposed rule included an exception to the restriction against owning real property suitable for occupancy by the family as a residence if the property does not meet the disability-related needs for all members of the family, including physical accessibility requirements. In response to public comment, HUD is adding language clarifying that the example of physical accessibility requirements is not the sole type of disability-related need that the property must meet for all family members. There are various circumstances where a property may not be suitable for occupancy for a household with a household member with disabilities. Other examples include, but are not limited to, a disability-related need for additional bedrooms, proximity to accessible transportation, etc.
HUD is also adding clarifying language throughout the section, including in § 5.618(a), on the programs covered by the section. In § 5.618(a)(1)(ii), the final rule adds language that clarifies the ability to sell is based on the State and local laws of the jurisdiction where the property is located. HUD has revised § 5.618(a)(1)(ii)(B) to clarify that asset limitations do not apply to a member of a family that jointly owns real property with another non-household member that does not reside with the family when that non-household member lives in the jointly owned property. This can apply in instances where a family member owns a fractional interest of a property with other relatives that do not reside with the family.
HUD has revised § 5.618(a)(2) since the proposed rule to add clarifications and examples of different ways in which a property will be considered “suitable for occupancy” under the amended 1937 Act. These clarifications and examples indicate that if a property is geographically located so that the distance or commuting time between the property and the family's place of work or a family member's educational institution would create a hardship for the family, as determined by the PHA or
HUD is also adding a new provision at § 5.618(a)(2)(v) to clarify that, for purposes of the asset limitation, a property that a family may not reside in under State or local laws of the jurisdiction where the property is located is not a property that is suitable for occupancy by the family as a residence. This can happen when an assisted family owns a commercial property that cannot legally be occupied as a residence by the family, such as a convenience store or a retail establishment. While owning such a property is not the form of property ownership prohibited under HOTMA, HUD notes that the real property would be considered an asset for purposes of determining: net family assets under § 5.603; annual income from net family assets under § 5.609(a)(2); and for purposes of determining if the family owns net family assets in excess of $100,000 under 5.618(a)(1)(i). The real property's value under these regulations is the net cash value of the real property after deducting reasonable costs that would be incurred in disposing of the family's real property, which would include repayment of any mortgage debt or other monetary liens on the real property.
HUD is changing the paragraph header in § 5.618(b) from “
Finally, in § 5.618(d), HUD adds language that states that while the PHA or owner has six months to begin eviction or termination proceedings for families that have excess or prohibited assets, the PHA or owner is still bound by other provisions of law.
For clarity, HUD is also adding a cross-reference to the new restrictions in § 5.618 in the regulations for denial or termination of assistance for the Section 8 moderate rehabilitation, HCV, and public housing programs at §§ 882.515(d), 982.552(b), 960.201(a) and 966.4(l)(2), respectively.
Section 92.2 is being amended to add the term
To determine whether a family is eligible to participate in HOME program activities, a PJ must calculate a family's annual income. HOME program activities include the support and development of affordable rental and homeownership housing, homebuyer downpayment assistance, rehabilitation of owner-occupied housing, and tenant-based rental assistance (TBRA) for very low-income and low-income families as defined in § 92.2. A PJ uses a family's annual income to determine eligibility for: occupancy of HOME-assisted rental unit, purchase of a homeownership unit, receiving homebuyer downpayment assistance, and obtaining rental assistance in TBRA.
The HOME regulations at § 92.203 permit a PJ to use one of two definitions for annual income for each rental project or program assisted with HOME funds: (1) adjusted gross income in IRA Form 1040 Individual Income Tax Return (IRS Form 1040) or (2) annual income as defined at § 5.609. The definition of adjusted gross income in the IRS Form 1040 is not changed in this rulemaking and will continue to align with the definition of adjusted gross income developed by the Department of Treasury. HUD is revising the definition of annual income at § 5.609 as part of this rulemaking and the changes will apply to income calculations made after the effective date of this final rule.
In this final rule, HUD is revising §§ 92.203 and 92.252 to align with the income and net family assets provisions amended by HOTMA and to reduce the administrative burden of calculating income when HOME funds are layered with other HUD programs. The final rule also clarifies who is considered a member of the family for the purpose of calculating income; identifies three cases where a PJ must calculate a tenant's adjusted income; and removes references to and the applicability of the disallowance of earned income at § 5.617 from the HOME program regulations two years after the effective date of the rule in conformity with the revisions to program regulations subject to the 1937 Act.
Under certain circumstances, the HOME program also uses the definition of adjusted income in § 5.611. This definition is used for the calculation of the maximum subsidy allowable for a family receiving TBRA, for the calculation of a family's Low HOME rent in accordance with § 92.252(b)(2), and for the calculation of rent for over-income tenants, in accordance with § 92.252(i)(2).
HUD is amending paragraph § 92.203(a) to add the subheading “
In accordance with new § 92.203(a)(1), a PJ must accept a PHA, owner, or rental subsidy provider's income determinations, in accordance with § 5.609, if a family is applying for or living in a HOME-assisted rental unit and the unit is being assisted by Federal project-based rental subsidy. Similarly, a PJ must accept a State project-based rental subsidy provider's income determination under the rules of that State program. Prior to this rulemaking, this requirement was only described in § 92.252(b)(2). This aligns the calculation of a family's income under the HOME program with the calculation of a family's income in other rental assistance or subsidy programs that assist the same unit. The requirement to accept a PHA's or owner's income determination applies when HOME funds are used in a project where units also receive a Federal project-based rental subsidy such as Section 8 Project-Based Rental Assistance, PBV, project-based assistance under HUD-VASH Vouchers, or rental assistance provided in conjunction with the Section 202 Supportive Housing for the Elderly Program (Section 202) or the Section 811 Supportive Housing for Persons with Disabilities Program (Section 811). For these units, the family's income must be calculated in accordance with the rules of the program providing the rental assistance or subsidy.
In accordance with § 92.203(a)(1), PJs must accept the PHA, owner, or rental
In an effort to further align HOME with the HCV Program as well as other forms of Federal tenant-based rental assistance, HUD is providing a new flexibility for PJs in § 92.203(a)(2). This new flexibility allows a PJ to accept a Federal tenant-based rental assistance provider's income determinations if the family is applying for or living in a HOME-assisted rental unit and the family is being assisted by a Federal tenant-based rental assistance program. This flexibility is an option when tenants in HOME-assisted units are assisted by programs that provide Federal tenant-based rental assistance such as the HCV program (including special purpose vouchers such as HUD-VASH vouchers), HOME-American Rescue Plan (HOME-ARP) Program, Emergency Solutions Grants Program (ESG), and the Housing Opportunities for Persons with AIDS (HOPWA) Program. For these units, the PJ may accept the income determinations made for the family in accordance with the rules of the program providing the rental assistance. When exercising this option, the PJ may accept determinations of annual and adjusted income conducted at initial occupancy, interim reexaminations, and annual reviews of eligibility, as applicable under that program's rules. However, a PJ must ensure these units comply with HOME rent limitations at § 92.252 (
This rule does not change the requirement that a PJ enter into agreement with the owner, developer, or sponsor of rental housing to commit HOME funds and impose the HOME affordability restrictions. However, HUD recommends that a PJ also enter into an agreement with the PHA, owner, or rental subsidy provider for Federal or State project-based rental subsidy programs, or with the rental assistance provider for Federal tenant-based rental assistance programs, to facilitate the sharing of income and rent determinations when income will be calculated in accordance with § 92.203(a)(1) or (2). This will ensure the project is able to meet the HOME rental occupancy requirements established in the HOME written agreement and 24 CFR part 92 (
For HOME-assisted units not assisted by Federal or State project-based rental subsidy or where a PJ has chosen not to accept a PHA, owner, or rental subsidy provider's determination of annual income, the PJ is subject to § 92.203(a)(3) and must continue to comply with the HOME requirements regarding determination of income in § 92.203(b) through (f), as applicable.
In applying § 92.203(a)(1) and (2), the PJ must accept a PHA's, owner, rental subsidy provider, or rental assistance provider's determination of annual and adjusted income under the rules of the applicable program. For HUD project-based rental subsidy programs, this includes but is not limited to the determination to: make the deductions under § 5.611(a), provide any permissive deductions under § 5.611(b), grant financial hardship exemptions to the family under § 5.611(c) through (e), and allow for any disallowance of earned income made under those program rules in accordance with § 5.617 (while those provisions remain in place). HUD also reminds PJs that, when applying § 92.203(a)(1) and (2), there are new flexibilities in § 5.609(c)(3) allowing PHAs administering HCV and owners of projects with project-based rental subsidies a safe harbor that allows them to accept annual income determinations made by administrators of means-tested forms of Federal public assistance such as Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP). To reduce burden and preserve program alignment, HUD is requiring that where the PHA or owner has accepted such a determination pursuant to § 5.609(c)(3), the PJ must also accept the PHA or owner's determination of annual and (as applicable) adjusted income regardless of whether the safe harbor was used in making that determination.
Furthermore, HUD similarly reminds PJs that though the HOME program does not incorporate asset limitations because there is no statutory basis to exclude families from the HOME program based upon the amount of assets that are held by those families, families that are subject to the asset limitations under § 5.618 because of their participation in a different program may be denied continued assistance under that program. PJs are under no requirement under the HOME program to exclude these families from participation and must continue to follow the tenant protection requirements in § 92.253(c) even if the families may no longer receive assistance under other HUD programs because of the family's assets. A HOME PJ may only terminate the tenancy or refuse to renew the lease of a tenant of rental housing assisted with HOME funds for good cause, as defined in § 92.253(c), which does not include having the type of assets or an amount of assets in excess of the limitations in § 5.618.
Where the PHA or owner enforces the asset limitations and terminates assistance to the unit or the family because the family's net family assets exceed the asset limitations in § 5.618, the family may remain in the HOME-assisted rental unit and the PJ must determine the family's annual income in accordance with § 92.203(b) through (e); calculate the family's adjusted income, if applicable, in accordance with § 92.203(f); and charge a rent in accordance with § 92.252(a) through (i).
Unless a PJ falls into one of the exceptions listed in § 92.203(a)(1) or (2), a PJ must calculate annual and (as applicable) adjusted income each year for HOME-assisted families in accordance with § 92.203(a)(3) and (f). HUD is not changing the requirements for what evidence a PJ must use for the first year the family is assisted or the documentation options available to the PJ in subsequent years. However, due to the changes discussed above, HUD is redesignating these options from § 92.203(a)(1) and (a)(2) to paragraphs § 92.203(b)(1) and (b)(2) and redesignating the introductory text to a new paragraph (b) and revises the new paragraph (b)(1) to update the reference to the new paragraph § 92.203(b)(1)(i). HUD also revises the paragraph to add the heading “
While HUD is not changing the two options of calculating annual income as part of this rulemaking, HUD is redesignating the paragraph explaining the two options of calculating annual income from § 92.203(b) to § 92.203(c), is revising new paragraph § 92.203(c) to add subheading
HUD is also redesignating the paragraph explaining that PJs have the option of using one of these two income definitions from § 92.203(c) to § 92.203(d), and adding a clarification of existing policy in the redesignated § 92.203(d). This clarification explains that though a PJ has the option to use either the definition of adjusted gross income contained in the IRS Form 1040 or the definition of annual income in § 5.609 as the definition of annual income for each rental project, there are some cases where a PJ will be required to use the definition of annual income in § 5.609 for the calculation of income for a rental project. This is because for rental housing projects containing units assisted by a Federal or State project-based rental subsidy, the PJ must accept the determination of annual and adjusted income made by the PHA, owner, or rental subsidy provider under that program's rules. Moreover, in cases where the PJ is accepting the calculations of a rental assistance provider's determination of annual and adjusted income for tenants receiving Federal tenant-based rental assistance, the PJ must calculate income in accordance with the rules of that program. For HUD-assisted tenant-based rental assistance and project-based rental subsidy programs, this would generally be the calculation of annual income under § 5.609. While this has been a longstanding HUD policy contained in § 92.252, HUD is making this clarification in the income regulations at § 92.203 to help PJs align the HOME program with project-based rental assistance programs.
HUD is redesignating paragraph (d) in § 92.203 as paragraph (e) and adding the heading “
In § 92.203(e)(1), HUD is also permitting grantees to use the certification process established in § 5.618(b) when imputing income for families whose net family assets, as defined in § 5.603, do not exceed $50,000 without taking further steps to verify the accuracy of the declaration. HUD is also clarifying that when families are homeowners applying for homeowner rehabilitation assistance under the HOME program, they may also exclude the value of their principal residence from the calculation of their Net Family Assets for purposes of the certification. This rule also clarifies, in § 92.203(e)(1), that the PJ must exclude the Federal tenant-based rental assistance provided to the family or any Federal or State project-based rental subsidy provided to the HOME rental housing unit from the calculation of annual income when determining eligibility for occupancy of HOME-assisted rental housing units.
The redesignated paragraph § 92.203(e)(3) restates the requirement that PJs continue to disallow increases in earned income of persons with disabilities occupying HOME-assisted rental units or receiving TBRA in accordance with § 5.617 until the elimination of the requirement. This requirement is derived from § 5.617(e). As § 5.617 will lapse two years after the effective date of this rule, HUD is revising paragraph § 92.203(e)(3), to explain that the requirements of § 92.203(e)(3) shall lapse on January 1, 2026.
In § 92.203, HUD redesignates paragraph (e) as paragraph (f), revises new paragraph (f), and adds subheading
The new paragraph (f)(1)(ii) requires the PJ to apply the mandatory deductions from income established at § 5.611(a) when determining a family's adjusted income for the purpose of calculating the rent applicable to a tenant in Low HOME Rent unit that is subject to the provisions of new paragraph § 92.252(b)(2)(i). Furthermore, the PJ may grant financial hardship exemptions according to the requirements of § 5.611(c) through (e) to families affected by the statutory increase in the threshold to receive health and medical care expense and reasonable attendant care and auxiliary apparatus expenses deductions from annual income under § 5.611(a)(3), as well as families that apply for a continued child care expense deduction. To use the authority, the PJ must develop policies and procedures for qualifying and granting the hardship exemptions in accordance with the requirements contained in § 5.611(e).
The new paragraph (f)(1)(iii) requires the PJ to apply the mandatory deductions from income established at § 5.611(a) when determining a family's adjusted income for the purpose of calculating the rent applicable to over-income tenants in accordance with § 92.252(i)(2).
Similar to earlier sections of the rule, the new paragraph (f)(2) clarifies that for Low HOME Rent units that receive Federal or State project-based rental subsidy, the PJ does not have to calculate the family's adjusted income and must accept the PHA, owner, or rental subsidy provider's determination of adjusted income under that program's rules.
While HUD is not changing the definitions of the High or Low HOME rents, HUD is revising § 92.252(b)(2) by splitting it into two paragraphs. Section 92.252(b) states that a PJ has the option of charging a family either (1) a rent that does not exceed 30 percent of the annual income of a family whose
To conform HOME requirements for subsequent income determinations, HUD is revising paragraph (h) of § 92.252 to update the cross references from § 92.203 to § 92.203(b)(1), from § 92.203(a)(1)(i) to § 92.203(b)(1)(i), and from § 92.203(a)(1)(ii) to § 92.203(b)(1)(ii). In the sixth year of a HOME rental project's affordability period, a PJ is not required to review source documentation for families whose incomes are determined in accordance with § 92.203(a)(1) and (2). HUD further specifies that if rental housing projects contain units assisted by a Federal or State project-based rental subsidy, the PJ must accept the determination of annual and adjusted income made by the PHA, owner, or rental subsidy provider under that program's rules. The revisions also permit a PJ to accept a rental assistance provider's income determination if the family is living in a HOME-assisted rental unit and the family is being assisted by Federal tenant-based rental assistance.
Section 93.2 is being amended to add the term
To determine whether a family is eligible to participate in HTF program activities, the HTF grantee must calculate the family's annual income. HTF program activities include the support and development of affordable rental and homeownership housing and homebuyer downpayment assistance for extremely low-income and very low-income families as defined in § 93.2. An HTF grantee uses a family's annual income to determine eligibility for occupancy of an HTF-assisted rental unit, purchase of a homeownership unit, and receiving homebuyer downpayment assistance.
In this final rule, HUD is revising § 93.151 and § 93.302 to align with HOTMA's income and net family assets provisions and reduce the administrative burden of calculating income when HTF funds are layered with other HUD programs. This final rule also codifies existing program requirements regarding income calculations, establishes who is considered a member of the family, explains how to determine the annual income of a family (projecting income), sets a limit on how long income determinations are good for, and clarifies that income or assets enhancement derived from the investment of HTF funds in a project cannot be included when calculating annual income. Although HUD aligned HTF with other HUD rental programs as much as possible, the Department codified these requirements to avoid confusion on which income requirements in the final rule applied to the HTF program.
HUD is revising § 93.151(a) to describe how grantees must determine the annual income of families living in HTF-assisted rental units. In § 93.151(a)(1), HUD specifies that if a family is applying for or living in an HTF-assisted rental unit, and the unit is assisted under the PHP, then an HTF grantee must accept the PHA's determination of the family's annual income and adjusted income under §§ 5.609 and 5.611, respectively. This requirement applies when HTF funds are used in projects that also include public housing funding in accordance with § 93.203.
In § 93.151(a)(2), HUD explains that if a family is applying for or living in an HTF-assisted rental unit, and the family is assisted under a Federal tenant-based rental assistance program, then an HTF grantee must accept the rental assistance provider's determination of the family's annual income and adjusted income under the rules of that program. This requirement applies when HTF funds are used in projects that also include families that receive Federal tenant-based rental assistance such as HOME TBRA, HOME-ARP TBRA, HCVs, ESG, CDBG-CV, HUD-VASH, and HOPWA assistance.
Section 93.151(a)(3) explains that if a family is applying for or living in an HTF-assisted rental unit and the unit is assisted with a Federal or State project-based rental subsidy, then an HTF grantee must accept the PHA, owner, or rental subsidy provider's determination of the family's annual income and adjusted income under that program's rules. This requirement applies when HTF funds are used in projects that also receive Federal or State project-based rental subsidy such as Section 8 Project-Based Rental Assistance, PBV, project-based assistance under HUD-VASH Vouchers, or rental assistance provided in conjunction with the Section 202 and Section 811 Programs. This aligns the calculation of a family's income under the HTF program with the calculation of a family's income in other rental assistance or project-based rental subsidy programs that assist the same family or unit as the HTF assistance.
In accordance with § 93.151(a)(1) through (3), HTF grantees must accept examinations of a family's annual and adjusted income conducted at initial occupancy, interim reexaminations, and annual reviews of eligibility, as applicable under that program's rules. This includes but is not limited to the determination to: make the deductions under § 5.611(a), provide any permissive deductions under § 5.611(b), grant financial hardship exemptions to the family under § 5.611(c) through (e), and allow for any disallowance of earned income made under those program rules in accordance with § 5.617 (while those provisions remain in place).
This rule does not change the requirement that an HTF grantee enter into an agreement with the recipient (owner or developer) of rental housing to commit HTF funds and impose the HTF affordability restrictions. However, HUD recommends that an HTF grantee also enter into agreement with the PHA, rental assistance provider, rental subsidy provider, or owner, as applicable, to facilitate the sharing of income and rent determinations to ensure the project is able to meet the HTF rental occupancy requirements established in the HTF written agreement and 24 CFR part 93 (
HUD also reminds HTF grantees that § 5.609(c)(3) contains new flexibilities allowing PHAs administering HCV and public housing and owners of projects with project-based rental subsidies a safe harbor that allows them to accept annual income determinations made by administrators of means-tested forms of Federal public assistance such as TANF
HUD similarly reminds HTF grantees that though the HTF program does not incorporate asset limitations because there is no statutory basis to exclude families from the HTF program based upon the amount of assets that are held by those families, families that are subject to the asset limitations under § 5.618 because of their participation in a different program may be denied continued assistance under that program. HTF grantees are under no requirement under the HTF program to exclude these families from participation and must continue to follow the tenant protection requirements in § 93.303(c) even if the families no longer receive assistance under other HUD programs because of the family's assets. An HTF grantee may only terminate the tenancy or refuse to renew the lease of a tenant of rental housing assisted with HTF funds for good cause under § 93.303(c), which does not include having the type of assets or an amount of assets in excess of the limitations in § 5.618.
Where the PHA or owner enforces the asset limitations and terminates assistance to the unit or the family because the family's net family assets exceed the asset limitations in § 5.618, the family may remain in the HTF-assisted rental unit and the grantee must determine the family's annual income in accordance with § 93.151(b) through (e) and charge a rent in accordance with § 93.302(b).
Under § 93.151(a)(4), for HTF-assisted units not assisted by the PHP or Federal or State project-based rental subsidy, and for families that are not assisted by Federal tenant-based rental assistance, a grantee must (a) continue to comply with the HTF requirements to determine annual income of families by examining at least 2 months of source documents at initial occupancy and every six years of the HTF period of affordability, (b) project the prevailing rate of income of the family, (c) specify which of three methods to determine annual income (
While HUD is not changing the two options of calculating annual income as part of this rulemaking, HUD is revising § 93.151(b)(1) to incorporate HUD's revisions to the definition of income at § 5.609(a) and (b), which is the definition of income provided by HOTMA. Notably, this requirement does not fully incorporate § 5.609(c), which describes how to calculate annual income in the public housing or Section 8 programs. The section does incorporate revisions to the definition of Net Family Assets at § 5.603 that are used to determine the imputed income on assets over $50,000 based on the current passbook saving rate in § 5.609(a).
HUD is also revising § 93.151(b)(2) to add a clarification of existing policy. An HTF grantee has the option to use either the definition of adjusted gross income contained in the IRS Form 1040 or the definition of annual income in § 5.609 as the definition of annual income for each rental project. While the provisions addressing the use of the IRS Form 1040 are not changing, HUD is revising the provisions allowing grantees to use the definition of annual income in § 5.609 to specify that there are some cases where an HTF grantee will be required to use the definition of annual income in § 5.609 for the calculation of income for a rental project. This is because for rental housing projects containing units assisted through the PHP, a Federal or State project-based rental subsidy, or through a Federal tenant-based rental assistance program, the HTF grantee must accept the determination of annual and adjusted income made under that program's rules. While this has been a HUD policy in § 93.302(b)(2) for units assisted by a Federal or State project-based rental subsidy, HUD is expanding this policy to also align HTF with the public housing and other Federal tenant-based rental assistance programs in response to public comment and HUD's policy of aligning HUD programs. HUD is making this clarification in the income regulations at § 93.151 to better help HTF grantees in complying with HTF program requirements.
HUD is also revising the header for paragraph (d) of § 93.151 to read as “
HUD is revising § 93.151 to add a new paragraph (e), entitled “
HUD also revises § 93.151 to add a new paragraph (f) to clarify that grantees do not have to calculate adjusted income in the HTF program. This paragraph explains that the only time a tenant's adjusted income is relevant to the HTF program is if a family or unit is assisted with Federal tenant-based rental assistance (
HUD revises § 93.302(e)(1) to update the reference to § 93.151(c) to read as § 93.151(d). In addition, HUD revises § 93.302(e)(2) to conform to the new requirement that grantees must continue to accept annual and adjusted income determinations performed under the rules of those programs for subsequent income determinations during the HTF affordability period for HTF-assisted
This final rule makes various changes to clarify how jurisdictions should make income determinations for the HOPWA program for resident rent payments. As explained in the proposed rule's preamble, Section 859 of the AIDS Housing Opportunity Act (42 U.S.C. 12908) requires that HOPWA rental assistance “be provided to the extent practicable in the manner” of the Section 8 program. Accordingly, the changes this final rule makes to the HOPWA regulations in 24 CFR part 574 generally track the changes this final rule makes regarding income determinations, income examinations, income reexaminations, net family asset requirements, and de minimis errors for the HCV program, the Section 8 program that is the most practicable for the largest share of HOPWA-funded projects to track. Accordingly, HOPWA has adopted most of the provisions in §§ 5.609, 5.611, 5.617, and 5.618, where practicable, in addition to many of the changes in part 982. Although HUD recognizes additional regulatory changes could be made to bring HOPWA rental assistance into closer alignment with the Section 8 program, HUD has determined some changes are not practicable to implement in HOPWA, as explained below, and other changes would require a separate rulemaking because they are beyond the scope of this particular rulemaking.
As discussed in the proposed rule, this final rule revises part 574 to apply the part 5 definition of net family assets in HOTMA as applied to the Section 8 program, except the value of a home of a participant receiving short-term mortgage or utility assistance under § 574.300(b)(6) or other assistance for which homeowners are eligible under the HOPWA program is excluded from the definition.
Section 574.310(d) is being revised to clarify the use of annual and adjusted income in the calculation of resident rent payments for persons receiving rental assistance or residing in any rental housing assisted under the HOPWA program, excluding short-term supported housing. Section 574.310(d) requires that the resident rent payments shall be the higher of three options. HUD is clarifying that for option one, the rent payment including utilities would be 30 percent of the family's monthly adjusted income. Option two is clarified as ten percent of the family's monthly income. Option three, which applies if a family receives welfare assistance from a public agency, remains unchanged.
As stated in § 574.310(e)(1)(i), references to PHAs and responsible entities in §§ 5.609 and 5.611 are understood to refer to the grantees or project sponsors that are determining income. This provision has been added to provide clarity to the HOPWA grantees on their roles and responsibilities.
HUD has determined that it is not practicable to permit permissive deductions in the HOPWA program as this final rule permits PHAs to do in the HCV program under § 5.611(b). HOTMA amends section 3 of the 1937 Act to provide PHAs with the ability to apply permissive deductions in the public housing, HCV, and Section 8 moderate rehabilitation programs. Other entities, even when administering the 1937 Act programs, were not provided this statutory authority. Likewise, HUD does not see any intent or justification in either HOTMA or the HOPWA program statute to give all HOPWA grantees and project sponsors the same ability and accountability as PHAs with developing and administering permissive deductions. Moreover, unlike in the HCV program, PHAs are just one subset of the entities that may administer HOPWA-funded rental assistance and housing, and HUD sees no intent or justification in HOTMA or the HOPWA program statute to provide PHAs with greater ability or accountability than other HOPWA grantees in administering HOPWA assistance. Accordingly, the HOPWA rule does not incorporate the part 5 provision on permissive deductions.
Additionally, unlike the Section 8 programs that make hardship exemptions mandatory, this final rule allows HOPWA grantees to make their own determination on whether to grant hardship exemptions. If a grantee implements hardship exemptions in their program, the grantee must follow the requirements of the revised § 5.611(c) through (e) for families affected by the statutory increase in the threshold to receive health and medical care expense and reasonable attendant care and auxiliary apparatus expenses deductions from annual income under § 5.611(a)(3), as well as families that apply for a continued child care expense deduction. To use the authority, the grantee must develop policies and procedures for qualifying and granting hardship exemptions in accordance with the requirements contained in § 5.611(c) through (e). Given the amount of administrative work required to institute these hardship exemptions as provided for the Section 8 programs, HUD has determined that it is practicable only to apply § 5.611(c)-(e) to HOPWA grantees who determine they have the capacity and choose to make available the hardship exemption as provided by § 5.611(c)-(e). In addition to the grantee's discretion to grant hardship exceptions, grantees are subject to Federal nondiscrimination requirements, including the obligation to provide reasonable accommodations that may be necessary for households with family members with disabilities.
This rule also revises part 574 to incorporate HOTMA's provisions for restrictions on assistance to families with certain assets but only for activities subject to the resident rent payment requirements.
Section 574.310(e)(1)(vi) restates the requirement that grantees disallow increases in earned income of persons with disabilities occupying HOPWA-assisted rental units as stated in § 5.617(e). As HUD is removing the requirement in § 5.617 two years after the effective date of this rule, HUD is only requiring that grantees follow § 5.617 during that time period.
Section 574.310(e)(3) details requirements for obtaining and documenting third-party income verification consistent with the provisions in § 982.516(a), aligning HOPWA requirements with the HCV program to the extent practicable. HUD recognizes that grantees do not have access to the same information that PHAs do; however, HUD believes the flexibility built into the regulation still makes it practicable for HOPWA grantees and project sponsors to comply with third-party verification requirements.
Lastly, § 574.310(e)(4)(v) allows a HOPWA grantee to provide a family with retroactive rent decreases in the event that the family fails to provide a grantee with timely information about a decrease in income that would trigger an interim reexamination. In these instances, just as in the HCV program, HOPWA grantees will have the option of retroactively adjusting rent as of the date of the change leading to the interim reexamination of family income or the effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination). To provide a retroactive rent decrease to an eligible family, the HOPWA grantee must develop a written policy allowing for retroactive rent decreases. HUD believes that these revisions may be made to the HOPWA regulations because they are consistent with changes in the HCV program and because HUD has determined that it is practicable to allow HOPWA grantees the same discretion to apply rent decreases retroactively, as is performed in the HCV program. For more information on how this provision operates, please see the extended Preamble discussion on Interim Reexaminations below.
This final rule updates certain definitions in the Section 202 and Section 811 program regulations to revise outdated references, clarify ambiguous terms, and consistently apply Section 8 provisions in part 5 of this title to the Section 202 and Section 811 programs. HUD is adding a definition of “Net family asset” to § 891.105 and defining it consistently with § 5.603. HUD is also revising the defined term “Tenant payment to Owner” at § 891.105 to “Tenant rent” while maintaining its definition. HUD is updating the corresponding instances of “tenant payment” (in part 891 that do not mean “Total tenant payment”) to “Tenant rent.” This change does not affect the use of the defined term and merely avoids confusion between “tenant payment” and “Total tenant payment.” HUD is defining “Gross rent” for all Section 202 and Section 811 projects at § 891.105 consistent with the Section 8 Housing Assistance Payment program at § 880.603(c)(3). HUD is therefore removing the project-specific definitions of “Gross rent” for Section 202/8 projects at § 891.520 and for Section 202/162 projects at § 891.655.
The Section 202 and Section 811 programs have income eligibility requirements, including income reexamination requirements, that follow Section 8 requirements. In this final rule, HUD is revising §§ 891.410(g)(1) and (3) (Section 202 program) and §§ 891.610(g)(1) and (3) (Section 811 program) to replace outdated cross references to part 813 of this chapter, which HUD removed in a final rule that took effect November 18, 1996 (61 FR 54492), with references to the Section 8 project-based assistance program at § 5.657. These references provide the regular income reexamination requirements as well as the income eligibility requirements. HUD is further revising the interim reexamination requirements at § 891.410(g)(2) and § 891.610(g)(2) by replacing the references to lease provisions with references to the Section 8 project-based assistance program at § 5.657. These changes provide for consistent application of Section 8 requirements in part 5 to the Section 202 and Section 811 programs and do not substantively change the requirements for grantees. Finally, HUD is revising § 891.410(g)(3)(i) to clarify that termination of eligibility for project rental assistance payment does not mean removal of the unit or residential space from the Project Rental Assistance Contract (PRAC).
HUD is making several technical amendments to part 891 in this final rule. This final rule updates outdated citations in the Section 202 and Section 811 program regulations. HUD is removing and reserving § 891.230 because it purports to apply selection preferences in part 5, subpart D, but there are no longer selection preferences defined in part 5 (including subpart D). HUD is making editorial revisions to § 810.410(g)(1) to discuss changes to payment amounts in one sentence and changes to the unit size in another sentence. HUD is also removing the reference to § 5.410(g) for informal review provisions for the denial of a Federal preference at § 891.610(e) because § 5.410(g) was removed. These changes will not affect grantees in a substantive manner, because the references are to provisions previously eliminated by statute and removed by HUD in a final rule that took effect April 28, 2000 (65 FR 16720).
This final rule also clarifies that the new “Net family assets” definition this rule adds to § 5.603 is applicable to the Section 202 and Section 811 programs, and there is no discretion to use the IRS income definition as suggested in the “HOTMA Section 102” chart in the proposed rule. The proposed rule's chart referenced the IRS definition; this was a drafting error. This final rule also clarifies that the hardship exemptions provided at § 5.611(c) through (e) are applicable to the Section 202 and Section 811 programs. The “HOTMA Section 102” chart in the proposed rule mistakenly stated that the hardship exemptions were not applicable; this error resulted from HUD conflating “adjusted income” and “minimum rent.”
Finally, this final rule replaces “should” with “must” in § 891.440 regarding Section 202/811 owners providing utility data as part of a utility allowance analysis. This change clarifies that providing these data is a requirement, which is not a substantive change because the utility allowance analysis has always treated this as a requirement.
Based on the public comments received during the reopened comment period, HUD makes changes to the new § 960.507, adds a new § 960.509, and inserts cross-references accordingly in §§ 5.520, 5.628, 960.253(a)(3) and (f)(1), 960.257(a)(5) and (b)(4) and 966.4(a) and (l). HUD also adds new or amended definitions at § 960.102, including “alternative non-public housing rent” (alternative rent), “covered person,” “non-public housing over-income family” (NPHOI family), and “over-income family” (OI family) which are discussed above. Small additional changes for clarity are also added throughout. Additionally, HUD adds a sentence regarding compliance for NPHOI families to § 960.600.
In § 960.206, HUD adds a new paragraph (b)(6) stating that the PHA may adopt a preference for admission of current NPHOI families who become a low-income family as defined in § 5.603(b) and are eligible for admission to the PHP. PHAs whose policy is to terminate OI families after the 24 consecutive month grace period may not use this preference because this preference may not be applied to current public housing families or families who have vacated the public housing project.
In § 960.253(a), HUD adds a new paragraph (3) in relation to the choice of rent for NPHOI families. The intent of this new paragraph is to make clear that, if allowed by PHA policy to remain in a public housing unit, NPHOI families will not have a choice in rent and instead must pay the alternative rent as defined in § 960.102. Paragraph (f)(1) of § 960.253 has been revised to address the new requirements for PHAs when conducting reexamination of family income for families paying the flat rent after a family is determined to be OI. Currently, the PHA conducts a reexamination of family income and composition at least once every three years for a family paying the flat rent. In the proposed rule, this paragraph had been modified to make clear that once a PHA determines a family is OI, the PHA must follow the income examination, documentation, and notification requirements under § 960.507(c) including conducting a reexamination of family income annually instead of once every three years.
In § 960.257(a)(5), HUD makes clear that the PHA may not conduct an annual reexamination of family income for NPHOI families. In § 960.257(b)(4), HUD clarifies that when OI families are in the period of up to six months before their tenancy is terminated, the PHA must conduct an interim reexamination of family income as otherwise required because the OI family is still a program participant prior to termination. However, the resulting income determination will not make the family eligible to remain in the PHP beyond the period defined by PHA policy.
HUD is making extensive changes to the proposed § 960.507. Throughout the sections addressing OI families, HUD clarifies that the period of time a family has to reside in their unit before having to vacate or pay a higher rent is 24 consecutive months, rather than 2 years.
HUD also includes a new § 960.509, covering the provisions that must be in leases provided to NPHOI families paying the alternative rent. HUD also makes conforming edits to use defined terms or terms more understood as part of the PHP, rather than introducing new terminology.
In § 960.507(a)(1), HUD clarifies that the OI provisions at § 960.507 apply to all families in the PHP, including families in the FSS program, or receiving the Earned Income Disregard (EID). In paragraph (a)(1), HUD has added language specifying the following: (1) mixed families (as defined in § 5.504) who are NPHOI families pay the alternative rent in accordance with the continued occupancy policy for OI families; (2) NPHOI families cannot participate in public housing resident councils; (3) NPHOI families cannot participate in programs only for public housing or low-income families; and (4) NPHOI families cannot receive Federal assistance, including a utility allowance, from PHAs.
In paragraph (a)(2), HUD states that PHAs must implement the requirements of § 960.507 by amending all applicable admission and continued occupancy policies according to the provisions in 24 CFR part 903. All PHAs must have effective OI policies, consistent with § 960.507, no later than 120 days after the date of publication of this final rule in the
It should be noted that OI families who have already exceeded the 24 consecutive month grace period, in accordance with a continued occupancy policy established in compliance with the 2018 FR Notice, are not entitled to another 24 consecutive month grace period when the rule is published. However, until this rule is effective, HUD will not enforce any requirement to terminate OI families who exceed the OI limit for 24 consecutive months. If a PHA chooses not to enforce an established termination policy, then the PHA must continue to treat such OI families as public housing families and offer the option of paying the income-based rent or a flat rent. For PHAs that adopted OI related waivers under HUD's CARES Act notice (Notice PIH 2021-14),
Consistent with the proposed rule, § 960.507(b) describes how to determine the OI limit. The OI limit is determined by multiplying the applicable income limit for a very low-income family as defined in § 5.603(b), by a factor of 2.4. In paragraph (c), HUD provides additional details on the procedures a PHA must follow in notifying OI families of their status. HUD is removing proposed language referring to multiple ways for the PHA to become aware of a family's OI status, instead specifying that OI procedures are triggered by annual or interim reexaminations, in order to reduce burden on PHAs and provide clarity on exactly how a PHA is to determine that a family is OI. When a PHA determines that a family is OI, the PHA must notify the family in writing of the family's OI status at that time, in accordance with paragraph (c)(1).
If a family continues to exceed the income limit for 12 consecutive months after receiving the first OI determination, the PHA must provide a second notice in accordance with § 960.507(c)(2). This second notice informs the family that they have been OI for 12 consecutive months and, if the family continues to be OI for another 12 consecutive months, the PHA will follow its continued occupancy policies for OI families in accordance with § 960.507(d). This notification must be provided within 30 days after the income examination that led the PHA to determine that the family has been OI for 12 consecutive months. The notice must also include the estimated alternative rent (
For families that maintain their OI status for a further 12 consecutive months (24 consecutive months in total), the PHA must provide the family with a third notice in accordance with § 960.507(c)(3). The third notice informs the family that it has exceeded the OI limit for 24 consecutive months. The third notice also states that the family must either pay the alternative rent as an NPHOI family or have their tenancy terminated in no more than six months, depending on the PHA's continued occupancy policy for OI families. If the family is allowed to stay as a NPHOI family under the PHA's OI policy, the PHA must also present the family with a new NPHOI lease under the terms contained in the new § 960.509 and inform the family that the least must be executed no later than 60 days of the date of the notice or at the next lease renewal, whichever is sooner.
Furthermore, HUD specifies in § 960.507(c)(4) that if a family falls below the OI limit at any time during the 24 consecutive months, the family is
HUD is modifying and clarifying, in what is now § 960.507(d), the requirements for PHAs after a family has exceeded the OI limit for 24 consecutive months. Rather than specify how to determine the alternative non-public housing rent in that provision, HUD has moved that detail into the definition of the term “alternative non-public housing rent” (or “alternative rent”) and instead simply states that the PHA must charge NPHOI families the alternative rent within 60 days of, or terminate the family's tenancy within six months after, the third notification to the family (pursuant to § 960.507(c)(3)), in accordance with the PHA's policies and State and local laws. If a PHA is terminating the family's tenancy, the PHA must continue to charge the families their public housing rent during the period prior to the termination.
In § 960.507(e), HUD clarifies the status of OI families once the 24-month grace period ends. The family's status will depend on the continued occupancy policy of the PHA. For PHAs that have a policy to terminate OI families, those families will still be PHP participants until their tenancy is terminated in the time frame established by the PHA (up to 6 months). During that time, the family may request an interim reexamination of income to potentially reduce their rent burden. However, the resulting income determination will not make the family eligible to remain in the PHP beyond the period before termination as defined by PHA policy.
For PHAs that have a policy to allow OI families to pay the alternative rent, those families will no longer be PHP participants once the 24-month grace period ends, and they execute a NPHOI lease. In other words, the OI family members will continue to be PHP participants until their tenancy is terminated or they execute the NPHOI lease. Section 960.509(a) states that the OI family must execute a NPHOI lease no later than the earlier of the next lease renewal or 60 days after the PHA notifies the family, pursuant to § 960.507(c)(3), that they have been OI for 24 consecutive months. If the family does not execute the NPHOI lease within this period, per § 960.509(a), the PHA must terminate the tenancy of the family no more than 6 months after the notification under § 960.507(c)(3) in accordance with § 960.507(d)(2). Notwithstanding, pursuant to § 960.509(a), the PHA may permit, in accordance with its OI policies, an OI family to execute the lease after the deadline, but before termination of the tenancy, if the OI family pays the PHA the total difference between the alternative non-public housing rent and their public housing rent dating back to the lease execution deadline. HUD largely retains the reporting requirements in the proposed rule, now found in § 960.507(f), for PHAs. HUD has only added language that would allow HUD to request other information on OI families from PHAs.
As a response to requests and comments that HUD received, both upon the initial proposed rule and the reopening of public comment, HUD is adding in this final rule a new § 960.509, which sets forth the lease requirements for OI families that are remaining in a public housing unit and paying the alternative rent as NPHOI families. This new section pulls heavily from existing regulations governing public housing leases in § 966.4, with adjustments made as needed to accommodate the fact that these families are not public housing participants. Notwithstanding, PHAs must still comply with Federal nondiscrimination requirements, including but not limited to, the Fair Housing Act, Title VI of the Civil Rights Act, Section 504, and Title II of the Americans with Disabilities Act (ADA), as applicable. In response to the public comment regarding reasonable accommodations, PHAs still have a legal obligation to provide for reasonable accommodations that may be necessary for individuals with disabilities. PHAs do not have discretion whether to provide reasonable accommodations. Moreover, in the context of unit transfers for a family when repairs to improve the life, health, or safety of a resident cannot be made within a reasonable time, consistent with fair housing and civil rights obligations, PHAs must provide comparable alternative accommodations having the appropriate number of bedrooms based on the family's need and accessible accommodations and reasonable accommodations for persons with disabilities.
Section 960.509(a) states that families who will remain as tenants paying the alternative rent must execute the lease for the NPHOI family no later than the earlier of the next lease renewal or 60 days after the third OI notification as described in § 960.507(c)(3). If the family does not execute the lease within this time, the PHA shall terminate the tenancy of the OI family pursuant to 960.507(d)(2).
In paragraph (b), HUD specifies the various provisions that must be in leases for NPHOI families, such as information on who is a party to the lease, how long the lease is for, what the costs covered by the lease are, how the lease is to be renewed or terminated, the tenant's rent and possible charges, tenant rights for use, the responsibilities of both the PHA and the tenant, repair and access obligations, procedures around lease termination and grievances, and how leases are to be modified.
The regulations at § 960.600 have been revised to include an additional sentence confirming that NPHOI families are not required to comply with the Community Service and Self-Sufficiency Requirements (CSSR). In the revised § 960.601, the definition of individuals exempt from the community service requirements is updated to reflect that members of NPHOI families are also exempt from those requirements. It should be noted that OI families, in the period before termination of tenancy or prior to becoming NPHOI families, are still PHP participants and so must remain compliant with all PHP requirements including the community service and self-sufficiency requirements (CSSR). New language in an amended § 964.125 clarifies that members of a NPHOI family are not eligible to be members of a public housing resident council organized in accordance with 24 CFR part 964, subpart B.
HUD has made conforming changes to the lease requirements provision under § 966.4(a)(2) regarding the term of the public housing lease for PHAs that have a continued occupancy policy under § 960.507(d)(2). This change requires the public housing lease to convert to a month-to-month term to account for the period before tenancy termination as determined by PHA policy.
The regulation at § 966.4(l)(2)(ii) has also been revised to remove the reference to § 960.261 as one of the grounds for termination of tenancy and replaced it with a reference to § 960.507. To conform to HOTMA, this final rule also removes the existing § 960.261 from HUD's regulations, which provides that PHAs may not evict or terminate the tenancy of a family that is over the income limit for public housing if the family is participating in the FSS program, or if they receive EID.
Section 960.261 has been removed as a part of the rulemaking process for two reasons. First, the reference made in § 960.261 to families who are over income is currently understood to mean a family whose annual income exceeds the limit for a low-income family at the time of initial occupancy which is 80 percent of the area median income (AMI) or lower. However, with HOTMA, Congress established a statutory
Second, § 960.261 has been deleted to remove the exception to evict or terminate the tenancy of a family solely because the family is OI provided the family has a valid contract for participation in an FSS program under part 984 or if the family receives EID. With this final rule, HUD intends for there to be no exceptions to the HOTMA OI provision.
This final rule revises § 5.233(a)(2)(i) to clarify that the use of EIV is required only at annual reexaminations, and not at interim reexaminations. However, PHAs and owners may use EIV for interim reexaminations if desired. Prior to this final rule, HUD interpreted “reexaminations” in § 5.233(a)(2)(i), which required the use of EIV at all reexaminations, to include interim reexaminations. However, since the EIV Income Report can take up to 90 days to be updated, it often is not helpful during an interim reexamination. This change also decreases PHAs' and owners' administrative burden.
The final rule changes § 5.230 to clarify that, except in enumerated circumstances, on or after this final rule's effective date, once an applicant has signed and submitted a new consent form, they are not required to do so again at the next interim or regularly scheduled income examination.
Additionally, this rule retains in large part the new paragraph (c) added by the proposed rule to § 5.232 but removes the reference to the PHA's Annual Plan as the proper place for a PHA to establish policies regarding an applicant, participant, or family member's revocation of consent to access financial records. Since the PHA's Annual Plan is not the appropriate place for such a policy, the final rule changes this and allows PHAs to address this within an admission and continued occupancy policy instead. As discussed in the preamble to the proposed rule, HOTMA provides PHAs with the discretion to determine whether applicants or recipients are ineligible for benefits if they, or their family members, refuse to provide or revoke the authorization to obtain financial records. The revision to § 5.232 is therefore necessary to clarify that the penalties described in that section will not apply if applicants or participants or their family members revoke their consent for the PHA to access financial records unless the PHA has established a policy that revocation of consent to access financial records will result in denial or termination of assistance or admission.
For consistency, this final rule specifies in the following regulatory provisions that the inflationary index for all necessary adjustments will be based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W):
In this final rule, annual inflationary adjustments will be established by rounding to the nearest dollar except that annual inflationary adjustments for the dependent deduction (§ 5.611(a)(1)) and the elderly or disabled family deduction ((§ 5.611(a)(2)) will be rounded to the next lowest multiple of $25. HUD makes this differentiation because HOTMA requires HUD to determine the dependent and elderly or disabled family deductions for each year by “rounding such amount to the next lowest multiple of $25.” HUD notes that the amounts described in the income exclusions in § 5.609(b)(14) and (15) both reference the dependent deduction, which is required to be rounded to the lowest multiple of $25. HUD declines to round to the next lowest multiple of $25 elsewhere in this final rule.
In general, HUD expects to make the revised amounts effective January 1st of each year for the following requirements in accordance with the inflationary adjustments covered by this final rule: the value cap on net family asset cap for imputing returns (§ 5.609(a)(2) and (b)(1)); the mandatory deduction for elderly and disabled families (§ 5.611(a)(2)); the restriction on the net family assets (§§ 5.618(a)(1)(i), 574.310(f)); the amount of net assets the PHA or owner may determine based on a certification by the family (§§ 5.618(b)(1), 5.659(e), 92.203(e); 93.151(e); 574.310(e)(3)(ii); 960.259(c)(2), and 982.516(a)(3)); and the mandatory deduction for a dependent ((§ 5.611(a)(1)), which is also used to calculate the income exclusion for earned income of dependent students (§ 5.609(b)(14)) and adoption assistance payments (§ 5.609(b)(15)).
HUD revises provisions in this final rule (in §§ 5.609(c)(4), 5.657(f), 574.310(h), 882.515(f), 882.808(i)(5), 960.257(f), and 982.516(f)) to define a de minimis error as an error that results in a difference in the determination of a family's adjusted income of $30 or less per month. This change from defining a de minimis error as a percentage error will enable a PHA or owner to make de minimis determinations on a family-by-family basis rather than having to do a full portfolio review to determine if a PHA, owner, or grantee exceeds the threshold. In addition, using a dollar amount instead of a percentage will make de minimis errors easier to calculate. However, HUD also provides that through issuance of a
In addition, to clarify that the de minimis protections apply to all calculations of income, not just during interim reexaminations, HUD moves the language about the de minimis safe harbor into its own paragraph in each location in which it is included in the regulations.
HUD also adds language to clarify that where a PHA or owner has made a mistake resulting in the family underpaying their rent, the family will not be held liable for the underpaid rent. This is in addition to language that was included in the proposed rule that would require PHAs and owners to repay families that were overcharged due to miscalculation errors.
In response to public comments asking for additional clarification on interim reexaminations, this final rule ensures that the language in §§ 5.657(c), 574.310(e)(4), 960.257(b), 882.515(b), and 982.516(c) is as consistent as possible. HUD also revises the language to clarify that the threshold for when a PHA, owner, or grantee must conduct a reexamination due to decreases in a family's income is a change of ten percent or a lower threshold set by the PHA or owner. Further, in most circumstances, PHAs, owners, or grantees must conduct interim reexaminations if a family's income has increased by ten percent or more, or such other amount established by HUD through notice.
HUD also adds language in each instance clarifying that “reasonable” interim reexamination processing time should be based on the amount of time it takes to verify information, but generally should not be longer than 30 days after changes in income are reported. HUD does not add more specific language in § 960.253(g), which addresses the ability of a public housing tenant to switch from flat rents to income-based rents due to a hardship, as it is beyond this rulemaking's scope. However, HUD expects that PHAs will follow a similar time frame for changing rent determination methods due to hardship as they do for other hardship evaluations. HUD also did not add the more specific language to § 574.310(e)(4) because the HOPWA program rule does not provide for flat rents.
Finally, HUD adds language in each location regarding the effective dates of any changes in rent due to an interim reexamination. If the tenant complies with the interim reporting requirements, the PHA, owner, or grantee must give the tenant 30 days advance notice of any rent increase, and the rent increase will be effective the first of the month commencing after the end of the 30-day period. If the tenant has complied with the interim reporting requirement and the tenant's rent will decrease, the change in rent is effective on the first day of the month after the date of action that caused the interim certification, for example the first of the month after the date of loss of employment. A 30-day notice is not required for these rent decreases.
If the tenant does not comply with the interim reporting requirements, and the PHA, owner, or grantee discovers the tenant has failed to report changes as required, the PHA, owner, or grantee must initiate an interim reexamination and implement rent changes as follows:PHAs, owners, or grantees must implement any resulting rent increase retroactive to the first of the month following the date that the action occurred, and any resulting rent decrease must be implemented no later than the effective date of the first rent period following completion of the reexamination.
However, rent or family share decreases may also be applied retroactively at the PHA's, owner's, or grantee's discretion, in accordance with the conditions established by the PHA, owner, or grantee in written policy. For example, a PHA, owner, or grantee may adopt a policy that would make the effective date of an interim reexamination retroactive to the first of the month following the date of the actual decrease in income as opposed to the first of the month following the interim reexamination. However, the final rule clarifies that a retroactive rent or family share decrease may not be applied prior to the later of the first of the month following the date of the change leading to the interim reexamination or the first of the month following the effective date of the family's most recent previous income examination (either interim or annual reexamination, or the first of the month following the family's initial examination if that was family's only income examination before the interim reexamination in question). In other words, a family's failure to report the change at a previous examination or reexamination may not be taken into consideration in applying the effective date of the interim reexamination.
The PHA, owner, or grantee may also choose to establish conditions or requirements for when such a retroactive application would apply (for example, where a family's ability to report a change in income promptly may have been hampered due to extenuating circumstances such as a natural disaster or disruptions to the PHA's, owner's, or grantee's management operations). In applying a retroactive change in rent or family share as the result of an interim reexamination, the PHA or owner must clearly communicate the impact of the retroactive adjustment to the family so there is no confusion over the amount of the rent that is the family's responsibility. In the HCV program, moderate rehabilitation program, and HOPWA's project- or tenant-based rental assistance programs, the PHA or grantee must also clearly communicate the impact of the retroactive adjustment to the owner as well. These policies may reduce the potential hardship on families and eliminate or significantly reduce the amount a family may owe for back rent if the family has had difficulty in making timely rent payments during the time between loss of income and the interim reexamination.
HUD anticipates that questions may arise about whether the retroactive rent regulations may apply back to decreases in income occurring before the effective date of this final rule. Any interim reexamination conducted under this final rule may not be applied retroactively to any period of time prior to the effective date of the final rule.
HUD intends to issue additional guidance in the future on retroactively applying interim reexaminations for PHAs and owners that may be interested in permitting retroactive rent decreases.
In § 960.257(c) and (d), HUD inserts the word “continued” to clarify that the policies PHAs are required to adopt regarding annual and interim reexaminations are part of the PHA's admission and continued occupancy policies. This brings the language in those paragraphs in line with language referring to the same policies in § 960.507(d) to create consistency when referring to the same things.
HUD intends to publish additional guidance to PHAs and owners on how they may use self-certifications from tenants and how PHAs and owners may help their tenants determine if any income change meets the threshold. HUD does acknowledge, however, that depending on the PHA's or owner's policies, the PHA or owner may be required to do extensive reviews of income to determine if the change in income meets the relevant threshold to trigger an interim reexamination.
This final rule and this preamble reference additional guidance that HUD will publish relating to implementation. Such guidance will be issued for the various HUD programs impacted by this final rule and will also include the applicable requirements for PHAs and owners, including fair housing and civil rights requirements, to ensure administration and implementation of HOTMA's statutory mandates and this final rule.
In addition to the HOTMA Section 102 provisions implemented through this final rule, Section 102 further provides in section 3(a)(7)(e) of the USHA that HUD shall develop a mechanism for disclosing information to a PHA for the purpose of verifying the employment and income of individuals and families in accordance with section 453(j)(7)(E) of the Social Security Act (42 U.S.C. 653(j)(7)(E)), and shall ensure PHAs have access to information
HUD is using this final rule to conform its moderate rehabilitation program and moderate rehabilitation SRO programs to HOTMA Section 102 and 104. While HUD's proposed rule inadvertently omitted proposed conforming changes to the moderate rehabilitation regulations at § 882.515 and the moderate rehabilitation SRO regulations at § 882.808 that it included for the public housing and other Section 8 programs, HUD has a solid justification for making these changes in this final rule.
Initially, Sections 102 and 104 of HOTMA amend the 1937 Act, respectively, to revise the frequency of family income reviews and calculations of income in HUD's public housing and Section 8 programs and to set limits on the assets that families residing in public housing and families receiving assistance under Section 8 may own. These HOTMA changes impact all Section 8 programs, including the Section 8 moderate rehabilitation program and the Section 8 moderate rehabilitation SRO program. Equally important, with respect to the income calculations, income reexaminations, and eligibility determinations, HUD's moderate rehabilitation programs function in the same manner as its HCV program. Specifically, the PHA (as opposed to the owner) is responsible for conducting income reviews and adjusting the tenant rent and housing assistance payment accordingly and is likewise responsible for issues related to a tenant's eligibility for admission to the program and continued assistance under the program. The owner does not have any role in income calculations, reexaminations, and eligibility determinations. Because of this similarity in functional roles and responsibilities to the HCV program, HUD believes that the public comments submitted in response to the proposed rule on these topics, which were presented as uniform polices impacting the public housing and all Section 8 programs in the same manner in the preamble discussion, provide HUD with a solid basis to make conforming changes to its moderate rehabilitation program and moderate rehabilitation SRO program regulations. In this regard, the interests of the parties most affected by HUD conforming changes—PHAs and program participants—are substantially identical to the parties impacted by the changes made to the HCV program. Finally, most of the HOTMA income changes impacting the moderate rehabilitation programs are implemented by revisions to part 5 of this final rule. The ability to use these part 5 changes in accordance with other interrelated HOTMA Section 102 and 104 requirements would be hindered without conforming changes to part 882. For example, while the PHA could apply the asset limitation under the new part 5, it could not rely on the statutorily permitted self-certification of the family that they have less than $50,000 in assets.
As a result, this final rule makes conforming changes to HUD's moderate rehabilitation regulations. These conforming changes are largely identical to those made to HUD's HCV program regulations at § 982.516. A discussion of the specific revisions to §§ 882.515 and 882.880 follows.
HUD is making conforming amendments to § 882.515(a) and § 882.808(i) for the moderate rehabilitation programs regarding the amendments made by HOTMA to allow families to self-certify when their combined net family assets are $50,000 or less, with that amount adjusted by an inflationary factor. As discussed in the preamble of the proposed rule, Section 104 of HOTMA not only establishes a limitation on the amount and type of assets that a family residing in public housing or assisted under the Section 8 programs may own but also provides that the PHA or owner could determine the net assets of a family based on a certification by the family that their net family assets do not exceed $50,000. This self-certification is codified at § 5.618(b). Under this final rule, HUD is also adding language on the self-certification of net family assets to moderate rehabilitation program regulations, consistent with the language added to the regulations specific to the other Section 8 programs. For more information on these Section 8 program changes, please see the discussion of the public comments received on the asset limitation and the self-certification under Section III, Income—Income from Assets, and Assets—Value of Assets, of this preamble.
HUD is making conforming changes to § 882.515(b), adding a new paragraph (e) to § 882.515, and adding a new paragraph (4) to § 882.808(i) for the moderate rehabilitation programs regarding the amendments made by HOTMA on requirements related to the timing of interim reexaminations. As discussed in the proposed rule, Section 102 of HOTMA deals with income reviews in HUD's public housing and Section 8 programs, including interim reexaminations. HUD is revising these regulations, consistent with revisions made for the program specific regulations for public housing and the other Section 8 programs, to implement requirements related to when interim reexaminations are conducted under HOTMA, what qualifies as a reasonable time for the PHA to conduct the interim reexamination, and the effective date of the rent changes. For more information on these Section 8 program changes, please see the discussion of public comments received related to interim reexamination issues under Section III—Interim Reexamination of Income, of this preamble.
HUD is making conforming changes by adding new paragraphs at § 882.515(f) and § 882.808(i)(5) for the moderate rehabilitation program and moderate rehabilitation SRO program regarding the amendments made by HOTMA for de minimis errors made by the PHA in calculating income. As discussed in the proposed rule, HOTMA provides that a PHA or owner will not be out of compliance with the statute's new provisions regarding income review and income calculation solely due to any de minimis errors made by the agency or owner in calculating family income. HUD is revising these regulations, consistent with revisions made for the program specific regulations for public housing and other Section 8 programs. For more information on these Section 8 program changes, please see the discussion of public comments received related to de minimis errors under Section III- De minimis errors, of this preamble.
Commenters submitted comments that were not on a specific proposal, but about the rulemaking in general. Some commenters expressed general support,
Some commenters suggested that HUD should choose between competing priorities by choosing alternatives that most reduce burdens or increase the likelihood that tenants can pay their rent. A commenter also expressed concerns that the proposed changes will hurt those who access HUD programs, particularly those with disabilities, and will price them out of extremely low-income programs. One commenter stated that the proposed rule would increase the difficulty for low-income populations supported with Federal housing funding.
A commenter stated that HUD should start an analysis to model HOTMA to determine the extent of adverse changes in PHA funding sources resulting from the changes and report the results to Congress prior to the changes going into effect.
Commenters stated that HUD should create an extended time after publication of the final rule before the rule is effective. Some suggested allowing PHAs up to 2 years to enforce the rule, while allowing PHAs to proceed earlier if they wish. Others stated that HUD should make the effective date 120 days after publication to allow for revision of training materials and to ease the transition for households.
Commenters supported the idea of HUD aligning rules and regulations across HUD programs where possible. The commenters stated that such alignment would ensure consistency, minimize errors and duplicate work, and reduce administrative burdens, particularly where projects blend multiple forms of assistance. Some commenters stated specifically that HUD should work with the IRS to streamline HUD programs with the LIHTC program.
Commenters also stated that when HUD cannot align rules across HUD programs, HUD should describe the differences between the programs and have a rule specifying what rule takes precedence when programs conflict and multiple funding sources are being used for the same household.
When a project is using multiple sources of HUD funding, HUD already has in place programmatic policies and requirements on how to combine and administer those multiple sources. For example, MFH addresses tenant rent issues for units with LIHTC financing and HAP assistance in the Multifamily Occupancy Handbook. PHAs and owners should continue to follow such policies.
Generally, commenters were in favor of aligning requirements between the HOME and other programs. Commenters stated that HUD should apply all revisions to adjusted income when combining HOME and other Federal programs. Commenters stated that HUD should adopt financial hardship exemptions for families receiving HOME TBRA but should do so through a separate process to ensure that all interested stakeholders have the opportunity to comment.
Others wrote that HUD should apply asset restrictions for any program funded by HOME to align regulations across the programs. However, one commenter stated that agencies that combine HOME funds with other program funds should be allowed to not enforce asset limitations.
A commenter asked for clarity on which entities are required to determine rent for HOME units receiving Federal or State subsidy, as the proposed rule seemed to require participating jurisdictions to do so, rather than the subsidy provider.
A commenter stated that, when a unit receives a Federal or State project-based rental subsidy, participating jurisdictions should rely on the other program's determination of adjusted income and rent calculations rather than requiring the participating jurisdiction to determine adjusted income.
There is no HOME statutory requirement to limit a family's assets or to remove a family from the HOME program if the family's net family assets exceed a threshold. HUD solicited public comment on whether HUD should impose asset limitations in the proposed rule to align with other programs. However, after due consideration and examination of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12701
Similarly, HUD has determined that there is no statutory basis for excluding families from participating in HOME homeownership activities because of the amount or types of assets they own, and that imposing an asset limitation for the HOME program would be counter to Congressional intent. The HOME program serves a broader group of beneficiaries through activities not authorized under many other HUD programs, and it is appropriate that potential homebuyers and homeowners seeking rehabilitation assistance have higher incomes and more assets than Section 8 families or public housing residents so that they can sustain homeownership. Applying an asset restriction to the HOME program would impact potential beneficiaries of HOME-funded activities and would result in fewer families being assisted. Also, applying an asset restriction to only one or two HOME sub-programs (
PJs are responsible for ensuring compliance with rent and income requirements applicable to rental housing assisted with HOME funds even if the rent and income eligibility determinations are conducted by entities under contract with the PJ or the PJ's housing partners (
Commenters asked for the Housing Opportunities for Persons with AIDS (HOPWA) program to have flexibility to not adopt some of the changes to the larger Section 8 program. A commenter stated support for the idea of having discretion not to enforce restrictions based on net assets and ownership of properties; the commenter stated that supportive housing programs like HOPWA should remain focused on achieving positive health outcomes, not excluding households from participation based on an arbitrary definition of wealth. A commenter also opposed applying the calculation of income changes to HOPWA, as the proposed rule separates income eligibility certifications and recertifications from income examinations and reexaminations for rental assistance activities, which would create confusion for HOPWA project sponsors. The commenter specifically cited the example that it is unclear if current income should be used for annual income eligibility certification, but old income should be used to determine rental assistance calculations.
Commenters stated that with the final rule, HUD should release an updated HOPWA income resident rent calculation spreadsheet.
HUD allows, but does not require, grantees to calculate income as provided by § 5.609 for the purposes of determining income eligibility. Due to the unique nature of the HOPWA program and its activities, HUD has determined that remaining flexible about the method used to determine income for eligibility purposes will best enable grantees to meet the needs of the program's intended beneficiaries regardless of the type of assistance an individual or family is seeking. However, HUD has determined it is generally practicable to align HOPWA with the HCV program in determining how to calculate resident rent payments. So § 574.310(e) will generally require HOPWA grantees to calculate income in accordance with § 5.609 for the purposes of determining the resident rent payment under 574.310(d). At initial occupancy, §§ 574.310 and 5.609(c)(1) require grantees to estimate a family's income for the upcoming 12-month period to determine the family's resident rent payment. For subsequent reexaminations of income, §§ 574.310 and 5.609(c)(2) require that a grantee calculate examine family's prior-year income (including any redetermination of income that took place during the year) and make adjustments to reflect current income if there was a change in income during the previous 12-month period that was not accounted for in a redetermination of income. This process, which is also being used in the HCV program, is explained in greater detail in the section of this preamble entitled “Prior-year income.”
HUD also agrees that additional guidance and support can be offered to HOPWA project sponsors to add clarity to this final rule and will be providing guidance after publication of the rule.
Commenters requested that HUD align the HTF program's income calculation with other HUD programs as many properties have combined HTF with HOME or Section 8 assistance. Commenters were divided about whether asset restrictions should be applied to the HTF program. Some stated that homeownership programs should not have asset restrictions. Others supported adopting asset restrictions for housing programs funded with the HTF.
The HTF program serves beneficiaries through activities not authorized under many other HUD programs, and it is appropriate that potential homebuyers seeking homebuyer assistance have more assets than Section 8 families or public housing residents so that they can sustain homeownership. Applying an asset restriction to the HTF Program would impact potential beneficiaries of HTF-funded homebuyer activities and would result in fewer families being assisted. Because there is no statutory restriction on a family's assets in the HTF program, HUD declines to add any restrictions with this rulemaking.
Commenters asked HUD to eliminate deductions and exclusions in income, in order to streamline determinations. A commenter stated that the proposed definition of “income” was too vague and asked for additional information on the interaction between seasonal and inconsistent income and its relationship to annual income for purposes of interim reexaminations. Another commenter stated that the suggested language defining “income” did not clarify anything.
A commenter stated that HOTMA's use of “determination of income” when referring to prior-year income instead of “estimation of income” for the upcoming year indicates that PHAs and owners may be expected to use different income calculation methods based on the time period covered. The commenter stated that using two methods would lead to increased errors when performing reexaminations, increasing the burden of operating the voucher program.
HUD recognizes how the language surrounding income determinations in different circumstances may be confusing, and HUD will consider whether to issue further guidance with more information in the future. However, HOTMA requires a different method for calculating income at different stages. For initial occupancy, as well as for interim reexaminations, PHAs and owners must estimate the family's income for the upcoming year (see, § 5.609(c)(1)). However, for annual reexaminations, PHAs and owners must generally use the family's income from the preceding year (see, § 5.609(c)(2)(i)).
Commenters stated that income from assets should be based on self-certification for all assets under $50,000 after the family's admittance to the housing program.
Commenters also asked for additional guidance on what to do when there has been some change in the asset values (such as changes to the value of a stock portfolio) that cannot be computed.
Several commenters asked HUD to use the passbook savings rate, either by disregarding imputed returns on assets and only using the passbook rate on the totality of the family's assets or for imputing asset returns.
Commenters asked if HUD intended PHAs and owners to only use imputed income for assets if the PHA or owner cannot calculate any income from assets.
Commenters stated that the withdrawal of earned interest should continue to count as income.
When the combined value of all net family assets has a total value of $50,000 or less, the family must include, on its self-certification that the net family assets do not exceed $50,000, the amount of actual income the family expects to receive from such assets, and that this amount is to be included in the family's income. The PHA or owner may determine both the value of the net family assets and the amount of actual income the family expects to receive from such assets based on the family's self-certification (see, § 5.618(b)).
When net family assets have a total value over $50,000, if the PHA or owner can compute actual income for some assets, but not all assets, the PHA or owner must compute the actual income for those assets where possible, calculate the imputed income for all remaining assets where the actual income cannot be computed, and combine both amounts to determine the family's income for all assets. The PHA or owner must calculate the imputed return on all net family assets when net family assets are over $50,000 if
This final rule does not change the requirement that PHAs and owners count earned interest as income.
A commenter stated that any lack of clarity and standardization of the application of a COLA for streamlined income determinations will lead to inconsistent applications and errors in rent calculations, and therefore HUD should provide standardized, updated sources for COLA calculation, an updated HOPWA rent calculator, and training. Without these additional resources, the commenter stated that HUD should allow jurisdictions to continue to recertify based on documentation of fixed-income sources such as benefit letters.
In addition, throughout this final rule, HUD has specified that amounts that are statutorily required to change due to inflation will be adjusted by HUD using the CPI-W.
Commenters stated that the use of income determinations from other programs should be discretionary. Other commenters stated that allowing PHAs and owners to use income determinations from other forms of assistance would reduce administrative burden and the time required to verify income. A commenter stated that the level of administrative relief from this policy will depend on the level of PHA discretion to determine which program information to use. A commenter stated that HUD should require PHAs and owners to adopt written, publicly available policies stating the circumstances under which they will use income determinations from other programs and then apply the policies consistently.
A commenter stated that it is not clear that HOTMA allows PHAs and owners to completely substitute another program's definition of income for the definition in the 1937 Act; allowing such a substitution would be a fundamental and far-reaching policy change.
A commenter stated that a PHA should not be required to recalculate income if the tenant has failed to provide the documentation needed within a timely manner and the PHA has had to use an outside determination of income. Another commenter stated that entitlement municipalities that provide rental assistance and non-PHA nonprofits should also be able to use outside income determinations.
Commenters asked if the ability to use an outside determination of income would allow a PHA or owner to obtain IRS records, including tax returns. A commenter stated that tenants should not be required to obtain the income determinations themselves. A commenter stated that HUD should add language to the consent form to authorize the PHA or owner to obtain income determination information from the relevant local administrators.
Another commenter stated that tenants should be made aware of what income reporting will affect their rent; specifically, the tenant should know whether reporting income changes to a LIHTC owner will result in that information being passed along to a PHA.
Commenters also expressed concerns about using income determinations by other agencies. One commenter stated that other forms of assistance may take income information at face value without additional verification and expressed concern that if there is a difference between information from EIV and the other agency, the PHA may receive an audit finding. Another stated that there may be errors or other inconsistencies in the income calculation by other agencies that may affect participation in HUD programs, especially if there was fraud involved in the original calculation of income. A commenter also stated that differences between States and between programs will result in inequities in determining rents.
In this final rule, HUD is clarifying that PHAs and owners will be able to use income determinations received through established data sharing agreements, or PHAs or owners can obtain income determinations directly from administrators for means-tested public assistance specified on the approved list in the regulation at § 5.609(c)(3). A PHA or owner may also rely on third-party documentation provided to the PHA or owner by the tenant of a determination made by a form of assistance on the list in the regulatory text.
Commenters asked for additional information and guidance on how to use determinations of income made by other agencies. Some asked for general guidelines, while others specifically asked for additional information on what documentation would be acceptable evidence of the income determination, including whether it has to come from the other agency or if it can come from the tenants. A commenter stated that HUD should delay rulemaking on allowing outside determinations of income until HUD provides additional information on how verification would work and the forms and sources of appropriate proof of the determinations.
Commenters asked HUD to provide additional information on how other agencies determine income and how the other determination can be used by PHAs or owners as a safe harbor. A commenter stated that HUD should provide information on how similar other agencies' definition of income is to HUDs, as using a calculation not aligned with HUD requirements may jeopardize a PHA's ability to provide fair determinations of income, leaving the PHA with legal vulnerabilities. The commenter further stated that having the list of the approved agencies' income sources will provide a safe harbor for PHAs. Commenters stated that HUD should delay rulemaking until it has conducted further research across programs and States to inform the rulemaking.
Many commenters stated that HUD should provide requirements on which determination to use when there is more than one available, and one suggested that if a discrepancy between determinations exists, PHAs should use the higher income. A commenter stated that if discretion lies with PHAs or owners, inconsistencies will arise, complicating the coordination of care between Continuums of Care providing case management. Others stated that HUD should give PHAs the discretion to determine which program's income information to use when more than one is available. A commenter stated that HUD should provide guidance on the best practices for resolving differences in determinations.
A commenter also asked for guidance on what to do if a participant disputes an income determination from another agency.
A commenter stated that HUD and Congress should work to eliminate duplicative, burdensome recertification requirements.
Because many of the other forms of public assistance have definitions of income that vary from State to State, it is not practical for HUD to provide detailed information to PHAs and owners on how the other forms of assistance define income. However, HUD intends to offer further guidance to PHAs and owners containing best practices for choosing between multiple available determinations and on how to resolve any discrepancies.
HUD also appreciates the suggestion to continue to streamline reexamination requirements across Federal agencies administering means-tested public assistance, and hopefully the efforts in using this interagency flexibility will highlight additional areas where the government can seek alignment.
Commenters responded to HUD's request for input on which types of assistance should be included in the list of outside determinations a PHA or owner may use. A commenter stated that HUD should establish a list of eligible programs, while others stated that HUD should allow PHAs to submit other methods to be approved by HUD or that HUD should not limit the forms of Federal assistance on the list. A commenter stated that HUD should give PHAs the flexibility to choose programs from a list provided by HUD and set out the choice in the administrative plan. Commenters also stated that HUD should not limit the number of programs that a PHA may use for determinations.
A commenter stated that PHAs or owners should be allowed to use Federal tax return information, particularly if the family was eligible for an earned income tax credit (EITC) or child tax credit. Others stated that HUD should not use EITC determinations, because tax returns contain a lot of personal information or because the data will be at least a year out of date. Another commenter stated that the calculations to determine EITC eligibility exclude substantial sources of income that the 1937 Act includes, which would increase program costs and would have varying effects on different groups of participants in HUD programs.
Commenters stated that HUD should allow determinations for Social Security or Supplemental Security Income. Others suggested including VA benefits or Social Security Disability Insurance (SSDI). A commenter stated that the income definition for SNAP is similar to the 1937 Act and is national, so it would be appropriate to use. Commenters stated that the programs in the 1937 Act should be allowed to use income determinations made for the HOME program, or determinations used for LIHTC. Commenters also suggested using determinations for the Head Start program or determinations made by child support enforcement agencies.
Other commenters stated that HUD should not allow PHAs and owners to use determinations for TANF, as States have wide leeway in setting the formula to determine income, and therefore there would be a wide range of different income determinations making it harder for HUD to provide effective oversight.
In this final rule, HUD is adding several forms of assistance to the list of means-tested public assistance that a PHA or owner may rely upon for an alternative income determination under § 5.609(c)(3): LIHTC; WIC; the SSI program; and other HUD programs, such as the HOME program. In addition, PHAs or owners may use income determinations from other forms of means-tested Federal public assistance if HUD has established a memorandum of understanding with the agency administering the assistance.
Because the use of outside income determinations is permissive for PHAs or owners, PHAs or owners must specify in their written admission and continued occupancy policies, HCV administrative plan, or House Rules, as applicable, the policies that they are adopting, including which programs from the HUD-approved list, if any, they will accept and their method for choosing between potentially competing determinations from different programs.
Commenters stated that using determinations by other agencies would be useful if the PHA could obtain the information the other agency used for verification. A commenter stated that the level of administrative relief from this policy will depend on the PHA's ability to develop and implement data-sharing agreements. Commenters wrote that HUD should facilitate data sharing to allow PHAs and owners to obtain information from other programs, because without such data sharing, the ability of PHAs and owners to use outside determinations would be limited. Some stated that HUD should provide capacity development and technical assistance to PHAs and owners for data sharing.
Commenters stated that PHAs should have the freedom to create their own data-sharing partnerships, and PHAs should have the freedom to create such partnerships with as many programs as possible. A commenter stated that local PHAs will have a better understanding of the accuracy of different program administrators and may have better relationships for sharing information.
Commenters stated that HUD should prioritize agreements with the Social Security Administration, given the number of families receiving Social Security, or the Department of Agriculture, due to the number of families receiving SNAP benefits.
Commenters stated that HUD should determine a way to share information electronically and asked for details about whether administrators of other programs would be willing to supply the information. A commenter stated that getting information from other agencies means that additional privacy protections will be needed.
HUD is prioritizing MOUs with the Social Security Administration and the Veterans' Administration, given existing agreements in other contexts, but HUD cannot guarantee which agreements will be in place first.
Many commenters stated that HUD should define “timely” with respect to a determination of income made by another agency; a commenter said that a time limit will prevent improper payments that might otherwise occur if a tenant does not honor reporting obligations to an outside agency. Some stated that the outside determination should be no older than 120 days, while
Another commenter stated that HUD should not establish a firm definition of timeliness, but HUD should publicize best practices, as PHAs and owners often consider determinations more than 90 days old to be stale.
Commenters stated that HOTMA does not eliminate the current practice of some PHAs of conducting more frequent income reviews of sporadic income sources and annualizing income. These commenters asked that HUD ensure the revised regulations do not preclude these practices and asked for HUD to provide explicit guidance permitting such actions.
Commenters also asked for additional clarity from HUD on what the revisions to annualizing income mean for PHAs and owners practically, so it will be clear what will happen when a PHA or owner cannot project long-term income.
This final rule retains changes from the proposed rule that eliminate the provision on annualizing income. PHAs and owners will look at the income for the previous 12 months for annual reexaminations.
Some commenters stated that shifting from anticipated income to actual income from the prior year was an important and positive change.
Other commenters stated that HUD's interpretation of the HOTMA language about prior-year income was not correct. Instead of referring to the prior 12 months of income, the commenters wrote, the intent was to use the family's income from the prior calendar year, which would allow the use of year-end documents and would create an incentive to increase earnings by delaying the impact of increased earnings on rent obligations.
Commenters also asked for additional guidance on how to use past income, particularly when a family's income may have started and stopped during the year or when there were multiple income changes during the prior year, since either may present significant difficulty for PHAs or owners. A commenter suggested allowing PHAs to use documentation from the immediately preceding 60 to 90 days.
Commenters stated that PHAs and owners must be given instructions to retain information submitted in the prior 12 months to determine if the annual review finds a change in income not accounted for previously. Others stated that HUD should provide PHAs with clear guidance on what would be acceptable forms of income verification.
Commenters opposed the idea of using past income, stating that using the income in the preceding year would not provide the most accurate and current family income. Instead, the commenters stated that PHAs should be given the most flexibility to determine accurate income, including just taking the prior-year determinations into consideration. A commenter stated that the regulation did not seem to reflect the HOTMA statutory language that allows PHAs and owners to make other adjustments to prior-year income that the PHA or owner considers appropriate to reflect current income.
Moreover, reading “preceding year” to mean the “preceding calendar year” creates contradictions in the statute and the rule. Consider the scenario where a family had an interim reexamination of income that took place in the current calendar year but preceding income calculation cycle: Under the statute, the PHA or owner must take “into consideration any redetermination of income during such prior year” when performing an annual income reexamination. If HUD interpreted “such prior year” to mean the “preceding calendar year,” the PHA or owner would ignore any interim reexaminations of income performed in the current calendar year and only consider interim reexaminations that took place in the preceding calendar year. This result runs counter to clear Congressional intent that PHAs and owners take the most recent calculation of income into consideration when performing an annual income reexamination. As a result, HUD concludes that the most reasonable reading of the statute is that “preceding year” means the 12 months preceding the calculation of income.
If a PHA or owner determines that the family's prior-year income does not reflect the family's current income, the PHA or owner is required to adjust the income determination under § 5.609(c)(2)(ii) and (iii).
While the existing procedures related to the order of hierarchy or acceptability for verification for income, assets, and expenses
Commenters stated that HUD should not rely on broad language to define what is included as income but should continue to have a list of what is specifically included, as the broader language may create confusion and increase the risk of litigation, while the specific list provides answers to questions from the public and individuals.
Some commenters asked that HUD specifically include certain payments as income, such as per capita payments to Native Americans from gaming operations and tribal kinship or guardianship payments or net income from businesses.
A commenter also stated that HUD should specify that funds only count as income if the family actually receives the income, not just because the family is entitled to it, such as child support payments.
HUD declines to specify in this final rule that income excludes payments not actually received by a family, such as child support payments that the family is entitled to but does not receive. It is HUD's position that such an exclusion is not necessary because § 5.609(a) states that all amounts “received from all sources” that are not excluded in paragraph (b) are income.
Commenters asked for HUD to define what a “gift” is for purposes of including it in income. Commenters also requested information on how HUD defines sporadic income for inclusion, and what types of funds would fall into this category.
Commenters stated that PHAs should not have to perform interim reexaminations for decreases in income if the family never had to report the change and the PHA used the family's prior 12 months of income to determine rent. While some commenters supported the elimination of interim reexaminations in the final 3 months of a certification period, others stated that PHAs and owners should still be required to conduct interim reexaminations for decreases in income.
A commenter suggested creating an expedited process, with a lower level of verification and a strict deadline, for downward adjustments in tenant rents. Another commenter stated that HUD should require providers to prioritize interim reexaminations for decreases over interim reexaminations for increases in income. A commenter stated that it would be appropriate for a PHA to inform an HCV owner that there is a potential adjustment being discussed, along with a timeline, to allow the owner to make an informed decision on whether to hold off on a lease enforcement action or whether a solution from the PHA is likely.
A commenter pointed out that there is inconsistency in certain language in the proposed §§ 5.657, 960.257, and 982.516. The commenter stated that the use of both “must” and “may” as well as both “make [the interim reexamination]” and “conduct [an interim reexamination]” within the proposed regulations regarding interim recertifications may be confusing and misinterpreted.
HUD is already creating in this final rule, at § 5.233(a)(2)(i), a simplified process for interim reexaminations by removing the requirement to use EIV, and HUD does not feel additional flexibilities are needed. In addition, because the changes made by HOTMA are intended to relieve burdens on PHAs and owners, HUD is declining to impose additional restrictions on PHAs and owners. A PHA and owner already prioritize interim reexaminations based on the order in which families request them, and HUD further declines to add notification requirements to HCV
HUD thanks commenters for pointing out where the regulatory language could be clearer. In some cases, different language is required. For example, families have the option (“may”) to request an interim, while PHAs and owners must perform the interim reexamination when requested if the changes in income or deductions meet the interim threshold percentage. However, HUD has revised the language referring to interim reexaminations in this final rule (in §§ 5.657(c), 574.310(e), 960.257(b), and 982.516(c)) to be consistent about the obligations of PHAs, owners, and grantees to “conduct” interim reexaminations.
Commenters stated that if there is an error in a downward adjustment, repayment can be arranged as with EIV.
A commenter opposed the prohibition on considering increased earned income when estimating if a family's income has increased; the commenter stated that this was equivalent to keeping the earned income disregard and would complicate administrative workflows by creating a different definition of income for interim and annual reexaminations. Another commenter stated that HUD should clarify that the reason a PHA would be required to take into account the family's actual decreased adjusted income over the previous 12 months on a prospective basis would be because the PHA would be determining the family's actual adjusted income over the previous 12 months.
Commenters stated that HUD should require PHAs to apply mid-year payment standard increases as promptly as possible. A commenter stated that if the payment standard is increased and the landlord increases rent before the next regular certification, the revised Section 8(o)(2)(A) of the 1937 Act requires the PHA to provide tenants with the benefit of the new payment standard immediately instead of waiting for the next regular examination. Commenters stated that HUD should revise the payment standard regulations to clarify that tenants who request a reasonable accommodation for an increase in payment standards are not required to pay 40 percent of their income in rent to see the benefits of the accommodation.
Commenters also stated that HUD should be explicit that PHAs and owners have the authority to adjust the total tenant payment (TTP) to account for the amount and timing of changes in income.
Commenters made suggestions regarding when rent calculations from interim reexaminations should take effect. A commenter stated that the effective date should be aligned with the next month. Another stated that HUD should clarify that the effective date of any change in rent would be based on the actual change in income and would be dependent on appropriate notice to the PHA of that change in income. A commenter suggested HUD adopt the provisions in the HUD Handbook 4350.3 “Occupancy Requirements of Subsidized Multifamily Housing Programs” that makes changes from increases effective on the first of the month after the end of a 30-day notice period, while changes from decreases in income are effective on the first day of the month after the date of the action that led to the interim reexamination.
Commenters also stated that HUD should prohibit housing providers from requiring retroactive increases in rent where a tenant has timely reported an increase in income.
If the tenant does not timely report a change in income as required by the PHA or owner's policy, any resulting rent increases from an interim reexamination will be retroactive to the first of the month following the date of the action resulting in an increased income and rent decreases will be effective no later than the first of the month following the completion of the interim reexamination.
Commenters stated that HUD should adopt the process from the HUD Handbook 4350.3:
Some commenters expressed support of the proposal that interim reexaminations would be triggered only by a ten percent change in income. Some stated that it is appropriate to move to percentages from a set dollar amount. Others stated that allowing a request for decreased rent when income falls ten percent is fair or will benefit families who need rental assistance. A commenter explicitly supported the grace period that allows families to benefit from earned income increases unless the family previously requested a decreased rent due to an income decrease.
Commenters stated that a PHA or owner should not be allowed to decline interim reexamination requests because the family's income change is below ten percent, especially if the change is for a decrease in income, to avoid creating a rent burden. Others stated that it should be up to the PHA's discretion to conduct interim reexaminations for income increases; commenters stated that some PHAs do not currently do interim reexaminations for income increases and requiring it now would increase their burden. Another commenter stated that instead of requiring reexaminations for families when the PHA or owner suspects an increased income, the need for interim reexaminations should be based on a family's self-reported monthly income at the request of families.
Some commenters opposed requiring PHAs to do interim reexaminations when a threshold change is met, because there is already a 90-day lag in EIV information and annualized income requires an even longer period of time; the commenters stated that it would not make sense to conduct interim reexaminations every time there is a fairly small change in income. A commenter stated that HUD should not implement requirements for interim reexaminations beyond what is statutorily required by HOTMA. Another commenter stated that HUD should be clear that PHAs and owners have a wide range of discretion, but MTW agencies still cannot exceed the ten percent threshold.
Other commenters stated that estimating when income has changed by ten percent would be difficult and it would basically require the PHA or owner to do all the income determination work anyway. Commenters stated that households will report many more minor changes to confirm they have not reached the threshold.
Some commenters opined on what type of income should be used to determine whether an interim reexamination is justified. Commenters stated that HUD should base the threshold on gross income, even self-declared, rather than adjusted income. A commenter stated that tenants earning hourly wages should be subject to a full calculation of income and assets, while fixed-income participants should be able to submit just gross expected income.
Commenters stated that the percentage triggering reexaminations should be higher than ten percent, because at lower income levels, small dollar changes in income will meet the ten percent threshold. A commenter stated that HUD should set a higher threshold for increases in income to set an incentive for increased earned income.
A commenter stated that HUD should set a threshold lower than ten percent to be fair to the poorest recipients of HUD assistance and stated that setting a national threshold instead of allowing PHA or owner discretion would obviate different rules and levels of hardship.
Other commenters suggested setting the threshold at fixed dollar amounts. Commenters suggested that using dollar amounts would increase clarity and ease of administration for PHAs and owners, because using a percentage would require a PHA or owner to go through a full calculation to determine if the threshold has been met. Another commenter stated that percentage changes would result in a disparate impact on lower-income households versus higher-income families—the same dollar amount change could trigger an interim reexamination for a lower-income family but not for a family with a higher income. Commenters suggested a change of $200 a month and suggested adjusting it for inflation. Others proposed a threshold of $400-$500 a month. A commenter pointed out that given that the Multifamily guidance currently suggests a threshold change of $200, whether or not a PHA or owner experiences a decrease in burden depends on the number of families served with income below $20,000.
Some commenters stated that PHAs and owners should have the discretion to use a percentage change or fixed dollar amount to set the threshold. Commenters stated that HUD should spell out the exemption for interim reexaminations for increases in income more clearly. A commenter suggested how HUD could clarify how PHAs and owners could determine whether a family has met the threshold for an interim reexamination and stated that HUD could provide tools to help families to determine if their income changes meet the interim reexamination threshold. A commenter stated that HUD should clarify that participants are not held responsible for unreported increased income below the ten percent threshold or if the PHA has a policy that does not require reporting increased income between annual reexaminations.
Commenters stated that HUD should set a different threshold for increases in income than for decreases and suggested the Multifamily standard of $200; a commenter stated that doing so would decrease interim reexaminations for very small increases in income, decreasing the burden on PHAs and owners. Another commenter suggested a threshold of $500 for increases in income.
Commenters stated that HUD should lower the threshold for decreases in income. A commenter stated that the downward threshold should be the lower of $100 per month or 5 percent of income to protect families and allow for easy determination that the family qualifies for an interim. Another commenter stated that the threshold should be 5 percent for income decreases for households with income less than 20 percent of AMI. Commenters stated that HUD should set a lower threshold because not decreasing rent when there is a significant income loss, which may be less than a ten percent change, could make a difference in being able to pay rent. A commenter suggested a threshold of $25 for extremely low-income families with decreased income.
However, there are some flexibilities built in for PHAs and owners. PHAs and owners may establish a lower threshold for changes in income or deductions resulting in a decrease of family income if they wish to do so and are willing to take on the additional administrative burden. In addition, with respect to income reviews for increases in income, PHAs or owners may elect not to conduct income reviews in the final 3 months of a certification period.
Unless the family has undergone an interim reexamination for a decrease in income after the completion of the last annual reexamination (or the family's initial income examination in the case where the family has not yet had its first annual reexamination), an interim reexamination is not triggered by an increase in the family's earned income, even if the increase is above the ten percent threshold. The PHA or owner has discretion regarding whether or not to conduct an interim reexamination based on any increases in earned income only if the family has undergone an interim certification for a decrease in income after the completion of the last annual reexamination (or initial examination, if the first annual reexamination has not yet occurred). The existence of the threshold also means that if there is an income change below the threshold, the tenant is not required to report the income change. Otherwise, only changes of more than ten percent of unearned income trigger an interim reexamination under the revised rule.
HUD notes that although there are flexibilities for PHAs and owners, entities must apply their policies uniformly and in compliance with all Federal nondiscrimination and fair housing requirements, including, but not limited to, the Fair Housing Act, Title VI of the Civil Rights Act, Section 504, and Title II of the Americans with Disabilities Act, as applicable. This also includes, among other requirements, providing for reasonable accommodations that may be necessary for individuals with disabilities.
Finally, HUD intends to publish additional guidance for PHAs and owners on how they may use self-certifications from tenants and how PHAs and owners may help their tenants determine if any income change meets the threshold. One objective of using self-certifications and other helpful guidance on estimating income changes that may meet the interim reexamination threshold is to alleviate the administrative burden on the PHA and owner of performing interim reexaminations where an interim reexamination will not lead to changes in income or amount the family must pay. HUD does acknowledge, however, that depending on the PHA's or owner's policies, the PHA or owner may be required to do extensive reviews of income to determine if the change in income meets the relevant threshold to trigger an interim.
HUD received many comments on how long a PHA or owner should have to conduct an interim reexamination. Some commenters stated that HUD should provide a definition of “a reasonable period of time” to conduct an interim reexamination. A commenter suggested providing a time frame to start the interim reexamination but should leave out a timeline for completing the review. Other commenters opposed HUD providing a definition of “reasonable time” in favor of allowing PHAs and owners to define it. These commenters stated that getting information may be outside the control of a PHA or owner, and size or financial differences between PHAs and owners mean a one-size-fits-all solution would not work.
Commenters stated that HUD should provide clarity on what exactly is covered by any specified deadline. Commenters stated that timeliness has two components, including how soon a family must report a change and how soon the PHA or owner must act upon that knowledge. Commenters asked whether the deadline should cover the time between the request and when the review is completed or the request and when the change is effective or whether the deadline would cover only the time between the request and when the review is started. Some stated that the clock should start from the date the PHA or owner receives all the information, while another commenter stated that the clock should start from the date the family reports a change.
Some commenters stated that it is reasonable to require an interim reexamination to be started within 2 weeks, but it is not enough time to complete the review.
Commenters supported following the Multifamily handbook, which states that, in general, interim reexaminations should not take longer than 4 weeks. However, these commenters stated that HUD should make this a more concrete deadline to avoid questions about whether the PHA or owner is compliant with the required time frame. Other commenters stated that it would take 30 days just to obtain all the needed information. Some pointed out that interim reexaminations are unexpected work that staff has to fit in around the regularly planned workload. A commenter stated that a PHA or owner may complete the review in less time if they prefer.
A commenter stated that the interim reexamination should be conducted in the same month that the information is received by the PHA, as long as it is not in the last 5 business days of the month.
Other commenters recommended a 60-day period, stating that such a time frame would give adequate time to receive required paperwork from tenants, review it, and calculate the revised income. A commenter stated that HUD should allow at least 60 days for PHAs with 30,000 or more vouchers, in line with the current time frame for annual reexaminations.
Other commenters stated that HUD should not set a time less than 90 days, as that would allow time to receive required documentation and to account for error corrections. A commenter also stated that this will lead to fewer interim reexaminations that only deal with small job changes. A commenter wrote that HOPWA should allow for 90 days to align with HOPWA assessment and service plan cycles and to minimize staff burden in reexaminations.
A commenter stated that 120 days was a reasonable time. Another suggested a time frame of 90-120 days to allow for the collection of 4 paystubs to demonstrate a long-term change, rather than just a short-term shift.
Some commenters distinguished between requests for changes due to increases in income and decreases in income. A commenter stated that HUD should specify a period to complete interim reexaminations for decreases in family income, as a failure to provide downward adjustments promptly could expose families to hardships and potential displacement and homelessness. The commenter stated that reexaminations for decreases in income should be completed in time to be effective before the family's next rent payment or one week, whichever is
Some commenters explicitly supported the elimination of the EID, stating that it will reduce the burden on PHAs and reduce income calculation errors.
Others objected to the elimination. They cited the benefits of EID in helping families become self-sufficient. Others stated that it allows families to secure their homes while maintaining employment. One commenter stated that Congress did not properly remove the EID from the statute with the language in HOTMA. Another commenter recognized the statutory change, even as they oppose eliminating the EID.
A commenter stated that HUD should provide PHAs with viable alternatives to EID, such as a once-in-a-lifetime deduction for residents that experience an EID qualifying event, such as excluding a percentage of the increase due to new earned income over the baseline income prior to the event.
Some commenters stated that current recipients should not be allowed to continue using the benefit until the end of their current period. However, many others stated that current participants should be allowed to continue to receive the EID benefit until their time ends. They stated that this would be fair to the current recipients, and some suggested that this would prevent the PHA from having to contact all affected families. A commenter even suggested that families in this group could have a limited form of the benefit, excluding the increased income of EID recipients during the 12-month period from when employment started, and then fully including all income after that period.
Commenters stated that HUD should continue to include families in EID if they had a qualifying event before the phase-out date of the EID, including if the family was not determined to be eligible until after the date the EID is fully phased out. Commenters stated that not allowing families that experience a qualifying event before the benefit is ended would upend the financial planning of those families.
Some commenters supported ending EID for HOPWA. Many commenters, however, opposed ending the benefit. These commenters stated that removing the policy would create a disincentive to work for people who already face significant economic and affordable housing barriers. Commenters stated that EID affords recipients the ability and time to adequately transition and to adjust to higher cost burdens. Commenters stated that the loss of the EID will threaten participants' housing stability, thereby threatening their health.
Commenters also stated that if HUD ends EID for the HOPWA program, current recipients should continue to receive the benefit, as abrupt removal of the benefit could destabilize tenants, causing them to possibly lose their homes.
Some commenters stated that they disagreed with HUD's conclusion that EID must be eliminated for the HOPWA program. Commenters stated that the language of HOTMA does not eliminate HUD's regulatory authority to continue EID with HOPWA, stating that HUD, in applying EID to the HOPWA program initially, relied on its authority under the HOPWA statute, not the 1937 Act.
However, the current statutory conditions for the HOPWA program (
For HOME, HUD is maintaining that there is no independent statutory basis for applying the EID in § 5.617 to persons with disabilities who are tenants in HOME-assisted rental housing or who are receiving HOME tenant-based rental assistance. HUD will continue to allow HOME tenants that have already taken advantage of the EID benefit upon the effective date of the final rule to continue to use EID for the full 24 months defined in § 5.617(c) but will not permit additional tenants to use EID in HOME after the effective date of the rule. HUD believes this is consistent with the statutory intent of removing EID from the 1937 Act and that this will maintain alignment between HOME and the Section 8 program.
Commenters wrote in favor of providing a comprehensive list of income that is excluded, stating that anything not on that list is considered income. Some commenters specified that HUD should consider using the IRS exclusion list. Similarly, commenters stated that HUD should include in the regulation the current list of forms of income other statutes require to be excluded, and HUD should update the list through a
There were many comments submitted offering suggestions on how HUD should exercise its flexibility in excluding certain funds from tenants' income. Some suggested that HUD exclude refunds from the EITC or even all tax refunds that are intended to alleviate poverty. A commenter suggested that HUD should exclude income taxes withheld by employers, child tax credits, adoption expense tax credits, or higher education tax credits.
Commenters stated that HUD should exclude all sporadic, nonrecurring gifts, with some writing that the statutory definition of income specifies “recurring gifts.” Commenters also stated that requiring tenants to report such amounts would create confusion and would put tenants at risk for not reporting a one-time amount. Others stated that tracking these amounts would be administratively difficult, and that including them would also make SSI and SSDI calculations, which are usually simple, more complex. A commenter stated that including sporadic funds would trigger many more interim reexaminations, and PHAs and owners cannot annualize such one-time funds. Other commenters stated that it is unfair to include nonrecurring amounts, because they are not consistent forms of income for which a family can budget, and tenants would be exposed to terminations for windfalls that may be depleted in months. A commenter stated that ending the exclusion of an inheritance could result in a family being OI and could affect asset calculations for subsequent years. A commenter stated, however, that it is administratively burdensome to determine if an amount is a sporadic gift, and therefore such amounts should be included in income.
A commenter suggested that as an alternative to fully including nonrecurring income, HUD should leave the sporadic income exclusion in place, allow rent to increase for a year (but prohibit terminations due to this type of income), and specify that previously terminated families will, after 30 days, be allowed back with a new income calculation; this would allow families with small inheritances to maintain support after 30, 60, or 90 days.
Commenters also wrote on the proposed exclusion for certain State Medicaid-managed care system payments to allow families to keep individuals with disabilities living at home. Some stated that HUD should explicitly exclude income from such payments, going beyond the proposed language that merely excludes “payments.” Others stated that HUD should not limit the exclusion to Medicaid-managed care payments but should extend the exclusion to all payments to a family from a State agency. Commenters supported the exclusion of ABLE accounts and stated that HUD should exclude State-run savings programs for eligible persons with disabilities.
Commenters suggested that HUD should exclude payments into long-term care insurance. Others stated that HUD should exclude not only medical reimbursements, but also reimbursements for disability-related expenses. Commenters suggested that HUD should exclude: payments for participation in a research study; amounts the household pays in formal child support; earnings for full-time students 18 years of age or older other than heads of households, co-heads of household, or spouses; income of foster adults; and annual income replacement housing “gap” payments or loan proceeds. Commenters suggested excluding income derived from Census employment. Commenters stated that HUD should exclude child support income, as such payments are often sporadic and are meant to cover the needs of the child.
Some commenters stated that HUD should exclude all veterans' disability benefits. However, another commenter stated that this would be too big an exclusion, and HUD should exclude only a percentage of such payments.
A commenter stated that HUD should adjust income exclusions for inflation.
Under current policies, certain tax refund payments, such as the EITC, are already excluded from income, and this final rule does not change that. In addition, PHAs and owners will continue to base income determinations on gross income, which includes income before Federal and State taxes are paid. Any Federal refund (or advance payment, with respect to a refundable credit) is excluded from income by statute (26 U.S.C. 6409). As far as excluding specific other refundable tax credits from States, HUD is including in this final rule language to exclude from income amounts directly received by the family as a result of State refundable tax credits or State tax refunds at the time they are received (§ 5.609(b)(24)(iii)).
In response to the public comments received, this final rule will no longer eliminate the exclusion from income of “temporary, nonrecurring, or sporadic” income. Rather, to address the concerns that the language in the existing regulation is unclear, HUD is modifying the language to exclude “nonrecurring” income received in the previous year that will not be repeated in
Additionally, to address other forms of short-term payments that would have been excluded under the previous blanket exemption, HUD is specifying certain forms of income that are included in the category of “nonrecurring” income that would be excluded from the calculation of income: work on the decennial Census (less than 180 days and not resulting in a permanent position) (§ 5.609(b)(24)(i)); direct Federal or State payments or tax credits intended for economic stimulus or recovery (§ 5.609(b)(24)(ii)); amounts received directly by the family as a result of State or Federal refundable tax credits or refunds at the time they are received (§ 5.609(b)(24)(iii) and (iv)); gifts for holidays, birthdays, or special occasions (§ 5.609(b)(24)(v)); in-kind donations from food banks or other organizations (§ 5.609(b)(24)(vi)); and lump-sum additions to assets such as lottery or other contest winnings (§ 5.609(b)(24)(vii)). As discussed above, because there has been some confusion, HUD is adding an exclusion in § 5.609(b)(25) to make clear HUD's existing practice of excluding civil rights settlements or judgments, including settlements or judgments for back pay. The wording of this exclusion reflects the fact that resolutions of civil rights matters may be structured settlements instead of lump-sum payments. With these revisions and additions, HUD intends to exclude from income sources of funds that cannot be relied upon to pay for a family's housing needs, while providing additional clarity to PHAs and owners about what funds should still be considered income, given the broad definition contained in HOTMA.
However, other types of funds that commenters asked to be excluded from income will be included in income under these revisions. Income from research studies or money received for child support, for example, would not fall into any of the exclusions and would be considered income under the final rule, unless the family can demonstrate that the funds will not be received in the coming year. HUD believes that these funds are potentially reliable enough to not automatically assume they will not be repeated, and they are funds that can be used to pay for a family's housing needs. Therefore, under the broad definition of income in HOTMA, these sorts of funds should be included in the calculation of income. However, PHAs have the discretion to use permissive deductions for these payments based on their policies.
HUD intends these changes to reduce burden, both on tenant families and on PHAs and owners. Determining if a payment is nonrecurring is difficult and can be unclear. Using past income consistently will ensure that families that do not receive the income regularly will see the adjustment in their calculated income at the next interim or annual reexamination. For the voucher program, families are not immediately terminated if their income increases and they reach zero for the housing assistance payment (HAP). Under § 982.455 (which HUD is not amending in this final rule), the family's HAP contract does not terminate until 180 days after the last payment has been made to the owner. Families are not likely to stop receiving assistance due to the inclusion of nonrecurring payments. Congress intended to streamline these requirements to reduce burden on PHAs and owners. Accepting proposed alternatives such as more frequent evaluations or temporary exclusions of certain types of income would limit the effect of that burden reduction.
HUD also appreciates comments about certain payments from States to allow families to keep individuals with disabilities living at home. If a family receives such a payment and it was already excluded from the family's income under the current regulation at 24 CFR 5.609(c)(16), this final rule does not change that. The proposed rule eliminated the requirement that such payments offset the cost of services or equipment, and this final rule retains that change. However, HUD is expanding § 5.609(b)(19) to cover all payments to a family from a State agency, regardless of whether such a payment is through Medicaid, in response to public comments that pointed out the wording under the proposed rule was too limiting because some States use a source of funding other than Medicaid managed care to provide for in-home support. In response to these comments, the final rule includes funding through any Medicaid structure, not just managed care. Furthermore, it also excludes payments from, or authorized by, State agencies in states which use a source of funding other than Medicaid to provide for in-home support. In addition, as discussed previously in this preamble, HUD is also clarifying in the final rule that payments may be made directly by a State Medicaid agency (including through a managed care entity) or other State agency or federal agency, or made by another entity authorized by the State Medicaid agency, or other State or Federal agency to do so on its behalf to enable a family member with a disability to remain living at home. HUD is also adding language in the final rule that payments to a member of the assisted family by the State Medicaid agency-managed care system or other State or Federal agency (or other entities authorized by those agencies to make such payments) for caregiving services to enable a family member who has a disability to live in the assisted unit are covered payments and would be excluded from the family's income.
HUD will continue to count payments for long-term care insurance as an unreimbursed health and medical care expense for purposes of § 5.611(a)(3)(i), but HUD declines to exclude such payments from the family's income. However, § 5.609(b)(6), which is not substantively changed by this final rule from the current regulatory text, excludes amounts received by the family that are specifically for, or in reimbursement of, the cost of health and medical care expenses for any family member.
Many other suggestions from commenters continue to be excluded from income under this final rule, such as the earned income of dependent full-time students and any income from foster adults and foster children. In addition, this final rule retains the language from the proposed rule excluding from income replacement housing “gap” payments in § 5.609(b)(23) and loan proceeds in § 5.609(b)(20). However, HUD declines to exclude payments either paid or received as child support from the family's income or additional veterans' disability payments not already excluded by another provision of § 5.609(b). PHAs still retain the ability to create permissive deductions from income.
The majority of income exclusions are categorical—funds that fit into one of the exclusions, regardless of amount, are excluded from income. However, to the extent that an exclusion is for a set dollar amount, almost all such amounts are to be adjusted annually according to the CPI-W.
A commenter stated that HUD should exclude income from assets from income, which would decrease labor costs for staff with a minimal impact on tenant rent payments. A commenter
A commenter stated that the proposed regulation in § 5.609(b)(1) excluded only imputed returns on assets and asks how actual income on assets under $50,000 should be treated.
In § 5.609(a)(2) of this final rule, HUD is clarifying the regulatory language regarding income from assets to help PHAs and owners determine what income from assets should be included in the family's annual income while also minimizing the burden on PHAs, owners, and families. Under § 5.618(b)(1), when all net family assets have a combined value of $50,000 or less, the family is to include on its self-certification that the combined value of net family assets do not exceed $50,000, and the amount of actual income the family expects to receive from the family's assets. This amount is to be included in the family's income. The PHA or owner may rely on this self-certification to serve as verification for both assets and the amount of actual income the family expects to receive from such assets.
When all net family assets have a combined value over $50,000, if the PHA or owner can compute the actual income for some assets, but not all assets, the PHA or owner must compute the actual income for those assets, calculate the imputed income for all remaining assets where the actual income cannot be computed, and combine both amounts to determine the income for all assets. The PHA or owner must calculate the imputed return on the combined value of all net family assets when the net family assets are more than $50,000 if
Commenters suggested that HUD should exclude the full amount of student financial assistance a tenant receives. Others stated that HUD should exclude only amounts paid to the educational institution while counting everything else as part of annual income.
Commenters asked for additional information and updated handbook guidance on the application of the student rule. Others asked for additional clarification on the definition of “grant-in-aid” and whether recurring gifts from family members to pay tuition and expenses would be included or excluded.
Commenters also stated that HUD should provide clarification on whether the financial aid exclusion applies to public housing as well as the HCV and PBRA programs.
A commenter also stated that HUD should ensure its policies do not create barriers to education or create undue hardships for part-time students.
Additionally, in response to the comments on the proposed rule, HUD has provided, in § 5.609(b)(9)(ii), additional language to define “student financial assistance” that is not otherwise excluded by the Federally mandated income exclusion in § 5.609(b)(9)(i). HUD defines “student financial assistance” in order to provide greater consistency of application. As discussed earlier in this preamble, the final rule provides that student financial assistance excluded by § 5.609(b)(9)(ii) is limited to financial assistance provided for the actual covered costs of the student, which are the actual costs of tuition, books and supplies (including supplies and equipment to support students with learning disabilities or other disabilities), room and board, and other fees required and charged to a student by an institution of higher education, and for a student who is not the head of household or spouse, the reasonable and actual costs of housing while attending the institution of higher education and not residing in an assisted unit. Student financial assistance must be a grant or scholarship received from the Federal government; a State, Tribal, or local government; a private foundation registered as a nonprofit; a business entity; or an institution of higher education. Furthermore, the grant or scholarship must be either expressly for tuition, book, supplies, room and board, or other fees required and charged to the student by the education institution; expressly to assist a student with the costs of higher education; or expressly to assist a student who is not the head of household or spouse with the reasonable and actual costs of housing while attending the education institution and not residing in an assisted unit.
The final rule states that student financial assistance does not include gifts from family or friends. In other words, gifts that are recurring and otherwise do not meet the criteria for the income exclusion for gifts would be counted as income under the final rule, regardless of whether the recipient of the gift is a student. This ensures that the application of the student financial assistance exclusion is equitable as it does not advantage students with wealthy family members or friends over other students.
The income exclusions in § 5.609(b)(9) apply to all families in assisted housing, regardless of whether the family participates in public housing or Section 8 programs. However, as discussed in an earlier part of this preamble, the application of the income exclusion in § 5.609(b)(9)(i) to families in the Section 8 programs may be limited when using funding from years when HUD appropriations language contains overriding language that requires HUD to include student assistance listed in Title IV of the HEA in the calculation of student financial assistance in excess of tuition and required costs and fees for purposes of determining the income for Section 8 heads of household or spouses who are either age 23 and under or without dependent children.
In response to the comment that HUD avoid creating barriers or hardships for part-time students, HUD notes that the exclusion in § 5.609(b)(9)(i) applies to part-time and full-time students equally. Additionally, HUD is expanding the student financial assistance exclusion in § 5.609(b)(9)(ii) to include part-time as well as full-time students. HUD believes that that it is appropriate to exclude student financial assistance, as defined in § 5.609(b)(9)(ii), from income regardless of whether the student is full or part-time. The reason the family is
A noted elsewhere in this preamble, HUD intends to offer further guidance on the student financial aid exclusion under this final rule.
Commenters weighed in on whether lump-sum payments should be counted as income. A commenter stated that HUD should maintain the current exclusion of lump-sum receipts from income because those lump sums cannot be annualized for income calculations.
Commenters stated that lump-sum insurance payments or settlements, which are meant to help recipients recover from significant financial losses, should not be included as income. Commenters stated that HUD should exclude damage awards from civil actions that do not result in disability other than such awards that represent lost wages, settlements for injuries resulting in disability but for which there is no declaration of culpability, or compensation for physical injuries recovered in various claims by injured people and their families, similar to IRS exemptions. Others stated that HUD should exclude only deferred disability lump-sum payments and current exclusions but should not add more blanket exemptions.
Others stated that it is fair to count as income settlements and subsequent drawdowns of funds meant to replace income or lump sums deposited into a bank account. A commenter said that lump sums deposited into trusts should not be counted as income unless it is drawn upon.
A commenter stated that the proposed exemption language would require a PHA to determine the specific legal claim under which the funds were awarded and would exclude settlements where the defendant avoids admitting to causing harm.
In addition, this final rule in § 5.609(b)(5) and (7) retains language from the proposed rule that excludes from income insurance payments, settlements for personal or property losses, and recoveries from civil actions or settlements based on claims of malpractice, negligence, or other breach of duty owed to a family member arising out of law that resulted in a member of the family becoming a family member with a disability. This final rule is silent on requirements regarding culpability of the parties, so that is not a factor in whether or not the recoveries or settlements are excluded from income. HUD is also adding a clarification that the exclusion of settlements for personal or property losses covers insurance payments and settlements for personal or property losses. Finally, HUD is further clarifying that payments made pursuant to the resolution of civil rights matters, which have always been excluded from income, are now explicitly listed in new § 5.609(b)(25), as explained above.
Commenters stated that the proposed regulation exempting certain payments from special needs trusts (SNTs) is too narrow. Some stated that the regulation unfairly counts as income funds distributed for non-medical, quality-of-life expenses, and many tenants with disabilities may create SNTs to pay for a variety of future needs, not just medical expenses. Commenters stated that the proposed rule could result in people with disabilities being forced to choose between housing and other necessities, and including all distributions would harm the relationships sanctioned by other means-tested programs between SNTs and other vendors.
Another commenter stated that limiting the exemption to only irrevocable trusts exclude payments that would qualify for the exemption other than the fact that they are in a different type of trust or account.
Commenters stated that requiring PHAs to verify the existence of the trusts and to project annual amounts received would be administratively burdensome.
Commenters stated that the plain meaning of the HOTMA amendments is that the distributions of the principal of trusts should not be income. Others stated that excluding only withdrawals for specific purposes would create operational and administrative challenges.
As a general rule, PHAs and owners must count any distributions of income from an irrevocable trust or a trust not under the control of the family (
HUD notes that these rules apply equally to irrevocable SNTs or revocable SNTs not under the control of the family or household. HUD recognizes that individuals with disabilities rely on SNT distributions to pay for a variety of
Finally, per the amendments made by Section 104 of HOTMA, revocable trusts under control of the family count as an asset under the definition of “net family assets” in § 5.603. Only trusts that are irrevocable or not under the control of a family or household member are excluded from a family's net family assets. Since revocable trusts under the control of the family or household are considered part of the net family assets, the final rule clarifies at § 5.609(b)(2)(ii) that distributions from these trusts are not used to calculate annual income. Instead, the PHA or owner must count all actual returns (
Some commenters stated that HUD should count as income any amount drawn against a payment from a bank or trust fund, including insurance payments or settlements. A commenter stated that the proposed regulations regarding distributions from trusts are complex, prone to error, and subject to subjective interpretations, and would privilege or penalize certain forms of income over other comparable incomes, often hinging on details such as whether or not there was a lawsuit, the type of account into which the funds were deposited, and whether the expenses are for a minor, none of which seem relevant to the availability of the funds to the family.
Others stated that HUD should exclude from income all withdrawals from insurance payments or settlements. A commenter stated that withdrawals from existing assets included in asset determinations should not be considered income; only “new money” to the family is income. A commenter stated that limiting the exclusion to disability-related withdrawals specifically related to the settlement would lead to confusion about what counts and what documentation is required, making things more complex and time-consuming, in direct opposition to the purpose of HOTMA. Others stated that insurance settlements are meant to compensate the family for a loss and verifying the circumstances around the payment or settlement would greatly add administrative burden to PHAs and owners. A commenter stated that the exclusion should apply regardless of whether the payment or settlement is related to a minor.
A commenter stated that both the lump sum and any interest earned from the lump sum should be counted as income if the sum is placed in a bank account.
Commenters stated that withdrawals of principal from accounts should not be counted as income if the original source is excluded from income. However, other commenters stated that including withdrawals as income in specific circumstances would increase the administrative burden on staff and residents to allow PHAs and owners to determine whether a withdrawal is included in the exclusion or not.
With respect to SNTs, commenters stated that all withdrawals from such trusts established for tenants with disabilities should be excluded from income. A commenter stated that all funds pulled from irrevocable trusts should be counted as income, as the trusts provide documentation on amounts distributed, but it would be difficult or impossible to track or prove the purpose of the distribution.
However, unless the amount meets one of the exceptions in § 5.603,
Please see the discussion under “Trust Distributions,” above, for a discussion of the treatment of distributions of income or principal from trusts.
Commenters stated that HUD should restore the deduction of attendant care and auxiliary apparatus expenses in excess of the earnings of the family member who can work because of such expenses, as the amendments in HOTMA do not require removing the deduction, and the deductions may pay for themselves over time by allowing higher earnings.
Commenters expressed concern that increasing the threshold for deductions will make it more difficult for families. Commenters suggested that expenses should qualify as a deduction at 4 percent of a family's income. Another commenter stated that child care deductions should be treated the same way as medical deductions, with a reasonable threshold before the allowance applies.
Commenters asked HUD to clarify that child care deductions are available year-round to a household with seasonal employment or education, otherwise PHAs or owners may limit the deduction only to months when the family member is working or taking classes.
HUD will consider providing additional guidance clarifying how to determine what expenses are deductible and how to determine such amounts.
Commenters supported increasing the deduction for elderly families or families with persons with disabilities. Some asked HUD to consider a more realistic increase, such as up to $750.
However, some commenters stated that HUD has not done the study required by Section 102(i) of HOTMA, and HUD should defer any rulemaking until the report is completed and submitted to Congress.
Commenters stated that adjusting the annual dependent deduction by inflation would create a hardship on PHAs, because HUD does not specify the inflation factor.
Some commenters supported raising the threshold for medical deductions, as it would reduce burdens on PHA and owner staff. Others opposed the increase. Some stated that it would eliminate the deduction for many households or would create an untenable situation for families already facing financial challenges due to health or disability. A commenter stated that the higher threshold would result in PHAs having to process many hardship exemptions.
Commenters expressed concern that increasing the threshold for deductions will make it more difficult for families. Commenters suggested that expenses should qualify as a deduction at 4 percent of a family's income. Others stated that increasing the threshold from 3 percent to 10 percent at one time is not fair to those who need the medical deduction; instead, the commenters suggested that HUD stagger the increase, either by relating increases only to inflation or doing a set amount each year for 3 to 7 years. Others suggested creating a maximum rent increase every year.
Some commenters had specific suggestions on how to ease the difficulties on families. One suggested a threshold of 6.5 percent. Another stated that HUD should make the current medical allowance available to all households, regardless of age or disability status.
Deductions for health and medical care expenses for elderly or disabled families are statutorily mandated, including the threshold that must generally be met for a family to receive the deductions. Therefore, HUD may not change the deduction to a different percent, as some commenters have requested. However, PHAs may adopt additional deductions from annual income for all families as a permissive deduction, though they will not be eligible for an increase in subsidy amounts to cover the costs of such permissive deductions, as discussed further later in this preamble. HUD has also provided hardship exemptions in accordance with HOTMA's requirements, thereby providing relief to affected families.
Some commenters were opposed to the use of permissive deductions. Some stated that they could result in disparate impacts, such as if a PHA creates a permissive deduction only for earned income, which would result in a discriminatory effect on certain protected classes with unearned income, such as persons with disabilities. Some stated that additional deductions, and proving such deductions did not materially increase subsidy, would be burdensome to the PHAs. One commenter requested that subsidy be increased if additional deductions are required.
Commenters stated that HUD should allow PHAs to adopt additional deductions based on the needs of their communities. One commenter stated that the standard for what is permitted should be broad enough not to discourage PHAs from exploring innovative solutions to the goals of HUD, PHA, and the community. A commenter stated that extending permissive deductions to Section 8 programs would add equity between programs and would reduce the complexity of administering different programs.
Commenters wrote that HUD should find ways to encourage the use of permissive deductions to encourage work. One stated that the statutory limitation on material increases in subsidy was a missed opportunity to provide such a work incentive. Others supported the idea of using permissive deductions to encourage tenants to work but stated that funding support from HUD is needed to make it work. A commenter also stated that even if HUD permits some subsidies for work incentives, it should still be left to PHAs to decide whether to implement them.
Commenters also wrote about allowing additional subsidy. Some stated that HUD should not allow additional subsidy to cover permissive deductions. Other commenters stated that requiring PHAs to bear all costs will result in very few permissive deductions being used and may even disincentivize PHAs from providing necessary deductions for residents. A commenter stated that allowing permissive deductions as described in the proposed rule could result in reduced funding resources for all agencies in the medium term. A commenter stated that the statute does allow some added subsidy costs because it only prohibits “material” increases.
Commenters spoke to how HUD proposed to define whether an increase in subsidy is “material.” A commenter stated that HUD should define “materially increase Federal expenditures” in such a way as to allow PHAs to create an earned income deduction, excluding 15 percent of earned income to remove disincentives for work and creating parity between families with earned income and families with fixed-income sources. Another suggested defining materially at 5 percent, as it is a figure HUD uses elsewhere. A commenter stated that HUD should clearly communicate the standard, and that it should be measured at a PHA's portfolio level, rather than at the family level. A commenter suggested that it may be more administratively burdensome for PHAs to demonstrate that there is no increased subsidy cost than it is worth it to the PHA to provide the additional deduction.
PHAs can respond to community needs by using a wide range of permissive deductions, including permissive deductions to provide incentives to work. However, given the statutory requirement that permissive deductions may not materially increase Federal expenditures, HUD does not want to reduce funding for all PHAs by factoring in permissive deductions prior to allocating PHA Operating Funds. Consequently, the final rule provides that a PHA that adopts such deductions for public housing will not be eligible for an increase in Capital Fund and Operating Fund formula grants and the costs of permissive deductions must be covered by each individual PHA rather than by HUD. Likewise, for the HCV, moderate rehabilitation, and moderate rehabilitation SRO programs, the final rule provides that the subsidy costs attributable to permissive deductions will not be taken into consideration in determining the PHA's HCV renewal funding or moderate rehabilitation funding.
Commenters expressed support for there being a cap on assets held by families receiving assistance under the 1937 Act. Some asked that the cap be raised to $250,000, because the cap of $100,000 may make elderly families with retirement savings ineligible for assistance. Commenters also requested that HUD permit PHAs to defer termination of families that are over the asset cap until the next annual reexamination to allow the family to demonstrate that the owner of the asset is selling the asset or is moving out of the household.
While some commenters agreed with the exclusion of IRAs from family assets, commenters also requested additional exclusions. Some suggested that HUD exclude disability-related durable medical equipment (such as electronic wheelchairs, lifts, or disability-adapted vehicles). Commenters stated that HUD should exclude any assets that are inaccessible to the tenants and provide no income. Commenters suggested that HUD exclude inheritances, or insurance payments, or amounts recovered for personal or property losses.
Commenters also stated that HUD is required to exclude equity in units bought under public housing homeownership programs when determining a family's eligibility for assistance. Others stated that HUD should exclude homes with negative equity.
HUD believes that insurance payments should continue to be counted as an asset. The 1937 Act, as amended by HOTMA, has a provision that a civil recovery or settlement for claims of malpractice, negligence, or other breach of duty owed to a family member arising out of law that resulted in a family member becoming disabled is excluded from net family assets. Given the specificity of the statutory language, HUD believes the intent of the statute is that other payments or settlements are to be counted as assets.
Under the amended 1937 Act, families that have a present ownership interest in, a legal right to reside in, and the legal authority to sell real property that is suitable for occupancy for the family (unless the person is a victim of domestic violence or if the family is offering the property for sale) are not eligible to receive rental assistance. A present ownership interest would include any title to a home, any ownership of membership shares in a cooperative, and any lease or other right to occupy a home or cooperative, all as defined by the State or local laws of the jurisdiction where the property is located. It would not include the right to purchase title to a residence under a lease-purchase agreement. In addition, the statutory language excludes from net family assets (1) real property for which the family does not have the effective legal authority to sell in the jurisdiction in which the property is located and (2) equity in property for which the family is currently receiving homeownership assistance through the HCV program from a PHA. These exclusions are contained in the definition of
Commenters asked HUD for clear and comprehensive guidelines on what constitutes “net family assets.” Commenters suggested that HUD specify in the definition of assets that it includes lump-sum items like insurance payments, settlements, and inheritances to prevent PHAs and owners from counting such funds as income.
Commenters requested clear guidance on the difference in treatment between whole life insurance and term life insurance, as community-based service providers experience barriers in getting vulnerable individuals housed due to life insurance issues.
This final rule does not change current practice regarding the treatment of different forms of life insurance. The cash value of an insurance policy is considered an asset, but the face value of any policy is not. Similarly, the final rule does not change current practices regarding the valuation of any form of real property owned by a family (
Some commenters supported the proposed exclusion of personal property valued at $50,000 or less from assets. A commenter stated that allowing PHAs to determine whether specific items are assets allows too much “fluidity” in making income determinations. In addition, commenters stated that the proposal aligns with the asset self-certification threshold, reducing the verification burden on staff.
Other commenters objected to the proposed exclusion of personal property from the determination of assets.
Commenters stated that HUD should define “necessary items” to prevent confusion of what they are, as PHAs and owners determine whether families are over the income and asset caps. Some commenters suggested that HUD include a non-exclusive list of necessary items in guidance.
Commenters suggested items to include in the list of “necessary items.” Some stated that the term should include items like home furniture or cars that are necessary for work or getting children to school. Commenters asked whether all cars would be considered “necessary” and whether the term “necessary” meant that there were, by implication, items that would be considered “non-necessary” (such as jewelry) that would then have to be included as assets. Some commenters suggested that HUD define “necessary” to include cars (or other forms of personal transportation), medical equipment, and other items essential for daily living (including furniture), education, and employment.
Some commenters also stated that HUD should not limit the exception to “necessary items.” Commenters stated that requiring PHAs or owners to determine the value of items like collectibles or jewelry, which may not be considered “necessary,” would be burdensome because values may differ based on local market conditions. Other commenters stated that it would be administratively burdensome to determine what items were “necessary” and what items would be included as an asset.
Commenters also stated that HUD should make it explicit that the PHA has the right to establish different levels of personal property to exclude from assets, in line with PHAs' ability to exercise flexibility in enforcement on asset restrictions or to establish other exceptions. Other commenters asked for clarity on whether the $50,000 cap is per item or total value of necessary items.
Commenters suggested that HUD should allow families to self-certify that their personal property is valued under $50,000, eliminating the burdensome requirement that PHAs itemize such property. Commenters stated that HUD should not require PHAs to document the value of personal property that is excluded from the calculation of net family assets.
In addition, the regulation, at § 5.618(b), allows PHAs, owners, grantees, and responsible entities to determine the worth of a family's personal property by accepting a family's self-certification that their property falls under the cap. This will reduce the burden on PHAs and owners to determine the value of any specific item.
Many commenters reacted to HUD's proposed implementation of the new prohibition imposed by HOTMA on providing rental assistance to families with a present ownership interest in real property that is suitable for occupancy. Some commenters stated that HUD should not prohibit families that own real property from being assisted, as the family may not be able to afford upkeep, insurance, or taxes on the property. Others suggested that HUD could allow families to keep any properties worth less than $50,000 or stated that HUD could exclude equity in a property for which a family receives homeownership assistance or units that were purchased under public housing homeownership programs. Commenters also stated that HUD should ensure that PHAs have discretion in whether or not to enforce the prohibition on real property ownership. Commenters asked HUD to provide additional clarity on how PHAs and owners should approach properties that the family is renting out.
Commenters asked HUD to provide additional clarity on what documentation a family must provide in order to qualify for an exception to the prohibition. Commenters stated that leaving it up to a PHA to determine what is acceptable documentation would invite litigation and suggested that HUD use the existing Multifamily Occupancy Handbook (4350.3) to allow for owners and PHAs to collect information in a broad range of formats. Other commenters stated that HUD should provide guidance for PHAs and owners, but not prescribe standards for determining suitability of the property. Some commenters suggested that families should be allowed to self-certify that they qualify for an exception. Commenters suggested that HUD could establish a hierarchy of acceptable verification.
Commenters also asked how PHAs and owners are to determine whether a family owns real property. Commenters suggested that families should be allowed to self-certify that they do not own property, stating that it would be counterproductive to require more. Some commenters stated that requiring PHAs to establish ownership relationships would be extremely onerous, and HUD should defer rulemaking on this issue until HUD can issue clear and comprehensive guidelines. Some commenters suggested that local auditor websites could be a way to determine ownership interests in real property.
Commenters also responded to the proposed list of types of ownership interests a family may have without affecting the family's eligibility to receive assistance. Some commenters stated that there are multiple forms of
Commenters made suggestions regarding determining whether a property is suitable for the family's occupancy. Some commenters stated that allowing exceptions to the prohibition on owning real property would cause PHAs to be out of compliance with the intention of the proposed rule. Other commenters stated that suitability of the property should not be limited to circumstances around a physical disability, as there may be circumstances where disability-related needs for a family may not be related to a physical disability. Commenters also stated that it would be beyond the expertise of owners or PHAs to make determinations of whether a property owned today will meet the needs of an older adult as they seek to age in place in their community.
However, the documentation to determine whether a family qualifies for one of the real property exemptions can vary widely according to the family's circumstances or what may be available. Therefore, specifying in the rule what documentation a PHA or owner may accept would be inappropriate. HUD will issue additional guidance with details on what forms of documentation may be appropriate under different circumstances, including how a PHA or owner may determine whether a family has a present ownership interest in or the effective legal authority to sell or whether the property is suitable for the family to occupy as a residence.
HUD also notes that the regulatory language regarding suitability due to disability
Finally, § 5.618 provides that PHAs and owners can determine that a family does not have any present ownership interest in any real property based on a certification by the family. By statute, the family certification only addresses whether or not the family has any current ownership interest in any real property. Thus, PHAs and owners must be aware that this certification only addresses one aspect of the general real property ownership limitation. A PHA and owner must still inquire whether or not the family has a present ownership interest in, a legal right to reside in, and the effective legal authority to sell real property that is suitable for occupancy by the family as a residence. For instance, a PHA or owner could use a form that includes both the certification as well as questions for the family to answer regarding the other restrictions.
Commenters supported the idea that HUD would also allow exceptions to the prohibition on owning real properties for survivors of domestic violence, dating violence, sexual assault, or stalking. Commenters stated that HUD should follow the procedures already established under the Violence Against Women Act (VAWA), including the documentation requirements and ability of survivors to self-certify their eligibility.
Some commenters stated that HUD should modify its existing forms (Forms 5380 and 5382) to allow families to identify the location of real property and to document their exemption from the real property prohibition due to being a survivor.
Other commenters stated that HUD should do a separate rulemaking for domestic violence survivors, perhaps waiting until after VAWA is reauthorized.
HUD also appreciates the commenters' concerns with HUD's VAWA forms. In accordance with the Paperwork Reduction Act, HUD will at a later date update its VAWA forms and the relevant information collection requests. Rulemaking related to VAWA reauthorization is beyond the scope of this HOTMA final rule, and HUD has determined that this final rule is the appropriate vehicle to implement the exception to the prohibition on owning real properties for survivors of domestic violence, dating violence, sexual assault, or stalking.
Many commenters spoke to how PHAs and owners should determine the value of assets of a family. Some stated that assets should be given the value assigned by the local tax assessor and applying inflation rates would be unfair and too burdensome to tenants. Other comments suggested that residents should be allowed to report the value of their assets, without requiring PHAs to do further research.
Commenters said that there should be a way to avoid itemization and valuation of assets and allowing self-certification that the family assets are below $50,000 would reduce the burden on staff and tenants. Commenters further stated that PHAs and owners
Commenters stated that allowing families to self-certify that their assets are under $50,000 is an “extreme” jump from the current self-certification amount of $5,000.
Commenters stated that HUD should not require PHAs to verify all assets triennially, since the income from assets is negligible in most cases and verifying and calculating assets requires a great deal of staff time.
Commenters also stated that HUD should round valuation figures down to the nearest $1,000 for assets so that staff have round numbers to use when applying inflation adjustments.
However, it is statutory that PHAs and owners are required to redetermine a family's income on an annual or triennial basis, and those income reexaminations include valuation and returns of assets.
While commenters submitted comments that covered a range of topics on hardships in general in HUD programs, most of the comments focused on the hardship provisions around the new deductions for healthcare and child care expenses.
Some commenters stated that it was premature for HUD to be issuing this rule. Commenters stated that HUD has not submitted the certification to Congress as required by Section 102(b) of HOTMA. Others stated that Congress contemplated more than normal notice-and-comment rulemaking regarding hardship exceptions. Commenters also stated that HUD should defer rulemaking on hardships for deductions until HUD can perform the study of the impact of HOTMA on tenants.
A commenter stated that there should not be hardship exemptions to rent requirements because the reduction in deductions for participants will be partially offset by the increase in the standard elderly/disabled deduction. A commenter also pointed out that having a different threshold for receiving deductions for some participants will be confusing for staff members and software providers, increasing the chance for error.
Commenters stated that placing the burden of determining whether a family should get a hardship on the PHA or owner would require residents to share personal information, and it would require owners to make determinations and subjective judgments based on deep levels of financial considerations, like credit card debt and budgeting priorities. Others stated that requiring families to demonstrate that the hardship is due to the decrease in deduction places too great a burden on the families, even potentially creating a litigation risk for PHAs because they are making subjective decisions. A commenter stated that allowing hardship exemptions when someone is attending school or is out of work would add burden and extra work to the PHA.
A commenter stated that HUD should adopt hardship exemptions for families consistently in all HUD-funded programs.
The 1937 Act, as it existed both before and after HOTMA, requires that tenants who are facing financial difficulties receive hardship exemptions for the amount of rent that they owe. In 2019, HUD submitted the certification pursuant to Section 102(b) of HOTMA that hardship and tenant protections in the 1937 Act, as amended by HOTMA, are being fully provided to tenants.
Determining whether a family is facing a financial difficulty, and what is causing that financial difficulty, is a very fact-specific determination, and therefore it is a determination best left up to an individual PHA or owner. HUD reminds PHAs and owners, however, that in undertaking the fact-specific determination relating to a family's financial difficulty, they must comply with Federal fair housing and nondiscrimination requirements, including but not limited to Title VI of the Civil Rights Act, Section 504, the Fair Housing Act, and the Americans with Disabilities Act, as applicable, which may include providing reasonable accommodations. However, the HOTMA amendments do require that HUD, by regulation, specifically provide hardship exemptions when the financial difficulty faced by the family is due to specific circumstances around child care or health and medical care and reasonable attendant care and auxiliary apparatus expenses. For the child care deduction, it is necessary, in those circumstances, for PHAs and owners to perform detailed analyses of what is causing the family's inability to pay rent.
Commenters stated that it is unclear why there were no hardship provisions provided for residents in Section 202/811 properties.
Commenters stated that the hardship exemption as proposed for the child care deduction is appropriate. Others stated that HUD should allow PHAs to establish a time limit for families to receive child care exemptions in their hardship policy. A commenter also stated that it is unclear if the proposed rule would allow the child care hardship exemption to continue after the next regular reexamination if the PHA finds that the family's hardship still exists.
Commenters stated that HUD should set the criteria for what constitutes a hardship and what the relief should be, rather than leaving it up to PHAs and owners. Some stated that allowing local decisions would create inconsistency and would create demand for certain apartments with more relaxed policies. Others stated that allowing discretion would create an atmosphere for litigation and the resulting variation would make it more difficult to audit and monitor PHAs and owners. A commenter stated that without set parameters for what is a hardship, the added research, paperwork, and time required for a PHA to determine the accuracy of a hardship claim would not fit within the Paperwork Reduction Act guidelines.
A commenter suggested that HUD should provide parameters for what constitutes a hardship and a skeleton framework of what would be required, such as how often it would need to be verified, how to verify, and what the family must provide to demonstrate the hardship.
Commenters suggested how HUD may define that a family is facing a hardship. One suggested that HUD define a hardship to be when rent and allowable expenses exceed 40 percent of adjusted income. Another suggested that if the household's housing payment exceeds 30 percent of adjusted household income, the family should be eligible for a hardship exemption.
Other commenters stated that HUD should continue to leave the definition of hardship up to the PHAs, remaining consistent with how the PHA defines it in other related contexts. Commenters stated that PHAs have already developed policies and procedures to document and provide hardship relief. A commenter stated that HUD should require PHAs and owners to include a procedure for exemptions in local policies and procedures along with resident notices.
Therefore, in § 5.611(c)(1) of this final rule, HUD is creating two ways by which a family may qualify for a health and medical care and reasonable attendant care and auxiliary apparatus expenses hardship. First, a family may qualify for a lower threshold for unreimbursed health and medical care expenses and reasonable attendant care and auxiliary apparatus expenses to be deducted from income if the family, at the time of the effective date of this final rule, is receiving the unreimbursed health and medical care expense and reasonable attendant care and auxiliary apparatus expense deduction at the 3 percent threshold. The form of that deduction is discussed in more detail below.
However, even families not receiving a deduction for health and medical care expenses and reasonable attendant care and auxiliary apparatus expenses at the time that this final rule is effective may still qualify for a hardship exemption if the family is experiencing a change in circumstances (as determined by the responsible entity) that would not otherwise trigger an interim reexamination. Families seeking a hardship exemption in this category must have eligible expenses that exceed 5 percent of the family's annual income in order to receive the benefit of the hardship exemption.
The reason behind creating these two categories is two-fold. First, HUD would like to relieve the financial burden placed on families currently receiving the health and medical care expense and reasonable attendant care and auxiliary apparatus expense deduction that would be affected by the increase in the threshold for such a deduction to be applied by providing a transition period to the new higher ten percent of family annual income threshold. Second, HUD recognizes that families may face financial hardships apart from changes made by HOTMA, where allowing the family to have a lower threshold to take such a deduction may be beneficial to the family. Determinations of what constitutes a financial hardship are fact-based determinations, however, and HUD feels that such determinations are best handled by the responsible entity that is closest to the family, rather than through regulatory text.
HUD is not making changes to the eligibility criteria proposed for hardship exemptions for child care but, as discussed above, is revising the length of time that the hardship exemption for child care may remain in effect.
Commenters had many suggestions on the form of relief that a hardship exemption should offer. Some suggested keeping the threshold for expenses at 3 percent for as long as the household demonstrates the hardship. Others stated that the PHA or owner should suspend the payment of the difference between what the family would have owed with a threshold of 3 percent and the new amount, allowing the household to repay when it can.
Commenters supported setting a ten percent cap on annual rent increases due to statutory changes in the medical deduction. Others stated that HUD should allow families experiencing a hardship to deduct their full health and medical expenses. One commenter stated that, at the least, HUD should allow for exemptions from the full increase required by amendments made by HOTMA.
Some commenters suggested phasing in the new thresholds for everyone, perhaps by setting the threshold at 6.5 percent for the first year for everyone.
In addition, this final rule revises the health and medical care expense and reasonable attendant care and auxiliary apparatus expense deduction hardship exemption for elderly or disabled families or families that include a person with disabilities that may not have been receiving the health and medical care and reasonable attendant care and auxiliary apparatus expense deduction on the effective date of the final rule but are experiencing a financial hardship. The family must demonstrate that the family's applicable medical expenses and/or reasonable
HUD is not making any changes from the proposed rule to the form of the hardship exemption for child care expenses but, as discussed above, is revising the length of time that the hardship exemption for child care may remain in effect.
Commenters also opined on how long a family should be eligible to receive a hardship exemption. Some suggested that families should be allowed to retain the exemption as long as it is needed, with no time limit. Commenters stated that the amendments in HOTMA do not limit the hardship provision to only the first year of implementation or to an interim reexamination. Others stated that, with older families, it is unlikely the family will be able to access any additional resources to make them able to afford the full increase in the deduction threshold.
Some commenters stated that allowing hardship exemptions to expire when the PHA or owner determines the family can pay would permit inconsistent and arbitrary determinations. Others stated that the hardship exemption should be extended for at least a year after the need for the exemption is established to allow the family to recover financially. Another commenter stated that HUD should provide a definite duration for exemptions, such as 90 or 180 days, not tied to annual reexaminations.
As discussed above, HUD collected public comments in the proposed rule on regulatory provisions regarding the new statutory income restrictions in public housing. However, HUD also re-opened public comments regarding the treatment of OI families and lease provisions for families remaining in a public housing unit and paying the alternative rent as a NPHOI family. This summary includes comments received in both solicitations and responses to those comments.
Some commenters objected to HUD's statement that OI families should not be considered residents of public housing. A few commenters simply stated that families should be allowed to remain in the PHP.
Other commenters stated that HUD's interpretation that all OI families remaining in their units can no longer participate in the PHP is an incorrect interpretation of the HOTMA amendments. These commenters stated that the statutory text explicitly allows PHAs to either terminate the family's tenancy or to charge the family a higher rent; the termination of tenancy is an alternative to allowing the family to stay. Commenters stated that the interpretation put forth by HUD in the proposed rule is inconsistent with its earlier proposed rule and other publications, including PIH Notice 2019-11, which seemed to support the idea that OI families remaining in a public housing unit would continue to be PHP participants.
A commenter stated that if HUD continues with the proposed interpretation, additional rule changes in parts 5, 960, 966, and 983 (plus changes to the Rental Assistance Demonstration (RAD) notice) would be required to effectuate new requirements impacting the remaining OI families, and that required termination would also impact many provisions dealing with public housing administration in general. Another commenter stated that other requirements on the physical unit would support the idea that the families living in them must be PHP participants: HUD must continue to treat the physical unit as a unit of public housing; the PHA remains obligated to lease the unit to an income-eligible public housing family upon turnover, and the unit remains part of the PHA's Faircloth limit and subject to a HUD Declaration of Trust and an Annual Contributions Contract.
A commenter stated that requiring an end to program participation, even for those families that stay in their units would be disruptive to the family. The commenter stated that if the family experiences a drop in income, they may not be able to find replacement housing that they can afford nearby, disrupting school, employment, and family obligations. The commenter also stated that wage-earning household members may opt to move out of the unit because of the loss of rights due to the end of PHP participation, and any remaining seniors in the family would be hurt because they would lose the support of their family members and would face additional uncertainty.
Several commenters also stated that requiring PHAs to end the program participation of remaining OI families would likely induce families to leave their units, thereby going against the income-mixing goals of various HUD statutes and policies, including Section 16 of the 1937 Act.
While HUD appreciates the public's concern that termination from the public housing program may be disruptive to families; such disruptions caused by implementing this policy will be addressed by requiring adequate notice to families of their status and the effects of such status as stipulated in the final rule. Furthermore, this rule also provides in § 960.507 a new 24 consecutive month grace period once a family becomes OI and allows the OI family to maintain its status in public housing should an OI family experience a drop in income below the OI limit while in the grace period. If a family's income drops below the OI limit before exhausting the 24 consecutive month grace period, this final rule provides in § 960.507(c)(4) that the family shall be entitled to another 24 consecutive month grace period if its income again goes above the OI limit. Additionally, the specific risk to seniors can be mitigated by updates to other HUD regulations made by HOTMA, such as the elderly family deduction, the health and medical care and reasonable attendant care and auxiliary apparatus expense deduction and associated hardship exemptions, as well as the continued use of permissive deductions as applicable. If a family continues to be OI for 24 consecutive months, HUD reasonably believes that their income will continue to be stable and the disruption due to termination or having to pay the alternative rent would be minimal.
In response to the concerns that HUD's HOTMA OI interpretation goes against the income-mixing goals of various HUD statutes and policies, including Section 16 of the 1937 Act, HUD believes that this final rule appropriately balances the need for local flexibility in HUD programs with the interest of meeting the new requirements in HOTMA. It should be noted that income-mixing goals are met at admissions. Per § 960.202(b)(1), 40 percent of the families admitted to the PHP must be 30 percent of AMI or lower. As a result, the income-mixing goals of the PHA are based on the families entering the program, not those exiting the program. Additionally, income-mixing goals will continue to be met by families whose income falls below the OI limit for the jurisdiction.
Commenters stated that the PHA's allotment of tenant protection vouchers (TPVs) should not change simply because some of the families on the property are non-public housing OI families. Commenters stated that HUD should continue to provide a TPV for every occupied unit, regardless of the family's OI status. One commenter stated that PHAs should be able to provide the TPV to the family and offer it to the first available income-eligible family on their waiting list, as the OI family would not be able to use the voucher.
Commenters stated that OI families that fall below the OI threshold during their 2-year grace period should not have to start as a new applicant for public housing, as they have not yet transitioned out of the program. Another commenter suggested also including OI families during the period before they have to vacate their tenancy.
Commenters supported the idea that PHAs should be allowed to easily readmit families to the PHP if they fall below the eligible income threshold again. A commenter stated that families that have already finished their grace period but remain on the property should be readmitted to public housing. Commenters stated that it should be up to the PHA to determine whether or not to create a preference for OI families that remain in the property, including whether or not to immediately readmit such families. Another commenter stated that allowing PHAs to adopt policies to facilitate timely (whether immediate or on another timeline set by the PHA) admittance of OI households remaining in their units that requalify for subsidy would help keep people housed and potentially prevent homelessness.
One commenter stated that OI families remaining in their unit should continue to be public housing residents and therefore should not have to face issues of readmittance or waiting lists.
A commenter stated that because many OI families remaining on the public housing property would not be eligible for admission into a Section 8 program, PHAs will need to factor in alternative units within their redevelopment/repositioning plans,
A commenter stated that special considerations should be afforded during the period before termination, or after the two-year grace period, if a PHA chooses to allow OI families to stay.
A commenter stated that PHAs should be able to allow remaining OI families to receive similar protections as in-place public housing-assisted families who are not OI when units have assistance converted under RAD or Section 18 of the 1937 Act. According to the commenter, PHAs should have the discretion to (i) allow OI families the right to remain in the unit post-conversion; (ii) permit them a right to return (if displaced due to work in the unit); (iii) allow them the right to be admitted immediately if they become income eligible in the future, delayed only by the time it takes to make an eligibility determination; and (iv) phase in the contract rent post-conversion.
Some commenters stated that HUD should not provide any special consideration to OI households if a PHA repositions their public housing property. One commenter opposed considerations because the families are no longer public housing families. However, the commenter stated that PHAs should be allowed to revisit the landlord-tenant relationship with such families upon repositioning. Another commenter opposed special considerations because the existing requirements for repositioning are sufficient, and policies specific to OI families can be set forth in the applicable relocation plan documents, which are reviewed by HUD. This commenter also stated that HUD should not use this proposed rule to promulgate new requirements for RAD, Section 18, and Section 22 programs; instead, existing program-specific guidance may provide protections, otherwise the URA would govern.
For OI families that must relocate due to a RAD conversion action, the URA may apply, depending upon the fact-specific determinations made under the URA's regulations at 49 CFR part 24 and PIH Notice 2016-17 (“Rental Assistance Demonstration (RAD) Notice Regarding Fair Housing and Civil Rights Requirements and Relocation Requirements Applicable to RAD First Component—Public Housing Conversions”).
However, the URA does not apply to Section 18 actions nor does the RAD `right to remain.
Commenters stated that if OI families are allowed to stay in the unit, they should still be considered public housing families and should be afforded all the rights and responsibilities as any other public housing family, including being subject to the community service requirements.
Other commenters stated that CSSR should not be mandated by HUD. One commenter stated that requiring families not in public housing to perform community service would put a strain on families that are likely already struggling, including possibly already working more than one job.
Some commenters stated that because OI families are not public housing residents, HUD cannot require a PHA to ensure the household meets community service or self-sufficiency requirements. Commenters stated that PHAs should be allowed to choose to add any such requirements to the new lease after the grace period, including CSSR. Another commenter stated that the family is no longer receiving a subsidy, and ostensibly no longer requires support from the PHA to develop marketable skills and a work history, so the household should not be obligated to meet with additional requirements such as CSSR but should have a more traditional landlord-tenant relationship with the PHA.
A commenter stated that OI families still in the FSS program should be allowed to continue to finish their FSS participation, even if they are no longer part of public housing or able to contribute additional money to the escrow, as continued access to the FSS service coordinator may still be beneficial, particularly when HUD allows non heads of households to participate in FSS.
A commenter stated that CSSR is outdated because it requires residents to prove they are worthy of aid, and staff time to administer the requirements would be better spent doing other things; therefore, the commenter advocated that HUD work with Congress to end the requirement entirely.
Some commenters stated that because remaining OI families would not be public housing families and would not be receiving any subsidy, HUD has does not have authority to mandate lease provisions outside of what the 1937 Act, as amended by HOTMA, specifies. One commenter cited section 2 of the 1937 Act, which states that PHAs should be given “the maximum amount of responsibility and flexibility in program administration” and stated that PHAs should be allowed to apply all of the requirements in 24 CFR part 966 to remaining OI families.
Other commenters advocated for allowing PHAs broad discretion in setting the terms of leases for remaining OI families, as long as they are in accordance with State and local laws. A commenter stated that allowing PHAs discretion would allow them to administer OI tenancies in the manner that is most efficient and least disruptive to their operations and to the families involved.
A commenter stated that PHAs should have the discretion to treat remaining OI families as public housing families in all non-rent aspects because all families living in the same building should be treated consistently, including the termination of tenancy process; the transfer process; reasonable accommodation requests; and succession rights. The commenter stated that a family should not be deprived of administrative hearing rights because of their OI status, nor should the PHA have to create a new series of rules and regulations for these families.
Commenters stated that HUD should mandate minimum lease provisions for conduct and occupancy restrictions related to drugs or sex offender status, but a commenter also stated that there should not be any additional grievance or due process rights because the families are choosing to remain as non-public housing residents.
Commenters stated that PHAs should have the discretion to determine whether to conduct income reviews. A commenter stated that HUD should not impose requirements because the HOTMA amendments already set the families' rents separate from their income. Another commenter stated that allowing PHAs to conduct annual and interim examinations would help provide a safety net to families in case their income falls again. A commenter stated that PHAs should specifically be allowed to conduct interim reexaminations for household additions.
A commenter stated that PHAs should be given discretion on how often to conduct unit inspections.
Some commenters felt that over-income residents should be given the same rights as other public housing families in the property, either because the property itself is remaining public housing, or because the families should stay in the public housing program.
A commenter also stated that increased rental charges to remaining OI families will not pay for increased administrative costs if their public housing tenancies are terminated, and HUD should provide additional tools to the PHA to assist administration of non-public housing units.
PHAs must still comply with Federal nondiscrimination requirements, including but not limited to the Fair Housing Act, Title VI of the Civil Rights Act, Section 504, and Title II of the ADA, as applicable. In response to the public comment regarding reasonable accommodations, PHAs still have a legal obligation to provide for reasonable accommodations that may be necessary for individuals with disabilities. PHAs do not have discretion whether to provide for reasonable accommodations. Moreover, in the context of unit transfers for a family when repairs to improve the life, health, or safety of a resident cannot be made within a reasonable time, consistent with fair housing and civil rights obligations, PHAs must provide comparable alternative accommodations having the appropriate number of bedrooms based on the family's need and accessible accommodations and reasonable accommodations for persons with disabilities.
A commenter stated that as long as OI households are following the same rules as everyone else, there will not be additional burdens on the PHA. Another commenter stated that even if there are additional burdens on a PHA from allowing OI families to stay, the PHA has the option to not allow the families to stay, so the extra burdens will be willingly assumed by the PHA. A commenter stated that there would be no consequences to PHAs or to OI families who elect to remain in their public housing unit.
A commenter stated that requiring termination of public housing tenancy will impose administrative burdens on PHAs by requiring PHAs to administer different tenancy types within the same development and to develop and translate new forms of leases and develop new procedures for these tenants.
In addition, a commenter stated that keeping OI families in public housing also reduces subsidy costs for HUD. A commenter stated that allowing OI families to stay will decrease PHA administrative burdens, and families will have greater success in achieving self-sufficiency. Another commenter stated that permitting OI families to stay helps maintain a sense of community, rewards self-sufficiency, promotes mixed-income communities, and allows families to live in areas that may be among the least affordable areas in the country that they may not be able to
A commenter stated that allowing OI families to stay will reduce or delay the availability of public housing units for additional families.
HUD appreciates that some members of the public believe that allowing OI families to stay will lead to greater success in achieving self-sufficiency, help maintain a sense of community, reward self-sufficiency, promote mixed-income communities, and allow families to live in areas that may be among the least affordable areas in the country. However, given the variety of circumstances throughout the country, these priorities are best set by local PHAs. HUD understands that allowing OI families to stay in a public housing unit may reduce or delay the availability of public housing units for additional families; however, HOTMA has made this a matter of PHA discretion.
Some commenters stated that it is unreasonable to allow OI families to continue to reside in public housing, especially for a period of over 12 months.
A commenter stated that HUD should issue guidance for PHAs on calculating the amount of monthly subsidy provided to the unit as set forth in Section 103 of HOTMA and should develop sample notices that PHAs could provide to OI families, informing them about their right to remain in public housing at the end of the six-month grace period. Commenters also asked for further guidance on the impacts of allowing OI families to stay. Some stated that additional guidance on how the subsidy for the unit is calculated is needed, as that information would be needed to allow families to calculate how much rent they will have to pay if they stay. Others stated that HUD should clarify if the subsidy amounts for the PHA would be decreased if OI families remain and pay higher rent.
Commenters stated that HUD should provide model notices, with translations, for PHAs to give to families once their incomes are over the limit for 2 consecutive years so that there is nationwide uniformity in such documents.
Commenters stated that PHAs should be able to defer termination for a family until the next annual reexamination if there is no housing in the geographic area that would not create a rent hardship or a hardship due to its distance from work, school, medical needs, or other essential services for the family. Commenters also stated that HUD should, in § 960.507(a), allow OI families to stay in public housing as a reasonable accommodation.
Commenters opposed the proposal that would not exempt families participating in FSS or EID from the over-income policy. One commenter stated that not allowing such an exemption would violate the intent of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (Pub. L. 115-174, 132 Stat. 1296).
Other commenters submitted comments on the requirement that PHAs submit certain information for HUD to report to Congress. Some commenters asked for the opportunity to review and comment on the tool to report the number of over-income families and the families on the waiting list. Others stated that HUD has not yet developed the reporting system to collect the needed information.
Guidance on calculating the amount of monthly subsidy provided to the unit will be provided by HUD annually. The final rule also provides detailed guidance on the notices PHAs are required to provide to OI families. For this reason, HUD does not plan to develop sample notices for PHAs to provide to OI families. However, HUD will continue to evaluate the need for further guidance on OI policies and procedures.
HUD is modifying the regulatory language in § 960.102(b) to include a definition of alternative non-public housing rent,
While HUD appreciates the public's concern about the hardships a family whose tenancy is terminated may face, the amendments in HOTMA state that if
Because the determination of a family's OI status is based on the determination of their income, PHAs must not include income that is excluded from income calculations, such as amounts based on participation in an EID or FSS program when determining if a family is OI.
HOTMA requires PHAs to submit an annual report on the number of OI families in public housing and the number of families on the PHA's waiting list for admission into public housing. HUD recognizes that there are needed system updates, and these updates will be put into place over the time period between the publication of this rule and the overall effective date of January 1, 2024.
Commenters made many suggestions on how HUD should determine “de minimis” errors that would not cause a PHA or owner to be out of compliance with HOTMA provisions regarding income review and calculation. Some commenters stated that disregarding errors below a set amount may mask larger problems, such as improper application of regulations, that need to be systematically investigated and corrected.
Many commenters stated that HUD should use the Section Eight Management Assessment Program (SEMAP) de minimis threshold of 5 percent of all income determinations made during a calendar year. A commenter stated that structuring the de minimis protections in this way would avoid penalizing a PHA or owner for a large number of tiny errors or a few substantial errors. Other commenters stated that the threshold should be ten percent of all income determinations during a calendar year and noted that ten percent would match the proposed threshold for interim reexaminations. Some suggested that HUD could set a threshold using determinations made at a property during the year. However, some commenters stated that using a threshold as a percentage of all determinations would require reviewers to conduct a 100 percent file review to determine if the errors were de minimis, creating a large administrative burden.
Many commenters also asked how HUD will determine whether an error fits within the de minimis allowance. Some commenters asked whether the error rate was per file or per total income determinations. Commenters stated that HUD should not aggregate errors on a calendar year, because rent calculation compliance has historically been made at the participant level. Others asked for clarification on the additional activities to which the de minimis threshold might apply.
Several commenters stated that HUD should not use 5 percent of individual income determinations. Others, however, agreed that HUD should use 5 percent of the family's adjusted income. Some suggested that the threshold should be lower, at 1 to 2 percent of household income.
Some commenters stated that HUD should set the threshold at a specific dollar amount instead of a percentage. Other commenters stated that using a percentage standard was more appropriate than using a set dollar amount because a specific dollar amount would not allow that error to scale to meet the income thresholds of families or localities, based on family income and the area cost of living.
Some stated that the threshold should be $30, others $50. Commenters that suggested a $50 threshold stated that it would ease the strain on the PHA. Some commenters stated that, following the requirements of the EIV discrepancy report, HUD should count as de minimis those errors that do not exceed $200 a month for any family.
Some commenters suggested de minimis be defined as a difference less than or equal to $10 per month in the assistance payment. Others suggested a combination approach of allowing errors less than the greater of $50 per month per household or 5 percent per month per household. Commenters also suggested the greater of $5 or 5 percent.
Some stated that every file should demonstrate that the owner or PHA has taken appropriate corrective action to repay the family for any overpayments for purposes of audits. Others stated that HUD should retain language in the regulation that makes it clear an owner or PHA must still repay overcharged families. Commenters asked for clarification on how owners or PHAs should proceed when a de minimis error results in an over-income family being approved for assistance. Commenters also stated that the regulation should be clear that the de minimis protection applies both for upward and downward adjustments.
Commenters also stated that HUD should also allow for de minimis errors made by tenant families. Commenters stated that HUD should work within the Management and Occupancy Review (MOR) process and with industry partners to find a reasonable alternative.
HUD is revising this final rule (in §§ 574.310(h), 960.257(f), and 982.516(f)) so that rather than defining a de minimis error as a percentage error, de minimis errors will be errors that result in a difference in the determination of a family's adjusted income of $30 or less per month. This change will allow de minimis determinations to be made on a family-by-family basis and will avoid having to do a full portfolio review to determine if a PHA, owner, or grantee exceeds the threshold. In addition, using a dollar amount instead of a percentage will make de minimis errors easier to calculate. However, HUD may issue a
HUD is also adding language to clarify that where a PHA, owner, or grantee has made a mistake resulting in the family underpaying their rent, the family will not be held liable for the underpaid rent, regardless of whether the mistake resulted in a de minimis error. This is in addition to language that was included in the proposed rule that
Some commenters stated that HUD should continue to require the use of EIV at interim reexaminations. Commenters stated that allowing PHAs the choice would expose PHAs to litigation risks over their decisions on how to verify income, and it could increase fraud and the misreporting of income. Commenters also stated that the information in the reports is significant and is needed to capture potential income changes.
Other commenters agreed with the proposal to make the use of EIV optional at interim reexaminations. Commenters stated that the information is too out of date to be useful and eliminating EIV as a requirement will reduce the burden on PHAs and owners. Commenters stated that they did not believe eliminating the requirement would result in an increase of incorrect income calculations or improper payments.
Commenters wrote that if EIV reveals at an annual examination that there was inaccurate information, the PHA can retroactively charge the family as needed. Commenters also stated that unreported income can be captured at annual reexaminations. Commenters stated that tenants should be advised that inaccurate reporting at interim reexaminations, discovered later, can lead to a requirement to repay any underpayments attributable to errors.
Commenters also stated that the Income Validation Tool (IVT) is redundant of EIV and therefore should not be required, either.
HUD appreciates the suggestion to eliminate the required use of the IVT. While that is beyond the scope of this current rule, HUD will continue to evaluate what guidance must be updated to reflect these decisions.
In addition, HUD agrees that tenants should be aware that inaccurately reporting income at an interim reexamination could result in the family having to repay the PHA or owner, which is discussed in current HUD guidance. HUD will evaluate the guidance to see if additional clarifications are warranted.
Commenters weighed in on the proposed changes to the financial disclosure requirements. One requested that the changes to the consent form be made effective immediately upon the effective date of the final rule. A commenter also stated that the termination of residency or subsidy should be pursued if a family member revokes consent.
Commenters suggested that HUD should use the Consumer Price Index (CPI) as the inflation factor when various amounts in the statute are to be adjusted by inflation. Commenters stated that HUD uses it for other data purposes. Some stated that HUD should use the CPI-W, as that affects the Social Security COLA. A commenter opposed using Chained CPI-U, as the commenter stated it underestimates the official poverty measure and the costs that people below the poverty line face.
Commenters stated that HUD should have a “hold harmless” provision in the case of a decrease, and that HUD should release the imputed passbook rate information with the release of updated income limits.
Some commenters stated that HUD should allow PHAs to use an inflationary index that is relevant to their geographic location.
Commenters also differed on whether HUD should use a single index for all inflationary adjustments. Some stated that HUD should use a commonly available and understood index for inflating all elements of the income calculation. Another commenter stated that HUD should use different inflationary indexes for different provisions. The commenter stated that passbook savings should be used to impute asset returns, while deductions should be adjusted by no less than the SSI COLA.
Commenters stated that prior to applying inflation factors, HUD should round figures down to the nearest $1,000 for assets and $50 for income to reduce administrative burden by providing round numbers for calculation of value after inflation.
Commenters also weighed in on when inflationary factors should be implemented. One commenter stated that HUD should allow PHAs to use Social Security and Veterans Affairs letters documenting the COLA when the COLA takes place, rather than requiring families to get a letter dated within 60 days of the PHA's request for information, as that would reduce burdens and speed up reexaminations. Others stated that HUD should provide a clear implementation date of when the inflation index is effective. A commenter asked for additional information on how long PHAs and owners have to apply the new amounts. Another recommended that inflationary changes be effective on January 1 of each year, applied on the family's next annual certification. A commenter also asked for specific guidance on inflationary adjustments for reexaminations that do not occur annually.
Commenters stated that adjusting annual dependent deductions based on inflation would create a hardship, because a national factor would generate inequalities but creating localized factors would require too much data.
A commenter stated that any regulatory changes due to HOTMA should not undercut the flexibility of the MTW program and the ability of MTW agencies to design and test innovative strategies.
Commenters also submitted comments regarding conversions due to RAD. Some stated that streamlining income and rent rules, both within HUD and with the LIHTC program would reduce confusion and make rent calculations predictable.
A commenter also stated that PHAs need to be able to earn an administrative fee in the first year to be able to pay for additional RAD-related tasks.
Commenters stated that changing income and asset limits will likely cause an influx of individuals looking for State and local rental assistance and shelter.
Commenters also wrote on the fact that PHAs and owners would have many more flexibilities under the new regulations. Some stated that HUD should require that owners have a policy on how they are implementing voluntary policies, to allow for consistent auditing. Others stated that it is not good to allow PHAs and owners discretion over program eligibility, because income, assets, and deductions should be uniform.
Commenters advocated for additional administrative fees beyond those for RAD, asking for an increase in Section 8 administrative fees to ten percent and to allow for training HOPWA project sponsors on the new regulations. One commenter pointed out that PHAs will have to pay for changes in software programs.
A commenter also asked for additional programmatic changes beyond what is required by HOTMA, such as repealing annual or agency plan requirements, eliminating the utility allowance schedule requirement, mandating enrollment in the FSS program, allowing computer-generated documents for verification to expire in 180 days instead of 60 days, allowing PHAs to charge minimum rents based on market conditions, eliminating the community service requirement, allowing triennial reexaminations for everyone, lowering payment standards when Congress reduces funding, reforming HCV portability, allowing a percentage of HAP and net restricted assets to supplement administrative fees lowered due to proration, reserving HCV funding for fully leased PHAs that have exhausted their budget authority and cannot maintain the lease-up capacity, or establishing a consistent timeline for releasing and finalizing HUD regulatory changes.
HUD will keep the suggestions for additional funding and programmatic changes in mind for future budgetary, statutory and legislative efforts, but they are beyond the scope of this rule.
Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.” The rule would update HUD regulations for various programs to conform to sections 102, 103, and 104 of HOTMA by listing specific criteria for triggering family income reviews, providing methods for calculating family income, revising the definition of income and adjusted income, setting a limit on the amount and type of assets that assisted families may have, revising the definition of net family assets, and requiring that applicants for and recipients of assistance provide authorization to PHAs to obtain financial records. This final rule was determined to be a significant regulatory action under section 3(f) of Executive Order 12866 (although not an economically significant regulatory action under the order). HUD prepared a Regulatory Impact Analysis (RIA) that addresses the costs and benefits of the final rule. HUD's RIA is part of the docket file for this rule at
The Regulatory Flexibility Act (5 U.S.C. 601
This final rule revises HUD regulations in certain ways that will reduce burden or provide flexibility for PHAs and owners and other housing providers. The final rule provides specific events that trigger an interim reexamination of family income, whereas current regulations provide that families may request reexaminations at any time. The final rule provides methods for calculating family income, but also provides a safe harbor for PHAs and owners who determine a family's income based on other forms of means-tested Federal public assistance. This final rule also provides that applicants and recipients of assistance must provide authorization for PHAs to obtain financial records in order to verify family income.
For the reasons presented, the undersigned certifies that this rule will not have a significant economic impact
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has Federalism implications if the rule either imposes substantial direct compliance costs on State and local governments and is not required by statute, or the rule preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule would not have Federalism implications and would not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive Order.
The final rule relates to establishment and review of income limits and exclusions with regard to eligibility for or calculation of HUD housing assistance or rental assistance and related external administrative or fiscal requirements and procedures that do not constitute a development decision that affects the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this final rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4; approved March 22, 1995) (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and on the private sector. This rule does not impose any Federal mandates on any state, local, or tribal government, or on the private sector, within the meaning of the UMRA.
The information collection requirements contained in this final rule have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2506-0133, 2577-0083, 2506-0215, and 2506-0171. HUD offices will conform the burden estimates associated with these control numbers to changes in this final rule. In accordance with the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid OMB control number.
The Catalog of Federal Domestic Assistance numbers applicable to the programs that would be affected by this rule are: 14.157, 14.181,14.195, 14.218, 14.239, 14.241, 14.275, 14.850, 14.856, and 14.871.
Administrative practice and procedure, Aged, Claims, Crime, Government contracts, Grant programs—housing and community development, Individuals with disabilities, Intergovernmental relations, Loan programs—housing and community development, Low and moderate income housing, Mortgage insurance, Penalties, Pets, Public housing, Rent subsidies, Reporting and recordkeeping requirements, Social security, Unemployment compensation, Wages
Administrative practice and procedure, Low and moderate income housing, Manufactured homes, Rent subsidies, and Reporting and recordkeeping requirements.
Administrative practice and procedure, Grant programs—housing and community development, Low and moderate income housing, Manufactured homes, Rent subsidies, Reporting and recordkeeping requirements.
Administrative practice and procedure, American Samoa, Community development block grants, Grant programs—education, Grant programs—housing and community development, Guam, Indians, Loan programs—housing and community development, Low and moderate income housing, Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico, Reporting and recordkeeping requirements, Student aid, Virgin Islands
Community facilities, Grant programs—housing and community development, Grant programs—social programs, HIV/AIDS, Low and moderate income housing, Reporting and recordkeeping requirements.
Grant programs—housing and community development, Homeless, Lead poisoning, Manufactured homes, Rent subsidies, Reporting and recordkeeping requirements.
Aged, Grant programs—housing and community development, Individuals with disabilities, Loan programs—housing and community development, Rent subsidies, Reporting and recordkeeping requirements.
Aged, Grant programs—housing and community development, Individuals with disabilities, Pets, Public housing.
Grant programs—housing and community development, Public housing, Reporting and recordkeeping requirements.
Grant programs—housing and community development, Public housing, Reporting and recordkeeping requirements.
Grant programs—housing and community development, Grant programs—Indians, Indians, Public housing, Rent subsidies, Reporting and recordkeeping requirements.
Accordingly, for the reasons described in the preamble, HUD amends 24 CFR parts 5, 92, 93, 570, 574, 882, 891, 960, 964, 966, and 982 as follows:
12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f, 1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat. 2396; Sec. 607, Pub. L. 109-162, 119 Stat. 3051 (42 U.S.C. 14043e
(a) * * * This subpart B also enables HUD and PHAs to obtain income information about applicants and participants in the covered programs through computer matches with State Wage Information Collection Agencies (SWICAs) and Federal agencies, and from financial institutions and employers, in order to verify an applicant's or participant's eligibility for or level of assistance. * * *
(b) * * *
(2) The information covered by consent forms described in this subpart involves income information from SWICAs, wages, income, and resource information from financial institutions, net earnings from self-employment, payments of retirement income, and unearned income as referenced at 26 U.S.C. 6103. * * *
(b) * * *
(1)
(2)
(i) When any person 18 years or older becomes a member of the family, that family member must sign and submit a consent form;
(ii) When a member of the family turns 18 years of age, that family member must sign and submit a consent form; or
(iii) As required by HUD or the PHA in administrative instructions.
(c) * * *
(4) A provision authorizing PHAs to obtain any financial record from any financial institution, as the terms financial record and financial institution are defined in the Right to Financial Privacy Act (12 U.S.C. 3401), whenever the PHA determines the record is needed to determine an applicant's or participant's eligibility for assistance or level of benefits; and
(5) A statement that the authorization to release the information requested by the consent form will remain effective until the earliest of:
(i) The rendering of a final adverse decision for an assistance applicant;
(ii) The cessation of a participant's eligibility for assistance from HUD and the PHA; or
(iii) The express revocation by the assistance applicant or recipient (or applicable family member) of the authorization, in a written notification to HUD.
(c) This section does not apply if the applicant or participant, or any member of the assistance applicant's or participant's family revokes his/her consent with respect to the ability of the PHA to access financial records from financial institutions, unless the PHA establishes an admission and occupancy policy that revocation of consent to access financial records will result in denial or termination of assistance or admission.
(a) * * *
(2) * * *
(i) As a third-party source to verify tenant employment and income information during annual and streamlined reexaminations of family composition and income, in accordance with § 5.236 and administrative guidance issued by HUD; and
(1) A single person, who may be:
(i) An elderly person, displaced person, disabled person, near-elderly person, or any other single person;
(ii) An otherwise eligible youth who has attained at least 18 years of age and not more than 24 years of age and who has left foster care, or will leave foster care within 90 days, in accordance with a transition plan described in section 475(5)(H) of the Social Security Act (42 U.S.C. 675(5)(H)), and is homeless or is at risk of becoming homeless at age 16 or older; or
(2) A group of persons residing together, and such group includes, but is not limited to:
(i) A family with or without children (a child who is temporarily away from the home because of placement in foster care is considered a member of the family);
(ii) An elderly family;
(iii) A near-elderly family;
(iv) A disabled family;
(v) A displaced family; and
(vi) The remaining member of a tenant family.
(d) Determining adjusted income, as provided in § 5.611(a) and (c) through (e), for families who apply for or receive assistance under the following programs: Section 202 Supportive
(e) Limitations on eligibility for assistance based on assets, as provided in § 5.618, in the Section 8 (tenant-based and project-based) and public housing programs.
The additions and revisions read as follows:
(b) * * *
(2) In determining net family assets, PHAs or owners, as applicable, must include the value of any business or family assets disposed of by an applicant or tenant for less than fair market value (including a disposition in trust, but not in a foreclosure or bankruptcy sale) during the two years preceding the date of application for the program or reexamination, as applicable, in excess of the consideration received therefor. In the case of a disposition as part of a separation or divorce settlement, the disposition will not be considered to be for less than fair market value if the applicant or tenant receives consideration not measurable in dollar terms. Negative equity in real property or other investments does not prohibit the owner from selling the property or other investments, so negative equity alone would not justify excluding the property or other investments from family assets.
(3) Excluded from the calculation of net family assets are:
(i) The value of necessary items of personal property;
(ii) The combined value of all non-necessary items of personal property if the combined total value does not exceed $50,000 (which amount will be adjusted by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers);
(iii) The value of any account under a retirement plan recognized as such by the Internal Revenue Service, including individual retirement arrangements (IRAs), employer retirement plans, and retirement plans for self-employed individuals;
(iv) The value of real property that the family does not have the effective legal authority to sell in the jurisdiction in which the property is located;
(v) Any amounts recovered in any civil action or settlement based on a claim of malpractice, negligence, or other breach of duty owed to a family member arising out of law, that resulted in a family member being a person with a disability;
(vi) The value of any Coverdell education savings account under section 530 of the Internal Revenue Code of 1986, the value of any qualified tuition program under section 529 of such Code, the value of any Achieving a Better Life Experience (ABLE) account authorized under Section 529A of such Code, and the value of any “baby bond” account created, authorized, or funded by Federal, State, or local government.
(vii) Interests in Indian trust land;
(viii) Equity in a manufactured home where the family receives assistance under 24 CFR part 982;
(ix) Equity in property under the Homeownership Option for which a family receives assistance under 24 CFR part 982;
(x) Family Self-Sufficiency Accounts; and
(xi) Federal tax refunds or refundable tax credits for a period of 12 months after receipt by the family.
(4) In cases where a trust fund has been established and the trust is not revocable by, or under the control of, any member of the family or household, the trust fund is not a family asset and the value of the trust is not included in the calculation of net family assets, so long as the fund continues to be held in a trust that is not revocable by, or under the control of, any member of the family or household.
(1) For the Section 202 Supportive Housing Program for the Elderly, the “Owner” as defined in 24 CFR 891.205;
(2) For the Section 202 Direct Loans for Housing for the Elderly and Persons with Disabilities, the “Borrower” as defined in 24 CFR 891.505; and
(3) For the Section 811 Supportive Housing Program for Persons with Disabilities, the “Owner” as defined in 24 CFR 891.305.
(a) Annual income includes, with respect to the family:
(1) All amounts, not specifically excluded in paragraph (b) of this section, received from all sources by each member of the family who is 18 years of age or older or is the head of household or spouse of the head of household, plus unearned income by or on behalf of each dependent who is under 18 years of age, and
(2) When the value of net family assets exceeds $50,000 (which amount HUD will adjust annually in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers) and the actual returns from a given asset cannot be calculated, imputed returns on the asset based on the current passbook savings rate, as determined by HUD.
(b) Annual income does not include the following:
(1) Any imputed return on an asset when net family assets total $50,000 or less (which amount HUD will adjust annually in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers) and no actual income from the net family assets can be determined.
(2) The following types of trust distributions:
(i) For an irrevocable trust or a revocable trust outside the control of the family or household excluded from the definition of net family assets under § 5.603(b):
(A) Distributions of the principal or corpus of the trust; and
(B) Distributions of income from the trust when the distributions are used to pay the costs of health and medical care expenses for a minor.
(ii) For a revocable trust under the control of the family or household, any distributions from the trust; except that any actual income earned by the trust, regardless of whether it is distributed, shall be considered income to the family at the time it is received by the trust.
(3) Earned income of children under the 18 years of age.
(4) Payments received for the care of foster children or foster adults, or State or Tribal kinship or guardianship care payments.
(5) Insurance payments and settlements for personal or property losses, including but not limited to payments through health insurance, motor vehicle insurance, and workers' compensation.
(6) Amounts received by the family that are specifically for, or in reimbursement of, the cost of health and medical care expenses for any family member.
(7) Any amounts recovered in any civil action or settlement based on a claim of malpractice, negligence, or other breach of duty owed to a family member arising out of law, that resulted in a member of the family becoming disabled.
(8) Income of a live-in aide, foster child, or foster adult as defined in §§ 5.403 and 5.603, respectively.
(9)(i) Any assistance that section 479B of the Higher Education Act of 1965, as amended (20 U.S.C. 1087uu), requires be excluded from a family's income; and
(ii) Student financial assistance for tuition, books, and supplies (including supplies and equipment to support students with learning disabilities or other disabilities), room and board, and other fees required and charged to a student by an institution of higher education (as defined under Section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002)) and, for a student who is not the head of household or spouse, the reasonable and actual costs of housing while attending the institution of higher education and not residing in an assisted unit.
(A) Student financial assistance, for purposes of this paragraph (9)(ii), means a grant or scholarship received from—
(
(
(
(
(
(B) Student financial assistance, for purposes of this paragraph (9)(ii), does not include—
(
(
(
(
(C) Student financial assistance, for purposes of this paragraph (b)(9)(ii) must be:
(
(
(
(D) Student financial assistance, for purposes of this paragraph (b)(9)(ii), may be paid directly to the student or to the educational institution on the student's behalf. Student financial assistance paid to the student must be verified by the responsible entity as student financial assistance consistent with this paragraph (b)(9)(ii).
(E) When the student is also receiving assistance excluded under paragraph (b)(9)(i) of this section, the amount of student financial assistance under this paragraph (b)(9)(ii) is determined as follows:
(
(
(
(
(10) Income and distributions from any Coverdell education savings account under section 530 of the Internal Revenue Code of 1986 or any qualified tuition program under section 529 of such Code; and income earned by government contributions to, and distributions from, “baby bond” accounts created, authorized, or funded by Federal, State, or local government.
(11) The special pay to a family member serving in the Armed Forces who is exposed to hostile fire.
(12)(i) Amounts received by a person with a disability that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set aside for use under a Plan to Attain Self-Sufficiency (PASS);
(ii) Amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred (
(iii) Amounts received under a resident service stipend not to exceed $200 per month. A resident service stipend is a modest amount received by a resident for performing a service for the PHA or owner, on a part-time basis, that enhances the quality of life in the development.
(iv) Incremental earnings and benefits resulting to any family member from participation in training programs funded by HUD or in qualifying Federal, State, Tribal, or local employment training programs (including training programs not affiliated with a local government) and training of a family member as resident management staff. Amounts excluded by this provision must be received under employment training programs with clearly defined goals and objectives and are excluded only for the period during which the family member participates in the employment training program unless those amounts are excluded under paragraph (b)(9)(i) of this section.
(13) Reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era.
(14) Earned income of dependent full-time students in excess of the amount of the deduction for a dependent in § 5.611.
(15) Adoption assistance payments for a child in excess of the amount of the deduction for a dependent in § 5.611.
(16) Deferred periodic amounts from Supplemental Security Income and Social Security benefits that are received in a lump sum amount or in prospective monthly amounts, or any deferred Department of Veterans Affairs disability benefits that are received in a lump sum amount or in prospective monthly amounts.
(17) Payments related to aid and attendance under 38 U.S.C. 1521 to veterans in need of regular aid and attendance.
(18) Amounts received by the family in the form of refunds or rebates under State or local law for property taxes paid on the dwelling unit.
(19) Payments made by or authorized by a State Medicaid agency (including through a managed care entity) or other State or Federal agency to a family to enable a family member who has a disability to reside in the family's assisted unit. Authorized payments may include payments to a member of the assisted family through the State Medicaid agency (including through a managed care entity) or other State or Federal agency for caregiving services the family member provides to enable a family member who has a disability to reside in the family's assisted unit.
(20) Loan proceeds (the net amount disbursed by a lender to or on behalf of a borrower, under the terms of a loan agreement) received by the family or a third party (
(21) Payments received by Tribal members as a result of claims relating to the mismanagement of assets held in trust by the United States, to the extent such payments are also excluded from gross income under the Internal Revenue Code or other Federal law.
(22) Amounts that HUD is required by Federal statute to exclude from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the exclusions set forth in paragraph (b) of this section apply. HUD will publish a notice in the
(23) Replacement housing “gap” payments made in accordance with 49 CFR part 24 that offset increased out of pocket costs of displaced persons that move from one federally subsidized housing unit to another Federally subsidized housing unit. Such replacement housing “gap” payments are not excluded from annual income if the increased cost of rent and utilities is subsequently reduced or eliminated, and the displaced person retains or continues to receive the replacement housing “gap” payments.
(24) Nonrecurring income, which is income that will not be repeated in the coming year based on information provided by the family. Income received as an independent contractor, day laborer, or seasonal worker is not excluded from income under this paragraph, even if the source, date, or amount of the income varies. Nonrecurring income includes:
(i) Payments from the U.S. Census Bureau for employment (relating to decennial census or the American Community Survey) lasting no longer than 180 days and not culminating in permanent employment.
(ii) Direct Federal or State payments intended for economic stimulus or recovery.
(iii) Amounts directly received by the family as a result of State refundable tax credits or State tax refunds at the time they are received.
(iv) Amounts directly received by the family as a result of Federal refundable tax credits and Federal tax refunds at the time they are received.
(v) Gifts for holidays, birthdays, or other significant life events or milestones (
(vi) Non-monetary, in-kind donations, such as food, clothing, or toiletries, received from a food bank or similar organization.
(vii) Lump-sum additions to net family assets, including but not limited to lottery or other contest winnings.
(25) Civil rights settlements or judgments, including settlements or judgments for back pay.
(26) Income received from any account under a retirement plan
(27) Income earned on amounts placed in a family's Family Self Sufficiency Account.
(28) Gross income a family member receives through self-employment or operation of a business; except that the following shall be considered income to a family member:
(i) Net income from the operation of a business or profession. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations; and
(ii) Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family.
(c)
(1)
(i) To determine family income for initial occupancy or for the initial provision of housing assistance; or
(ii) To determine family income for an interim reexamination of family income under §§ 5.657(c), 960.257(b), or 982.516(c) of this title.
(2)
(ii) In determining the income of the family for the previous 12-month period, the PHA or owner must take into consideration any redetermination of income during the previous 12-month period resulting from an interim reexamination of family income under §§ 5.657(c), 960.257(b), or 982.516(c) of this title.
(iii) The PHA or owner must make adjustments to reflect current income if there was a change in income during the previous 12-month period that was not accounted for in a redetermination of income.
(3)
(A) The Temporary Assistance for Needy Families block grant (42 U.S.C. 601,
(B) Medicaid (42 U.S.C. 1396
(C) The Supplemental Nutrition Assistance Program (42 U.S.C. 2011
(D) The Earned Income Tax Credit (26 U.S.C. 32).
(E) The Low-Income Housing Credit (26 U.S.C. 42).
(F) The Special Supplemental Nutrition Program for Woman, Infants, and Children (42 U.S.C. 1786).
(G) Supplemental Security Income (42 U.S.C. 1381
(H) Other programs administered by the Secretary.
(I) Other means-tested forms of Federal public assistance for which HUD has established a memorandum of understanding.
(J) Other Federal benefit determinations made in other forms of means-tested Federal public assistance that the Secretary determines to have comparable reliability and announces through the
(ii) If a PHA or owner intends to use the annual income determination made by an administrator for allowable forms of Federal means-tested public assistance under this paragraph (c)(3), the PHA or owner must obtain it using the appropriate third-party verification. If the appropriate third-party verification is unavailable, or if the family disputes the determination made for purposes of the other form of Federal means-tested public assistance, the PHA or owner must calculate annual income in accordance with 24 CFR part 5, subpart F. The verification must indicate the tenant's family size and composition and state the amount of the family's annual income. The verification must also meet all HUD requirements related to the length of time that is permitted before the third-party verification is considered out-of-date and is no longer an eligible source of income verification.
(4)
(i) The PHA or owner must still take any corrective action necessary to credit or repay a family if the family has been overcharged for their rent or family share as a result of the de minimis error in the income determination, but families will not be required to repay the PHA or owner in instances where a PHA or owner has miscalculated income resulting in a family being undercharged for rent or family share.
(ii) HUD may revise the amount of de minimis error in this paragraph (c)(4) through a rulemaking published in the
(a)
(2) $525 for any elderly family or disabled family, which amount will be adjusted by HUD annually in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, rounded to the next lowest multiple of $25;
(3) The sum of the following, to the extent the sum exceeds ten percent of annual income:
(i) Unreimbursed health and medical care expenses of any elderly family or disabled family; and
(ii) Unreimbursed reasonable attendant care and auxiliary apparatus expenses for each member of the family who is a person with a disability, to the extent necessary to enable any member of the family (including the member who is a person with a disability) to be employed. This deduction may not exceed the combined earned income received by family members who are 18 years of age or older and who are able to work because of such attendant care or auxiliary apparatus; and
(4) Any reasonable child care expenses necessary to enable a member of the family to be employed or to further his or her education.
(b)
(i)
(ii)
(2) For the HUD programs listed in § 5.601(d), the responsible entity must calculate such other deductions as required and permitted by the applicable program regulations.
(c)
(i)
(ii)
(B) Twelve months after the relief in this paragraph (c)(1)(ii) is provided, the family must receive a deduction totaling the sum of expenses under paragraph (a)(3) of this section that exceed 7.5 percent of annual income.
(C) Twenty-four months after the relief in this paragraph (c)(1)(ii) is provided, the family must receive a deduction totaling the sum of expenses under paragraph (a)(3) of this section that exceed ten percent of annual income and the only remaining relief that may be available to the family will be paragraph (d)(1) of this section.
(D) A family may request hardship relief under paragraph (c)(2) of this section prior to the end of the twenty-four-month transition period. If a family making such a request is determined eligible for hardship relief under paragraph (c)(2) of this section, hardship relief under this paragraph ends and the family's hardship relief shall be administered in accordance with paragraph (c)(2) of this section. Once a family chooses to obtain relief under paragraph (c)(2) of this section, a family may no longer receive relief under this paragraph.
(2)
(i)
(B) Relief under this paragraph (c)(2) is available regardless of whether the family previously received deductions under paragraph (a)(3) of this section, is currently receiving relief under paragraph (c)(1) of this section, or previously received relief under paragraph (c)(1) of this section.
(ii)
(B) The family's hardship relief ends when the circumstances that made the family eligible for the relief are no longer applicable or after 90 days, whichever comes earlier. However, responsible entities may, at their discretion, extend the relief for one or more additional 90-day periods while the family's hardship condition continues.
(d)
(e)
(2)
(e)
(f)
(a)
(i) The family's net assets (as defined in § 5.603) exceed $100,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers; or
(ii) The family has a present ownership interest in, a legal right to reside in, and the effective legal authority to sell, based on State or local laws of the jurisdiction where the property is located, real property that is suitable for occupancy by the family as a residence, except this real property restriction does not apply to:
(A) Any property for which the family is receiving assistance under 24 CFR 982.620; or under the Homeownership Option in 24 CFR part 982;
(B) Any property that is jointly owned by a member of the family and at least one non-household member who does not live with the family, if the non-household member resides at the jointly owned property;
(C) Any person who is a victim of domestic violence, dating violence, sexual assault, or stalking, as defined in this part 5 (subpart L); or
(D) Any family that is offering such property for sale.
(2) A property will be considered “suitable for occupancy” under paragraph (a)(1)(ii) of this section unless the family demonstrates that it:
(i) Does not meet the disability-related needs for all members of the family (
(ii) Is not sufficient for the size of the family;
(iii) Is geographically located so as to be a hardship for the family (
(iv) Is not safe to reside in because of the physical condition of the property (
(v) Is not a property that a family may reside in under the State or local laws of the jurisdiction where the property is located.
(b)
(2) A PHA or owner may determine compliance with paragraph (a)(1)(ii) of this section based on a certification by a family that certifies that such family does not have any present ownership interest in any real property at the time of the income determination or review.
(3) When a family asks for or about an exception to the real property restriction because a family member is a victim of domestic violence, dating violence, sexual assault, or stalking, the PHA or owner must comply with the confidentiality requirements under § 5.2007. The PHA or owner must accept a self-certification from the family member, and the restrictions on requesting documentation under § 5.2007 apply.
(c)
(2) The PHA or owner may choose not to enforce the restrictions in paragraph (a) of this section or establish exceptions to such restrictions only pursuant to a policy adopted by the PHA or owner.
(3) Eligibility criteria for establishing exceptions may provide for separate treatment based on family type and may be based on different factors, such as age, disability, income, the ability of the family to find suitable alternative housing, and whether supportive services are being provided. Such policies must be in conformance with all applicable fair housing statutes and regulations, as discussed in this part 5.
(d)
(e)
The addition reads as follows:
(a) * * *
(5) For public housing only, the alternative non-public housing rent, as determined in accordance with § 960.102 of this title.
(c)
(2)
(3)
(i) The owner may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this
(ii) The owner may choose not to conduct an interim reexamination in the last three months of a certification period.
(4)
(5)
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the owner's policies, owners must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the owner, in accordance with the owner's conditions as established in written policy, and subject to paragraph (c)(5)(iii) of this section.
(iii) A retroactive rent decrease may not be applied by the owner prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
(e)
(f)
(1) The owner must take any corrective action necessary to credit or repay a family if the family has been overcharged for their rent as a result of the de minimis error in the income determination. Families will not be required to repay the owner in instances where the owner has miscalculated income resulting in a family being undercharged for rent or family share.
(2) HUD may revise the amount of de minimis error in this paragraph (f) through a rulemaking published in the
(e)
42 U.S.C. 3535(d) and 12701—12839, 12 U.S.C. 1701x.
(a)
(1) If a family is applying for or living in a HOME-assisted rental unit, and the unit is assisted by a Federal or State project-based rental subsidy program, then a participating jurisdiction must accept the public housing agency, owner, or rental subsidy provider's determination of the family's annual income and adjusted income under that program's rules.
(2) If a family is applying for or living in a HOME-assisted rental unit, and the family is assisted by a Federal tenant-based rental assistance program (
(3) In all other cases, the participating jurisdiction must calculate annual income in accordance with paragraphs (b) through (e) of this section and calculate adjusted income in accordance with paragraph (f) of this section.
(b)
(i) Examine at least 2 months of source documents evidencing annual income (
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
(2) For all other families (
(c)
(1) Annual income as defined at §§ 5.609(a) and (b) of this title (except when determining the income of a homeowner for an owner-occupied rehabilitation project, the value of the homeowner's principal residence may be excluded from the calculation of net family assets, as defined in § 5.603 of this title); or
(2) Adjusted gross income as defined for purposes of reporting under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax purposes.
(d)
(e)
(2) The participating jurisdiction is not required to re-examine the family's income at the time the HOME assistance is provided, unless more than six months has elapsed since the participating jurisdiction determined that the family qualified as income eligible.
(3) The participating jurisdiction must follow the requirements in § 5.617 of this title when making subsequent income determinations of persons with disabilities who are tenants in HOME-assisted rental housing or who receive HOME tenant-based rental assistance. This paragraph (e)(3) will lapse on January 1, 2026.
(f)
(i) A participating jurisdiction must calculate the adjusted income of a family receiving tenant-based rental assistance to determine the amount of assistance in accordance with § 92.209(h). To calculate the family's adjusted income for a family in tenant-based rental assistance, the participating jurisdiction must apply the deductions in § 5.611(a) of this title and may choose to grant financial hardship exemptions in accordance with the process described in §§ 5.611(c) through (e) of this title.
(ii) A participating jurisdiction must calculate a tenant's adjusted income if the tenant is living in a Low HOME Rent unit and is subject to the provisions of § 92.252(b)(2)(i). To calculate a family's adjusted income to determine the Low HOME Rent in accordance with § 92.252(b)(2)(i), a participating jurisdiction must apply the deductions in § 5.611(a) of this title and may choose to grant financial hardship exemptions in accordance with the process described in §§ 5.611(c) through (e) of this title.
(iii) A participating jurisdiction must calculate a tenant's adjusted income if the tenant is over-income, and rent must be recalculated in accordance with § 92.252(i)(2). To calculate the family's adjusted income for an over-income family, the participating jurisdiction must apply the deductions in § 5.611(a) of this title.
(2) If a unit is assisted by a Federal or State project-based rental subsidy program, then a participating jurisdiction is not required to calculate the family's adjusted income and must accept the public housing agency, owner, or rental subsidy provider's determination of adjusted income under that program's rules.
(b) * * *
(2)(i) The rent does not exceed 30 percent of the family's adjusted income.
(ii) If the unit receives Federal or State project-based rental subsidy and the very low-income family pays as a contribution toward rent not more than 30 percent of the family's adjusted income, then the maximum rent (
(h)
42 U.S.C. 3535(d), 12 U.S.C. 4568.
(a)
(1) If a family is applying for or living in an HTF-assisted rental unit, and the unit is assisted under the public housing program, then a grantee must accept the public housing agency's determination of the family's annual income and adjusted income under §§ 5.609 and 5.611 of this title, respectively.
(2) If a family is applying for or living in an HTF-assisted rental unit, and the family is assisted under a Federal tenant-based rental assistance program (
(3) If a family is applying for or living in an HTF-assisted rental unit, and the unit is assisted with a Federal or State project-based rental subsidy program, then a grantee must accept the public housing agency, owner, or rental subsidy provider's determination of the family's annual income and adjusted income under the rules of that program.
(4) In all other cases, the grantee must calculate annual income in accordance with paragraphs (b) through (e) of this section.
(b)
(i) “
(ii) “
(2) The grantee may use only one definition of annual income for each HTF-assisted program (
(c)
(2)
(d)
(2) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(3) Obtain a written statement from the administrator of a government program under which the family receives benefits and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
(e)
(2) The grantee is not required to re-examine the family's income at the time the HTF assistance is provided, unless
(f)
(e)
(2) An owner who re-examines a tenant's annual income through a statement and certification in accordance with § 93.151(d)(2) must examine the source documentation of the income of each tenant every 6th year of the affordability period unless the tenant or unit is assisted under the public housing program, Federal or State project-based rental assistance program, or a Federal tenant-based rental assistance program (
12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 3535(d) and 5301-5320.
12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 3535(d) and 5301-5320.
(d) * * *
(1) 30 percent of the family's monthly adjusted income;
(2) Ten percent of the family's monthly income; or
(e)
(i) As with the references to “grantee” and “grantees” in paragraphs (e), (f), and (h) of this section, the references to “PHA” and “responsible entity” in §§ 5.609 and 5.611 of this title refer to the “grantee” or “project sponsor” that is determining income;
(ii) References in § 5.609(c) of this title to an interim reexamination of family income under §§ 5.657(c), 960.257(b), or 982.516(c) of this title refer to an interim reexamination provided under paragraph (e)(4) of this section;
(iii) References in § 5.609(c) of this title to a streamlined income determination under §§ 5.657(d), 960.257(c), or 982.516(b) of this title refer to a streamlined income determination provided under paragraph (e)(5) of this section;
(iv) Section 5.611(b) of this title does not apply;
(v) The grantee may choose to grant financial hardship exemptions in accordance with the process described in §§ 5.611(c) through (e);
(vi) During the period that § 5.617 of this title remains in effect, the calculation of monthly adjusted income must also include the disallowance of earned income as provided by § 5.617 of this title.
(2)
(3)
(A) Reported family annual income;
(B) The value of assets;
(C) Expenses related to deductions from annual income; and
(D) Other factors that affect the determination of adjusted income.
(ii) For a family with net family assets (as the term is defined in paragraph (f) of this section) equal to or less than $50,000, which amount will be adjusted annually in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Worker, the grantee may accept, for purposes of recertification of income, a family's declaration under § 5.618(b) of this title, except that the grantee must obtain third-party verification of all family assets every 3 years.
(iii) The grantee must establish procedures that are appropriate and necessary to require that income data provided by applicant or participant families is complete and accurate.
(4)
(ii)
(iii)
(A) The grantee may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased unless the family has previously received an interim reduction under paragraph (e)(4)(i) of this section during the certification period; and
(B) The grantee may choose not to conduct an interim reexamination in the last three months of a certification period.
(iv)
(v)
(B) If the family has failed to report a change in family income or composition in a timely manner according to the grantee's policies, grantees must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the grantee, in accordance with the grantee's conditions as established in written policy, and subject to paragraph (e)(4)(v)(C) of this section.
(C) A retroactive rent decrease may not be applied by the grantee prior to the later of the first of the month following:
(
(
(5)
(ii)
(A) Social Security, Supplemental Security Income, Supplemental Disability Insurance.
(B) Federal, state, local, or private pension plans.
(C) Annuities or other retirement benefit programs, insurance policies, disability or death benefits, or other similar types of periodic receipts.
(D) Any other source of income subject to adjustment by a verifiable Cost-of-Living Adjustment (COLA) or current rate of interest.
(iii)
(A) When 90 percent or more of a family's unadjusted income consists of fixed income, grantees using streamlined income determinations must apply a COLA or COLAs to the family's fixed-income sources, provided that the family certifies both that 90 percent or more of their unadjusted income is fixed income and that their sources of fixed income have not changed from the previous year. For non-fixed income, grantees may choose, but are not required, to make appropriate adjustments pursuant to paragraph (e)(2) of this section.
(B) When less than 90 percent of a family's unadjusted income consists of fixed income, grantees using streamlined income determinations must apply a COLA to each of the family's sources of fixed income. Grantees must determine all other income pursuant to paragraph (e)(2) of this section.
(iv)
(v)
(f)
(h)
(1) The grantee must take any corrective action necessary to credit or repay a family if the family has been overcharged for their resident rent payment as a result of the de minimis error in the income determination.
(2) HUD may revise the amount of de minimis error in this paragraph (h) through a rulemaking published in the
42 U.S.C. 1437f and 3535(d).
(a) * * * For a family with net family assets (as the term is defined in § 5.603 of this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, a family's declaration under § 5.618(b) of this title, except that the PHA must obtain third-party verification of all family assets every 3 years.
(b)
(2) The PHA may decline to conduct an interim reexamination of family income if the PHA estimates the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or a lower threshold established by the PHA.
(3) The PHA must conduct an interim reexamination of family income when the PHA becomes aware that the family's adjusted income (§ 5.611 of this title) has changed by an amount that the PHA estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except:
(i) The PHA may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and
(ii) The PHA may choose not to conduct an interim reexamination in the last three months of a certification period.
(4)(i) If the family has reported a change in family income or composition in a timely manner according to the PHA's policies, the PHA must provide the family with 30 days advance notice of any increase in the Total Tenant Payment and Tenant Rent, and such increases will be effective the first day of the month beginning after the end of that 30-day period. Total Tenant Payment and Tenant Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income.
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the PHA's policies, PHAs must implement any resulting Total Tenant Payment and Tenant Rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting Total Tenant Payment and Tenant Rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, a PHA may apply a Total Tenant Payment and Tenant Rent decrease retroactively at the discretion of the PHA, in accordance with the conditions established by the PHA in the administrative plan and subject to paragraph (c)(4)(iii) of this section.
(iii) A retroactive Total Tenant Payment and Tenant Rent decrease may not be applied prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
(5) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination.
(d)
(e)
(f)
(1) The PHA must take any corrective action necessary to credit or repay a family if the family has been overcharged for their Tenant Rent or Total Tenant Payment as a result of an error (including a de minimis error) in the income determination. Families will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in a family being undercharged for Tenant Rent or Total Tenant Payment.
(2) HUD may revise the amount of de minimis error in this paragraph (f) through a notice published in the
(i) * * *
(1)
(4)
(5)
(A) The PHA must take any corrective action necessary to credit or repay an individual if the individual has been overcharged for their Tenant Rent or Total Tenant Payment as a result of an error (including a de minimis error) in the income determination. Individuals will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in an individual being undercharged for Tenant Rent or Total Tenant Payment.
(B) HUD may revise the amount of de minimis error in this paragraph (i)(5) through a rulemaking published in the
12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.
The additions read as follows:
(g)
(2)
(3)
(a)
(c) * * *
(2) One month's per unit operating cost (or contract rent, if applicable), minus the amount of the household's (or family's) security deposit balance. Any reimbursement under this section will be applied first toward any unpaid tenant rent due under the lease. No reimbursement may be claimed for any unpaid tenant rent for the period after termination of the tenancy. The Owner (or Borrower) may be eligible for vacancy payments following a vacancy in accordance with the requirements of § 891.445 (or §§ 891.650 or 891.790, as applicable).
(e)
(g) * * * (1)
(2)
(3) * * * (i) A family shall remain eligible for housing assistance payments until the total tenant payment equals or exceeds the gross rent. The termination of subsidy eligibility will not affect the family's other rights under its lease. Housing assistance payments may be resumed if, as a result of changes in income, rent, or other relevant circumstances during the term of the HAP contract, the family meets the income eligibility requirements of § 5.657 of this title and housing assistance is available for the unit under the terms of the HAP contract. The family will not be required to establish its eligibility for admission to the project under the remaining requirements of paragraph (c) of this section.
42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 3535(d).
(b) * * *
(i) The applicable fair market rent, as defined in 24 CFR part 888, subpart A, for the unit; or
(ii) The amount of the monthly subsidy provided for the unit, which will be determined by adding the per unit assistance provided to a public housing property as calculated through the applicable formulas for the Public Housing Capital Fund and Public Housing Operating Fund.
(A) For the Public Housing Capital Fund, the amount of Capital Funds provided to the unit will be calculated as the per unit Capital Fund assistance provided to a PHA for the development in which the family resides for the most recent funding year for which Capital Funds have been allocated;
(B) For the Public Housing Operating Fund, the amount of Operating Funds provided to the unit will be calculated as the per unit amount provided to the public housing project where the unit is located for the most recent funding year for which a final funding obligation determination has been made;
(C) HUD will publish such funding amounts no later than December 31 each year.
(a) * * * (1) Basic eligibility. An applicant must meet all eligibility requirements in order to receive housing assistance. At a minimum, the applicant must be a family, as defined in § 5.403 of this title, must be income-eligible, as described in this section, and must meet the net asset and property ownership restriction requirements in § 5.618 of this title. Such eligible applicants include single persons.
(b) * * *
(6)
(a) * * *
(3)
(f) * * *
(1) For a family that chooses the flat rent option, the PHA must conduct a reexamination of family income and composition at least once every three years, except for families a PHA determines exceed the over-income limit described in § 960.507(b). Once a PHA determines that a family has an income exceeding the over-income limit, the PHA must follow the income examination and notification requirements under § 960.507(c).
(e)
(1) Receiving the disallowance of earned income under this section on December 31, 2023 or
(2) Eligible to receive the Jobs Plus program rent incentive pursuant to the Jobs Plus FY2023 notice of funding opportunity (NOFO) or earlier appropriations and distributed through prior Jobs Plus NOFOs.
(f)
The addition reads as follows:
(a) * * *
(5) For all non-public housing over-income families, the PHA may not conduct an annual reexamination of family income.
(b)
(2) The PHA may decline to conduct an interim reexamination of family income if the PHA estimates the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD by notice), or a lower threshold established by the PHA.
(3) The PHA must conduct an interim reexamination of family income when the PHA becomes aware that the family's adjusted income (as defined in § 5.611 of this title) has changed by an amount that the PHA estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except:
(i) The PHA may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, except that, based on the PHA's established written policy, the PHA may consider increases in earned income if the PHA has processed an interim reexamination for a decrease in the family's income under paragraph (b)(1) of this section within the same annual or biennial reexamination cycle; and
(ii) The PHA may choose not to conduct an interim reexamination in the last three months of a family's certification period, in accordance with the PHA's established written policy.
(4) For over-income families in the period of up to six months before their tenancy termination pursuant to § 960.507(d)(2), the PHA must conduct an interim reexamination of family income as otherwise required under this paragraph. However, the resulting income determination will not make the family eligible to remain in the public housing program beyond the period before termination as defined by PHA policy.
(5) The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition.
(6)
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the PHA's policies, PHAs must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, a PHA may apply rent decreases retroactively at the discretion of the PHA, in accordance with the conditions established by the PHA in written policy and subject to paragraph (b)(6)(iii) of this section.
(iii) A retroactive rent decrease may not be applied by the PHA prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
(e) Reviews of family income under this section are subject to the provisions in section 904 of the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, as amended (42 U.S.C. 3544).
(f)
(i) The PHA must take any corrective action necessary to credit or repay a family if the family has been overcharged for their rent as a result of an error (including a de minimis error) in the income determination. Families will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in a family being undercharged for rent or family share.
(ii) HUD may revise the amount of de minimis error in this paragraph (f) through a rulemaking published in the
(c) * * *
(2) For a family with net family assets (as the term is defined in § 5.603 of this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, a family's declaration under § 5.618(b) of this title, except that the PHA must obtain third-party verification of all family assets every 3 years.
(a)
(1) This provision applies to all families in the public housing program, including FSS families and all families receiving EID.
(i) Mixed families (as defined in § 5.504 of this title) who are non-public housing over-income families pay the alternative non-public housing rent (as defined in § 960.102), as applicable.
(ii) All non-public housing over-income families are precluded from participating in a public housing resident council.
(iii) Furthermore, non-public housing over-income families cannot participate in programs that are only for public housing or low-income families.
(iv) PHAs cannot provide any Federal assistance, including a utility allowance, to non-public housing over-income families.
(2) PHAs must implement the requirements of this section by amending all applicable admission and continued occupancy policies according to the provisions in 24 CFR part 903. All PHAs must have effective over-income policies, consistent with the requirements of this section, no later than June 14, 2023.
(b)
(c)
(2) The PHA must conduct an income examination 12 months after the initial over-income determination described in paragraph (c)(1) of this section, unless the PHA determined the family's income fell below the over-income limit since the initial over-income determination. If the PHA determines the family has exceeded the over-income limit for 12 consecutive months, the PHA must provide written notification of this 12-month over-income determination no later than 30 days after the income examination that led to the 12-month over-income determination. The notice must state that the family has exceeded the over-income limit for 12 consecutive months and continuing to exceed the over-income limit for a total of 24 consecutive months will result in the PHA following its continued occupancy policy for over-income families in accordance with paragraph (d) of this section. Additionally, if applicable under PHA policy, the notice must include an estimate (based on current data) of the alternative non-public housing rent for the family's unit. Pursuant to 24 CFR part 966, subpart B, the PHA must afford the family an opportunity for a hearing if the family disputes within a reasonable time the PHA's determination that the family has exceeded the over-income limit.
(3) The PHA must conduct an income examination 24 months after the initial over-income determination described in paragraph (c)(1) of this section, unless the PHA determined the family's income fell below the over-income limit
(i) That the family has exceeded the over-income limit for 24 consecutive months.
(ii) That the PHA must either terminate the family's tenancy or charge the family the alternative non-public housing rent, in accordance with it continued occupancy policy for over-income families in accordance with paragraph (d) of this section.
(A) If the PHA determines that under its policy the family's tenancy must be terminated in accordance with paragraph (d)(2) of this section, then the notice must inform the family of this determination and state the period of time before tenancy termination.
(B) If the PHA determines that under its policy the family must be charged the alternative non-public housing rent in accordance with paragraph (d)(1) of this section, then the notice must inform the family of this determination and state that the family be charged the alternative non-public housing rent in accordance with paragraph (d)(1) of this section. The PHA must also present the family with a new lease, in accordance with the requirements at § 960.509, and inform the family that the lease must be executed no later than 60 days of the date of the notice or at the next lease renewal, whichever is sooner.
(iii) Pursuant to 24 CFR part 966, subpart B, the PHA must afford the family an opportunity for a hearing if the family disputes within a reasonable time the PHA's determination that the family has exceeded the over-income limit.
(4) If, at any time during the consecutive 24-month period following the initial over-income determination described in paragraph (c)(1) of this section, a PHA determines that the family's income is below the over-income limit, the family is entitled to a new 24 consecutive month period of being over-income and new notices under paragraphs (c)(1), (c)(2), and (c)(3) of this section if the PHA later determines that the family income exceeds the over-income limit.
(d)
(1) Require the family to execute a new lease consistent with § 960.509 and charge the family the alternative non-public housing rent, as defined in § 960.102, no later than 60-days after the notice is provided pursuant to paragraph (c)(3) of this section or at the next lease renewal, whichever is sooner; or
(2) Terminate the tenancy of the family no more than 6 months after the notification under paragraph (c)(3) of this section as determined by the PHA's continued occupancy policy. PHAs must continue to charge these families the family's choice of income-based, flat rent, or prorated rent for mixed families during the period before termination. The PHA must give appropriate notice of lease tenancy termination (notice to vacate) in accordance with State and local laws.
(e)
(f)
(a)
(b)
(1)
(i) The name of the PHA and names of the tenants.
(ii) The unit rented (address, apartment number, and any other information needed to identify the dwelling unit).
(iii) The term of the lease (lease term and renewal in accordance with paragraph (b)(2) of this section).
(iv) A statement of the utilities, services, and equipment to be supplied by the PHA without additional cost, and the utilities and appliances to be paid for by the tenant.
(v) The composition of the household as approved by the PHA (family members, foster children and adults, and any PHA-approved live-in aides). The family must promptly inform the PHA of the birth, adoption, or court-awarded custody of a child. The family must request PHA approval to add any other family member as an occupant of the unit.
(2)
(ii) At any time, the PHA may terminate the tenancy in accordance with paragraph (b)(11) of this section.
(3)
(B) The lease must specify the initial amount of the tenant rent at the beginning of the initial lease term. The PHA must comply with State or local law in giving the tenant written notice stating any change in the amount of tenant rent.
(ii)
(iii)
(iv)
(v)
(4)
(5)
(i) To maintain the dwelling unit and the project in decent, safe, and sanitary condition.
(ii) To comply with requirements of applicable State and local building codes, housing codes, and HUD regulations materially affecting health and safety.
(iii) To make necessary repairs to the dwelling unit.
(iv) To keep project buildings, facilities, and common areas, not otherwise assigned to the tenant for maintenance and upkeep, in a clean and safe condition.
(v) To maintain in good and safe working order and condition electrical, plumbing, sanitary, heating, ventilating, and other facilities, and appliances, including elevators, supplied, or required to be supplied by the PHA.
(vi) To provide and maintain appropriate receptacles and facilities (except containers for the exclusive use of an individual tenant family) for the deposit of ashes, garbage, rubbish, and other waste removed from the dwelling unit by the tenant in accordance with paragraph (b)(6)(vii) of this section.
(vii) To supply running water, including an adequate source of potable water, and reasonable amounts of hot water and reasonable amounts of heat at appropriate times of the year (according to local custom and usage), except where the building that includes the dwelling unit is not required by law to be equipped for that purpose, or where heat or hot water is generated by an installation within the exclusive control of the tenant and supplied by a direct utility connection.
(viii) To notify the tenant of the specific grounds for any proposed adverse action by the PHA as required by State and local law.
(ix) To comply with Federal, State, and local nondiscrimination and fair housing requirements, including Federal accessibility requirements and providing reasonable accommodations for persons with disabilities.
(x) To establish necessary and reasonable policies for the benefit and well-being of the housing project and the tenants, post the policies in the project office, and incorporate the regulations by reference in the lease.
(6)
(i) Not assign the lease or sublease the dwelling unit.
(ii) Not provide accommodations for boarders or lodgers.
(iii) Use the dwelling unit solely as a private dwelling for the tenant and the tenant's household as identified in the lease, and not use or permit its use for any other purpose.
(iv) Abide by necessary and reasonable policies established by the PHA for the benefit and well-being of the housing project and the tenants, which must be posted in the project office and incorporated by reference in the lease.
(v) Comply with all applicable State and local building and housing codes materially affecting health and safety.
(vi) Keep the dwelling unit and such other areas as may be assigned to the tenant for the tenant's exclusive use in a clean and safe condition.
(vii) Dispose of all waste from the dwelling unit in a sanitary and safe manner.
(viii) Use in a reasonable manner all electrical, plumbing, sanitary, heating, ventilating, air-conditioning and other facilities, including elevators.
(ix) Refrain from, and cause members of the household and guests to refrain from destroying, defacing, damaging, or removing any part of the dwelling unit or housing project.
(x) Pay reasonable charges (other than for wear and tear) for the repair of damages to the dwelling unit, or to the housing project (including damages to buildings, facilities, or common areas) caused by the tenant, a member of the household or a guest.
(xi) Act, and cause household members and guests to act, in a manner which will not disturb other residents' peaceful enjoyment of their accommodations and will be conducive to maintaining the project in a decent, safe, and sanitary condition.
(xii) Assure that no tenant, member of the tenant's household, guest, or any other person under the tenant's control engages in:
(A)
(
(B)
(xii) To assure that no member of the household engages in an abuse or pattern of abuse of alcohol that affects the health, safety, or right to peaceful enjoyment of the premises by other residents.
(7)
(8)
(i) The tenant must immediately notify project management of the damage.
(ii) The PHA must repair the unit within a reasonable time. The PHA must charge the tenant the reasonable cost of the repairs if the damage was caused by the tenant, the tenant's household, or the tenant's guests.
(iii) The PHA must offer standard alternative accommodations, if available, where necessary repairs cannot be made within a reasonable time, subject to paragraph (b)(5)(ix) of this section; and
(iv) The lease must allow for abatement of rent in proportion to the seriousness of the damage and loss in value as a dwelling if repairs are not made in accordance with paragraph (b)(8)(ii) of this section or alternative accommodations not provided in
(9)
(i) The PHA is, upon reasonable advance notification to the tenant, permitted to enter the dwelling unit during reasonable hours for the purpose of performing routine inspections and maintenance, for making improvement or repairs, or to show the dwelling unit for re-leasing. A written statement specifying the purpose of the PHA entry delivered to the dwelling unit at least two days before such entry is reasonable advance notification.
(ii) The PHA may enter the dwelling unit at any time without advance notification when there is reasonable cause to believe that an emergency exists; and
(iii) If the tenant and all adult members of the household are absent from the dwelling unit at the time of entry, the PHA must leave in the dwelling unit a written statement specifying the date, time, and purpose of entry prior to leaving the dwelling unit.
(10)
(i) Except as provided in paragraph (b)(9) of this section, notice to a tenant must be provided in a form to allow meaningful access for persons who are limited English proficient and, in a form, to ensure effective communication with individuals with disabilities; and
(ii) Notice to the PHA can be in writing, hand delivered, or sent by prepaid first-class mail to PHA address provided in the lease, orally, or submitted electronically through a communications system established by the PHA for that purpose.
(11)
(ii)
(A) Criminal activity or alcohol abuse as provided in paragraph (b)(11)(iv) of this section.
(B) Failure to accept the PHA's offer of a lease revision to an existing lease: with written notice of the offer of the revision at least 60 calendar days before the lease revision is scheduled to take effect; and with the offer specifying a reasonable time limit within that period for acceptance by the family.
(iii)
(iv)
(
(B)
(
(C)
(
(D)
(E)
(F)
(
(
(G)
(
(
(
(12)
(13)
(14)
(15)
PHAs and residents must comply with the requirements of this subpart beginning with PHA fiscal years that commence on or after October 1, 2000. Unless otherwise provided by § 903.11 of this chapter, Annual Plans submitted for those fiscal years are required to contain information regarding the PHA's compliance with the community service requirement, as described in § 903.7 of this chapter. Non-public housing over-income families are not required to comply with the requirements of this subpart.
(1) Is 62 years or older;
(2)(i) Is a blind or disabled individual, as defined under Section 216(i)(1) or Section 1614 of the Social Security Act (42 U.S.C. 416(i)(1); 1382c), and who certifies that because of this disability she or he is unable to comply with the service provisions of this subpart, or
(ii) Is a primary caretaker of such individual;
(3) Is engaged in work activities;
(4) Meets the requirements for being exempted from having to engage in a work activity under the State program funded under part A of title IV of the Social Security Act (42 U.S.C. 601
(5) Is a member of a family receiving assistance, benefits or services under a State program funded under part A of title IV of the Social Security Act (42 U.S.C. 601
(6) is a member of a non-public housing over-income family.
42 U.S.C. 1437d, 1437g, 1437r, 3535(d).
42 U.S.C. 1437d and 3535(d).
The revision and addition read as follows:
(a) * * *
(2) * * *
(iii) The lease shall convert to a month-to-month term for families determined to be over-income whose tenancy will be terminated in accordance with § 960.507(d)(2) of this chapter as of the date of the notice provided under § 960.507(c)(3) of this chapter. PHAs must charge these families, who continue to be public housing program participants, the family's choice of income-based, flat rent, or prorated rent for mixed families during the period before termination.
(iv) At any time, the PHA may terminate the tenancy in accordance with paragraph (l) of this section.
(l) * * *
(2) * * *
(iii) No longer meeting the restrictions on net assets and property ownership as provided in § 5.618 of this title.
42 U.S.C. 1437f and 3535(d).
(a) * * *
(3) For a family with net family assets (as the term is defined in § 5.603 of this title) equal to or less than $50,000, which amount will be adjusted annually by HUD in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes of recertification of income, a family's declaration under § 5.618(b) of this title, except that the PHA must obtain third-
(c)
(2) The PHA may decline to conduct an interim reexamination of family income if the PHA estimates the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or a lower threshold established by the PHA.
(3) The PHA must conduct an interim reexamination of family income when the PHA becomes aware that the family's adjusted income (as defined in § 5.611 of this title) has changed by an amount that the PHA estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except:
(i) The PHA may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and
(ii) The PHA may choose not to conduct an interim reexamination in the last three months of a certification period.
(4)
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the PHA's policies, PHAs must implement any resulting family share and family rent to owner increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting family share and family rent to owner decrease must be implemented no later than the first rent period following completion of the reexamination. However, a PHA may apply a family share and family rent to owner decrease retroactively at the discretion of the PHA, in accordance with the conditions established by the PHA in the administrative plan and subject to paragraph (c)(4)(iii) of this section.
(iii) A retroactive family share and family rent to owner decrease may not be applied prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
(d)
(e) * * *
(1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination.
(f)
(i) The PHA must take any corrective action necessary to credit or repay a family if the family has been overcharged for their rent or family share as a result of an error (including a de minimis error) in the income determination. Families will not be required to repay the PHA in instances where the PHA has miscalculated income resulting in a family being undercharged for rent or family share.
(ii) HUD may revise the amount of de minimis error in this paragraph (f) through a rulemaking published in the
(h) Reviews of family income under this section are subject to the provisions in section 904 of the Stewart B. McKinney Homeless Assistance Amendments Act of 1988, as amended (42 U.S.C. 3544).
(b) * * *
(6) The PHA must deny or terminate assistance based on the restrictions on net assets and property ownership when required by § 5.618 of this title.
Securities and Exchange Commission.
Supplemental proposed rule.
The Securities and Exchange Commission (“SEC” or “Commission”) is reissuing and revising a proposal that was initially published in September 2011 that would implement a provision under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) prohibiting an underwriter, placement agent, initial purchaser, or sponsor of an asset-backed security (including a synthetic asset-backed security), or any affiliate or subsidiary of any such entity, from engaging in any transaction that would involve or result in certain material conflicts of interest.
Comments should be received on or before March 27, 2023.
Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such items will be made available on our website. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at
Benjamin Meeks, Special Counsel, or Brandon Figg, Attorney-Adviser, in the Office of Structured Finance, Division of Corporation Finance at (202) 551-3850, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
We are proposing to add the following rule under 15 U.S.C. 77a
Section 621 of the Dodd-Frank Act
In September 2011, the Commission proposed for comment a rule designed to implement Section 27B.
We are proposing new Rule 192 (the “re-proposed rule”) pursuant to Section 27B(b), which requires the Commission to issue rules for the purpose of implementing the prohibition in Section 27B(a).
The re-proposed rule takes into account developments in the ABS market since 2011 and the comments received in response to the 2011 proposed rule to provide greater clarity regarding the scope of prohibited and permitted conduct.
To achieve these objectives, the re-proposed rule would:
•
•
•
•
We believe that the re-proposed rule would help to prevent the abusive conduct that Section 27B is designed to prevent by reducing the incentive for a securitization participant to structure an ABS in a way that would put the securitization participant's interests ahead of those of ABS investors.
Under proposed Rule 192(a)(1), a securitization participant would be prohibited, for a specified time period with respect to an asset-backed security, from engaging in any transaction that would involve or result in a material conflict of interest between such securitization participant and an investor in such asset-backed security. For purposes of the re-proposed rule, the term “asset-backed security” would be defined in proposed Rule 192(c) to have the same meaning as set forth in Section 3 of the Exchange Act
We received comment in response to the 2011 proposed rule requesting clarification whether certain products, such as certain types of municipal securities, would be Exchange Act ABS.
We also received comment suggesting an exclusion from the rule for certain types of ABS, including ABS with underlying assets for which information is readily available or where the investor is involved in asset selection.
We also received comment on the 2011 proposed rule recommending that the rule should only cover synthetic ABS because greater risk arises out of synthetic ABS.
With regard to synthetic ABS, we received comment suggesting that the term “synthetic ABS” should be defined.
We received comment in response to the 2011 proposed rule that the rule should explicitly cover hybrid ABS that contain a mix of financial and synthetic assets.
We also received comment recommending that the rule include a catch-all provision to cover any product that functions as the economic equivalent of a cash ABS, synthetic ABS, or hybrid ABS.
We received comment on the 2011 proposed rule from portfolio managers
Finally, we received comment on the 2011 proposal stating that not excluding Enterprise or Ginnie Mae ABS from the scope of the rule would have significant economic and market impacts.
1. We seek comment on the proposed definition of asset-backed security for purposes of proposed Rule 192. Is it necessary to further clarify components of the proposed definition?
2. Are market participants familiar with which securities products fall under the definition of Exchange Act ABS? Should the re-proposed rule provide more specificity regarding the types of ABS that would be subject to the re-proposed rule?
3. Should we add a catch-all provision to the proposed definition of asset-backed security to cover any product that functions as the economic equivalent of a cash ABS, synthetic ABS, or hybrid cash and synthetic ABS? Please comment on the advantages or disadvantages. If so, what additional types of securities or transactions should be included that would not be covered by the definition of asset-backed security in the re-proposed rule?
4. The re-proposed rule does not define “synthetic ABS,” and we are not providing specific guidance regarding whether any particular products are “synthetic ABS.” As stated above, we have described synthetic securitizations as securitizations that are designed to create exposure to an asset that is not transferred to or otherwise part of an asset pool, such as through a CDS or a total return swap. Should we define “synthetic ABS” to incorporate that description or otherwise define such term as a fixed-income or other security that references any type of financial asset and allows the holder of the security to receive payments that depend primarily on the value or performance of the referenced assets? Are there particular products (1) where additional clarity is necessary as to whether such products are “synthetic ABS” or (2) that the rule should expressly state are not “synthetic ABS”? Please identify any such products and explain why additional clarification is needed. Furthermore, is additional clarification needed regarding what is or is not a hybrid cash and synthetic asset-backed security?
5. Should proposed Rule 192(b) contain an additional exception from the prohibition on material conflicts of interest for certain synthetic balance sheet CLOs, as suggested by commenters to the 2011 proposed rule,
6. As stated above, municipal securitizations that are Exchange Act ABS would fall within the definition of asset-backed security for purposes of the re-proposed rule. Should we clarify in rule text or through guidance the types of municipal securitizations that would be covered by the re-proposed rule? If so, please identify those types of municipal securitizations that you believe require clarification and explain why. Are there types of municipal securitizations that should be exempt from the re-proposed rule? If so, please explain why they should be exempt, including whether the opportunity exists for securitization participants to engage in the type of conduct the re-proposed rule is designed to prohibit with respect to such municipal securitizations.
7. Are there types of government-guaranteed securities that should be exempt from the re-proposed rule? Please explain why they should be exempt, including whether the opportunity exists for securitization participants to engage in the type of conduct that the re-proposed rule is designed to prohibit with respect to such securities.
Consistent with Section 27B(a), the prohibition in the re-proposed rule would apply to transactions entered into by certain key participants involved in the creation and sale of an ABS, namely an underwriter, placement agent, initial purchaser, or sponsor, each of which would be a “securitization participant” as defined in proposed Rule 192(c). The functions performed by such persons are essential to the design, creation, marketing, and/or sale of an ABS. The re-proposed rule focuses on transactions that could give such persons the incentive to market or structure ABS and/or construct underlying asset pools in a way that would position them to benefit from the actual, anticipated, or potential adverse performance of the relevant ABS or its underlying asset pool. Also, consistent with Section 27B(a) and to help prevent potential evasion, the prohibition in the re-proposed rule would apply to the transactions entered into by the affiliates and subsidiaries of any such person. Subject to certain exceptions discussed below, each of the foregoing entities would be captured by the definition of “securitization participant” in the re-proposed rule.
The Commission did not propose definitions of the terms “underwriter,” “placement agent,” “initial purchaser,” and “sponsor” in the 2011 proposed rule, and we received comment to the 2011 proposed rule that we should refrain from providing definitions for certain persons.
8. Should we modify the proposed definition of the term “securitization participant,” and if so, how? Are any modifications necessary or advisable to mitigate any unintended consequences?
9. As discussed above in Section II.A., municipal securitizations that are Exchange Act ABS would fall within the definition of asset-backed security for purposes of the re-proposed rule. Therefore, parties related to a municipal securitization that are “securitization participants” would be subject to the re-proposed rule. For example, under the re-proposed rule a “municipal advisor” under 17 CFR 240.15Ba1-1(d)(1) could be a “securitization participant” under the re-proposed rule based on the functions that it performs in connection with a municipal securitization. Should certain parties related to a municipal securitization be excluded from the scope of the re-proposed rule? If so, how would those exclusions be consistent with Section 27B? Are there any special considerations related to municipal advisors that should be considered in applying the re-proposed rule?
Proposed Rule 192(c) would define a “placement agent” or “underwriter” as a person who has agreed with an issuer or selling security holder to:
• Purchase securities from the issuer or selling security holder for distribution;
• Engage in a distribution for or on behalf of such issuer or selling security holder; or
• Manage or supervise a distribution for or on behalf of such issuer or selling security holder.
Proposed Rule 192(c) would define “distribution” as used in the proposed definitions of “underwriter” or “placement agent” to mean:
• An offering of securities, whether or not subject to registration under the Securities Act, that is distinguished from ordinary trading transactions by the presence of special selling efforts and selling methods; or
• An offering of securities made pursuant to an effective registration statement under the Securities Act.
Proposed Rule 192(c) would define “initial purchaser” in a manner consistent with the Commission's prior use of that term in the context of ABS.
The proposed definitions of the terms “underwriter,” “placement agent,” and “initial purchaser” in the re-proposed rule would identify persons by their function in connection with a securitization as suggested by certain commenters to the 2011 proposed rule.
The proposed definitions of the terms “underwriter,” “placement agent,” and “initial purchaser” do not exclude an underwriter, placement agent, or initial purchaser that was not directly involved in structuring an ABS transaction or selecting the assets underlying the ABS, as requested by a commenter to the 2011 proposed rule.
10. Are the proposed definitions of the terms “initial purchaser,” “placement agent,” and “underwriter” overinclusive or underinclusive, and why? If you believe that any of the proposed definitions are overinclusive or underinclusive, please provide an alternative definition and explain why you believe it is appropriate.
11. Should we modify the proposed definition of the terms “placement agent” and “underwriter,” and if so, how should the proposed definition be modified and why? Specifically, is it appropriate to use the same definition for such terms? If not, please explain why and suggest revisions. Should we modify the proposed definition to provide for functions in addition to the functions specified in the proposed definition?
12. As discussed above, the proposed definition of the terms “placement agent” and “underwriter” would be limited to persons that have agreed with an issuer or a selling security holder to perform the functions detailed in the proposed definition. Should the proposed definition be expanded to include selling group members who have no such agreement with an issuer or selling security holder? Why or why not?
13. Should the proposed definition of the term “distribution” be modified? If so, please explain why and provide an alternative definition. In particular, should “the presence of special selling efforts and selling methods” be included in the proposed definition? Additionally, should the magnitude of the offering be considered as part of the proposed definition?
14. Should we modify the proposed definition of the term “initial purchaser,” and if so, how should the proposed definition be modified and why?
Proposed Rule 192(c) would, subject to certain exceptions,
• Any person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the entity that issues the asset-backed security; or
• Any person:
○ With a contractual right to direct or cause the direction of the structure, design, or assembly of an asset-backed security or the composition of the pool of assets underlying the asset-backed security; or
○ That directs or causes the direction of the structure, design, or assembly of an asset-backed security or the composition of the pool of assets underlying the asset-backed security.
Similar to the other proposed definitions discussed above, the proposed definition of the term “sponsor” is a functional definition that would apply regardless of the title bestowed upon the person (
Paragraph (i) of the proposed definition of “sponsor” in proposed Rule 192(c), which is derived from the definition of the term “sponsor” in Regulation AB,
Consistent with our concerns about the potential underinclusiveness of the Regulation AB definition of “sponsor” for purposes of the re-proposed rule, paragraph (ii) of the proposed definition of “sponsor” in proposed Rule 192(c) would apply more broadly to also cover, subject to certain exceptions, any person that directs or causes the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS or has the contractual right to do so.
First, paragraph (ii)(A) of the proposed definition of “sponsor” would include, subject to certain exceptions, any person with a contractual right to direct or cause the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS (a “contractual rights sponsor”).
The re-proposed rule does not provide that an actual exercise of contractual rights would be necessary for purposes of the proposed definition of “sponsor.” Our understanding of general industry practices based on our oversight of ABS markets is that there are a relatively small number of parties in a given ABS transaction with such contractual rights,
We understand that there may be instances where a person that does not have a contractual right to do so may nevertheless direct or cause the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS. For example, in connection with certain well-known examples of synthetic CDOs that were issued in the lead up to the financial crisis of 2007-2009, hedge funds that desired to take short positions in synthetic CDO securities (
As stated above, participating in asset selection for an ABS provides the opportunity for a person to benefit through a bet against the ABS or the underlying assets by selecting assets that such person believes will perform poorly. Therefore, the definition that we are proposing would cover a person, such as a private fund manager, who selects all or a portion of the assets underlying the ABS by directing the relevant person with the contractual right to do so and, based on its ability to select assets that are expected to perform poorly, enters into a transaction to short the ABS. The facts and circumstances regarding the actions of such a person would be distinguishable from that of an ABS investor that is acquiring a long position in the relevant ABS. An ABS investor that is acquiring a long position in the relevant ABS would be expected to provide input with respect to the structure of the ABS investment or the underlying pool of assets for the purpose of maximizing the expected value of its ABS investment. For example, investors in certain ABS markets may have stipulations regarding general characteristics of the composition of the underlying pool of an ABS that must be satisfied in order for that investor to agree to acquire the relevant securities, including to ensure that the ABS investment would comply with its investment guidelines. Therefore, an ABS investor that is interested in acquiring a long position in an ABS would not be considered to direct the composition of assets merely because such investor expresses its preferences regarding the assets that would collateralize its ABS investment. Paragraph (ii)(B) of the proposed definition of “sponsor” is not intended to capture such investors as a “sponsor” and is intended to capture only those persons—such as the hedge fund managers in the examples referred to above—that direct or cause the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS other than in connection with their acquisition of a long position in the ABS.
The proposed definition of “sponsor” is a functional definition that would apply regardless of the title bestowed upon such person. Accordingly, a person would be a sponsor for purposes of the re-proposed rule if such person organized and initiated the ABS transaction or directed or had the contractual right to direct the structure, design, or assembly of the ABS or the composition of the pool of assets underlying the ABS, regardless of whether the person is referred to as the sponsor of the ABS or by some other title (
To avoid having the scope of the proposed definition of “sponsor” extend beyond those persons with the incentive and ability to engage in the conduct that is prohibited by Section 27B, paragraph (ii)(C) of the proposed definition of “sponsor” would exclude a person that performs only administrative, legal, due diligence, custodial, or ministerial acts related to the structure, design, or assembly of the ABS or the composition of the pool of assets underlying the ABS. Whether a person performs only such functions is a determination that would be based upon the specific facts and circumstances of an ABS transaction. For example, we believe that the activities customarily performed by accountants, attorneys, and credit rating agencies with respect to the creation and sale of an ABS, and the activities customarily performed by trustees, custodians, paying agents, calculation agents, and other contractual service providers relating to the ongoing management and administration of the entity that issues the ABS, are the sorts of activities that would typically fall within the exclusion from the definition of the proposed definition of the term “sponsor.” This exclusion should address the concerns of a commenter that the persons defined to be subject to the prohibition of the re-proposed rule should not inadvertently include trustees, servicers, law firms, accountants, and diligence providers.
Paragraph (iii)(A) of the proposed definition of “sponsor” in proposed Rule 192(c) would provide that the United States or an agency of the United States would not be a “sponsor” for purposes of the re-proposed rule with respect to an ABS that is fully insured or fully guaranteed as to the timely payment of principal and interest
As discussed below, with respect to the types of fully insured or fully guaranteed securities of which the United States, an agency of the United States, or the Enterprises might otherwise be a sponsor absent these proposed exclusions, it is the United States that is exposed to the credit risk of the underlying assets. Therefore, if these entities were to enter into the types of conflicted transactions that this rule is intended to address, investors would ultimately not be exposed to credit risks stemming from such transactions.
Each of these exclusions would apply only to the entities specified in the relevant exclusion, and any other securitization participants involved with an ABS issued or guaranteed by such entity (
With respect to an ABS that is fully insured or fully guaranteed as to the timely payment of principal and interest by the United States, the United States or an agency of the United States would not be a “sponsor” under paragraph (iii)(A) of the proposed definition of “sponsor” in proposed Rule 192(c). These ABS would include mortgage-backed securities (“MBS”) guaranteed by the Government National Mortgage Association (“Ginnie Mae”), a wholly owned U.S. Government corporation that guarantees investors the timely payment of principal and interest on MBS backed by Federally insured or guaranteed loans, including mortgage loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As a result of the proposed exception in paragraph (iii)(A) of the proposed definition of “sponsor,” Ginnie Mae would not be a “sponsor” with respect to its guaranteed ABS. Ginnie Mae's guarantee is backed by the full faith and credit of the United States. Given that Ginnie Mae sets certain guidelines and serves as guarantor for the MBS that it guarantees,
As guarantor, the United States is exposed to the full credit risk related to the underlying assets. In turn, investors in ABS that are fully backed by the United States government rely on the support provided by the full faith and credit of the United States and not on the creditworthiness of the obligors on the underlying assets, and therefore are not exposed to the credit risk of the underlying assets. As a result, investors in such ABS are not exposed to the risk that was present in certain ABS transactions prior to the financial crisis of 2007-2009 where investors suffered credit-based losses due to the poor performance of the relevant asset pool while key securitization parties entered into transactions to profit from such poor performance.
Similar to the reasons for excepting the United States government and agencies thereof, under paragraph (iii)(B) of the proposed definition of “sponsor” in proposed Rule 192(c), Fannie Mae and Freddie Mac, in each case, for so long as the applicable Enterprise is operating under conservatorship or receivership
The Enterprises act as mortgage loan seller, master servicer, and, at times, trustee for collateralized mortgage obligations and other MBS. The Enterprises select and manage the assets in the asset pools underlying the securities and set the selection criteria and servicing guidelines for the securities. The Enterprises serve as guarantors for MBS, and, as guarantors, they are required to make principal and interest payments on the securities regardless of credit losses on the underlying mortgages.
Because some of these activities fall within the proposed definition of “sponsor,” Fannie Mae or Freddie Mac (or a successor limited-life regulated entity) would, absent an exception, be the sponsor of the ABS that it issues for purposes of the re-proposed rule. However, because such entities would be excluded from the definition of “sponsor” under, and subject to the conditions of, paragraph (iii) of the proposed definition of “sponsor,” neither Enterprise would be subject to the rule's prohibition with respect to the relevant Enterprise-guaranteed ABS. We believe that this is appropriate where Fannie Mae and Freddie Mac operate with capital support from the United States and fully guarantee the timely payment of principal and interest on their guaranteed ABS. This is because Fannie Mae and Freddie Mac are exposed to the entire credit risk of the mortgages that collateralize such ABS instead of investors, and an Enterprise's
Both Fannie Mae and Freddie Mac have been operating under the conservatorship of FHFA since September 6, 2008. Concurrently with being placed in conservatorship under Section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, each Enterprise entered into a Senior Preferred Stock Purchase Agreement (“PSPA”) with the United States Department of the Treasury (“Treasury”). Under each PSPA, Treasury provided capital support to the Enterprises through the purchase of senior preferred stock of each Enterprise.
One commenter to the 2011 proposed rule also suggested an exception for the Enterprises' security-based credit risk transfer (“CRT”) transactions to allow for efficient mitigation of the Enterprises' retained credit risk associated with their holdings of residential and commercial mortgages and MBS.
The proposed exclusion of the Enterprises, subject to certain conditions, from the definition of “sponsor” with respect to Enterprise-guaranteed ABS should address concerns that, absent such an exception, an Enterprise might be prohibited from engaging in a security-based CRT transaction, which could be a “conflicted transaction” under the re-proposed rule with respect to an Enterprise's guaranteed ABS.
We note, however, that because a CRT security issued in a security-based CRT transaction is not guaranteed by the relevant Enterprise, investors in a CRT security would bear credit risk. Furthermore, because the CRT security is not fully insured or fully guaranteed by an Enterprise, the proposed exclusion from the definition of “sponsor” for the Enterprises with respect to Enterprise-guaranteed ABS would not apply to a CRT security itself. Therefore, the Enterprises would be “sponsors” of CRT securities for purposes of the re-proposed rule and would be prohibited from engaging in conflicted transactions that would be prohibited by the re-proposed rule with respect to investors in such CRT securities.
15. Is the proposed definition of the term “sponsor” overinclusive or underinclusive? Please explain why or why not.
16. We seek comment on the concept in the definition of the term “sponsor” of a person directing or causing the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS. Is this concept, in the context of a person that does not have a contractual right to exercise such direction, overinclusive or underinclusive, and why? In particular, is the reference to “causes the direction of” necessary in order to capture direction given through a third party, or is the reference unnecessary because of the inclusion of the anti-circumvention provision in proposed Rule 192(d)? Why or why not? Are there additional indicia that should be included or referenced for purposes of the facts and circumstances that would be relevant to this determination? What parties that have a role in a securitization could fall within the proposed definition of “sponsor” because they direct or cause the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying an ABS? Should all of these parties be included? Should other parties be included in the definition of “sponsor”? Which of these parties would not be a sponsor because of the exclusion in paragraph (ii)(C) of the proposed definition of “sponsor” for a person that performs only administrative, legal, due diligence, custodial, or ministerial acts related to the structure, design, or assembly of the ABS or the composition of the pool of assets underlying the ABS? The proposed definition of the term “sponsor” includes, but is not limited to, a sponsor as defined in Regulation AB. If the rule were limited to the Regulation AB definition of “sponsor,” would that make the rule underinclusive? Would it be clear how to determine which party or parties would be a sponsor when applying the Regulation AB definition of “sponsor” to the wider population of ABS that are not subject to Regulation AB, but are
17. We seek comment on an alternative definition of the term “sponsor” where paragraph (ii) of the proposed definition of “sponsor” would include a contractual rights sponsor described in paragraph (ii)(A) of the proposed definition of “sponsor” but would not include a directing sponsor described in paragraph (ii)(B) of the proposed definition of “sponsor.” Would this alternative definition better address concerns of commenters on the 2011 proposed rule about potential overinclusiveness of the definition of the term “sponsor” by covering only persons with a contractual relationship with the entity that issues the ABS (or with one or more of the other securitization participants)? Would this alternative definition be underinclusive because it would not cover all the parties that could direct or cause the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS, such as a hedge fund manager or other private fund manager that would have an opportunity to benefit from a bet against the performance of the ABS or the underlying assets? If paragraph (ii) of the definition of “sponsor” were limited to a contractual rights sponsor, even if it might not cover the full range of potentially culpable parties, would it nonetheless prevent most conflicted transactions from occurring because of its interaction with other provisions of the rule? Further, should the definition of the term “sponsor” be limited to refer to only a contractual rights sponsor that has actually exercised its relevant contractual rights?
18. We seek comment on an alternative definition of the term “sponsor” that would include an additional catch-all prong that would include “any other person that makes a material contribution to the design, composition, assembly, sale, or management of an asset-backed security” as suggested by certain commenters to the 2011 proposed rule.
19. Is the exclusion in paragraph (ii)(C) of the proposed definition of “sponsor” for a person that performs only administrative, legal, due diligence, custodial, or ministerial acts related to the structure, design, or assembly of the ABS or the composition of the pool of assets overinclusive or underinclusive, and why? Are there additional administrative activities and functions in the context of ABS that should be addressed? Is it clear whether servicers or other contractual service providers with ongoing managerial or administrative roles with respect to the securitization, but limited discretion over the structure, design, or assembly of the ABS or the composition of the pool of assets underlying the ABS, would qualify for the proposed exclusion? Please explain why or why not. Should the exclusion be modified to provide more detail on the types of activities that can be provided by a party while continuing to qualify for the exclusion from the proposed definition of “sponsor”? If so, please explain how the exclusion should be modified, including which types of activities the exclusion should reference.
20. Should we modify the proposed exception from the definition of “sponsor” for the United States or an agency of the United States with respect to an ABS that is fully insured or fully guaranteed by the United States? If so, describe any suggested modifications or deletions to the exception and explain why they would be necessary and how they would be consistent with Section 27B.
21. Should we modify the proposed exception from the definition of “sponsor” for the United States or an agency of the United States to apply not only with respect to an ABS that is fully insured or fully guaranteed by the United States but also an ABS that is not fully insured or fully guaranteed by the United States? If so, describe any suggested modifications or deletions to the exception and explain why they would be necessary and how they would be consistent with Section 27B.
22. The proposed exceptions from the definition of “sponsor” in paragraph (iii) of the proposed definition of “sponsor” are premised on the fact that the United States, and not investors in such ABS, is exposed to the credit risk of the underlying assets because of the credit support provided by the United States. Are there other types of non-credit-related risks, such as interest rate risk or prepayment risk, that we should also address in the context of such fully insured or fully guaranteed ABS transactions for purposes of the prohibition, and if so, how should these proposed exceptions be modified to address such risks?
23. Should we modify the proposed exception from the definition of “sponsor” in paragraph (iii)(B) of the proposed definition of “sponsor” for the Enterprises with respect to an ABS that is fully insured or fully guaranteed by the relevant entity? Please describe any suggested modifications or deletions to the exception and explain why they would be necessary and how they would be consistent with Section 27B.
24. The proposed exception from the definition of “sponsor” for the Enterprises in paragraph (iii)(B) of the proposed definition of “sponsor” would apply only for so long as the applicable Enterprise is operating under conservatorship or receivership of FHFA with capital support from the United States. Should it apply beyond that time period? If so, why, and how would that be consistent with Section 27B?
25. If so, then investors in Enterprise-guaranteed ABS would be relying solely on the Enterprise guarantee due to the lack of the capital support from the United States. If the exception were to extend beyond conservatorship, then are there any ways that the rule could address the credit risk related to the Enterprise guarantee and the conflicts that could arise from securitization participants engaging in conflicted transactions? Should the exception for the Enterprises be subject to any other conditions?
26. In addition to or in lieu of the proposed exceptions from the definition of “sponsor” in paragraph (iii) of the proposed definition of “sponsor” discussed above, should there be an exception for ABS that is fully insured or fully guaranteed by, or collateralized solely by obligations issued, fully insured, or fully guaranteed by, the United States or an agency of the United States? If so, should it be an exception to the definition of “asset-backed security,” or should it be an exception to the re-proposed rule's prohibition? Please explain why any such exception would be necessary and what conditions, if any, should apply to the application of that exception. How would such an exception be consistent with Section 27B?
27. In addition to or in lieu of the proposed exceptions from the definition of “sponsor” in paragraph (iii) of the
28. Are there any other types of government entities, including municipal entities, that should be exempt from the re-proposed rule? Please explain why they should be exempt and how such an exemption would be consistent with Section 27B. If the relevant ABS are not fully insured or fully guaranteed by a government or government-controlled entity, then please explain why securitization participants that would be covered by the re-proposed rule should be exempt, including whether the opportunity exists to engage in the type of conduct prohibited by the re-proposed rule.
Consistent with Section 27B(a), the proposed definition of “securitization participant” in proposed Rule 192(c) would extend to affiliates and subsidiaries of an underwriter, placement agent, initial purchaser, or sponsor of an ABS. Including affiliates and subsidiaries in the re-proposed rule would help to prevent affiliates and subsidiaries from being used to evade the rule's prohibitions and would also be consistent with Section 27B.
Proposed Rule 192 is being proposed under the Securities Act, and the rule refers to the definitions of the terms “affiliate” and “subsidiary” under 17 CFR 230.405 (“Securities Act Rule 405”). Under Securities Act Rule 405, an “affiliate” of a specified person is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified, and a “subsidiary” of a specified person means an affiliate controlled by such person directly, or indirectly through one or more intermediaries.
We believe that these definitions are commonly understood by market participants and would help to prevent evasion of the re-proposed rule. The re-proposed rule is designed to prevent securitization participants from entering into transactions that are bets against the ABS that they create or sell to investors, and it would be inconsistent with the intent of the re-proposed rule if the prohibition did not extend to cover a transaction structure where a securitization participant directs, either directly or through one or more intermediaries, an affiliate or subsidiary to enter into such a bet against the relevant ABS. We believe that, to cover the various ways in which an affiliate or subsidiary relationship may be effectuated, the re-proposed rule should cover such a scenario whether the securitization participant's ability to direct the management and policies of the relevant entity are through the ownership of voting securities, by contract, or otherwise.
The inclusion of affiliates and subsidiaries in the re-proposed rule means that persons in addition to underwriters, placement agents, initial purchasers, or sponsors of an ABS would be securitization participants for purposes of the re-proposed rule if they are an affiliate or subsidiary of an underwriter, placement agent, initial purchaser, or sponsor of an ABS. For example, a servicer that is a sponsor's affiliate would fall within the scope of the re-proposed rule even if the servicer's role in connection with the securitization would not meet the re-proposed rule's definition of the term “sponsor.”
We received comments to the 2011 proposed rule that including affiliates and subsidiaries would be overinclusive and that it would impose an unduly burdensome impact on certain persons.
Information barriers, in the form of written, reasonably designed policies and procedures, have been recognized in others areas of the Federal securities laws and the rules thereunder. For example, brokers and dealers have used information barriers to manage the potential misuse of material non-public information to adhere to Section 15(g) of the Exchange Act.
The re-proposed rule does not include the use of information barriers as an exception for affiliates and subsidiaries because we are concerned about the potential to use an affiliate or subsidiary to evade the re-proposed rule's prohibition. However, we seek comment below on whether an exception utilizing information barriers to exclude affiliates and subsidiaries could be implemented in a way that would be consistent with Section 27B. Responses to such questions would provide further insight
An information barriers exception could contain conditions that must be met to qualify for such exception, which would help ensure that the relevant affiliates or subsidiaries of a securitization participant would not engage in transactions that would involve or result in a material conflict of interest. For example, an information barrier-based exception could contain a condition requiring that an underwriter, placement agent, initial purchaser, or sponsor of an ABS establish, implement, maintain, enforce, and document written policies and procedures to prevent the flow of information to and from such underwriter, placement agent, initial purchaser, or sponsor and its affiliates and subsidiaries that might result in a violation of the re-proposed rule. Such written policies and procedures could aid the underwriter, initial purchaser, placement agent, and sponsor in monitoring and enforcing the applicable information barriers. For example, the policies and procedures could include a physical separation of personnel which could help to restrict information flow, for example, between a securitization participant and its affiliates and subsidiaries, and could promote a barrier between activities related to securitization and other activities that are unrelated to the creation and distribution of ABS. Additionally, policies and procedures could restrict the activities of an underwriter, placement agent, initial purchaser, or sponsor in the context of an ABS transaction to only those activities necessary for it to act in such capacity, such that the securitization participant would be further limited in its ability to engage in activity that Section 27B is designed to prevent.
A second condition to an information barriers exception could be to require that an underwriter, placement agent, initial purchaser, or sponsor of an ABS establish, implement, maintain, enforce, and document a written internal control structure governing the implementation and adherence to the policies and procedures required under the information barriers exception. An internal control condition would aid the underwriter, initial purchaser, placement agent, and sponsor in monitoring, identifying, and remediating non-compliance with the applicable information barriers. For example, an internal control structure would help identify whether policies and procedures would need to be modified so that they achieve their intended purpose.
A third condition could be that the securitization participant obtains an annual, independent assessment of the operation of the policies and procedures and internal control structure required under the information barriers exception. This condition would also aid the underwriter, initial purchaser, placement agent, and sponsor in monitoring, identifying, and remediating non-compliance with the applicable information barriers that are not identified by the internal control structure.
A fourth condition could be that the affiliate or subsidiary has no officers (or persons performing similar functions) or employees (other than clerical, ministerial, or support personnel) in common with the underwriter, initial purchaser, placement agent, or sponsor and was not involved in the creation, distribution, origination of the assets, or otherwise providing services with respect to the related ABS. For example, originators and servicers that are affiliates or subsidiaries of an underwriter, placement agent, initial purchaser, or sponsor would not meet the elements of this condition. This condition would recognize that it would be nearly impossible to have an effective information barrier to prevent the flow of information if the affiliates or subsidiary shared common officers or employees, was involved in the creation, distribution, or origination of the assets, or is otherwise providing services related to the ABS.
A fifth condition could be that the information barriers exception would not be available if, in the case of any specific securitization, the underwriter, initial purchaser, placement agent, or sponsor knows or reasonably should know that, notwithstanding meeting the conditions described above, the transaction would involve or result in a material conflict of interest. We seek commenters' views on an information barriers exception with the conditions described above. We also seek comment on other or different conditions below.
29. Is it appropriate for the Securities Act Rule 405 definitions of the terms “affiliate,” “subsidiary,” and “control” to apply for purposes of the re-proposed rule? If not, please explain why and provide alternative definitions of these terms that should be used.
30. If a securitization participant that is an investment adviser “controls” a fund that it manages for purposes of the re-proposed rule, then such fund would be an “affiliate” or “subsidiary” of such investment adviser and subject to the re-proposed rule. Is this appropriate? If not, please explain why, provide alternative definitions of the relevant terms that should be used, and explain how the modifications would be consistent with Section 27B.
31. The proposed definitions of the terms “affiliate” and “subsidiary” could include a securitization participant's non-U.S. affiliates and subsidiaries. Would the inclusion of affiliates and subsidiaries within the scope of the re-proposed rule result in the rule having an unnecessary and highly burdensome global reach, as suggested by one commenter to the 2011 proposed rule?
32. As discussed above, information barriers are used as tools to manage conflicts of interest in other areas of the Federal securities laws and the rules thereunder.
33. Please identify any additional conditions that would be appropriate for a potential information barriers exception to include in order to help maintain strong conflict of interest protection while permitting normal course business activities for certain affiliates and subsidiaries, and how those conditions would be consistent with Section 27B.
34. Should any of the conditions described in question 32 be modified if the final rule were to include an information barriers exception? For example, should condition (1) be modified to specify that policies and procedures such as physical separation of personnel and functions and limitations on the types of permissible activities of an underwriter, initial purchaser, placement agent, or sponsor (and its affiliates and subsidiaries) could satisfy this condition? Should condition (1) be modified to specify that the policies and procedures must take into consideration the nature of the entity's business? Should any of the conditions be deleted? If so, explain why, including why the removal of any such conditions would be consistent with Section 27B if the final rule were to include an information barriers exception.
35. Should the potential information barriers exception described in question 32 include a condition that the offering document for the ABS must disclose the types of transactions that the affiliate or subsidiary could engage in as part of its normal, ordinary course of business? How could any such disclosure condition be structured so that the resulting disclosure would not contain vague boilerplate language? How could such disclosure be provided to investors if the transactions occur after the offering but within the timeframe of the prohibition? How would any such disclosure conditions be consistent with Section 27B?
36. Should the potential information barriers exception described in question 32 provide an exception for specific types of businesses that are unrelated to the creation and distribution of ABS such that only affiliates and subsidiaries engaged in those specific businesses would be eligible for the exception? If yes, please explain and provide a list of specific businesses unrelated to the creation and distribution of ABS that should be listed in any such exception (for example, mutual fund asset-management, investment advisers acting on behalf of clients, foreign trading desks facilitating customer trades). Also, please explain how any such exceptions would be consistent with Section 27B. If no, please explain.
37. Should the potential information barriers exception described in question 32 provide an exception if the affiliate or subsidiary already would be subject to existing rules and regulation that provide for conflict management or restricting information flow as the requirements of such rules and regulations could help to achieve the policy objectives of the re-proposed rule? Please list specific rules and regulations that provide for managing conflicts of interest or restricting information flow at the affiliate or subsidiary as a condition to qualifying for such exception.
38. Should the re-proposed rule include an information barriers exception as described by one commenter to the 2011 proposed rule?
We are proposing in Rule 192(a)(1) that the prohibition on conflicted transactions would commence on the date on which a person has reached, or has taken substantial steps to reach, an agreement
The re-proposed rule's approach to the commencement point is designed to reduce the circumstances in which a person could engage in prohibited conduct prior to the issuance of the relevant ABS. We preliminarily believe that the point at which a securitization participant has reached, or has taken substantial steps to reach, an agreement that such person will become a securitization participant is the appropriate commencement point for the prohibition in the re-proposed rule because that is the point at which a person may be incentivized and/or can act on an incentive to engage in the misconduct that Section 27B is designed to prevent.
Whether a person has taken substantial steps to reach an agreement to become a securitization participant would be a facts and circumstances determination based on the actions of such person in furtherance of becoming a securitization participant. For example, a person who has engaged in substantial negotiations over the terms of an engagement letter or other agreement to become an underwriter, placement agent, initial purchaser, or sponsor of an ABS would be subject to the prohibition in the re-proposed rule by virtue of having taken substantial steps to reach an agreement to become a securitization participant. The re-proposed rule does not define “agreement” or “substantial steps to reach . . . an agreement” in the context of the commencement point. However, we seek comment below on indicia of whether a person has reached an agreement to become a securitization participant, or taken substantial steps to reach such an agreement, and whether such indicia should be specified in the rule.
Proposed Rule 192(a)(1) prohibits a securitization participant from engaging in any transaction that would involve or result in any material conflict of interest
Certain commenters to the 2011 proposed rule supported specific dates as the commencement point (
39. We seek commenters' views regarding the approach to the covered timeframe in the re-proposed rule. Should we modify the proposed covered timeframe in the re-proposed rule, and if so, how and why?
40. In particular, we seek comment on the proposed commencement point of the re-proposed rule's prohibition on material conflicts of interest. Is it appropriate for the re-proposed rule's prohibition to commence at the point at which a person has reached, or has taken substantial steps to reach, an agreement that such person will become a securitization participant, and why? Are there modifications to the commencement point that might be necessary or advisable to mitigate any unintended consequences? Should the rule specify when a person has reached an agreement to become a securitization participant? For example, should the rule specify that “agreement” refers to a formal, written agreement to become a securitization participant, or should it instead specify that “agreement” refers to an agreement in principle as to the major terms of the arrangement by which such person will become a securitization participant, and why? Should the rule identify specific activities that would constitute “substantial steps” to becoming an underwriter, placement agent, initial purchaser, or sponsor of an ABS? Why or why not? Please provide comment on specific activities that you believe constitute “substantial steps” to becoming an underwriter, placement agent, initial purchaser, or sponsor of an ABS, and whether any or all of such activities should be specified in the rule.
41. We seek comment on whether we should specify additional factors that would indicate when a person has reached an agreement to become a securitization participant. Should an “agreement” arise only through an executed engagement letter or the oral equivalent of an executed engagement letter, or should the facts and circumstances of the situation dictate when an agreement has been reached?
42. We seek comment on the implications of the commencement point of the re-proposed rule's prohibition on affiliates and subsidiaries of a person seeking to become an underwriter, placement agent, initial purchaser, or sponsor of an ABS. How would an affiliate or a subsidiary of such a person know that the person had taken substantial steps to reach an agreement to become a securitization participant, such that a conflicted transaction entered into by the affiliate or subsidiary would be prohibited by the re-proposed rule if the person seeking to become a securitization participant were to ultimately reach an agreement to become a securitization participant? Are there existing information barriers in place within certain regulated firms that would prevent the person seeking to become a securitization participant from informing its affiliates and subsidiaries that it had taken substantial steps to reach an agreement to become a securitization participant? For these or other reasons, should the re-proposed rule be modified to prohibit conflicted transactions by affiliates or subsidiaries of a person seeking to become an underwriter, placement agent, initial purchaser, or sponsor of an ABS only after such person has reached an agreement to become a securitization participant, and why? If so, please explain how the re-proposed rule should be modified, and how such
43. How should the rule treat a person that never reaches an agreement to become an underwriter, placement agent, initial purchaser, or sponsor of an ABS, despite having taken substantial steps to reach such an agreement? As discussed above, the re-proposed rule's prohibition generally would not apply to a person that does not reach an agreement to become an underwriter, placement agent, initial purchaser, or sponsor of an ABS, even if such person were to take substantial steps to reach such an agreement. However, once a person has become a securitization participant, the rule's prohibition would apply to such person commencing on the date on which such person reached, or took substantial steps to reach, an agreement to become a securitization participant. Would this approach be underinclusive because it would not cover parties that might have had a significant role in determining the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS? Why or why not? Are any such concerns about potential underinclusiveness adequately mitigated by the anti-circumvention provision in proposed Rule 192(d)?
Section 27B(a) provides that an underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity, of an ABS, including a synthetic ABS, shall not, at any time for a period ending on the date that is one year after the date of the first closing of the sale of the asset-backed security, engage in any transaction that would involve or result in any material conflict of interest with respect to any investor in a transaction arising out of such activity.
Consistent with Section 27B(a), the prohibition in proposed Rule 192(a)(1) provides that a securitization participant shall not, for a period commencing on the date on which a person has reached, or has taken substantial steps to reach, an agreement that such person will become a securitization participant with respect to an asset-backed security and ending on the date that is one year after the date of the first closing of the sale of such asset-backed security, directly or indirectly engage in any transaction that would involve or result in any material conflict of interest between the securitization participant and an investor in such asset-backed security. As set forth in proposed Rule 192(a)(2), engaging in any transaction would involve or result in any material conflict of interest between a securitization participant and an investor if such transaction is a “conflicted transaction” as defined in proposed Rule 192(a)(3). This formulation is designed to effectuate Section 27B by prohibiting a securitization participant from entering into a conflicted transaction that is, in effect, a bet against the ABS that such securitization participant created and/or sold to investors. We believe that this prohibition in the re-proposed rule, along with the proposed definitions of “conflicted transaction” discussed below,
The prohibition in the re-proposed rule applies to a “conflicted transaction” entered into by a securitization participant. This is defined under proposed Rule 192(a)(3) to include two main components. One component is whether the transaction is:
• A short sale of the relevant ABS;
• The purchase of a CDS or other credit derivative pursuant to which the securitization participant would be entitled to receive payments upon the occurrence of a specified adverse event with respect to the relevant asset-backed security; or
• The purchase or sale of any financial instrument (other than the relevant asset-backed security) or entry into a transaction through which the securitization participant would benefit from the actual, anticipated, or potential:
○ Adverse performance of the asset pool supporting or referenced by the relevant ABS;
○ Loss of principal, monetary default, or early amortization event on the relevant ABS; or
○ Decline in the market value of the relevant ABS.
The other component relates to materiality—
Paragraphs (i) and (ii) of the proposed definition of “conflicted transaction” in proposed Rule 192(a)(3) would capture transactions that constitute direct bets against the relevant ABS itself. In the case of proposed Rule 192(a)(3)(i), such a direct bet against an ABS would be a short sale where the securitization participant sells an ABS that it does not own (or that it will borrow for purposes of delivery). In such a situation, if the price of the ABS declines, then the short selling securitization participant could buy the ABS at the lower price to cover its short and make a profit. However, it is not relevant for purposes of the re-proposed rule whether the securitization participant makes a profit on the short sale. It is sufficient that the securitization participant sells the ABS short. In the case of proposed Rule 192(a)(3)(ii), a direct bet against an ABS would be entering into a credit derivative that references such ABS and entitles the securitization participant to receive a payment upon the occurrence of an adverse event with respect to the ABS such as a failure to pay, restructuring or any other adverse event that would trigger a payment on the derivative contract. It would be irrelevant for the purpose of proposed Rule 192(a)(3)(ii) whether the credit derivative is in the form of a CDS or other credit derivative product because the focus is on the economic substance of the credit derivative as a bet against the relevant ABS without regard to the specific contractual form or structure of the derivative. Proposed Rule 192(a)(3)(ii) would also capture any credit derivative entered into by the securitization participant with the special purpose entity issuer of a synthetic CDO where that credit derivative would entitle the securitization participant to receive payments upon the occurrence of a specified adverse event with respect to an ABS that is referenced by such credit derivative and with respect to which the relevant person is a securitization participant under the re-proposed rule.
Clause (iii) of the proposed definition of “conflicted transaction” would capture the purchase or sale of any other financial instrument or entry into a transaction the terms of which are substantially the economic equivalent of a direct bet against the relevant ABS. Specifically, proposed Rule 192(a)(3)(iii) would capture the purchase or sale of any financial instrument (other than the relevant ABS) or entry into a transaction
• Adverse performance of the asset pool supporting or referenced by the relevant ABS;
• Loss of principal, monetary default, or early amortization event on the relevant ABS; or
• Decline in the market value of the relevant ABS.
The financial instruments captured under proposed Rule 192(a)(3)(iii) would, for example, include entering into the short-side of a derivative (with the special purpose entity issuer of a synthetic CDO or otherwise) that references the performance of the pool of assets underlying the ABS with respect to which the person is a securitization participant under the re-proposed rule and pursuant to which the securitization participant would benefit if the referenced asset pool performs adversely. This is intended to address comments to the 2011 proposed rule in support of a definition of the term “transaction” that would include not only a short sale of the relevant ABS or the purchase of CDS protection on the relevant ABS, but would also include the purchase or sale of products that are linked to, or otherwise create an opportunity to benefit from the actual, anticipated, or potential adverse performance of, the pool of assets underlying the relevant ABS.
In addition to the purchase or sale of such financial instruments, proposed Rule 192(a)(3)(iii) would also capture the “entry into a transaction” through which the securitization participant would benefit from certain actual, anticipated, or potential adverse events with respect to the relevant ABS or its underlying asset pool. This should similarly help alleviate the risk of any attempted evasion of the rule that is premised on the form of the transaction rather than its substance. For example, in certain synthetic ABS structures, the relevant agreement that the securitization participant enters into with the special purpose entity that issues the synthetic ABS may in some circumstances not be documented in the form of a swap; however, the terms of such agreement are structured to replicate the terms of a swap pursuant to which the special purpose entity that issues the synthetic ABS is obligated to make a payment to the securitization participant upon the occurrence of certain adverse events in respect of the ABS for which the person is a securitization participant under the re-proposed rule. Proposed Rule 192(a)(iii) would capture such an agreement based on the economic substance of the transaction.
We received comment to the 2011 proposed rule that the scope of prohibited transactions should be limited to transactions other than those that are an integral part of the creation and sale of the relevant ABS.
Under proposed Rule 192(a)(3)(iii), it would not be necessary for the securitization participant to actually benefit from a conflicted transaction. Rather, it would be sufficient that the transaction creates an opportunity for the securitization participant to benefit, for example, from a decline in the market value of the ABS. The relevant transaction would be a “conflicted transaction” even absent such a decline in market value.
We received comments both in opposition to and in support of including the modifier “directly or indirectly” as used in the relevant interpretation in the 2011 proposed rule
In a change from the 2011 proposed rule, the re-proposed rule would not define a conflicted transaction to include the scenario in which a securitization participant would benefit directly or indirectly (
Certain commenters to the 2011 proposed rule requested clarification regarding how prohibited activity would be distinguished from activity undertaken independently of, and not in connection with, a securitization.
Consistent with Section 27B's prohibition of conflicts of interest that are “material,” the definition of “conflicted transaction” in proposed Rule 192(a)(3) requires that there is a substantial likelihood that a reasonable investor would consider the relevant transaction important to the investor's investment decision whether to acquire the asset-backed security. This is similar to the discussion in the release for the 2011 proposed rule,
The use of this standard would not in this context imply that a transaction otherwise prohibited under the re-proposed rule would be permitted if there were adequate disclosure made by the securitization participant to the relevant investor. The prohibition would apply to transactions that are bets against the relevant ABS whether or not such transactions are disclosed to investors in the ABS. While certain commenters to the 2011 proposed rule supported the use of disclosure to manage material conflicts of interest,
Similarly, the use of the reasonable investor standard would not imply that a transaction otherwise prohibited by the re-proposed rule would be permitted if an investor selected or approved the assets underlying the ABS. Although certain commenters to the 2011 proposed rule suggested that the rule should not prohibit conflicts of interest between a securitization participant and an investor in an ABS if the investor was involved in selecting the underlying assets or approving the underlying portfolio,
Also, although certain commenters to the 2011 proposed rule supported limiting the scope of material conflicts of interest to ABS transactions that are intentionally designed to fail,
Under the re-proposed rule, a securitization participant would be prohibited from designing an ABS to intentionally fail and then entering into a conflicted transaction in order to profit from the adverse performance of the ABS; however, the re-proposed rule would not apply only to ABS that are intentionally designed to fail. We are not proposing an intentionally designed-to-fail test to determine what constitutes a material conflict of interest because we believe that such a test could lead to attempts to evade the rule. Moreover, the need to prove intent could make enforcement of the rule more difficult, thereby potentially weakening investor protection. We believe that the proposed definition of “material conflict of interest” in the re-proposed rule is consistent with Section 27B, which is not limited only to ABS that are intentionally designed to fail.
As discussed below, both the proposed risk-mitigating hedging activities exception and the proposed bona fide market-making activities exception to the re-proposed rule include a requirement that a securitization participant have certain documented policies and procedures in place related to its compliance with the requirements of the relevant exception. However, the re-proposed rule does not include a more generalized requirement that a securitization participant would be required to have documented policies and procedures in place that are reasonably designed to prevent the securitization participant from violating the re-proposed rule's prohibition with respect to conflicted transactions regardless of whether the securitization participant is relying on an exception from the re-proposed rule. This is because, unlike the exceptions that would include specific requirements that would need to be satisfied in order for securitization participants to meet such exceptions, the prohibition in the re-proposed rule is a general prohibition on entering into conflicted transactions that cannot be waived on the basis of certain documented policies and procedures. We seek comment below on whether such a requirement should be included in the re-proposed rule.
44. Are there any changes we should make to clarify the application of proposed Rule 192(a)? If so, what changes should we make and why? Should we revise the approach to defining the unlawful activity that is subject to the prohibition under the re-proposed rule? If you believe that the approach should be different, please provide an alternative approach and explain why such approach would be preferable and how it would be consistent with the prohibition on material conflicts of interest in Section 27B.
45. Does the re-proposed definition of “material conflicts of interest” accurately capture the material conflicts of interest that Section 27B is designed to address? If you believe that there is a definition that better identifies the material conflicts of interest that Section 27B is designed to address, please provide a revised definition and an explanation for the revisions. For example, would it clarify the application of proposed Rule 192(a) if the qualification about the transaction being important to a reasonable investor's investment decision were included in the definition of “material conflict of interest” in proposed Rule 192(a)(2) rather than, or in addition to, in the definition of “conflicted transaction” in proposed Rule 192(a)(3)?
46. Proposed Rule 192(a)(1) refers to “directly or indirectly” engaging in a transaction involving or resulting in a material conflict of interest. Is the reference to “directly or indirectly” necessary in order to capture multi-step transactions or conflicted transactions entered into by a securitization participant through a third party? Is the reference to “directly or indirectly” unnecessary because any such attempts to “indirectly” engage in a conflicted transaction would be covered by the anti-circumvention provision in proposed Rule 192(d)? In your responses to each of these questions, please explain why or why not.
47. Is there activity that securitization participants currently engage in with respect to ABS that would fall within the definition of “conflicted transaction”? If so, please provide a detailed explanation of such activity, the securitization participants involved with respect thereto, and the frequency as to which such activity is engaged in by such securitization participants. Please describe how that activity is or is not consistent with Section 27B.
48. Is there any activity that you believe would fall within the scope of the proposed definition of “conflicted transaction” but is not the type of transaction that Section 27B is intended to prohibit? Please provide a detailed description of how the rule could define this activity and those transactions, and the conditions that should attach to any such exemption in order to protect investors from the misconduct that is targeted by Section 27B.
49. Is there any activity that you believe would not fall within the scope of the proposed definition of “conflicted
50. Is it appropriate for proposed Rule 192(a)(3)(ii) to cover the purchase of a credit default swap or any other credit derivative pursuant to which the securitization participant would be entitled to receive payments upon the occurrence of specified credit events in respect of the relevant ABS? Should proposed Rule 192(a)(3)(ii) also apply to the purchase of any security-based swap pursuant to which the securitization participant would be entitled to receive payments upon the occurrence of a decline in price of the relevant ABS? Would such an approach be overinclusive or otherwise result in significant overlap with the coverage of proposed Rule 192(a)(3)(iii)?
51. Are there any special considerations regarding the use of total return swaps that should be addressed in the context of the proposed definition of “conflicted transaction”?
52. Please discuss the impact of the proposed definition of “conflicted transaction” on entities with multiple affiliates or subsidiaries, particularly with respect to how a securitization participant would benefit from certain actual, anticipated, or potential adverse events with respect to the relevant ABS or its underlying asset pool under proposed Rule 192(a)(3)(iii). Is the proposed definition of “conflicted transaction” as applied to entities with multiple affiliates or subsidiaries appropriate? If not, please explain why and provide a description of any additional qualifying language or alternative that would be more appropriate and consistent with Section 27B.
53. The re-proposed rule does not include a disclosure-based or investor approval-based exception for managing material conflicts of interest. If you believe that the re-proposed rule should allow securitization participants to manage potential conflicts of interest using disclosure or through obtaining investor approvals, then please explain how disclosure or investor approval of such potential conflicts of interest would adequately protect investors against the risks associated with such conflicts of interest, particularly in light of the concerns expressed in this re-proposal. How could a disclosure exception be structured so that the resulting disclosure would not contain vague boilerplate language? Should the rule also require that a securitization participant disclose that it entered into a transaction that would be a conflicted transaction? How could this disclosure be provided to investors if the securitization participants engage in transactions that occur after the offering but within the timeframe of the prohibition? Please also explain how disclosure or investor approval would be consistent with Section 27B.
54. The re-proposed rule would not be limited to only capturing designed-to-fail transactions and therefore would not include a designed-to-fail standard for what constitutes a material conflict of interest. If you believe that a designed-to-fail standard should be the relevant standard instead of the one that is included in the re-proposed rule, then please explain how such standard would adequately protect investors against the risks associated with such conflicts of interest, particularly in light of the concerns expressed in the re-proposal. Please also explain how such a standard would be consistent with Section 27B.
55. As discussed above, the re-proposed rule does not expressly prohibit actions of third parties in the proposed definition of the term “material conflict of interest” and takes a different approach to address possible conflicts than the approach described in the interpretations included in the 2011 Proposing Release by defining the term “sponsor” in a manner that we believe would directly capture most of the parties whose conduct would have been covered by the 2011 proposed rule.
56. Are there any unintended effects on securitizations from the proposed definitions of the terms “material conflicts of interest” and “conflicted transaction”? If so, please provide alternative definitions designed to minimize such effects, and explain how those alternative definitions would be consistent with Section 27B.
57. Under the re-proposed rule, the issuance of a synthetic ABS where a securitization participant enters into the short side of the transaction with the issuing entity of the synthetic ABS would be a “conflicted transaction” because the securitization participant would be entitled to payment if the referenced assets, and thus the ABS, perform poorly. Is this the appropriate result? Please explain why or why not. Are there examples of synthetic ABS where a securitization participant taking the short position in the referenced assets would not necessarily benefit from the adverse performance of the underlying asset pool, the loss of principal, monetary default, or early amortization event, or decline in the market value of the relevant ABS? If so, should the definition of “conflicted transaction” exclude the issuance of such synthetic ABS? If so, please explain how such exclusion would be consistent with Section 27B.
58. Are there transactions that would be “conflicted transactions” under the re-proposed rule that occur with respect to municipal ABS? If so, please describe those transactions, the relevant persons that are parties thereto, and the frequency as to which they are entered into by such persons.
59. Should the re-proposed rule include a requirement that a securitization participant have documented policies and procedures in place that are reasonably designed to prevent the securitization participant from violating the re-proposed rule's prohibition with respect to conflicted transactions? What should the consequences be for a securitization participant that did not follow such procedures? Would such a requirement provide effective protection for investors? Should such a requirement be in addition to or in lieu of the proposed compliance program requirements discussed below with respect to the risk-mitigating hedging activities exception and the bona fide market-making activities exception?
60. If a general compliance program requirement as described in question 59 were to be included in the re-proposed rule, are there any types of securitization participants that should be exempted from such requirement? For example, should government entities (including municipal entities) and/or smaller securitization participants be exempt from such
61. We seek comment on whether the re-proposed rule should include a safe harbor whereby a person that meets the proposed definition of “securitization participant” but nonetheless has no involvement in the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS would be exempt from the re-proposed rule's prohibition on material conflicts of interest. Would such a safe harbor address concerns that the re-proposed rule might unduly burden parties that would not have the incentive or ability to engage in conduct prohibited by Section 27B? Would it weaken the conflicts of interest protection of the re-proposed rule, and if so, how? Are there specific conditions that could be included in the safe harbor in order to address any such concerns? If so, please identify any such conditions. Please also explain whether and how such a safe harbor would be consistent with Section 27B.
62. We seek comment on whether the re-proposed rule should include a safe harbor whereby a securitization participant could rely on the judgment of a governance specialist as to whether a transaction would be a “conflicted transaction” for purposes of the re-proposed rule, in the manner suggested by one commenter to the 2011 proposed rule.
We received comment on the 2011 proposed rule that the rule should address potential evasion of the rule's prohibition on material conflicts of interest, and commenters noted a variety of ways in which a securitization participant might attempt to evade the re-proposed rule's prohibition.
63. We seek commenters' views regarding the anti-circumvention provision in proposed Rule 192(d). Is it appropriate for the re-proposed rule to prohibit transactions that circumvent the prohibition in proposed Rule 192(a)(1) by deeming such transactions to violate proposed Rule 192(a)(1)? Why or why not?
64. Should proposed Rule 192(d) be modified such that a transaction circumventing the re-proposed rule's prohibition will only be deemed to violate proposed Rule 192(a)(1) if the securitization participant knows or has reason to know that the transaction is undertaken for the purpose of circumventing the re-proposed rule's prohibition? Please explain why or why not.
65. Should proposed Rule 192(d) be modified in order to address other ways in which a person might attempt to evade the prohibition in the re-proposed rule, including with regard to the proposed exceptions for risk-mitigating hedging activities, liquidity commitments, or bona fide market-making activities? If so, how should proposed Rule 192(d) be modified and why?
66. Would proposed Rule 192(d) be overinclusive or otherwise result in potential uncertainty as to the coverage of the re-proposed rule's prohibition, and if so, how should proposed Rule 192(d) be modified to address such concerns? Are there examples of transactions that proposed Rule 192(d) would prohibit but should not? Please explain how any such modifications to proposed Rule 192(d) would be consistent with Section 27B.
67. We seek comment on whether the relationship between proposed Rule 192(d) and the proposed exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities should be clarified. If so, please explain what clarifications are necessary, and why.
68. We seek comment on an alternative anti-circumvention provision that would instead provide that, if a securitization participant engages in a transaction or a series of related transactions as part of a plan or scheme
Section 27B(c) provides that the prohibition in Section 27B(a) does not apply to risk-mitigating hedging activities in connection with positions or holdings arising out of the underwriting, placement, initial purchase, or sponsorship of an ABS, provided that such activities are designed to reduce the specific risks to the underwriter, placement agent, initial purchaser, or sponsor associated with positions or holdings arising out of such underwriting, placement, initial purchase, or sponsorship.
Risk-mitigating hedging activities of a securitization participant permitted under the proposed exception would include hedging conducted in connection with and related to individual or aggregated positions, contracts, or other holdings of the securitization participant arising out of its securitization activities, including the origination or acquisition of assets that it securitizes.
In order to distinguish permitted risk-mitigating hedging activity under the re-proposed exception from prohibited conflicted transactions that would constitute a bet against the relevant ABS, we are proposing certain conditions that would have to be satisfied in order for the risk-mitigating hedging activity exception to apply. We believe that this proposed approach is consistent with views of certain commenters to the 2011 proposed rule that recommended a narrow risk-mitigating hedging activities exception that is designed to reduce specific risks and that includes robust conditions.
Under the re-proposed exception, the initial issuance of an ABS, such as a synthetic ABS, would not be risk-mitigating hedging activity.
We are proposing in Rule 192(b)(1)(ii)(A) that the first condition of the exception be that, at inception of the hedging activity and at the time of any adjustments to the hedging activity, the risk-mitigating hedging activity of the securitization participant is designed to reduce or otherwise significantly mitigate one or more specific, identifiable risks arising in connection with and related to identified positions, contracts, or other holdings of the securitization participant arising out of its securitization activities, based upon the facts and circumstances of the identified underlying and hedging positions, contracts, or other holdings and the risks and liquidity thereof. This condition would be the essential requirement of the proposed exception that the relevant hedging activity is risk-mitigating. Various activities of a securitization participant, such as acquiring a portfolio of assets in anticipation of issuing an ABS or retaining a portion of an ABS issuance with respect to which it is a securitization participant, expose the securitization participant to the risk that such positions could decline in value. Permissible risk-mitigating hedging
We recognize that the risks of the relevant exposures are dynamic and may change over time and that new risks may emerge in a way that would make the hedging activity that was designed at inception less effective. The prohibition of the re-proposed rule only applies for a limited timeframe,
Similarly, we are proposing in Rule 192(b)(1)(ii)(B) that the second condition of the exception be that the risk-mitigating hedging activity would be required to be subject, as appropriate, to ongoing recalibration by the securitization participant to ensure that such hedging activity satisfies the requirements applicable to the first condition of the exception and does not facilitate or create an opportunity to benefit from a conflicted transaction other than through risk-reduction. For example, if a securitization participant enters into a hedge that would be permitted under the exception and subsequent to that hedge, the risk exposure is reduced, under the proposed condition, the securitization participant would be required to ensure that it is not “overhedged” so that the position would not constitute a bet against the relevant ABS, which could require the securitization participant to adjust or recalibrate its hedge. We believe that this condition would help minimize the ability of a securitization participant to engage in hedging activity that could create material conflicts of interest with investors in the relevant ABS. The second condition does not specify an exact frequency as to which a securitization participant would be required to recalibrate its hedge; however, we seek comment regarding this below.
In addition, both the first and second conditions described above are consistent with comments to the 2011 proposed rule recommending we clarify that speculative or profit-making activity would be inconsistent with activity that should be eligible to qualify for the risk-mitigating hedging activities exception,
The first and second proposed conditions also set forth a principle-based approach that should not unduly disrupt normal course hedging activities that do not present material conflicts of interest with ABS investors and therefore should reduce the compliance burden of the proposed exception. For example, we received comment to the 2011 proposed rule that a securitization participant may not be able to create a hedge that exactly offsets any exposure arising from a specific risk.
On the other hand, we did receive a comment to the 2011 proposed rule that there should be exact negative correlation between the risk being hedged and the corresponding hedge position rather than rough negative correlation, and if exact negative correlation were impossible, the commenter recommended that the rule require that a securitization participant provide an explanation, certified by the chief executive officer and chief compliance officer of the securitization participant, of the reasons for why exact negative correlation was impossible.
We also did not include a condition in the proposed risk-mitigating hedging activities exception that no employee receive compensation arising from or related in any way to any income generated by any hedging activity as suggested by one commenter to the 2011 proposed rule
The proposed risk-mitigating hedging activities exception would also not require that a hedge be entered into contemporaneously,
We also received a comment to the 2011 proposed rule that a securitization participant should be permitted to hedge a retained investment in a cash ABS on a periodic basis (
We also received a comment to the 2011 proposed rule asking for clarity that the risk-mitigating hedging activities exception would be available throughout the time period during which the rule is applicable.
We are proposing in Rule 192(b)(1)(ii)(C) that the third condition to the exception be that the securitization participant has established, and implements, maintains, and enforces, an internal compliance program that is reasonably designed to ensure the securitization participant's compliance with the requirements applicable to the exception, including reasonably designed written policies and procedures regarding the risk-mitigating hedging activities that provide for the specific risk and risk-mitigating hedging activity to be identified, documented, and monitored. This proposed condition is designed to promote robust compliance efforts and to help ensure that activity that would qualify for the re-proposed exception is indeed risk-mitigating while also recognizing that securitization participants are positioned to determine the particulars of effective risk-mitigating hedging activities policies and procedures for their own business. We believe it is important that reasonably designed written policies and procedures provide for the specific risk and the risk-mitigating hedging activities to be identified, documented, and monitored to help facilitate the securitization participant's compliance with the conditions specified in proposed Rule 192(b)(1)(ii)(A) and (B), which require that the risk-mitigating hedging activity be tied to such risks at inception and over the time period that the prohibition of the re-proposed rule would apply. While we recognize that this documentation requirement may result in certain costs,
We received a comment to the 2011 proposed rule that any securitization participant relying on the proposed exception for risk-mitigating hedging activities should be required to affirmatively certify that it is undertaking such activity for the sole purpose of hedging a risk arising in connection with its securitization activities, and not for the purpose of generating speculative profits.
69. Is the scope of the proposed risk-mitigating hedging activities exception appropriate, or is it overinclusive or underinclusive, and why? Please provide specific examples of any activity that should be included in or excluded from the scope of the exception and provide a justification as to why and how such inclusion or exclusion would be consistent with Section 27B.
70. Should any of the proposed conditions applicable to the risk-mitigating hedging activities exception be modified? If yes, please provide the suggested modification and explain how such modification is consistent with Section 27B.
71. Is the condition in proposed Rule 192(b)(1)(ii)(A) that risk-mitigating hedging activities must be designed to reduce or otherwise significantly mitigate one or more “specific, identifiable risks” arising in connection with and related to identified positions, contracts, or other holdings of the securitization participant appropriate? Please explain why or why not. Is there sufficient clarity as to what risks are “specific” and “identifiable” for purposes of this condition? If not, please identify any specific indicia that should be included or referenced for purposes of this determination.
72. Should the proposed condition regarding a securitization participant's ongoing recalibration of its hedging activities specify how frequently a securitization participant should do such recalibrating? Should the proposed condition specify certain thresholds or triggers for such recalibration? What are the implications for a securitization participant if its hedge counterparty refuses to adjust the hedge?
73. Is it appropriate that the proposed risk-mitigating hedging activities exception would allow for the relevant hedging activity to be conducted on an aggregated basis? Are there any particular evasion concerns that could arise with respect to this approach?
74. Should the proposed risk-mitigating hedging activities exception require that a risk-mitigating hedge have an exact negative correlation with the exposure being hedged? If so, and if exact negative correlation were impossible, should the exception require that a securitization participant relying on the exception provide a certification explaining why exact negative correlation was impossible? If so, what form should such a certification take, and why? For example, should the certification be required to be filed with, or otherwise furnished to, the Commission, or should it instead be required to be retained in the files of the securitization participant in accordance with its written policies and procedures? Should the exception require that such certification be made by the chief executive officer and chief compliance officer of the securitization participant as suggested by a commenter to the 2011 proposed rule,
75. As discussed above, certain of the proposed conditions to the proposed risk-mitigating hedging activities exception are similar to those that are applicable to the equivalent exception to the Volcker Rule's proprietary trading prohibition.
76. Should the proposed risk-mitigating hedging activities exception require a securitization participant relying on the exception to affirmatively certify that it is undertaking such activity for the purpose of hedging a risk arising in connection with its securitization activities and that it has complied with the relevant conditions in the re-proposed rule? If so, what form should such a certification take, and when should it be required to be made? For example, should the certification be required to be filed with, or otherwise furnished to, the Commission, or should it instead be required to be retained in the files of the securitization participant in accordance with its written policies and procedures? Should the certification requirement permit a securitization participant to make the required certification on a periodic basis with respect to all risk-mitigating hedging activity occurring during that period, and if so, how frequently should the certification be required to be made? Please explain whether and how such a certification requirement would be practical for securitization participants given that the proposed exception would permit hedging conducted in connection with and related to individual or aggregated positions, contracts, or other holdings of the securitization participant arising out of its securitization activities, including its origination or acquisition of assets in anticipation of securitization.
77. Should any additional conditions apply to the proposed risk-mitigating hedging activities exception? If yes, please provide a specific description of any such additional condition and how such additional condition would be consistent with Section 27B.
78. Are the proposed conditions of the risk-mitigating hedging activities exception adequate to address any potential misuse and evasion of the exception? What are the ways in which a securitization participant could
79. Is the proposed condition applicable to the risk-mitigating hedging activities exception regarding compliance and monitoring appropriate? Should such a condition include more or less stringent requirements? The proposed condition requires reasonably designed written policies and procedures regarding the risk-mitigating hedging activities that provide for the specific risk and risk-mitigating hedging activity to be identified, documented, and monitored. Is there sufficient clarity as to what risks are specific and identifiable at the outset of the risk-mitigating hedging activity? If not, please explain what further guidance or clarification would be helpful in this context. Please identify any additional conditions that should be required as part of the compliance program condition.
80. Should smaller securitization participants be exempt from certain elements of the compliance program condition, such that those elements of the condition would apply only to securitization participants with significant trading assets and liabilities similar to the equivalent exception to the Volcker Rule, or should all elements of the compliance program condition apply to all securitization participants in order to adequately protect ABS investors? Alternatively, should the implementation of the compliance program requirement applicable to smaller securitization participants be delayed in order to give such entities more time to comply with the requirement? Why or why not? In your responses, please explain how “smaller securitization participant” should be defined for purposes of any such exemption or delayed implementation.
81. Are there other potential positive or negative consequences of the proposed risk-mitigating hedging activities exception? How might the proposed risk-mitigating hedging activities exception impact affiliates or subsidiaries of a securitization participant? What investment strategies of affiliates or subsidiaries might be impacted, and how might they be impacted? In particular, how might the proposed exception impact the hedging strategies of affiliated private funds and/or their investment advisers?
Section 27B(c) provides that the prohibition in Section 27B(a) does not apply to purchases or sales of ABS made pursuant to and consistent with commitments of the underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity, to provide liquidity for the ABS.
We also received a comment that the term “commitment” should be defined to mean a contractual obligation to provide liquidity.
82. Is the proposed scope of the liquidity commitments exception appropriate, or is it overinclusive or underinclusive? Is further guidance or clarification necessary regarding the meaning of the term “commitment” or the scope of permissible liquidity commitments? Why or why not?
83. Should the proposed exception for liquidity commitments apply only to purchases and sales of the ABS made pursuant to, and consistent with, the commitments of the securitization participant to provide liquidity for the ABS, as proposed, or should the exception apply to activity other than purchases and sales of the ABS, such as a commitment to provide loans pursuant to a liquidity facility, and why?
84. In addition to the examples provided above, are there other activities that should be covered by the re-proposed exception for liquidity
85. Should the Commission require that a commitment be evidenced by a contractual obligation? Please discuss whether such contractual obligations are a current practice and if there are particular benefits or drawbacks to including such a requirement.
86. We received a comment to the 2011 proposed rule inquiring if “dollar roll” transactions in the Enterprise ABS market would qualify for the liquidity commitments exception.
87. Could the proposed exception for liquidity commitments in the re-proposed rule result in any adverse consequences? If yes, please explain.
Section 27B(c) provides that the prohibition in Section 27B(a) does not apply to purchases or sales of ABS made pursuant to and consistent with bona fide market-making in the ABS.
The requirements of the proposed bona fide market-making activities exception draw from the concept of market-making in both the Volcker Rule, designed to ensure that banking entities may continue to function in less liquid and illiquid markets,
The prohibition in proposed Rule 192(a) would apply not only to short sales of the relevant ABS, but to a variety of conflicted transactions. For example, the prohibition would also
Furthermore, the proposed bona fide market-making activities exception does not include a requirement to analyze the applicability of the exception on a trade-by-trade basis. Similar to the Volcker Rule, the proposed bona fide market-making activities exception is instead focused on the overall market-making related activities of a securitization participant in assets that would otherwise be conflicted transactions, with a condition that those activities are related to satisfying the reasonably expected near term demand of the securitization participant's customers. The proposed exception is also designed to give a securitization participant that is a market maker the flexibility to acquire positions that hedge a securitization participant's market-making inventory.
We received a comment to the 2011 proposed rule expressing concern that the 2011 proposed rule would prohibit hedging as part of permitted market-making, resulting in curtailed market-making and a reduction in market liquidity.
We also received comment to the 2011 proposed rule in support of grounding the bona fide market-making activities exception in the secondary market and excluding a securitization participant's initial recommendations and sales of a new ABS from qualifying for the exception.
We also received comment that the bona fide market-making exception should permit a securitization participant to issue a synthetic securitization and purchase the CDS protection through such issuance.
We also received comment to the 2011 proposed rule suggesting that the bona fide market-making activities exception could be strengthened to prevent misuse through an anti-abuse provision prohibiting use of the exception to circumvent the statutory
We are proposing in Rule 192(b)(3)(ii)(A) that the first condition to the exception be that the securitization participant routinely stands ready to purchase and sell one or more types of the financial instruments set forth in proposed Rule 192(b)(3)(i) as a part of its market-making related activities in such financial instruments, and is willing and available to quote, purchase and sell, or otherwise enter into long and short positions in those types of financial instruments, in commercially reasonable amounts and throughout market cycles on a basis appropriate for the liquidity, maturity, and depth of the market for the relevant types of such financial instruments. However, similar to other rules,
This “routinely stands ready” standard is based on the standard set forth in the Volcker Rule
We are proposing in Rule 192(b)(3)(ii)(B) that the second condition to the exception be that the securitization participant's market-making related activities are designed not to exceed, on an ongoing basis, the reasonably expected near term demands of clients, customers, or counterparties, taking into account the liquidity, maturity, and depth of the market for the relevant types of financial instruments. This proposed condition is the same as that included in the Volcker Rule, which is designed to identify activity that is characteristic of bona fide market-making activity and not speculative trading while still allowing subject entities to continue to make a market across less liquid asset classes.
We are proposing in Rule 192(b)(3)(ii)(C) that the third condition of the exception be that the compensation arrangements of the persons performing the market-making activity of the securitization participant are designed not to reward or incentivize conflicted transactions. It would be consistent with this proposed condition if the relevant compensation arrangement is designed to reward effective and timely intermediation and liquidity to customers. It would be inconsistent with this proposed condition if the relevant compensation arrangement is instead designed to reward speculation in, and appreciation of, the market value of market-making positions that the securitization participant enters into for the benefit of its own account. This approach is similar to that taken for purposes of the Volcker Rule.
We are proposing in Rule 192(b)(3)(ii)(D) that the fourth condition of the exception be that the securitization participant would be required to be licensed or registered to engage in the relevant market-making activity, in accordance with applicable laws and SRO rules. This condition is designed to limit persons relying on the proposed exception for bona fide market-making activities to only those persons with the appropriate license or registration to engage in such activity in accordance with the requirements of applicable laws and SRO rules for such activity—unless the relevant person is exempt from registration or excluded from regulation with respect to such activity under applicable law and SRO rules.
We are proposing in Rule 192(b)(3)(ii)(E) that the fifth and final condition to the exception be that the securitization participant would be required to have established and must implement, maintain, and enforce an internal compliance program that is reasonably designed to ensure the securitization participant's compliance with the requirements of the bona fide market-making activities exception, including reasonably designed written policies and procedures that demonstrate a process for prompt mitigation of the risks of its positions and holdings. This proposed condition is designed to help ensure that the activities of a securitization participant relying on the bona fide market-making activities exception are indeed bona fide market-making activities, and not the type of transactions that would involve or result in a material conflict of interest between a securitization participant for an ABS and an investor in such ABS.
We also believe it is important that the reasonably designed written policies and procedures demonstrate a process for prompt mitigation of the risks of a securitization participant's positions and holdings that arise from market-making in ABS and the related financial instruments described in Rule 192(b)(3)(i), such as the risks of aged positions and holdings, because doing so would help to prevent a securitization participant from engaging in a transaction and maintaining a position that is adverse to the relevant ABS that remains open and exposed to potential gains for a prolonged period of time. The re-proposed rule does not define “prompt” mitigation in this context. While mitigating the risks of such positions and holdings would not be required to be contemporaneous with the acquisition of such positions or holdings, prompt mitigation would mean that the mitigation occur without delay that would facilitate or create an opportunity to benefit from a conflicted transaction remaining in the securitization participant's market-making inventory. We seek comment below on more precise indicia of “prompt” mitigation of such risks, and whether such indicia should be specified in the rule.
The proposed requirement that a process for such risk mitigation activity be included in a securitization participant's written policies and procedures would help ensure that activity is not speculative activity disguised as market-making by establishing the processes by which the relevant trading personnel would enter into, adjust, and unwind such hedging positions with respect to its market-making inventory. This approach is consistent with certain comments to the 2011 proposed rule supporting the inclusion of a compliance condition in the bona fide market-making activities exception
We received a comment to the 2011 proposed rule that any securitization participant relying on the proposed exception for bona fide market-making activities should be required to affirmatively certify that it is undertaking such activity for the sole purpose of market-making in connection with the securitization, and not for the purpose of generating speculative profits.
88. Is the scope of the proposed bona fide market-making activities exception appropriate or is it overinclusive or underinclusive? Please provide specific examples of any activity that should be included in or excluded from the scope of the exception and provide a justification as to why and how that modification would not compromise investor protection. For example, is it appropriate for the proposed exception to apply to market-making in the financial instruments described in proposed Rule 192(b)(3)(i) or should the scope of financial instruments be narrowed or expanded? Does market-making in CDS in response to customer demands implicate the types of material conflicts of interest that the re-proposed rule is designed to address?
89. Should any of the proposed conditions applicable to the proposed bona fide market-making activities exception be modified? If yes, please provide the suggested modification and explain how such modification would be consistent with statutory authority and how that modification would not compromise investor protection. For example, should the bona fide market-making activities exception be modified to align more closely with market-making in the context of Regulation SHO? If so, please explain how the exception should be modified and why, and how doing so would not compromise investor protection. Should the bona fide market-making activities exception in the re-proposed rule include a condition that the securitization participant analyze the applicability of the exception on a trade-by-trade basis? Is the proposed condition that the securitization participant's market-making related activities are designed not to exceed, on an ongoing basis, the reasonably expected near term demands of clients, customers, or counterparties, taking into account the liquidity, maturity, and depth of the market for the relevant types of financial instruments sufficient to prevent a securitization participant from providing a cover for activity that is not client driven but rather a bet against the relevant ABS? Should this condition include any additional requirements, such as the requirement that the securitization participant's market-making activities are driven by customer trading, customer liquidity needs, customer investment needs, or risk management by customers?
90. Is it appropriate to consider the liquidity, maturity, and depth of the market for the relevant financial instruments in determining whether a securitization participant routinely stands ready to purchase and sell such financial instruments for purposes of the proposed bona fide market-making activities exception? Would such considerations potentially allow a securitization participant to characterize only sporadic trading in illiquid financial instruments as market-making
91. Should the compensation condition to the proposed bona fide market-making activities exception provide additional specificity regarding what it would mean for the compensation arrangements to be designed not to reward or incentivize conflicted transactions? If so, please explain what specific indicia or metrics would be appropriate for purposes of that determination and why, and please provide examples of acceptable and unacceptable compensation arrangements.
92. Are the proposed conditions of the bona fide market-making activities exception adequate to address any potential misuse and evasion of the exception? What are the ways in which a securitization participant could attempt to utilize the proposed exception in order to disguise speculative activity as bona fide market-making? Are any such concerns about potential misuse or evasion of the exception adequately mitigated by the anti-circumvention provision in proposed Rule 192(d)? Should an explicit anti-abuse provision be added as a condition to the proposed exception requiring that “the market-making activity must not be conducted or designed to evade the requirements” of proposed Rule 192, or would such a provision be unnecessary because of the anti-circumvention language in proposed Rule 192(d)?
93. As discussed above, certain of the conditions of the proposed bona fide market-making activities exception are similar to those that are applicable to the equivalent exception to the Volcker Rule's proprietary trading prohibition.
94. Is the proposed condition applicable to the bona fide market-making activities exception regarding compliance and monitoring appropriate? Should such a condition include more or less stringent requirements? For example, should the condition require that a securitization participant have reasonably designed policies and procedures in place that specifically identify, document, and monitor the risks of its market-making positions and holdings (including an accounting of any positions or holdings that would constitute conflicted transactions under the re-proposed rule in the absence of the proposed exception for bona fide market-making activities) and the actions taken to demonstrably mitigate promptly those risks? Please identify any additional conditions that should be required as part of the compliance program condition. Is there sufficient clarity as to whether mitigation of the risks of market-making positions and holdings would be considered “prompt” as required by the proposed condition? If not, please explain what further guidance or clarification would be helpful in this context, including any specific indicia that should be included or referenced for purposes of this determination.
95. Should the proposed bona fide market-making activities exception require a securitization participant relying on the exception to affirmatively certify that it is undertaking such activity for the purpose of market-making in financial instruments permitted under the proposed exception and that it has complied with the relevant conditions in the re-proposed rule? If so, what form should such a certification take, and when should it be required to be made? For example, should the certification be required to be filed with, or otherwise furnished to, the Commission, or should it instead be required to be retained in the files of the securitization participant in accordance with its written policies and procedures? Should the certification requirement permit a securitization participant to make the required certification on a periodic basis with respect to all bona fide market-making activity occurring during that period, and if so, how frequently should the certification be required to be made? Please explain whether and how such a certification requirement would be practical for securitization participants.
96. Should smaller securitization participants be exempt from certain elements of the compliance program condition, such that those elements of the condition would apply only to securitization participants with significant trading assets and liabilities similar to the equivalent exception to the Volcker Rule, or should all elements of the compliance program condition apply to all securitization participants in order to adequately protect ABS investors? Alternatively, should the implementation of the compliance program requirement applicable to smaller securitization participants be delayed in order to give such entities more time to comply with the requirement? Why or why not? In your responses, please explain how “smaller securitization participant” should be defined for purposes of any such exemption or delayed implementation.
97. What are the positive or negative consequences of the bona fide market-making activities exception in the re-proposed rule?
We request and encourage any interested person to submit comments on any aspect of the re-proposed rule, other matters that might have an impact on the re-proposed rule, and any suggestions for additional changes. With respect to any comments, we note that they are of greatest assistance to our rulemaking initiative if accompanied by supporting data and analysis of the issues addressed in those comments and by alternatives to our re-proposal where appropriate.
This re-proposed rule would implement the requirements of Section 27B,
As discussed above in Section I.B., Section 27B requires that the Commission issue rules for the purpose of implementing the prohibition in Section 27B, and Section 27B specifies the ABS transactions and securitization participants to be covered by the re-proposed rule, as well as the timeframe of the re-proposed rule's prohibition. We are sensitive to the economic impact, including the costs and benefits, imposed by its rules.
Where possible, we have sought to quantify the benefits, costs, and effects on efficiency, competition, and capital formation expected to result from the re-proposed rule. However, we are unable to reliably quantify many of the economic effects due to limitations on available data. Therefore, parts of the discussion below are qualitative in nature, although we try to describe, where possible, the direction of these effects. We further note that even in cases where we have some data regarding certain economic effects, the quantification of these effects is particularly challenging due to the number of assumptions that we need to make to forecast how the ABS issuance practice would change in response to the re-proposed rule, and how those responses would, in turn, affect the broader ABS market. For example, the re-proposed rule's effects would depend on how sponsors, borrowers, investors, and other parties to the ABS transactions (
The baseline we use to analyze the economic effects of the re-proposed rule is the current set of rules, regulations, and market practices. To the extent that they are not consistent with current market practices, the proposed requirements would impose new costs. The proposed requirements would affect ABS market participants, including securitization participants and investors in ABS, and would indirectly affect loan originators, consumers, and businesses that seek access to credit. The costs and benefits of the proposed requirements depend largely on the current market practices specific to each securitization market. The economic significance or the magnitude of the effects of the proposed requirements also depend on the overall size of the securitization market and the extent to which the requirements could affect access to, and the cost of, capital. Below, we describe our current understanding of the securitization markets that would be affected by this re-proposed rule.
The securitization markets are important for the U.S. economy and constitute a large fraction of the U.S. debt market.
Since the re-proposed rule would apply to any person from the point at which it has reached, or has taken substantial steps to reach, an agreement to become a securitization participant until one year after the date of the first closing of the sale of the ABS, to estimate the number of affected parties and the size of the affected ABS market, we use ABS issuance information rather than information on ABS amounts outstanding. For the purposes of establishing an economic baseline and to estimate affected market size, we use data covering the most recent full calendar year 2021 to avoid any seasonal effects on estimates (“baseline period”).
We estimate that the baseline period annual issuance of private-label
Parties potentially affected by the re-proposed rule include:
• Parties that have direct compliance obligations under the re-proposed rule with respect to the proposed prohibition, namely, underwriters, placement agents, initial purchasers, and sponsors, or any affiliates or subsidiaries of such entities (“securitization participants” as defined above).
• U.S. agencies and the Enterprises with respect to certain types of ABS.
• Other entities that provide services in the securitization process, including depositors, servicers and other service providers, as well as their domestic and foreign affiliates and subsidiaries.
• Counterparties that invest/deal in financial products, including derivatives, related to synthetic ABS (and hybrid cash and synthetic ABS). For example, dealers that trade CDS on the ABS to securitization participants.
• ABS investors,
• Ultimate borrowers that rely on ABS markets for capital (
• Other market participants that could be affected by changes in securitization practices. For example, originators that retain residual interest in the reference asset pool or their creditors.
While one part of the proposed definition of the term “sponsor” is derived from the Regulation AB definition of sponsor, the definition in the re-proposed rule also includes any person that directs or causes the direction of the structure, design, or assembly of an ABS or the composition of the pool of assets underlying the ABS (a “directing sponsor”) or that has the contractual right to do so (a “contractual rights sponsor”). Whether a person is a directing sponsor would be based upon the specific facts and circumstances. This new definition of “sponsor” for purposes of the re-proposed rule has not been used before. Thus, the set of ABS sponsors would consist of three types of entities: those that organize and initiate an ABS transaction, those that are contractual rights sponsors, and those that are directing sponsors (for example, the latter two types might include Registered Investment Advisers (“RIAs”) that advise hedge funds, and that could also qualify as a sponsor under the re-proposed rule). We estimate that in the baseline period, there were 455 unique sponsors of the first type of private-label non-municipal ABS and there were 52 unique underwriters for such ABS deals; of these, we estimate that there were 14 unique sponsors and 16 unique underwriters of risk transfer ABS.
Current market practices may be generally consistent with the re-proposed rule requirements as a result of market participants' current compliance with the existing rules and reputational incentives described below.
As an initial matter, the general anti-fraud and anti-manipulation provisions of the Federal securities laws, including Section 17(a) of the Securities Act, Section 10(b) and Rule 10b-5 under the
There were several ABS deals exhibiting conflicts of interest targeted by the re-proposed rule that were generally originated in the pre-financial crisis years, 2005-2007. These deals harmed investors, exposed conflicts of interest of certain securitization participants, and received increased attention from Congress, the market, and regulators in the 2010s.
Following the financial crisis of 2007-2009, the Commission adopted several rules that reinforce the alignment of economic incentives of securitization participants and investors and reduce information asymmetries. Regulation RR, adopted by the Commission in 2014 for the purpose of implementing Section 941 of the Dodd-Frank Act, generally requires certain ABS sponsors (as defined under Regulation RR) to retain not less than 5 percent of the credit risk of the assets collateralizing an ABS for a period from five to seven years, after the date of closing of the securitization transaction, as specified by the rule.
Compared to the re-proposed rule, Regulation RR is narrower in its scope: it restricts the conduct of only those securitization participants that are “sponsors” for purposes of Regulation RR, the definition of which is roughly analogous to paragraph (i) of the re-proposed rule's multi-part definition of “sponsor.”
Further, SEC-registered ABS offerings must comply with the SEC's registration, disclosure, and reporting requirements. Commission disclosure requirements, including asset-level disclosures for some asset classes,
As noted above, current market practices may be generally consistent with the re-proposed rule requirements as a result of compliance with the existing rules described above. Additionally, securitization participants might be incentivized to avoid conflicted transactions in order to maintain their industry reputation and avoid reputational harm. A securitization participant that is known to regularly engage in “conflicted transactions” as defined in proposed Rule 192(a)(3) might lose its reputation among investors and its participation in ABS deals that a participant facilitates. Failure to disclose a person's substantial role in selecting assets underlying an ABS and that person engaging in conflicted transactions would make a securitization participant potentially subject to enforcement actions under the anti-fraud provisions of the securities laws.
We preliminarily believe that this is the current market equilibrium due to market participants' obligation to comply with the existing rules and to reputational incentives. However, we do not have data on actual incidence of conflicted transactions, and it is possible that such transactions continue to occur.
Securitizations are an important part of the financial system, facilitating capital formation and capital flows from investors to borrowers. However, they
First, asymmetric information can reduce the willingness of less informed market participants
Second, asymmetric information may increase risk-taking by more informed counterparties if they do not bear the adverse consequences of such risks—an effect commonly known as “moral hazard.”
Securitization participants have access to more information about the credit quality and other relevant borrower characteristics than the ultimate investors in the securitized assets. Securitization participants may also participate in the selection of assets for ABS. This information asymmetry can have adverse market effects to the extent that securitization participants seek to profit from their differential information. As observed above, prior to the financial crisis of 2007-2009, sponsors sold assets that they knew to be very risky, without conveying that information to ABS investors, and sometimes even while taking financial positions to benefit from adverse performance of underlying assets.
The patterns for adverse selection and misreporting low-quality assets were even more severe in CDOs and synthetic CDOs in the period prior to the financial crisis of 2007-2009.
There are several possible ways, which can be complementary, to mitigate the effects of such information asymmetries in the securitization process. One way to partially offset information asymmetries is to require that sponsors retain some “skin in the game,” through which loan performance can affect sponsors' profits as much as—or more than—those of the ABS investors: that is accomplished by the credit risk retention mandated by Regulation RR.
The adverse selection problem may be especially severe when it is costly for investors to demand from securitization participants sufficient transparency about the assets or securitization structure to overcome informational differences between these securitization participants and investors or when it is costly for investors to process such information. In these cases, the securitization process can misalign incentives so that the welfare of some market participants is maximized at the expense of other market participants. Many of these risks are not adequately disclosed to investors in securitizations, an issue that is compounded as sponsors introduce increasingly complex structures like CDOs or synthetic ABS.
Thus, the re-proposal is designed to enhance investor protection and the integrity of the ABS markets by helping to constrain the ability of securitization participants to benefit from the information asymmetry and limiting their incentives to exploit the information asymmetry at the expense of ABS investors. In particular, securitization participants would further be precluded from benefitting from the actual, anticipated, or potential adverse performance of an ABS or assets underlying such ABS. And, the re-proposed rule would help prevent the sale of ABS that are tainted by the material conflicts of interest that Section 27B is designed to address, to the extent such sales currently occur, and would curb activity that is viewed as contributing to the financial crisis of 2007-2009. In this way, the re-proposal would help prevent conflicted transactions leading to the creation and sale of ABS that facilitate amplification of risk transfer from informed to uninformed parties and the spread of risks from low quality or riskier loans throughout the financial system.
Accordingly, the re-proposal might have economic effects on broader credit markets. ABS investors may be willing to pay more or accept a lower rate of return for bearing the credit risk, which
The economic considerations above are significantly less applicable to ABS backed by the full faith and credit of the United States government. Even though investment in such fully insured or fully guaranteed ABS is not risk free, investors in such ABS are not exposed to the credit risk of individual underlying assets and, thus, are not subject to the adverse selection and moral hazard issues described above.
Both overall costs and overall benefits of the re-proposed rule would depend on the extent to which the existing market practices are largely consistent with the re-proposed rule and the existing investor protection mechanisms via anti-fraud and anti-manipulation provisions of the securities laws. Costs and benefits are separately discussed in the next sections in more detail.
Investors in ABS economically benefit from the performance of ABS that is commensurate with the level of risk that investors are willing to take and, generally, they do not benefit from the adverse performance of ABS. The re-proposed rule would benefit investors by prohibiting securitization participants from engaging in certain transactions through which they would benefit from the actual, anticipated, or potential adverse performance of an ABS, or assets underlying such ABS, to the detriment of ABS investors. Additionally, the re-proposed rule would provide broad investor protection by prohibiting conflicted transactions and this protection could help alleviate investor concerns that the securities they purchase might be tainted by certain material conflicts of interest. It could also help reduce moral hazard and adverse selection costs in the ABS market, leading to better investor protection and lower cost of capital.
The re-proposed rule could enhance market stability through reduced incentives to engage in conflicted transactions and other speculative activity in the ABS market. This effect could be especially pronounced for asset pools that are involved in re-securitizations or synthetic ABS because of their complexity and the relative difficulty of assessing information about underlying assets of such ABS. Enhanced market stability would reduce the variance of ABS prices in the primary market and volatility of ABS prices in the secondary market.
Lower adverse selection costs, higher expected liquidity, and lower expected volatility in ABS markets can lower the expected return required by ABS investors to invest in ABS and, in turn, that may lower credit costs in loan markets for households and corporations whose debts enter the reference asset pools underlying the asset-backed securitizations. For the reasons explained above, therefore, this re-proposal could lead to lower credit costs to the extent it would lower adverse selection costs, increase expected liquidity, and lower expected volatility.
We believe our proposed definitions of the terms “underwriter,” “placement agent,” “initial purchaser,” “sponsor,” “material conflict of interest,” and “conflicted transaction” in the re-proposed rule would capture with precision the types of securitization participants and types of conflicts of interest at which Section 27B is aimed, would reduce asymmetric information between securitization participants and investors, and, in turn, may reduce evasion and better protect investors. In particular, the proposed definition of “sponsor” captures both the contractual rights associated with sponsoring ABS and a person's function in connection with a securitization. The function prong in the proposed definition of sponsor relies on a determination of directing the structure of the ABS or the composition of its underlying asset pool rather than solely on contractual rights to exercise discretion over ABS. The proposed definition would reduce rule evasion executed through non-contractual control over the composition of the asset pool for ABS. All these effects would further reduce adverse selection costs in the ABS market and encourage investment in asset-backed securities to the extent that investors consider material conflicts of interest important in their investment decisions. Clearly defined terms also facilitate compliance with the rule and reduce compliance costs.
The re-proposed rule would commence application of the rule's prohibition when a person has reached, or has taken substantial steps to reach, an agreement to become a securitization participant. This approach in the re-proposed rule would help prevent evasive conduct that might happen before closing of a securitization and, thus, further enhance investor protection benefits of the re-proposed rule. Similarly, covering affiliates or subsidiaries of securitization participants under the proposed definition of “securitization participant” would help ensure that the benefits of the re-proposed rule are not nullified through evasive conduct executed via such affiliates or subsidiaries.
In addition, the re-proposed rule would specify the scope of conflicts of interest through the proposed definitions of the terms “material conflict of interest” and “conflicted transaction.” “Material conflict of interest” would be defined as any transaction that would involve or result in a material conflict of interest between a securitization participant of an ABS and an investor in such ABS if such a transaction is a conflicted transaction. The proposed definition of “conflicted transaction” would include explicit descriptions of specific types of conflicting transactions and would also include any financial instrument through which the securitization
The re-proposed rule provides exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities, which are consistent with Section 27B. As discussed below, all of these exceptions taken together could improve market efficiency and facilitate investor protection without diluting the investor protection benefits of the re-proposed rule. The re-proposal's conditions for the availability of these exceptions would permit valuable risk-mitigating hedging, liquidity provision, and bona fide market-making, while reducing the severity of conflicts of interest between securitization participants and investors in ABS, thus enhancing investor protections. Defining the scope of these exceptions may also ease compliance with the rule, although benefits from specificity could be dampened by the proposed anti-circumvention provision which states that a transaction circumventing the proposed prohibition will be deemed a conflicted transaction. To the extent the proposed anti-circumvention provision prevents misuse of the exceptions, however, that provision would strengthen investor protections.
Risk-mitigating hedging activities permit a securitization participant to fine-tune the amount of credit risk taken or to limit some of the consequences of taking a risk. We believe that the proposed risk-mitigating hedging activities exception would promote the re-proposed rule's benefits of investor protection without prohibiting securitization participants' risk mitigation activities, unduly increasing securitization participants' costs of engaging in such activities, or increasing barriers to entry in ABS markets. Thus, the proposed exception may improve efficiency of ABS markets and help protect ABS investors. The re-proposed rule's conditions that risk-mitigating hedging activities do not facilitate or create an opportunity to benefit from a conflicted transaction, and that a securitization participant establishes an internal compliance program, enhance the benefits of the rule by assuring investors that risk-mitigating hedging activities of securitization participants would be less likely to create (intentionally or inadvertently) economic conflicts of interest with investors. Moreover, the policies and procedures in the proposed risk-mitigating hedging activities exception that provide for the identification, monitoring, and documentation of the risk and related hedging could be used by the Commission in its examination programs for regulated entities. Thus, the proposed risk-mitigating hedging activities exception would help ensure the investor protection benefits of the rule, while allowing risk-reducing actions of securitization participants.
The proposed exceptions for liquidity commitments and bona fide market-making activities may help prevent a loss of secondary liquidity and efficiency in the ABS market and, thus, benefit ABS investors. The re-proposed rule conditions for the availability of and limits on the liquidity commitments and bona fide market-making activities exceptions, as well as the requirement that a securitization participant establish an internal compliance program, may enhance the benefits of the re-proposal by assuring investors that such activities of securitization participants would be less likely to create (intentionally or inadvertently) economic conflicts of interest with investors.
The re-proposed rule also includes an exception from the proposed definition of “sponsor” for the United States, agencies of the United States, and, subject to certain conditions, the Enterprises, in each case with respect to an ABS that is fully insured or fully guaranteed by the relevant entity. While the Enterprises are in conservatorship with the U.S. Treasury and the Enterprises retain all credit risk associated with guaranteed ABS, market participants perceive Enterprise-guaranteed ABS as having almost no credit risk.
The re-proposed rule would create direct compliance costs for securitization participants, some of which are discussed in detail in Section IV.C. The compliance costs could come from the need to establish policies, procedures, and informational barriers to implement the re-proposed rule, as well as associated legal review.
Section IV below estimates the initial and ongoing compliance costs to implement, maintain, and enforce written policies and procedures for securitization participants that would be relying on the risk-mitigating hedging activities or bona fide market-making activities exceptions of the re-proposed rule.
As required by Section 27B(a), the scope of securitization participants in the re-proposed rule includes affiliates and subsidiaries of underwriters, placement agents, initial purchasers, and sponsors. In some instances, the activities of an affiliate or subsidiary may not be known to the underwriter, placement agent, initial purchaser, or sponsor, and could, inadvertently, involve or result in a material conflict of interest with the investors in the ABS. Monitoring the activities of the affiliate or subsidiary for conflicts could be operationally difficult, especially when there are existing information barriers between the entities, including for reasons unrelated to the ABS (
Despite the inclusion of the risk-mitigating hedging activities exception, restrictions under the re-proposed rule could limit risk mitigation and revenue-enhancing investment options available to affected securitization participants. For example, by restricting the type and extent of hedging allowed to those activities excepted from the re-proposed rule, securitization participants may not be able to actively hedge their portfolio exposure. This outcome could require securitization participants to increase their fees to compensate for the loss of ability to hedge some risks. Alternatively, such costs could be borne by securitization participants or passed to investors in the form of lower expected returns or to borrowers in the form of higher cost of capital.
We recognize that the re-proposed rule could affect the scope of some current activities undertaken by underwriters, sponsors, and other securitization participants, if they perceive such activities as conflicting with the re-proposed rule. For example, one commenter to the 2011 proposed rule suggested that financial firms might not be able to determine with a sufficient level of certainty that a conflict of interest exists or does not exist with respect to a transaction, and that this lack of clarity will provide significant disincentive for activity in ABS.
Thus, the re-proposed rule could result in the loss of clientele for some securitization participants, especially diversified firms that service different risk-mitigation and investment needs of clients, customers, or counterparties. This could have an adverse impact on securitization participant revenues as well as costs, due to the nature of the business (for example, underwriting), where finding and retaining clientele could be an expensive activity.
At the same time, clients, customers, or counterparties of covered parties in the ABS market could also face higher search costs as they might need to find new, non-conflicted counterparties. The clients, customers, or counterparties also could bear undesirable costs by losing the ability to utilize firms with particular expertise or specialization in certain areas due to real or perceived material conflicts of interest. Clients, customers, or counterparties might also incur costs in searching for a different firm to consummate a transaction, where they have a preexisting relationship that they too have invested resources into developing. In addition, to retain their ability to utilize specific firms for non-asset-backed security related transactions, some potential clients, customers, or counterparties might choose to forgo the ABS investment. We recognize that if the re-proposed rule were to cause an investor to forgo an ABS investment entirely, the investor could incur costs in seeking out alternative investments as well as the opportunity cost of the loss of return from the ABS investment.
Taken together, conflicting out certain relationships can reduce market liquidity and investor choice through a decline in the available set of investment opportunities. This decline could be more acute in the short-term when securitization participants and clients, customers, or counterparties realign their business practices to comply with the rule, but it could persist even in the long run.
The re-proposed rule could impose certain costs upon departments within a firm not directly involved with the securitization process, by influencing their ability to conduct transactions that could result in a material conflict of interest with investors in an asset-backed security for which the firm is a securitization participant. The scope of the re-proposed rule could require monitoring for potential material conflicts of interest within all or many departments of the firm. If any department's proposed transaction were determined to raise a potential material conflict of interest, that department would have to abandon the proposed transaction or wait until the re-proposed rule's prohibition period ended.
The re-proposed rule may have significant costs with respect to how firms and clients, customers, or counterparties establish, maintain, and benefit from relationships. For instance, because larger financial entities tend to be organized in an effort to achieve synergies and economies of scope in combining and offering multiple services, restrictions on such activities could lead to changes to their business activities that could reduce firm earnings. These potential changes could have some disruptive effect on the firms, their clients, customers, or counterparties, and the broader marketplace, reducing current efficiencies that may exist. Restricting the ability of securitization participants to maintain relationships that service multiple objectives could ultimately negatively affect both financial firms and their clients', customers', or counterparties' ability to conduct economically efficient activities.
As discussed above, we do not believe that there is a significant amount of activity in the synthetic or hybrid cash and synthetic securitization markets
Paragraph (ii)(B) of the re-proposed definition of the term “sponsor”—proposing to define a “sponsor” functionally as any person that directs or causes the direction of the structure, design, or assembly or the composition of the pool of assets of an ABS—might increase securitization participants' costs because entities would have to determine, under the specific facts and circumstances, whether they fall under this definition. Such costs might arise even for entities that perform solely administrative, legal, due diligence, custodial, or ministerial functions because such entities would also need to determine whether they fall within the ministerial exception of the term “sponsor.”
The re-proposed rule would also commence application of the rule's prohibition when a person has reached, or has taken substantial steps to reach, an agreement to become a securitization participant. This commencement point would increase costs on securitization participants and those who seek to become securitization participants, because of the need to determine whether and at what point they are covered by prohibitions under the re-proposed rule. Additionally, some entities might avoid participation in some other market activities even if they are not participating in any securitizations, due to potential uncertainty and perceived difficulties in making the determination of whether they are securitization participants for purposes of the re-proposed rule, thus reducing the efficiency of those markets.
The re-proposed rule would also define the terms “material conflict of interest” and “conflicted transaction” by including explicit descriptions of specific types of conflicting transactions and also including any transaction through which the securitization participant would benefit from the actual, anticipated, or potential adverse performance of an ABS or its underlying asset pool. Although complying with the statutory prohibition could result in the re-proposed rule imposing the costs discussed earlier in this section, these costs might be mitigated by the certainty and clarity provided by the proposed definitions of these key terms. In particular, the proposed detailed definitions of “material conflict of interest” and “conflicted transaction” might make it easier for securitization participants to evaluate a potentially conflicting transaction, including those covered by the proposed anti-circumvention provision.
Exceptions under the re-proposed rule might give rise to additional costs. As discussed above, the re-proposed rule provides exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities, which are consistent with Section 27B. As discussed in Section III.D.1., we believe that such exceptions would preserve the ability of securitization participants to reduce and mitigate specific risks that arise out of underwriting, placement, initial purchase, or sponsorship of an asset-backed security, and may preserve secondary market liquidity and efficiency, while enhancing investor protections. However, we recognize that securitization participants would bear additional costs in dedicating resources to determine whether their activities fall within these exceptions. Moreover, securitization participants would incur costs of complying with conditions for the availability of these exceptions, such as costs related to the policies and procedures requirement for risk-mitigating hedging activities and bona fide market-making activities exceptions, as discussed in greater detail in Section III.D.2.
Finally, the re-proposed rule would provide an exception for the Enterprises while the Enterprises are in conservatorship and when they act as sponsors of securitizations. If the Enterprises exit conservatorship, the Enterprises would likely face increased costs similar to those outlined above for private-label ABS issuers and might have to re-structure or abandon their CRT offerings to comply with the re-proposed rule. As a result, an Enterprise exit from conservatorship might result in increased costs for U.S. mortgage borrowers and higher Enterprise capital requirements.
The scope of activities under the re-proposed rule that could constitute material conflicts of interest could potentially impact market efficiency, competition among asset-backed securitization market participants, and capital formation via the ABS markets.
As discussed above in Section III.D.1., the re-proposed rule would generally lead to lower adverse selection costs, higher expected liquidity, and lower expected volatility in the ABS markets. Taken together, these benefits would improve the efficiency of the ABS markets.
Other factors could also affect efficiency. As an initial matter, larger entities with multiple business lines could have, as a result of their structure, unavoidable material conflicts of interest and such entities might abandon their participation in securitizations to avoid violating the re-proposed rule. An investor that utilizes such entities for multiple services could have to switch to competitors or, depending on the structure of asset-backed security, forgo the transaction. Thus, the re-proposed rule could increase competition amongst covered parties and relatively smaller entities might gain market share at the expense of relatively larger entities. The re-proposed rule could create competitive benefits for less diversified firms and firms that already have in place policies and procedures similar to the ones required by the re-proposed rule. One commenter to the 2011 proposed rule similarly stated that the rule could lead to increased competition among underwriters in the ABS market, which could in turn increase efficiency and help reduce moral hazard related to having fewer underwriters in the ABS market who may, therefore, be more inclined to take larger risks.
On the other hand, certain requirements of the re-proposed rule that would be applicable to the risk-mitigating hedging activity exception and bona fide market-making activities exception are similar to those under the Volcker Rule (see discussion in Sections II.E. and II.G.). Such similarity would be more beneficial to securitization participants that are already familiar with the Volcker Rule compliance issues and already have relevant programs in place, because these securitization participants would incur lower initial costs of compliance. Securitization participants of this type tend to be larger entities (
ABS investors could incur additional search costs and enjoy less efficient business processes due to the loss of relationships with securitization participants described above. Securitization participants could also lose profits or fees that would have resulted from conflicting transactions,
Since the ABS offering process can involve multiple lead underwriters or underwriting syndicates with several members,
The re-proposed rule may reduce informational efficiency of ABS prices. Informed short positions of securitization participants can aid in price discovery and the re-proposal would reduce information about intrinsic values that would otherwise have been embedded in ABS prices due to informed trades of securitization participants. However, the re-proposed rule would also reduce the effects of information asymmetries between securitization participants and ABS investors, which may reduce adverse selection costs and may increase the willingness of ABS investors to engage in ABS transactions, thus, possibly improving informational efficiency of ABS prices.
The re-proposed rule could adversely impact short-term and medium-term operational efficiency of the ABS market because covered parties and their customers may seek less efficient transaction structures to effect investment strategies similar to the current baseline. However, as securitization participants adapt their transaction activity to avoid conflicted transactions, the ABS market is likely to become more accessible, more liquid, and less volatile. This may improve the longer-term operational efficiency of the ABS market and the underlying debt markets.
Enhanced investor protection and more stable ABS markets could result in greater investor participation, resulting in higher capital formation. To the extent that the re-proposed rule reduces the adverse selection costs and improves pricing efficiency that follow from the asymmetric information problem discussed in Section III.C. above, it would result in more efficient allocation of capital and thereby enhance capital formation.
However, the potential benefits of the re-proposal for capital formation could be offset by potential losses in investment opportunities due to disruptions in relationships with securitization participants, at least in the short-term. The re-proposed rule could negatively impact economic efficiency both from the point of view of securitization participants, and sometimes also from the point of view of investors who seek to invest in asset pools that back ABS, if certain ABS transactions did not occur because of the scope of the re-proposed rule.
The re-proposed rule also provides an exception from the proposed definition of “sponsor” for the United States or an agency of the United States or for the Enterprises, while the Enterprises are in conservatorship, when they act as sponsors of securitizations that are fully guaranteed. If the Enterprises do exit conservatorship, additional frictions created by the need for the Enterprises to comply with the re-proposed rule requirements would likely weaken the competitive position of the Enterprises compared to private-label ABS issuers, in particular, increasing costs and possibly hampering capital formation in the mortgage market via the Enterprise channel. However, some of that capital formation could move to private-label ABS markets that might gain some competitive advantage if Enterprises have to incur additional costs. If the Enterprises were to become private entities and to maintain an exemption post conservatorship, that would disadvantage other private entities that would not enjoy such an exemption.
We considered a number of alternative approaches, with some of the alternatives suggested by commenters to the 2011 proposed rule. This section considers potential economic effects of reasonable alternatives.
We could change the scope of the definition for securitization participants. One alternative to our proposed definition would be to broaden the definition of the terms “placement agent” and “underwriter” to include language used in the Volcker Rule that would include “a person who has agreed to participate or is participating in a distribution of such securities for or on behalf of the issuer or selling security holder.” While this approach could offer additional investor protections, we preliminarily believe that the benefits associated with applying the rule's prohibitions to persons with an ancillary role in the distribution of an ABS, such as selling group members who have no direct relationship with an issuer or selling security holder, would not offer substantial benefit, and could substantially increase compliance costs. Alternatively, we could also narrow the scope of securitization participants. We could, for example, exclude persons who have only taken substantial steps to reach an agreement—but have not reached such agreements—to become an underwriter, placement agent, initial purchaser, or sponsor, of an ABS. This could reduce compliance costs associated with determining when the potential securitization participant has taken substantial steps to reach an agreement to participate. We believe, however, that this could increase the circumstances in which a person attempts to evade the rule by engaging
As discussed above in Section II.A., the re-proposal would specify the scope of material conflicts of interest for purposes of the re-proposed rule as conflicts of interest that arise between a securitization participant for an ABS and investors in such ABS, as a result of engaging in any transaction through which the securitization participant would benefit from the actual, anticipated, or potential adverse performance of an ABS or its underlying asset pool. This aspect of the re-proposal would limit the scope of the prohibition to certain conflicts of interest, rather than extending the re-proposed rule's prohibition to broader conflicts of interest that are wholly independent of and unrelated to a specific ABS. Defining the scope of the re-proposed rule to broadly cover any conflict of interest between securitization participants and investors would significantly increase the costs of the rule and decrease efficiency of the securitization markets. Therefore, the tailoring of this prohibition in the re-proposed rule may reduce the economic costs of the re-proposal as discussed above.
The re-proposal could have included an exception for affiliates or subsidiaries of securitization participants that rely on information barriers, under certain conditions. Such conditions could include a requirement that the affiliate or subsidiary is engaged in a business wholly unrelated to securitization; that the securitization participant establishes, maintains, and enforces information barriers, such as physical separation of personnel and functions, and limits permissible activities as memorialized in reasonably designed written policies and procedures; that existing rules and regulations already provide for managing conflicts of interest or restricting information flow at the affiliate or subsidiary; and that offering documents for the ABS disclose the types of transaction that the affiliate or subsidiary could engage in as part of their normal, ordinary course of business.
As discussed above in Sections II.B.3. and III.D.2., the re-proposed rule may be significantly more costly for large and diversified securitization participants that have an extensive network of affiliates and subsidiaries, such as investment companies and investment advisers, engaged in unrelated businesses. Relative to the re-proposed rule, an information barriers exception could reduce the above costs of the prohibition for securitization participants with large affiliate and subsidiary networks, especially if the affiliate or subsidiary is already subject to existing rules and regulations that provide for conflict management or restricting information flow.
However, an alternative that reduces the scope of conflicted transactions, but adds information barriers, may be insufficient to manage conflicts of interest intended to be addressed by the re-proposed rule and may be difficult to monitor and enforce.
In addition, an information barriers alternative would give rise to its own costs related to the conditions for the applicability of the alternative exception, such as costs of physically separating personnel and functions, costs of designing related policies and procedures, and costs of monitoring and enforcing information barriers. Notably, under the alternative, securitization participants would choose to rely on such an exception only if costs of complying with the information barriers exception would be lower than costs of complying with the re-proposed rule's prohibitions.
Potential alternatives to excluding from the definition of “sponsor” the United States or an agency of the United States or the Enterprises, while the Enterprises are in conservatorship, and when they act as sponsors of securitizations that are fully guaranteed, would likely result in lower benefits or higher costs. Providing no exclusion from the definition for such entities as sponsors of government-guaranteed securitizations or for the Enterprises' securitizations may increase frictions in the government-guaranteed or the Enterprise ABS or CRT processes, perhaps increasing costs for U.S. mortgage borrowers or limiting the transfer of credit risk to investors, without attendant benefits of reducing the adverse selection problem in securitizations, which is alleviated by the government guarantee or the conservatorship. Making the Enterprise exclusion permanent (
Another alternative exception concerns synthetic CLOs. As described in Section II.A., we received comments to the 2011 proposed rule that suggested an exception for certain synthetic balance sheet CLOs. Providing such exception would reduce compliance costs to certain banks and CLO managers who could use such CLOs as a risk management tool. However, such
We considered alternative conditions of the proposed exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities as described in detail in Sections II.E., II.F., and II.G., respectively, including alternatives suggested by the comments to the 2011 proposed rule. Generally, making the conditions for the exceptions less stringent would reduce investor protection benefits of the re-proposed rule while also reducing compliance costs. Conversely, making the exceptions more stringent (
We also considered proposing a certification requirement for using the risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities exceptions. Under this alternative, an officer within the securitization participant would certify that the conditions supporting the exception had been met. This additional step might provide additional investor protection, but might also create additional paperwork and procedural burdens associated with documenting the exception. To avoid these burdens, or perceived enforcement or liability risk, securitization participants might choose not to engage in the excepted activities even in legitimate circumstances.
We request comment on all aspects of our economic analysis, including the potential costs and benefits of the re-proposed rule and alternatives thereto, and whether the rule, if we were to adopt it, would promote efficiency, competition, and capital formation. In addition, we request comments on our selection of data sources, empirical methodology, and the assumptions we have made throughout the analysis. Commenters are requested to provide empirical data, estimation methodologies, and other factual support for their views, in particular, on costs and benefits estimates. We especially appreciate comments that distinguish between costs and benefits that are attributed to Section 27B itself and costs and benefits that are a result of policy choices made by the Commission in implementing the statutory requirements. In particular, we request comments on the following questions on the Economic Analysis:
98. What additional qualitative or quantitative information should be considered as part of the baseline for the economic analysis of the re-proposed rule?
99. Are the costs and benefits of the re-proposed rule accurately characterized? If not, why not? Should any of the costs or benefits be modified? What, if any, other costs or benefits should be taken into account? If possible, please offer ways of estimating these costs and benefits. What additional considerations can be used to estimate the costs and benefits of the proposed amendments?
100. What would be the impact of the re-proposed rule on the ultimate borrowers (
101. Would the types, or extent, of any benefits or costs of the re-proposed rule differ between different types of securitizations? For example, do potential benefits or costs differ in their application to ABS backed by different types of assets? Do the types, or extent, of any benefits or costs from the re-proposed rule differ between ABS and synthetic ABS? If so, how do the benefits or costs differ?
102. Would the potential benefits and costs differ for securitizations of different size?
103. Are the costs and benefits of the re-proposed rule different between municipal ABS and non-municipal ABS? How does the re-proposed rule affect ultimate borrowers of loans that back municipal ABS?
104. Would potential benefits and costs differ for securitization participants of different size?
105. What potential costs might arise in relation to monitoring for transactions that would result in a material conflict of interest between a securitization participant and investors in the ABS? Do securitization participants have existing procedures that might help mitigate potential costs? What is the proportion of securitization participants that currently enter into contractual assurances that would be compliant with the re-proposed rule?
106. With respect to potential costs related to the re-proposed rule prohibiting transactions by affiliates, subsidiaries, or another department within the firm that would result in a material conflict of interest with investors in the ABS, is it possible to quantify the cost of not being permitted to undertake such transactions?
107. Are the effects on competition, efficiency, and capital formation arising from the proposed amendments accurately characterized? If not, why not?
108. Are the economic effects of the above alternatives accurately characterized? If not, why not? Should any of the costs or benefits be modified? What, if any, other costs or benefits should be taken into account?
109. Are there other reasonable alternatives to the proposed amendments that should be considered? What are the costs, benefits, and effects on competition, efficiency, and capital formation of any other alternatives?
110. Are there data sources or data sets that can help refine the estimates of the costs and benefits associated with the proposed amendments? If so, please identify them.
111. What are the benefits and costs of reasonable alternatives to the proposed conditions for the exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities? Are there alternative conditions we should include, and if so, why?
112. What benefits and costs might result from requiring an officer to certify that the conditions supporting the
Certain provisions of the re-proposed rule would impose a new “collection of information” requirement within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
The re-proposed rule would implement Section 621 of the Dodd-Frank Act, which added Section 27B to the Securities Act, by prohibiting securitization participants from directly or indirectly engaging in any transaction that would involve or result in any material conflict of interest between a securitization participant for such ABS and an investor in such ABS. A more detailed description of the re-proposed rule, including the need for the information and its proposed use, as well as a description of the likely respondents, can be found in Section II above, and a discussion of the economic effects of the re-proposed rule can be found in Section III above.
The collection of information would be mandatory for securitization participants that rely on two exceptions to the re-proposed rule described below. Additionally, the collection of information is not required to be filed with the Commission or otherwise made publicly available but would not be confidential.
The re-proposed rule would not require a securitization participant to implement, maintain, or enforce written policies and procedures, unless it is relying on the risk-mitigating hedging activities or bona fide market-making activities exceptions of the re-proposed rule. The proposed policies and procedures requirements are intended to help prevent evasion of the re-proposed rule and the abusive conduct at which Section 27B to the Securities Act is aimed by requiring the implementation, maintenance, and enforcement of frameworks to facilitate compliance with the other conditions of each exception. If a securitization participant were a regulated entity, the collection of such information (
As stated below in PRA Table 1, we estimate that there are a total of 1,265 securitization participants, all of whom could rely on the risk-mitigating hedging activities exception and 150 of these securitization participants could rely on the bona fide market-making activities exception. For the purposes of this analysis, as described below, we have made assumptions regarding actions respondents might take to manage and memorialize compliance with the re-proposed rule.
The availability of the proposed exceptions would be conditioned on securitization participants implementing, maintaining, and enforcing written policies and procedures reasonably designed to ensure compliance with the requirements of the exceptions, including the identification, documentation, and monitoring of such activities. Accordingly, securitization participants would be required to either prepare new policies and procedures or update existing ones in order to rely on the exception.
We estimate that for each securitization participant relying on the proposed exceptions, it would take approximately 80 hours to initially prepare new written policies and procedures
The following table summarizes the estimated paperwork burdens associated with the re-proposed rule.
Below we estimate the paperwork burden in hours and costs as a result of the new collection of information established by the re-proposed rule. These estimates represent the average burden for all securitization participants, both large and small. In deriving our estimates, we recognize that the burdens would likely vary among individual securitization participants. We estimate the total annual burden of the re-proposed rule to be 45,540 burden hours. We calculated the burden estimate by multiplying the estimated number of securitization participants by the estimated average amount of time it would take a securitization participant to prepare and review and update the policies and procedures under the re-proposed rule. For purposes of the PRA, the burden is to be allocated between internal burden hours and outside professional cost. PRA Table 3 sets forth the percentage estimate for the burden allocation for the new collection of information. We also estimate that the average cost of retaining outside professionals is $600 per hour.
We are using the above estimates for the purposes of calculating reporting burdens associated with the re-proposed rule. Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comments in order to:
• Evaluate whether the proposed collection of information would be necessary for the performance of the functions of the Commission, including whether the information would have practical utility;
• Evaluate the accuracy of our estimates of the burdens of the proposed collection of information;
• Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected;
• Evaluate whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology; and
• Evaluate whether the proposed amendments would have any effects on any other collection of information not previously identified in this section.
Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing these burdens. Persons submitting comments on the collection of information requirements should direct them to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503; and send a copy to Vanessa Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090, with reference to File No. S7-01-23. Requests for materials submitted to OMB by the Commission with regard to the collection of information requirements should be in writing, refer to File No. S7-01-23 and be submitted to the U.S. Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549. OMB is required to make a decision concerning the collection of information between 30 and 60 days after publication of this release. Consequently, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.
For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”),
• An annual effect of the U.S. economy of $100 million or more (either in the form of an increase or a decrease);
• A major increase in costs or prices for consumers or individual industries; or
• Significant adverse effects on competition, investment, or innovation.
We request comment on whether the re-proposed rule would be a “major” rule for purposes of SBREFA. In particular, we request comment and empirical data on:
• The potential effect on the U.S. economy on an annual basis;
• Any potential increase in costs or prices for consumers or individual industries; and
• Any potential effect on competition, investment, or innovation.
The Regulatory Flexibility Act (“RFA”)
We are proposing Rule 192 to implement Section 27B of the Securities Act. The re-proposed rule seeks to prevent the sale of ABS that are tainted by material conflicts of interest by prohibiting securitization participants from engaging in certain transactions that could incentivize a securitization participant to structure an ABS in a way that would put the securitization participant's interests ahead of those of ABS investors. The re-proposed rule also provides a standard for determining which types of transactions would be prohibited so that activities that are routinely undertaken in connection with the securitization process or with respect to the types of financial assets underlying securitizations covered by the re-proposed rule that do not give rise to the risks that Section 27B was intended to address would not be unnecessarily restricted. The requirements of the re-proposed rule are discussed in more detail in Section II above. We discuss the economic impact and potential alternatives to the re-proposed rule in Section III above, and the estimated compliance costs and burdens of the re-proposed rule under the PRA in Section IV above.
The re-proposed rule is being proposed under authority set forth in in Sections 10, 17(a), 19(a), 27B, and 28 of the Securities Act.
The re-proposed rule would affect some small entities—such as municipal entities, small broker-dealers, and RIAs that advise hedge funds—that would be “sponsors” for purposes of the re-proposed rule.
For purposes of the RFA, under 17 CFR 230.157 and 17 CFR 240.0-10(a), an issuer, other than an investment company, is a “small business” or “small organization” if it had total assets of $5 million or less on the last day of its most recent fiscal year and is engaged or proposing to engage in an offering of securities not exceeding $5 million. We estimate that no sponsors of private-label ABS would meet the definition of “small entity” applicable to issuers.
A municipal entity is a small entity for purposes of the RFA (
A broker-dealer is a small entity if it has total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to 17 CFR 240.17a-5(d), or, if not required to file such statements, had total capital of less than $500,000 on the last business day of the preceding fiscal year (or in the time that it has been a business, if shorter); and it is not affiliated with any person (other than a natural person) that is not a small business or small organization.
RIAs other than broker-dealers that advise hedge funds and municipal advisors that advise with respect to municipal securitizations, could also qualify as a “sponsor” under the re-proposed rule. A RIA is a small entity if it: (i) has assets under management having a total value of less than $25 million; (ii) did not have total assets of $5 million or more on the last day of its most recent fiscal year; and (iii) does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more, or any person (other than a natural person) that had total assets of $5 million or more on the last day of its most recent fiscal year.
We estimate that there are 112 municipal advisors who would be sponsors of ABS for purposes of the re-proposed rule.
This results in a Commission estimate of 162 to 191 small entities that could be impacted by the re-proposed rule.
If adopted, the re-proposed rule would apply to small entities to the same extent as other entities, irrespective of size. Therefore, we expect that most of the benefits and costs associated with the re-proposed rule would be similar for large and small entities. Accordingly, we refer to the discussion of the re-proposed rule's economic effects on all affected parties, including small entities, in Section III above. Consistent with that discussion, we anticipate that the economic benefits and costs could vary widely among small entities based on a number of factors, such as the nature and conduct of their businesses, which makes it difficult to project the economic impact on small entities with precision. We note, however, that the similarity of certain proposed exceptions to the re-proposed rule to the Volcker Rule might be more beneficial to larger entity securitization participants (
Compliance with the re-proposed rule might require the use of professional skill, including legal skills. We request comment on how the re-proposed rule would affect small entities.
We have not identified any Federal rules that currently duplicate, overlap, or conflict with the re-proposed rule. We request comment on whether commenters perceive any such duplication, overlap, or conflict if the re-proposed rule is adopted and, if so, how we should address any such duplication, overlap, or conflict.
The RFA directs us to consider alternatives that would accomplish our stated objectives, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, we considered the following alternatives:
• Establishing different compliance requirements that take into account the resources available to small entities;
• Delaying the implementation of compliance requirements for small entities to take into account the resources available to them;
• Exempting small entities from all or part of the requirements;
• Using performance rather than design standards; and
• Clarifying, consolidating, or simplifying compliance and reporting requirements under the rules for small entities.
The re-proposed rule seeks to prevent the sale of ABS that are tainted by material conflicts of interest by prohibiting securitization participants from engaging in certain transactions that could incentivize a securitization participant to structure an ABS in a way that would put the securitization participant's interests ahead of those of ABS investors. We believe that all ABS investors should be protected from securitization participants entering into conflicted transactions, and exempting small entities from the re-proposed rule's prohibition, establishing different compliance requirements for small entities, or delaying the implementation of the compliance requirements for small entities could frustrate that goal by protecting only ABS investors in transactions with respect to which the relevant securitization participants are larger entities. We do not believe that imposing different standards or requirements based on the size of the securitization participant would be appropriate, and doing so might result in additional costs associated with ascertaining whether a particular securitization participant may avail itself of such different standards. For these reasons, we are not proposing differing compliance or reporting requirements or timetables, or an exception, for small entities. For the same reasons we do not believe it would be appropriate to impose different standards or requirements based on the size of the securitization participant, we do not believe that the implementation of compliance requirements for small entities should be delayed. We request comment below whether the implementation of compliance requirements for small entities should be delayed. Section II.B. above includes specific requests for comment on whether certain categories of securitization participants should be exempted from the re-proposed rule.
We do not believe that clarifying, consolidating, or simplifying the compliance requirements under the re-proposed rule would permit us to achieve our stated objective. We have sought to create a clear, consolidated, and simple regulatory framework as we believe appropriate under the circumstances. With respect to using performance rather than design standards, the prohibition of the re-proposed rule is a performance standard that would prohibit a securitization participant from entering into a conflicted transaction during the covered time-period. Although the proposed bona fide market-making activities and risk-mitigating hedging activities exceptions do include design standards, we believe that those design standards would promote the objective of the re-proposed rule while still providing flexibility to securitization participants to design compliance programs that are tailored to their specific business models. Sections II.E. and II.G. above include specific requests for comment on whether smaller securitization participants should be exempted from the proposed compliance program requirements applicable to the bona fide market-making activities and risk-mitigating hedging activities exceptions, and if so, how “smaller securitization participant” should be defined for purposes of any such exemption.
We encourage the submission of comments with respect to any aspect of the IRFA. In particular, we request comment regarding:
• The number of small entities that may be affected by the re-proposed rule;
• The existence or nature of the potential impact of the re-proposed rule on small entities discussed in the analysis;
• How the re-proposed rule could further lower the burden on small entities by, for example, exempting small entities from compliance requirements applicable to such entities or delaying the implementation of compliance requirements for such entities; and
• How to quantify the impact of the re-proposed rule.
Commenters are asked to describe the nature of any impact and provide empirical data supporting the extent of the impact. Comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the re-proposed rule is adopted, and will be placed in the same public file as comments on the re-proposed rule itself.
The Commission is proposing new 17 CFR 230.192 under the authority set forth in Sections 10, 17(a), 19(a), 27B, and 28 of the Securities Act.
Reporting and recordkeeping requirements, Securities.
For the reasons set forth in the preamble, the Commission is proposing to amend title 17, chapter II of the Code of Federal Regulations as follows:
15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78
(a)
(2)
(3)
(i) A short sale of the relevant asset-backed security;
(ii) The purchase of a credit default swap or other credit derivative pursuant to which the securitization participant would be entitled to receive payments upon the occurrence of specified credit events in respect of the relevant asset-backed security; or
(iii) The purchase or sale of any financial instrument (other than the relevant asset-backed security) or entry into a transaction through which the securitization participant would benefit from the actual, anticipated or potential:
(A) Adverse performance of the asset pool supporting or referenced by the relevant asset-backed security;
(B) Loss of principal, monetary default, or early amortization event on the relevant asset-backed security; or
(C) Decline in the market value of the relevant asset-backed security.
(b)
(1)
(ii)
(A) At the inception of the hedging activity and at the time of any adjustments to the hedging activity, the risk-mitigating hedging activity is designed to reduce or otherwise significantly mitigate one or more specific, identifiable risks arising in connection with and related to identified positions, contracts, or other holdings of the securitization participant, based upon the facts and circumstances of the identified underlying and hedging positions, contracts or other holdings and the risks and liquidity thereof;
(B) The risk-mitigating hedging activity is subject, as appropriate, to ongoing recalibration by the securitization participant to ensure that the hedging activity satisfies the requirements set out in paragraph (b)(1) of this section and does not facilitate or create an opportunity to benefit from a conflicted transaction other than through risk-reduction; and
(C) The securitization participant has established, and implements, maintains, and enforces, an internal compliance program that is reasonably designed to ensure the securitization participant's compliance with the requirements set out in paragraph (b)(1) of this section, including reasonably designed written policies and procedures regarding the risk-mitigating hedging activities that provide for the specific risk and risk-mitigating hedging activity to be identified, documented, and monitored.
(2)
(3)
(ii)
(A) The securitization participant routinely stands ready to purchase and sell one or more types of the financial
(B) The securitization participant's market-making related activities are designed not to exceed, on an ongoing basis, the reasonably expected near term demands of clients, customers, or counterparties, taking into account the liquidity, maturity, and depth of the market for the relevant types of financial instruments described in paragraph (b)(3)(i) of this section;
(C) The compensation arrangements of persons performing the foregoing activity are designed not to reward or incentivize conflicted transactions;
(D) The securitization participant is licensed or registered to engage in the activity described in paragraph (b)(3) of this section in accordance with applicable law and self-regulatory organization rules; and
(E) The securitization participant has established, and implements, maintains, and enforces, an internal compliance program that is reasonably designed to ensure the securitization participant's compliance with the requirements of paragraph (b)(3) of this section, including reasonably designed written policies and procedures that demonstrate a process for prompt mitigation of the risks of its market-making positions and holdings.
(c)
(i) An offering of securities, whether or not subject to registration under the Securities Act of 1933, that is distinguished from ordinary trading transactions by the presence of special selling efforts and selling methods; or
(ii) An offering of securities made pursuant to an effective registration statement under the Securities Act of 1933.
(i) Purchase securities from the issuer or selling security holder for distribution;
(ii) Engage in a distribution for or on behalf of such issuer or selling security holder; or
(iii) Manage or supervise a distribution for or on behalf of such issuer or selling security holder.
(i) An underwriter, placement agent, initial purchaser, or sponsor of an asset-backed security; or
(ii) Any affiliate (as defined in 17 CFR 230.405) or subsidiary (as defined in 17 CFR 230.405) of a person described in paragraph (i) of this definition.
(i) Any person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the entity that issues the asset-backed security; or
(ii) Any person:
(A) with a contractual right to direct or cause the direction of the structure, design, or assembly of an asset-backed security or the composition of the pool of assets underlying the asset-backed security; or
(B) that directs or causes the direction of the structure, design, or assembly of an asset-backed security or the composition of the pool of assets underlying the asset-backed security.
(C) Notwithstanding paragraphs (ii)(A) and (ii)(B) of this definition, a person that performs only administrative, legal, due diligence, custodial, or ministerial acts related to the structure, design, or assembly of an asset-backed security or the composition of the pool of assets underlying the asset-backed security will not be a sponsor for purposes of this rule.
(iii) Notwithstanding paragraphs (i) and (ii) of this definition:
(A) The United States or an agency of the United States will not be a sponsor for purposes of this rule with respect to an asset-backed security that is fully insured or fully guaranteed as to the timely payment of principal and interest by the United States.
(B) The Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation operating under the conservatorship or receivership of the Federal Housing Finance Agency pursuant to section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617) with capital support from the United States; or any limited-life regulated entity succeeding to the charter of either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation pursuant to section 1367(i) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617(i)), provided that the entity is operating with capital support from the United States; will not be a sponsor for purposes of this rule with respect to an asset-backed security that is fully insured or fully guaranteed as to the timely payment of principal and interest by such entity.
(d)
By the Commission.
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Summary presentation of final rules.
This document summarizes the Federal Acquisition Regulation (FAR) rules agreed to by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) in this Federal Acquisition Circular (FAC) 2023-02. A companion document, the
For effective dates see the separate documents, which follow.
The analyst whose name appears in the table below in relation to the FAR case. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755 or
The FAC, including the SECG, is available at
Summaries for each FAR rule follow. For the actual revisions and/or amendments made by these FAR rules, refer to the specific item numbers and subjects set forth in the documents following these item summaries. FAC 2023-02 amends the FAR as follows:
This final rule provides for accelerated payments to contractors that are small businesses and to small business subcontractors by accelerating payments to their prime contractors. The rule implements section 873 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L. 116-92), which amends 31 U.S.C. 3903(a). The rule also implements section 815 of the William M. (Mac) Thornberry NDAA for FY 2021, which amended 10 U.S.C. 2307(a) (now found at 10 U.S.C. 3801). This final rule may have a positive impact on small entities, but it will not have a significant economic impact on a substantial number of small entities.
This final rule amends the FAR to align with SBA's regulations related to several topic areas. This rule clarifies that SBA determines size status as of the date of initial offer for a multiple-award contract, whether or not the offer includes price, or the price is evaluated. Additionally, in accordance with FAR 19.301-2(b)(2), the “ostensible subcontractor rule” (a small business must not be unduly reliant on a nonsimilarly situated small business subcontractor or have such a subcontractor perform the primary and vital requirements of the contract) is implemented in this rule as a new ground for socioeconomic status protest. The rule also clarifies that contracting officers will not be able to exercise options past the fifth year of long-term 8(a) contracts if the 8(a) contractor no longer qualifies for the 8(a) program. Lastly, the rule clarifies the size standard for the information technology value added resellers under North American Industry Classification System code 541519 is 150 employees, not 500 employees.
Administrative change is made at FAR 2.101.
Federal Acquisition Circular (FAC) 2023-02 is issued under the authority of the Secretary of Defense, the Administrator of General Services, and the Administrator of National Aeronautics and Space Administration.
Unless otherwise specified, all Federal Acquisition Regulation (FAR) and other directive material contained in FAC 2023-02 is effective February 14, 2023 except for Items I through III, which are effective March 16, 2023.
Department of Defense (DoD), General Services Administration (GSA),
Final rule.
DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to implement a section of the National Defense Authorization Act for Fiscal Year 2020 to provide for accelerated payments to small business contractors and subcontractors and a comparable statute applicable only to the Department of Defense.
Effective March 16, 2023.
Ms. Zenaida Delgado, Procurement Analyst, at 202-969-7207 or by email at
DoD, GSA, and NASA published a proposed rule at 86 FR 53923 on September 29, 2021, to implement a policy that provides for accelerated payments to contractors that are small businesses and to small business subcontractors by accelerating payments to their prime contractors. This change implements section 873 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L. 116-92). Section 873 amends 31 U.S.C. 3903(a).
Specifically, section 873 requires agencies to establish an accelerated payment date for small business prime contractors, to the fullest extent permitted by law, with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract. Section 873 also requires that, to the fullest extent permitted by law, the head of an agency establish an accelerated payment date for prime contractors that subcontract with small businesses, with a goal of 15 days after receipt of a proper invoice, if—
(1) A specific payment date is not established by contract; and
(2) The contractor agrees to make accelerated payments to the subcontractor without any further consideration from, or fees charged to, the subcontractor. The final rule implements both aspects of section 873. For DoD, however, this case implements section 815 of the William M. (Mac) Thornberry NDAA for FY 2021, which amended 10 U.S.C. 2307(a)(2)(A) (now found at 10 U.S.C. 3801) by striking the language “if a specific payment date is not established by contract.” Accordingly, this case excludes from DoD contracts the condition reflected in the language “a specific payment date is not established by contract.”
Four respondents submitted comments on the proposed rule.
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the public comments in the development of the final rule. A discussion of the comments and the changes made to the rule as a result of those comments are provided as follows:
There are no significant changes from the proposed rule.
Of the four responses received, none provided negative comments on the rule, although they suggested changes as described below. No changes resulted from the public comments.
Other changes made to the final rule are as follows:
• To add a clarification at FAR 32.009-1(a) by creating paragraphs (a)(1) and (a)(2) to differentiate DoD from civilian agencies regarding the removal of the phrase “if a specific payment date is not established by contract” at 10 U.S.C. 3801 per section 815 of the William M. (Mac) Thornberry NDAA for FY 2021, Public Law 116-283; the statutory text was moved from 10 U.S.C. 2307(a) to 10 U.S.C. 3801.
• To make editorial corrections at: 52.213-4(a)(1)(x) to be consistent with the FAR 52.233-4 citation at FAR 52.212-5.
This rule does not add any new solicitation provisions or contract clauses. This rule amends the following FAR clauses: 52.212-5, Contract Terms and Conditions Required To Implement Statutes or Executive Orders-Commercial Products and Co mmercial Services; 52.213-4, Terms and Conditions-Simplified Acquisitions (Other Than Commercial Products and Commercial Services); 52.232-40, Providing Accelerated Payments to Small Business Subcontractors; and 52.244-6, Subcontracts for Commercial Products and Commercial Services.
The FAR rule makes the 10 U.S.C. 2307(a) (now found at 10 U.S.C. 3801) and 31 U.S.C. 3903 statutory changes to a requirement already applicable to contracts at or below the SAT and to contracts for the acquisition of commercial products and commercial services, including COTS items.
The Federal Acquisition Regulatory Council (FAR Council) is applying the rule to contracts at or below the SAT and acquisitions of commercial products and commercial services, including acquisitions for COTS items, in accordance with 41 U.S.C. 1905, 41 U.S.C. 1906, and 41 U.S.C. 1907. Discussion of the FAR Council determinations is set forth below.
41 U.S.C. 1905 governs the applicability of laws to acquisitions at or below the SAT. Section 1905 generally limits the applicability of new laws when agencies are making acquisitions at or below the SAT, but provides that such acquisitions will not be exempt from a provision of law under certain circumstances, including when the FAR Council makes a written determination and finding that it would not be in the best interest of the Federal Government to exempt contracts and subcontracts in amounts not greater than the SAT from the provision of law.
The FAR Council has made a determination to apply this statute to contracts and subcontracts at or below the SAT. These accelerated payments provide benefits to contractors that are small businesses, to contractors that subcontract with small businesses, and to small business subcontractors by accelerating payments to their prime contractors, without adding any reporting or recordkeeping requirements. Approximately 96 percent of Federal contracts are in amounts at or below the SAT. An exception for contracts and subcontracts at or below the SAT would exclude contracts and subcontracts intended to be covered by the law, thereby undermining the overarching public policy purpose of the law.
41 U.S.C. 1906 governs the applicability of laws to contracts for the acquisition of commercial products and commercial services and is intended to limit the applicability of laws to those contracts. Section 1906 provides that if the FAR Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts and subcontracts for commercial products and commercial services the provision of law will apply to them.
41 U.S.C. 1907 states that acquisitions of COTS items will be exempt from certain provisions of law unless the Administrator for Federal Procurement Policy makes a written determination and finds that it would not be in the best interest of the Federal Government to exempt contracts for the procurement of COTS items.
The FAR Council has made a determination to apply this statute to contracts and subcontracts for commercial products and commercial services. The Administrator for Federal Procurement Policy has made a determination to apply this statute to acquisitions for COTS items. These accelerated payments provide benefits to contractors that are small businesses, to contractors that subcontract with small businesses, and to small business subcontractors by accelerating payments to their prime contractors, without adding any reporting or recordkeeping requirements. Over 50 percent of Federal contracts are awarded using commercial procedures. An exception for commercial products and commercial services, including COTS items, contracts and subcontracts would exclude contracts and subcontracts intended to be covered by the law, thereby undermining the overarching public policy purpose of the law.
The final rule expands the FAR policy regarding accelerated payments to small business contractors by: (1) providing accelerated payments to prime contractors that are small businesses; (2) establishing a goal of payment within 15 days after receipt of a proper invoice; and (3) prohibiting prime contractors from requesting any further consideration from the subcontractor in exchange for the accelerated payments. The Government expects this rule to improve cash flow and access to the Federal marketplace for small businesses, which are likely to have lower cash reserves and less access to inexpensive credit when compared to other than small businesses,
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of
As required by the Congressional Review Act (5 U.S.C. 801-808) before an interim or final rule takes effect, DoD, GSA, and NASA will send the rule and the “Submission of Federal Rules Under the Congressional Review Act” form to each House of the Congress and to the Comptroller General of the United States. A major rule cannot take effect until 60 days after it is published in the
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601-612. The FRFA is summarized as follows:
This final rule amends the FAR to provide for accelerated payments to contractors that are small businesses, and to small business subcontractors by accelerating payments to their prime contractors. Specifically, the statute requires agencies, to the fullest extent permitted by law, to establish an accelerated payment date for small business contractors, with a goal of 15 days after receipt of a proper invoice, if a specific payment date is not established by contract. For contractors that subcontract with small businesses, the statute requires agencies, to the fullest extent permitted by law, to establish an accelerated payment date, with a goal of 15 days after receipt of a proper invoice, if—
(a) A specific payment date is not established by contract; and
(b) The contractor agrees to make accelerated payments to the subcontractor without any further consideration from, or fees charged to, the subcontractor.
For DoD, however, this rule implements section 815 of the William M. (Mac) Thornberry NDAA for FY 2021, which amended 10 U.S.C. 2307(a)(2)(A) (now found at 10 U.S.C. 3801) by striking the language “if a specific payment date is not established by contract.” Accordingly, the final rule excludes from DoD contracts the condition reflected in the language “a specific payment date is not established by contract.”
The objective is to implement section 873 of the NDAA for FY 2020 (Pub. L. 116-92), which amends 31 U.S.C. 3903(a). The rule also implements a change made by section 815 of the William M. (Mac) Thornberry NDAA for FY 2021 to 10 U.S.C. 2307(a), now found at 10 U.S.C. 3801, which requires DoD to keep the 15 days rather than allow a different specific date to be established in the contract.
There were no significant issues raised by the public comments in response to the initial regulatory flexibility analysis.
The final rule applies to small businesses that are prime contractors, and to small businesses that are subcontractors on Federal prime contracts. Based on data obtained from the Federal Procurement Data System, 120,907 unique entities (including 78,813 small businesses) were awarded contracts for FY 2021. There is no data source to know how many subcontracts are awarded to small businesses. With regard to the impact of the prohibition on fees or other consideration in return for accelerated payments, it is not possible to estimate how many of these small business subcontractors may have been required to provide consideration or pay fees to the prime contractor in order to receive accelerated payments.
The final rule does not include additional reporting or recordkeeping requirements. There are no available alternatives to the final rule to accomplish the desired objective of the statute.
Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat Division. The Regulatory Secretariat Division has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration.
This rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501-3521).
Government procurement.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 12, 32, and 52 as set forth below:
40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.
(a)(1) Pursuant to 31 U.S.C. 3903(a), agencies other than the Department of Defense (DoD) shall provide accelerated payments, to the fullest extent permitted by law, with a goal of 15 days after receipt of a proper invoice and all other required documentation, if a specific payment date is not established by contract, to—
(i) Small business contractors; and
(ii) Prime contractors that subcontract with a small business concern, if the prime contractor agrees to make payments to the small business subcontractor within 15 days of receiving the accelerated payment from the Government, after receipt of a proper invoice and all other required documentation from the small business subcontractor, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.
(2) Pursuant to 10 U.S.C. 3801(b), DoD shall provide accelerated payments, to the fullest extent permitted by law, with a goal of 15 days after receipt of a proper invoice and all other required documentation, to—
(i) Small business contractors; and
(ii) Prime contractors that subcontract with a small business concern, if the prime contractor agrees to make payments to the small business subcontractor within 15 days of receiving the accelerated payment from the Government, after receipt of a proper invoice and all other required documentation from the small business subcontractor, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.
(b) This acceleration does not provide any new rights under the Prompt Payment Act and does not affect the application of the Prompt Payment Act late payment interest provisions.
(c) Agencies may use the Governmentwide commercial purchase card as a method of payment (see 32.1108) to facilitate accelerated payment, to earn refunds, and to reduce invoice processing costs.
The addition reads as follows:
(a) * * *
(2) * * * See 32.903(a)(5), but see 32.009-1(a).
The revisions and additions read as follows:
(a) * * *
(5) 52.232-40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023) (31 U.S.C. 3903 and 10 U.S.C. 3801).
(e)(1) * * *
(xxii) 52.232-40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023) (31 U.S.C. 3903 and 10 U.S.C. 3801). Flow down required in accordance with paragraph (c) of 52.232-40.
Alternate II (MAR 2023). * * *
(e)(1) * * *
(ii) * * *
(U) 52.232-40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023) (31 U.S.C. 3903 and 10 U.S.C. 3801). Flow down required in accordance with paragraph (c) of 52.232-40.
The revisions and addition read as follows:
(a) * * *
(1) * * *
(viii) 52.232-40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023) (31 U.S.C. 3903 and 10 U.S.C. 3801).
(x) 52.233-4, Applicable Law for Breach of Contract Claim (OCT 2004) (Pub. L. 108-77 and 108-78 (19 U.S.C. 3805 note)).
(a)(1) In accordance with 31 U.S.C. 3903 and 10 U.S.C. 3801, within 15 days after receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business subcontractor.
(2) The Contractor agrees to make such payments to its small business subcontractors without any further consideration from or fees charged to the subcontractor.
The revision reads as follows:
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Final rule.
DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to implement several changes made to the Small Business Administration (SBA) regulations.
Effective March 16, 2023.
Ms. Malissa Jones, Procurement Analyst, at 571-886-4687, or by email at
DoD, GSA, and NASA published a proposed rule at 87 FR 10327 on February 24, 2022, to amend the FAR to implement several revisions that the Small Business Administration (SBA) made to its regulations in its final rule published on November 29, 2019, at 84 FR 65647. Five respondents submitted comments in response to the proposed rule.
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed the public comments in the development of the final rule; a minor change was made to 19.307(d)(1)(iii) as a result of the public comments received. A discussion of the comments is provided as follows:
There are no significant changes from the proposed rule.
Minor editorial changes were made at FAR 19.306(d), 19.307(d), and 19.308(d)(2).
This rule amends several solicitation provisions and contract clauses at FAR 52.204-8, 52.212-1, 52.212-5, 52.219-1, 52.219-18, and 52.219-28. However, this rule does not impose any new requirements on contracts at or below the SAT or for commercial products, or for commercial services, including commercially available off-the-shelf (COTS) items. The clauses continue to apply to acquisitions at or below the SAT, to acquisitions for commercial products and commercial services including COTS items.
This rule will impact the operations of the Government and contractors as described in this section.
This rule will impact the Government with regard to long-term 8(a) contracts. Contracting officers will not be able to exercise options past the fifth year of long-term 8(a) contracts if the 8(a) contractor no longer qualifies for the 8(a) program. Contractors who are 8(a) participants with long-term contracts may find that the Government cannot exercise a fifth-year option on that contract if the contractor is no longer eligible for the 8(a) program.
Offerors who are information technology value-added resellers should be able to more easily understand the size standard that applies to them.
The “ostensible subcontractor rule” is implemented in this rule as a new ground for protest. Small business contractors must not be overly reliant on non-similarly situated small business subcontractors or have such a subcontractor perform primary and vital requirements of the contract. Therefore, a small business contractor must have the necessary expertise within its own organization.
This rule is not expected to result in any costs to contractors or offerors.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.
As required by the Congressional Review Act (5 U.S.C. 801-808) before an interim or final rule takes effect, DoD, GSA, and NASA will send the rule and the “Submission of Federal Rules Under the Congressional Review Act” form to each House of the Congress and to the Comptroller General of the United States. A major rule cannot take effect until 60 days after it is published in the
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 U.S.C. 601-612. The FRFA is summarized as follows:
DoD, GSA, and NASA are issuing a final rule to amend the Federal Acquisition Regulation (FAR) to implement several revisions made to the Small Business Administration (SBA) regulations in SBA's final rule published on November 29, 2019, at 84 FR 65647. The revisions address the point in the procurement process at which small business size status is determined for offers for multiple-award contracts. SBA generally determines size status at the time of initial offer including price. However, for a solicitation for a multiple-award contract that does not require offers to include price or where price is not evaluated, SBA will determine size as of the date of initial offer, whether or not the offer includes price or the price is evaluated. The revisions also address the eligibility requirements for 8(a) participants under long-term contracts (
There were no significant issues raised by the public comments in response to the initial regulatory flexibility analysis.
This rule will apply to small entities that do business with the Federal Government. According to the data in SAM, as of January 2022, 420,000 of the active entity registrations are for entities that are small business concerns for at least one NAICS code. This rule will impact 8(a) participants who are Federal contractors with contracts that have a duration of more than five years, including options. An analysis of the data in the Federal Procurement Data System (FPDS) indicates that, for fiscal years 2019 through 2021, an average of 326 long-term contracts (
This rule will affect information technology value added resellers under NAICS code 54159. An analysis of the data in FPDS shows that, for fiscal years 2019 through 2021, an average of 699 unique large businesses and 1,129 unique small businesses were awarded contracts each year under NAICS code 541519.
This rule does not include any new reporting, recordkeeping, or other compliance requirements for small entities.
This rule does not duplicate, overlap, or conflict with any other Federal rules.
There are no known significant alternative approaches that would accomplish the stated objectives.
Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat Division. The Regulatory Secretariat Division has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration.
This rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501-3521).
Government procurement.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 19, 49, and 52 as set forth below:
40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.
(a) * * *
(1) * * * They are also available at
(3) SBA determines the size status of a concern, including its affiliates, as of the date the concern represents that it is small to the contracting officer as part of its initial offer, which includes price.
(4) When an agency uses a solicitation for a multiple-award contract that does not require offers for the contract to include price, SBA determines size as of the date of initial offer for the multiple-award contract, whether or not the offer includes price or the price is evaluated. (See 13 CFR 121.404(a)(1)(iv)).
(d) * * *
(3) SBA will consider protests for HUBZone set-aside or sole-source service contracts or orders, if a HUBZone prime contractor is unduly reliant on a small entity subcontractor that is not a similarly-situated entity as defined in 13 CFR 125.1, or if such subcontractor performs the primary and vital requirements of the contract. For allegations that the prime contractor is unduly reliant on an other-than-small subcontractor, see size protests at 19.302, and 13 CFR 121.103(h)(2), which treats the pair as joint venturers for size determination purposes (the “ostensible subcontractor rule”).
The addition reads as follows:
(d) * * *
(1) * * *
(iii) For set-aside or sole-source service contract or order ostensible subcontractor protests, the protester presents credible evidence of the alleged undue reliance on a small entity subcontractor that is not a similarly-situated entity as defined in 13 CFR 125.1, or credible evidence that the small non-similarly situated entity is performing the primary and vital requirements of the contract. For allegations that the prime contractor is unduly reliant on an other-than-small subcontractor, see size protests at 19.302, and 13 CFR 121.103(h)(2), which treats the pair as joint venturers for size determination purposes (the “ostensible subcontractor rule”).
The addition reads as follows:
(d) * * *
(1) * * *
(iii) For WOSB or EDWOSB set-aside or sole-source service contracts or orders, the protest presents evidence that the prime contractor is unduly reliant on a small entity subcontractor that is not a similarly-situated entity as defined in 13 CFR 125.1, or a protest alleging that such subcontractor is performing the primary and vital requirements of a set-aside or sole-source WOSB or EDWOSB contract. For allegations that the prime contractor is unduly reliant on an other-than-small subcontractor, see size protests at 19.302, and 13 CFR 121.103(h)(2), which treats the pair as joint venturers
The addition and revision read as follows:
(b) * * *
(1)
(2)
* * * SBA designates the concern as an 8(a) participant in the Dynamic Small Business Search (DSBS) at
The addition reads as follows:
(a) * * *
(2) Length of contract, including option periods (see 19.812(d)); and
The addition reads as follows:
(d) For 8(a) contracts exceeding 5 years including options, the contracting officer shall verify in DSBS or SAM that the concern is an SBA-certified 8(a) participant no more than 120 days prior to the end of the fifth year of the contract. If the concern is not an SBA-certified 8(a) participant, the contracting officer shall not exercise the option (see 13 CFR 124.521(e)(2)).
The revisions read as follows:
Alternate I ([MAR 2023 * * *
The revision reads as follows:
The revision reads as follows:
The revisions read as follows:
Alternate II (MAR 2023) * * *
The revision reads as follows:
The revision reads as follows:
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Final rule.
This document makes an amendment to the Federal Acquisition Regulation (FAR) in order to make needed editorial changes.
Effective: February 14, 2023.
Ms. Lois Mandell, Regulatory Secretariat Division (MVCB), at 202-501-4755 or
This document makes an editorial change to 48 CFR part 2.
Government procurement.
Therefore, DoD, GSA, and NASA amend 48 CFR part 2 as set forth below:
40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.
Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Small Entity Compliance Guide (SECG).
This document is issued under the joint authority of DoD, GSA, and NASA. This
February 14, 2023.
The FAC, including the SECG, is available at
For clarification of content, contact the analyst whose name appears in the table below. Please cite FAC 2023-02 and the FAR Case number. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755 or
Summaries for each FAR rule follow. For the actual revisions and/or amendments made by these FAR rules, refer to the specific item numbers and subjects set forth in the documents following these item summaries. FAC 2023-02 amends the FAR as follows:
This final rule provides for accelerated payments to contractors that are small businesses and to small business subcontractors by accelerating payments to their prime contractors. The rule implements section 873 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L. 116-92), which amends 31 U.S.C. 3903(a). The rule also implements section 815 of the William M. (Mac) Thornberry NDAA for FY 2021, which amended 10 U.S.C. 2307(a) (now found at 10 U.S.C. 3801). This final rule may have a positive impact on small entities, but it will not have a significant economic impact on a substantial number of small entities.
This final rule amends the FAR to align with SBA's regulations related to several topic areas. This rule clarifies that SBA determines size status as of the date of initial offer for a multiple-award contract, whether or not the offer includes price, or the price is evaluated. Additionally, in accordance with FAR 19.301-2(b)(2), the “ostensible subcontractor rule” (a small business must not be unduly reliant on a nonsimilarly situated small business subcontractor or have such a subcontractor perform the primary and vital requirements of the contract) is implemented in this rule as a new ground for socioeconomic status protest. The rule also clarifies that contracting officers will not be able to exercise options past the fifth year of long-term 8(a) contracts if the 8(a) contractor no longer qualifies for the 8(a) program. Lastly, the rule clarifies the size standard for the information technology value added resellers under North American Industry Classification System code 541519 is 150 employees, not 500 employees.
Administrative change is made at FAR 2.101.