The Department of Veterans Affairs (VA) Accountability and Whistleblower Protection Act of 2017, Public Law 115-41 (June 23, 2017), authorizes the Secretary of the VA to issue an order directing a VA employee to repay, in whole or in part, any award or bonus paid on or after June 23, 2017, to an employee under title 5, United States Code, including chapters 45 or 53, or title 38, United States Code, if it is determined the employee engaged in misconduct or poor performance prior to the payment of the award or bonus, and the award or bonus would not have been paid, in whole or in part, had the misconduct or poor performance been known prior to payment. Furthermore, the law authorizes the Secretary of the VA to issue an order to an employee to repay the amount, or a portion of the amount, paid to or on behalf of an employee under title 5, United States Code, for relocation expenses, including 5 U.S.C. 5724 and 5724a, or title 38, United States Code, if it is determined the relocation expenses were paid on or after June 23, 2017, following an act of fraud or malfeasance that influenced the authorization of the relocation expenses. Finally, the law authorizes the Secretary of the VA to reduce retirement benefits of employees convicted of certain crimes and removed for performance or misconduct. In all cases, the law provides that, upon issuance of an order by the Secretary, the individual has the right to appeal the order to the Director of the Office of Personnel Management (OPM). However, this rulemaking will only address appeals to the Director of OPM regarding recoupment of awards, bonuses, and relocation expenses. Appeals of orders regarding reduction of retirement benefits of employees convicted of certain crimes will be addressed in a future rulemaking.

Section 204 of Public Law 115-41 amended subchapter I of chapter 7 of title 38, United States Code, by adding a new section 721. Specifically, 38 U.S.C. 721 outlines procedural requirements for recoupment of awards or bonuses paid to VA employees. If the Secretary determines an individual has engaged in misconduct or poor performance prior to payment of the award or bonus and that such award or bonus would not have been paid, in whole or in part, had the misconduct or poor performance been known prior to payment, the Secretary must provide certain procedural protections before issuing an order for repayment. Before such repayment, the employee is afforded (A) notice of the proposed order; and (B) an opportunity to respond to the proposed order by not later than 10 business days after the receipt of such notice. If the individual responds to the proposed order, the Secretary will issue an order not later than five business days after receiving the individual's response. If the individual does not respond to the proposed order, the Secretary will issue an order not later than 15 business days after the Secretary provides notice to the individual. These procedures are outlined in VA policies  1 and are not part of this rulemaking. It is important to note that neither the law nor VA policies require the VA to have taken a disciplinary action, adverse action, or performance-based action for the Secretary to seek recoupment of any awards or bonuses, nor do they prohibit recouping an award or bonus in addition to taking a disciplinary, adverse, or performance-based action. The order by the Secretary only needs to show that the Secretary has determined the employee has engaged in misconduct or poor performance and that the award or bonus would not have been paid had the misconduct or poor performance been known at the time of the award. Upon the issuance of an order by the Secretary, the individual may appeal the order to the Director of OPM before the date that is seven business days after the date of such issuance. This rulemaking establishes the appeal procedures to OPM.

Section 205 of Public Law 115-41 amended subchapter I of chapter 7 of title 38, United States Code, by adding a new section 723. Specifically, 38 U.S.C. 723 outlines procedural requirements for recoupment of relocation expenses paid to or on behalf of VA employees. If the Secretary determines that relocation expenses were paid following an act of fraud or malfeasance that influenced the authorization of the relocation expenses, the Secretary must provide certain procedural protections before the Secretary decides to issue an order directing an individual to repay the amount, or a portion of the amount, paid to or on behalf of the individual for relocation expenses. Before such repayment, the employee is afforded (A) notice of the proposed order; and (B) an opportunity to respond to the proposed order by not later than 10 business days after the receipt of such notice. If the individual responds to the proposed order, the Secretary will issue an order not later than five business days after receiving the individual's response. If the individual does not respond to the proposed order, the Secretary will issue an order not later than 15 business days after the Secretary provides notice to the individual. These procedures are also outlined in VA policies  2 and are not part of this rulemaking. It is important to note that neither the law nor VA policies require the VA to have taken a disciplinary action or adverse action for the Secretary to seek recoupment of relocation expenses, nor do they prohibit recouping relocation expenses in addition to taking a disciplinary, adverse, or performance-based action. The order by the Secretary only needs to show that the Secretary has determined the employee has engaged in an act of fraud or malfeasance that influenced the authorization of the relocation expenses. Upon the issuance of an order by the Secretary, the individual may appeal the order to the Director of OPM before the date that is seven business days after the date of such issuance. As noted earlier, this rulemaking addresses the appeal procedures to OPM.

This interim final rule establishes a new part in the Code of Federal Regulations at 5 CFR part 755 with subparts A and B. Subpart A outlines appeal procedures for recoupment of awards and bonuses for all employees of the VA. Subpart B outlines appeal procedures for recoupment of relocation expenses for all employees of the VA. In addition to the statutory requirements guiding OPM in the development of this interim final rule, OPM was informed by the procedures established by the VA regarding recoupment of awards, bonuses, or relocation expenses outlined in VA Handbook 5017/20, Employee Recognition and Awards.

OPM is adding a new part at 5 CFR part 755 to implement the appeals procedures for recoupment of awards, bonuses, and relocation expenses for employees of the VA. This new part is entitled “Appeal Procedures for Recoupment of Awards, Bonuses, or Relocation Expenses Awarded or Approved for All Employees of the Department of Veterans Affairs.” The following sections discuss the scope and procedures within the subparts of part 755.

Under part 755, OPM is adding a new subpart A which will be known as “Awards and Bonuses.” These new procedures are outlined below.

Subpart A applies to a current or former civil service employee of the Department of Veterans Affairs (VA). OPM has concluded that a “current employee” is an individual appointed in the civil service as outlined in 5 U.S.C. 2105 or under title 38 regarding VA civil service employees. This subpart does not apply to contractor employees performing work at the VA on behalf of a contractor because contractor employees are not appointed in the civil service. In recognition of the possibility that VA may issue a recoupment order after an employee has left the VA, for example through transfer to another agency, removal, resignation, or retirement from Federal service, former VA employees are also covered by this appeal process.

Specifically, subpart A is limited to appeals filed pursuant to 38 U.S.C. 721 by an “employee” of the VA to the Director of OPM, or designee, regarding an order by the Secretary of the VA, or designee, directing the employee to repay the amount, or a portion of the amount, of any award or bonus paid to the employee under title 5, United States Code, including chapters 45 or 53 of such title, or title 38, United States Code. OPM has determined this includes, among other provisions under title 5, awards and bonuses paid pursuant to 5 U.S.C. chapter 45 (Awards); 5 U.S.C. 5336 (Additional Step Increases commonly known as Quality Step Increases); 5 U.S.C. 5384 (Performance awards in the Senior Executive Service); 5 U.S.C. 5753 and 5754 (Recruitment, Relocation, and Retention Bonuses); and any title 38 authorities regarding awards and bonuses.

OPM's review on appeal is limited to whether the procedures in VA's policies on recoupment were followed or, in the absence of any such policies, the VA's order was otherwise in compliance with 38 U.S.C. 721. As discussed in more detail elsewhere in this rule (see, e.g., discussion regarding § 755.103), OPM believes the statutory timeframes established by Congress suggest that Congress did not intend for OPM to conduct a more fulsome or comprehensive review of the merits concerning the VA's order. Furthermore, Congress did not provide OPM the authority to adjudicate the underlying decisions by the VA regarding any disciplinary or adverse action or any performance-based action. Accordingly, subpart A does not cover appeals regarding any disciplinary or adverse action, or any performance-based action taken by the VA, even if such action serves as the basis for the Secretary of the VA, or designee, to order recoupment of a bonus or award paid to an employee of the VA. Likewise, OPM will not review any discrimination claim or prohibited personnel practice claim raised in any appeal. Depending on the employee, VA may have multiple legal authorities available for addressing misconduct and performance issues, such as 5 U.S.C. chapter 75 (Adverse Actions); 5 U.S.C. 4303 (Actions based on unacceptable performance); 5 U.S.C. 3592 (addressing unacceptable performance for SES); and various title 38, United States Code, authorities for addressing misconduct or unacceptable performance. These statutory authorities have separate appeals or grievance procedures to address any adverse actions or performance-based actions taken by the VA and may serve as the basis for the Secretary of the VA, or designee, to order recoupment of awards or bonuses. Employees may file discrimination complaints to the Equal Employment Opportunity Commission (EEOC) and prohibited personnel practice complaints with the U.S. Office of Special Counsel (OSC). VA employees should consult with their servicing human resources office with questions regarding applicable grievance or appeal rights regarding any disciplinary or adverse action, or performance-based actions, that may be taken against an employee.

To implement the statutory timeframes established by Congress, OPM is defining the term “business days” to mean weekdays, which are Monday through Friday, except when such a day is designated as a Federal holiday by OPM, or the employee's assigned facility or OPM is closed for regular business, e.g., inclement weather, lapse in appropriations. OPM notes that this definition is similar to the definition of “Business Days” outlined in VA's policy regarding the recoupment of awards and bonuses but notes that the calculation of business days is slightly different from that established in VA's policy. VA's definition of a business day is based upon the employee's receipt of an order, whereas OPM defines a business day, for the purposes of an appeal to OPM, as beginning on the first business day after the issuance of the order to the employee. OPM's approach to calculating business days mirrors the statutory language in 38 U.S.C. 721(b)(1), promotes consistent use of an objective timeframe, and avoids the risk of presumption of delivery.

This section describes the procedures for VA employees to follow when submitting an appeal regarding a VA order for recoupment of an award or bonus under 38 U.S.C. 721. An employee may file an appeal to the Director of OPM by U.S. mail or by email, within seven business days after the date of issuance of the order pursuant to 38 U.S.C. 721(a)(3). This time limit is established in law. Appeals which are untimely filed may be dismissed resulting in the VA's decision being upheld. OPM, for good cause shown, may accept an untimely appeal. OPM adopts the approach taken by the Merit Systems Protection Board in Alonzo v. Department of the Air Force, 4 MSPB 262, 4 M.S.P.R. 180 (1980), in determining whether an employee establishes good cause for the untimely filing of an appeal.

If the employee elects to file by the U.S. mail, it must be addressed to Director, U.S. Office of Personnel Management, 1900 E Street NW, Room 7H28 (Attention: Accountability and Workforce Relations), Washington, DC 20415. OPM will rely upon the postmark to determine timeliness for filing the appeal. If the employee elects to file by email, it must be sent to employeeaccountability@opm.gov. OPM will rely upon the date the email was sent to determine timeliness for filing the appeal.

The law does not specify the content for any appeal filed with OPM. Therefore, OPM has determined what information OPM needs to adequately consider the appeal. OPM is requiring that minimum information to be included in any appeal to reflect the narrow grant of authority 38 U.S.C. 721 gives to OPM. The appeal must be submitted in writing and must be signed by the employee or their representative. OPM is not requiring a specific form be used in filing the appeal, but any appeal must include the specified information for OPM to properly adjudicate the appeal. The written appeal must include (1) a copy of the notice of proposed order received pursuant to 38 U.S.C. 721(a)(2)(A); (2) a copy of the employee's response to the proposed order, if any; (3) a copy of the order received pursuant to 38 U.S.C. 721(a)(3); (4) a statement explaining why the employee believes the order received pursuant to 38 U.S.C. 721(a)(3) is in error; (5) the name, mailing address, telephone number, and email address of the employee and, if applicable, the same information for their representative; and (6) the name, mailing address, telephone number, and email address of the VA official who issued the order pursuant to 38 U.S.C. 721(a)(3). OPM will notify the VA upon receipt of a complete, timely appeal. The VA must provide OPM a copy of the evidence file relied upon in proposing and deciding its recoupment order as soon as possible but no later than five business days after OPM sends its notice to the VA. For OPM to make an appropriate decision, OPM must have all necessary facts and evidence relied upon by the VA when making its recoupment decision. If necessary, OPM may request VA provide information in addition to the evidence file. For example, OPM may need additional information to address the employee's belief the order by the VA was in error. Any additional information requested by OPM must be provided to OPM within five business days after OPM's request. VA must also furnish a copy of any additional information requested by and provided to OPM to the employee. VA's failure to provide the evidence file or any requested additional information to OPM will result in a finding against the VA.

An employee covered by this subpart is entitled to be represented by an attorney or other representative. OPM may disallow as an employee's representative an individual whose activities as representative would cause a conflict of interest or position, or an employee of any agency whose release from their official position would give rise to unreasonable costs or whose priority work assignments preclude their release. This is consistent with other complaint processes regulated by OPM.

Finally, it is unclear to OPM whether the appeal rights to OPM are the exclusive process for bargaining unit employees to challenge a VA order on recoupment of awards or bonuses or whether VA bargaining unit employees may file a grievance under any applicable negotiated grievance procedure which ends in binding arbitration. OPM requests comment on whether bargaining unit employees may use the negotiated grievance process under 5 U.S.C. 7121 to challenge a VA order in lieu of filing an appeal with OPM. OPM also requests comment on whether this determination is impacted by whether the award or bonus was originally paid under title 5 authority or under title 38 authority.

The law provides that, upon the issuance of an order by the Secretary, an individual shall have an opportunity to appeal the order to the Director of OPM within seven business days after the date of such issuance. The law further provides that the Director shall make a final decision regarding the appeal within 30 business days after receiving the appeal. Therefore, due to this compressed timeline, OPM has determined the best way to fulfill its obligations to render a timely decision on any appeal is to base the decision on the written record only, which will include the submissions by the employee and the agency. There will be no formal hearing procedures for this appeal.

The burden is upon the employee to establish the timeliness of the appeal and to explain why the VA's order is in error as to one or both of the bases found in 38 U.S.C. 721(a)(1). OPM may uphold the VA order if the employee or their designated representative fails to provide required information. As noted previously, OPM will also uphold the VA order if the appeal was untimely filed without good cause shown for the delay.

Since Congress did not provide OPM the authority to adjudicate decisions by the VA regarding any disciplinary or adverse action, or any performance-based action, OPM's review of the VA order is limited to whether the procedures in VA's policies on recoupment of awards and bonuses  3 pursuant to 38 U.S.C. 721 were followed, or, in the absence of such policies, whether the order was otherwise in compliance with the statute. In other words, OPM will not review whether any disciplinary or adverse action, or performance-based action, which may have been relied upon by the VA in its recoupment order, was appropriate. OPM will accept the facts found by the VA regarding the disciplinary or adverse action, performance-based action, or other type of finding or action, if any, which was relied upon by the VA in making its recoupment decision. As noted earlier, OPM will not review any discrimination claim or prohibited personnel practice claim raised in any appeal. Employees may file complaints with the EEOC or OSC, where appropriate.

Within 30 business days after receiving an appeal, OPM will make a decision on the employee's appeal. OPM will then send a written appeal decision to the employee or to the employee's representative, if any, advising whether the VA order is upheld by OPM. OPM will send the VA a copy of the appeal decision. This time limit is consistent with the statutory requirements.

Pursuant to 38 U.S.C. 721(b)(2), the OPM decision on appeal is final. There will not be any further administrative review available within OPM, and thus this rule does not establish any process for requests for reconsideration. The law is silent regarding any statutory right to judicial review of an OPM appeal decision. Accordingly, although OPM will send its appeal decision to the employee, OPM will not provide an accompanying statement of “appeal rights.” OPM requests comment on whether a VA employee may seek judicial review of an OPM final decision. If so, where would judicial review occur? OPM may revise its procedures to address appeals based on comments received.

Under part 755, OPM is adding a new subpart B which will be known as “Relocation Expenses.” These new procedures are outlined below.

Like subpart A, subpart B applies to a current or former civil service employee of the Department of Veterans Affairs (VA). OPM has concluded that a “current employee” is an individual appointed in the civil service as outlined in 5 U.S.C. 2105 or under title 38, United States Code, regarding VA civil service employees. This subpart does not apply to contractor employees performing work at the VA on behalf of a contractor because contractor employees are not appointed in the civil service. In recognition of the possibility that VA may issue a recoupment order for relocation expenses after an employee has left the VA, for example through transfer to another agency, resignation from Federal service, removal, or retirement from Federal service, former VA employees are covered by this appeal process.

Specifically, subpart B is limited to appeals filed pursuant to 38 U.S.C. 723 by an “employee” of the VA to the Director of OPM, or designee, regarding an order by the Secretary of the VA, or designee, directing the employee to repay the amount, or a portion of the amount, paid to or on behalf of the employee for relocation expenses under title 5, United States Code, including any expenses under section 5724 or 5724a of title 5, or under title 38, United States Code.

OPM's review on appeal is limited to whether the procedures in VA's policies on recoupment of relocation expenses were followed or, in the absence of any such policies, whether the VA's order was otherwise in compliance with 38 U.S.C. 723. As discussed in more detail elsewhere in this rule (see, e.g., discussion regarding § 755.203), OPM believes the statutory timeframes established by Congress suggest that Congress did not intend for OPM to conduct a more fulsome or comprehensive review of the merits concerning the VA's order. Furthermore, as previously discussed in subpart A, Congress did not provide OPM the authority to adjudicate the underlying decisions by the VA regarding any disciplinary or adverse action or any performance-based action. Accordingly, subpart B does not cover appeals regarding any disciplinary or adverse action, or any performance-based action taken by the VA and which can serve as the basis for the Secretary of the VA, or designee, to order recoupment of relocation expenses paid to an employee of the VA. Likewise, OPM will not review any discrimination claim or prohibited personnel practice claim raised in any appeal. Depending on the employee, VA may have multiple legal authorities for addressing misconduct and performance issues such as 5 U.S.C. chapter 75 (Adverse Actions); 5 U.S.C. 4303 (Actions based on unacceptable performance); 5 U.S.C. 3592 (addressing unacceptable performance for SES); and any title 38 authorities for addressing misconduct or unacceptable performance. These statutory authorities have separate appeals or grievance procedures which address any adverse actions or performance-based actions taken by the VA and which may happen to serve as the basis for the Secretary of the VA, or designee, to order recoupment of relocation expenses. Employees may file complaints with the EEOC or OSC, where appropriate. VA employees should consult with their servicing human resources office with questions regarding applicable grievance or appeal rights regarding any disciplinary or adverse action, or performance-based actions that may be taken against an employee.

OPM is defining “business days” to mean weekdays, which are Monday through Friday, except when such a day is designated as a Federal holiday by OPM, or the employee's assigned facility or OPM is closed for regular business, e.g., inclement weather, lapse in appropriations. OPM notes that this definition is similar to the definition of “Business Days” outlined in VA's policy regarding the recoupment of relocation expenses but notes that the calculations of business days is slightly different from that established in VA's policy. VA's definition of a business day is based upon the employee's receipt of an order, whereas OPM defines a business day, for the purposes of an appeal to OPM, as beginning on the first business day after the issuance of the order to the employee. OPM's approach to calculating business days mirrors the statutory language in 38 U.S.C. 721(b)(1), promotes consistent use of an objective timeframe, and avoids the risk of presumption of delivery.

This section describes the procedures for VA employees to follow when submitting an appeal regarding a VA order for recoupment of relocation expenses as provided by 38 U.S.C. 723. An employee may file an appeal to the Director of OPM by U.S. mail or by email, within seven business days after the date of issuance of the order pursuant to 38 U.S.C. 723(a)(3). Like the time limit established for recoupment of awards and bonuses, this time limit is established in law. Appeals which are untimely filed may be dismissed resulting in the VA's decision being upheld. OPM, for good cause shown, may accept an untimely appeal. OPM adopts the approach taken by the Merit Systems Protection Board in Alonzo v. Department of the Air Force, 4 MSPB 262, 4 M.S.P.R. 180 (1980), in determining whether an employee establishes good cause for the untimely filing of an appeal.

If the employee elects to file by the U.S. mail, it must be addressed to Director, U.S. Office of Personnel Management, 1900 E Street, NW, Room 7H28 (Attention: Accountability and Workforce Relations), Washington, DC 20415. OPM will rely upon the postmark to determine timeliness for filing the appeal. If the employee elects to file by email, it must be sent to employeeaccountability@opm.gov. OPM will rely upon the date the email was sent to determine timeliness for filing the appeal.

The law does not specify the content for any appeal filed with OPM. Therefore, OPM has determined what information OPM needs to adequately consider the appeal. The appeal must be submitted in writing and must be signed by the employee or their representative. OPM is not requiring a specific form be used in filing the appeal, but any appeal must include the specified information for OPM to properly adjudicate the appeal. The written appeal must include (1) a copy of the notice of proposed order received pursuant to 38 U.S.C. 723(a)(2)(A); (2) a copy of the employee's response to the proposed order, if any; (3) a copy of the order received pursuant to 38 U.S.C. 723(a)(3); (4) a statement explaining why the employee believes the order received pursuant to 38 U.S.C. 723(a)(3) is in error; (5) the name, mailing address, telephone number, and email address of the employee and their representative if the employee has elected to be represented; and (6) the name, mailing address, telephone number, and email address of the VA official who issued the order pursuant to 38 U.S.C. 723(a)(3). OPM will notify the VA upon receipt of a complete, timely appeal. The VA must provide OPM a copy of the evidence file relied upon in proposing and deciding its recoupment order as soon as possible but no later than five business days after OPM sends its notice to the VA. For OPM to make an appropriate decision, OPM must have all necessary facts and evidence relied upon by the VA when making its recoupment decision. If necessary, OPM may request VA provide information in addition to the evidence file. For example, OPM may need additional information to address the employee's belief the order by the VA was in error. Any additional information requested by OPM must be provided to OPM within five business days after OPM's request. VA must also furnish a copy of any additional information requested by and provided to OPM to the employee. VA's failure to provide the evidence file or any requested additional information to OPM will result in a finding against the VA.

An employee covered by this subpart is entitled to be represented by an attorney or other representative. OPM may disallow as an employee's representative an individual whose activities as representative would cause a conflict of interest or position, or an employee of any agency whose release from their official position would give rise to unreasonable costs or whose priority work assignments preclude their release. This is consistent with other complaint processes regulated by OPM.

Finally, like the appeal process for recoupment of awards and bonuses, it is unclear to OPM whether the appeal rights to OPM are the exclusive process for bargaining unit employees to challenge a VA order on recoupment of relocation expenses or whether VA bargaining unit employees may file a grievance under any applicable negotiated grievance procedure which ends in binding arbitration. OPM requests comment on whether bargaining unit employees may use the negotiated grievance process under 5 U.S.C. 7121 to challenge a VA order in lieu of filing an appeal with OPM. OPM also requests comment on whether this determination is impacted by whether the relocation expense was originally paid under title 5 authority or under title 38 authority.

The law provides that, upon the issuance of an order by the Secretary, an individual shall have an opportunity to appeal the order to the Director of OPM within seven business days after the date of such issuance. The law further provides that the Director shall make a final decision regarding the appeal within 30 business days after receiving the appeal. Therefore, due to this compressed timeline, OPM has determined the best way to fulfill its obligations to render a timely decision on any appeal is to base the decision on the written record only, which will include the submissions by the employee and the agency. Like the appeal process for recoupment of awards and bonuses, there will be no formal hearing procedures for this appeal.

The burden is upon the employee to establish the timeliness of the appeal and to explain why the VA's order is in error under 38 U.S.C. 723. OPM may uphold the VA order if the employee or their designated representative fails to provide required information. As noted previously, OPM will also uphold the VA order if the appeal was untimely filed without good cause shown for the delay.

Since Congress did not provide OPM the authority to adjudicate decisions by the VA regarding any disciplinary or adverse action, or any performance-based action, OPM's review of the VA order is limited to whether the procedures in VA's policies on recoupment of relocation expenses  4 pursuant to 38 U.S.C. 723 were followed, or, in the absence of such policies, compliance with the statute. In other words, OPM will not review whether any disciplinary or adverse action, or performance-based action, which may have been relied upon by the VA in its recoupment order was appropriate. OPM will accept the facts found by the VA regarding the disciplinary or adverse action, or performance-based action, which was relied upon by the VA in making its recoupment decision. OPM will not review any discrimination claim or prohibited personnel practice claim raised in any appeal. Employees may file complaints with the EEOC or OSC, where appropriate.

Within 30 business days after receiving an appeal, OPM will make a decision on the employee's appeal. OPM will then send a written appeal decision to the employee or to the employee's representative, if any, advising whether the VA order is upheld by OPM. OPM will send the VA a copy of the appeal decision. This time limit is consistent with the statutory requirements.

Pursuant to 38 U.S.C. 723(b)(2), the OPM appeal decision is final. There will not be any further administrative review available within OPM, and thus this rule does not establish any process for requests for reconsideration. Like appeals of recoupment of awards and bonuses, the law is silent regarding any statutory right to judicial review of an OPM appeal decision. Accordingly, although OPM will send its appeal decision to the employee, OPM will not provide an accompanying statement of “appeal rights.” OPM requests comment on whether a VA employee may seek judicial review of an OPM final decision. If so, where would judicial review occur? OPM may revise its procedures to address appeals based on comments received.

OPM is issuing this rulemaking as an interim final rule because it has determined that, under the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(B), it would be impracticable to delay a final regulation until a public notice and comment process has been completed. VA finalized its internal policies regarding implementation of the authority to recoup awards, bonuses, and relocation expenses on January 29, 2024. Following the issuance of that policy, VA began using the authority to pursue recoupment actions, which could be appealed to OPM imminently if an order to recoup is issued. Therefore, OPM must be ready to receive and adjudicate appeals from VA employees. As explained in further detail below, OPM was unable to develop procedures until it had a better understanding of what process VA would provide and what record would be available for OPM review. VA finalized its internal policies regarding implementation of the authority to recoup awards, bonuses, and relocation expenses on January 29, 2024. OPM developed this interim final rule after review of VA's policies and procedures, consideration of legal and policy options, and consultation with VA. OPM also believes that waiver of notice and comment is in the public interest. Although OPM has statutory authority to hear appeals, the public is better served to have clear, established procedures that are easily accessible in the Code of Federal Regulations than for OPM to operate under uncodified procedures that could be variable or haphazard pending a final rule. This interim final rule is intended to provide near-term appellants with certainty with respect to the process for appealing a decision of the VA. OPM will seek to finalize this rule with the benefit of public insight as soon as possible. Accordingly, to ensure the regulations accurately reflect the current state of the law and to provide clear procedures for an employee seeking OPM review of a VA recoupment order, OPM finds that good cause exists to waive the general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b)(B). Expeditious issuance of this interim final regulation is required to prevent confusion and promote fairness as VA exercises its statutory authority resulting in appeals to OPM. OPM will promulgate a final rule, reflecting consideration of public comments, as soon as practical after receiving public comments on the interim final rule. In addition to welcoming comment on the provisions codified in this interim final rule, OPM invites comment on a number of additional procedural topics outlined below that OPM could address in the final rule.

Pursuant to 5 U.S.C. 553(d)(3), OPM finds that good cause exists to waive the 30-day delay in effective date and make these procedural regulations effective in upon publication. The delay in effective date is being waived because the provisions of the law regarding recoupment of bonuses, awards, or relocation expenses ( see 38 U.S.C. 721 and 723) became effective upon enactment, June 23, 2017, and the VA finalized its internal procedures regarding this law on January 29, 2024. In crafting this rule, OPM considered the VA's internal procedures, first, to ensure it designed an effective and efficient process for adjudicating appeals given the limited period of time afforded OPM by sections 721(b) and 723(b) to issue a decision. Additionally, OPM's jurisdiction is limited to a review of whether the procedures in VA's policies on recoupment of relocation expenses were followed or, in the absence of any such policies, whether the VA's order was otherwise in compliance with section 721 or 723. To issue a rule before VA established its internal procedures would have been unworkable and may have created inefficiencies that would either delay or rush OPM in reaching a decision; both of which would unnecessarily prejudice VA employees and the VA.

OPM also believes that after VA finalized its policy, the VA began exercising its authority under this statute and, if an order to recoup is issued, that OPM could receive an appeal prior to the standard 30-day effective date. A delay in the effective date could result in confusion and inconsistency in how to file an appeal with OPM and the content needed for such an appeal. In the interest of fairness and timely resolution for any VA employee who is subjected to a recoupment order in the near future, it is imperative to give effect to this rule as soon as practicable.

This interim final rule implements portions of sections 204 and 205 of Public Law 115-41, the Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017, which provides VA employees certain appeal rights to the Director of OPM regarding decisions by the VA to recoup awards, bonuses, or relocation expenses. These sections of Public Law 115-41 amend chapter 7 of title 38, United States Code. Under these authorities, OPM is prescribing additional details of the appeal process to provide consistency and transparency.

An alternative to this rulemaking is to not issue a regulation or any procedures regarding the appeals process. The law is silent on whether OPM must issue any policies or rules governing the appeals process. However, if OPM does not issue any policies or rules on the appeals process, this likely will result in confusion regarding how OPM will administer the appeals process as the law only outlines the right to appeal to the Director of OPM; the time limit for a VA employee to file an appeal; and a time limit for the Director to issue a decision regarding any appeal. The rule includes procedural protections for both the VA and employees during the appeal process that are not included in the statute that help inform OPM's decision-making and protect against prejudice. We view these risks in the absence of this rule as particularly elevated given the VA's past use of recoupment authority and stated intention to continue its use. Without further clarification of and inclusion of additional procedures OPM, the VA, and VA employees will follow, there will likely be confusion on procedural requirements, less-informed decision-making, and procedural prejudice to the parties.

Another alternative is to publish these procedures on OPM's public facing website. This provides some transparency regarding how OPM will administer the process. However, the public and interested stakeholders would not be provided an opportunity to review and provide comments and recommendations regarding the procedures since the procedures would not be published through a rulemaking process. Furthermore, 5 U.S.C. 552(a)(1) requires agencies to publish administrative adjudicatory procedures in the Federal Register . Moreover, given that the regulations apply only to VA employees, publishing these procedures on OPM's public facing website may cause confusion for the many non-VA employees who visit OPM's website for information.

Finally, another alternative is to publish this as a proposed rule seeking public comment instead of an interim final rule seeking public comment. This would mean the public and interested stakeholders would be provided an opportunity to review and provide comments and recommendations regarding the procedures in the traditional rulemaking process. However, following issuance of its final policy, VA began exercising its authority to recoup awards, bonuses, and relocation expenses. If the VA issues an order to recoup a bonus, award, or relocation expense before any final rule is published, the employee has a right under the law to appeal to the Director of OPM. This means OPM would be obligated to render a decision on any appeal before OPM has finalized and publicized any appeal process. As discussed in greater detail above in the sections on Waiver of Notice of Proposed Rule Making and Waiver of Delay in Effective Date and in the interest of fairness and transparency to all VA employees, OPM believes it is imperative to publish procedures as soon as possible now that VA has finalized its internal policies on these matters.

OPM is issuing this interim final rule to provide consistency and transparency regarding appeals by VA employees regarding orders by the VA to recoup awards, bonuses, or relocation expenses previously paid to these employees. Congress provided VA employees appeal rights regarding such orders by the VA. OPM's interim final rule provides more clarity regarding this appeal process. It provides VA employees with structure and an explanation of what to expect and provides employees with security that they will receive fair, consistent treatment in the consideration of an appeal.

The costs associated with the interim final rule are minimal. Most costs of this rule are expected to only impact OPM with some minor costs to the VA as it relates to the appeal process. No other Federal agencies are affected by this rule. We do not believe this rule will substantially increase the ongoing administrative costs to OPM or the VA. We anticipate OPM will leverage existing staff and resources to administer the appeal process. To a lesser extent, we anticipate VA will leverage existing staff and resources to respond to requests from OPM for information regarding decisions by the VA to recoup awards, bonuses, or relocation expenses. For VA employees appealing to OPM, we view the costs imposed upon these employees by this interim rule as minimal and limited to submitting existing information and a statement supporting any appeal.

With the above in mind, we estimate this rule will involve such activities as reviewing and analyzing VA employee appeals by OPM subject matter experts; requesting additional information from the VA as necessary; drafting a recommended appeal decision for the OPM Director or designee; meeting between OPM subject matter experts with the OPM Director or designee, if needed, regarding the recommended appeal decision; and taking steps to communicate the appeal decision by the OPM Director or designee to the employee or their representative and the VA. For this cost analysis, the assumed staffing for Federal employees performing the work required by the regulation is one executive; one GS-15, step 5; one GS-14, step 5; and one GS-13, step 5, in the Washington, DC, locality area. The 2024 basic rate of pay for an executive at an agency with a certified SES performance appraisal system is $246,400 annually, or $118.06 per hour. For General Schedule employees in the Washington, DC, locality area, the 2024 pay table rates are $185,824 annually and $89.04 hourly for GS-15, step 5; $157,982 annually and $75.70 hourly for GS-14; and $133,692 annually and $64.06 hourly for GS-13, step 5. We assume that the total dollar value of labor, which includes wages, benefits, and overhead, is equal to 200 percent of the wage rate, resulting in assumed hourly labor costs of $236.13 for an executive; $178.08 for a GS-15, step 5; $151.40 for a GS-14, step 5; and $128.12 for a GS-13, step 5. While OPM has no baseline data to estimate how many appeals will be filed with OPM, OPM is estimating that each appeal received will require an average of 40 hours of work by employees with an average hourly cost of $173.43. This would result in estimated costs of about $6,937.20 for OPM for each appeal filed with OPM.

As already noted, the VA will provide OPM a copy of the evidence file for the appeal process. OPM anticipates a negligible cost to the VA for providing the requested file. While VA may incur some costs regarding decisions it makes regarding recoupment of awards, bonuses, or relocation expenses, such matters are not covered by this interim final rule and are covered by VA policies.

Finally, the costs to VA employees appealing an order will be limited to the submission of the required information necessary for processing an appeal. All required information of an appeal is limited and readily available to the employee as nearly all of the required information is provided to the employee by VA or previously submitted by the employee to the VA. The only new information required of the employee is a statement supporting an appeal to OPM which we anticipate repeats much of the information previously provided to VA and which is required to be submitted as part of any appeal.

This interim final rule will benefit VA employees. This interim rule will provide consistency and transparency regarding the procedures OPM will follow when processing appeals by VA employees regarding decisions by the VA regarding recoupment of awards, bonuses, or relocations expenses. This final rule provides clarity regarding the procedural protections Congress has provided VA employees on such matters.

In addition to the questions posed in the description of the procedural regulations (repeated below) and given the unique nature of OPM's responsibility for adjudicating employee appeals on matters unique to only one Federal agency, OPM requests comments on the implementation and impact of this interim final rule. The types of information on which OPM is interested in public comments includes, but is not limited to, the following:

• If a disciplinary or adverse action, or performance-based action, relied upon by the VA in recoupment of an award, bonus, or relocation expense is subject to a grievance or appeal in a separate process and the grievance or appeal is still pending, how should this impact any decision by OPM? What if the disciplinary or adverse action, or performance-based action, relied upon by the VA is later overturned in the separate process after any decision by OPM regarding the recoupment by the VA?

• May VA bargaining unit employees use the negotiated grievance process under 5 U.S.C. 7121 to challenge a VA recoupment order in lieu of filing an appeal with OPM? Or do 38 U.S.C. 721 and 723 provide the sole method to challenge a VA recoupment order?

• Does coverage by the negotiated grievance procedure depend on whether the award or bonus was paid under title 5 authority or by title 38 authority?

• May a VA employee seek judicial review of an OPM final decision? If so, where would judicial review occur?

• Should OPM publish its appeal decisions and make them publicly available?

OPM welcomes comments on the answers to these questions and recommendations regarding whether and how these questions should be addressed in OPM regulations in a final rule. OPM may adopt additional procedures to address these and other issues identified in public comments in a final rule.

OPM has examined the impact of this rulemaking as required by Executive Orders 12866 (Sept. 30, 1993), 13563 (Jan. 18, 2011), and 14094 (Apr. 6, 2023), which 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). A regulatory impact analysis must be prepared for major rules with effects of $200 million or more in any one year. This rulemaking does not reach that threshold but has otherwise been designated as a “significant regulatory action” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094.

The Director of OPM certifies that this regulation will not have a significant impact on a substantial number of small entities.

This regulation will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132 (Aug. 10, 1999), it is determined that this interim final rule does not have sufficient federalism implications to warrant preparation of a Federalism Assessment.

This regulation meets the applicable standard set forth in Executive Order 12988.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits before issuing any rule that would impose spending costs on State, local, or Tribal governments in the aggregate, or on the private sector, in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold is currently approximately $183 million. This regulation will not result in the expenditure by State, local, or Tribal governments, in the aggregate, or by the private sector, in excess of the threshold. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

The Office of Information and Regulatory Affairs in the Office of Management and Budget has determined that this rule does not satisfy the criteria listed in 5 U.S.C. 804(2).

Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless the collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This rule does not result in a collection of information subject to the PRA.

OPM anticipates that the case records would be subject to the Privacy Act and will be covered by the new OPM System of Records Notice (SORN) “OPM/Internal-29, VA Recoupment and Reduction Appeals to OPM,” which is published elsewhere in this issue of the Federal Register .

In November 2015, Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (sec. 701 of Pub. L. 114-74) (the 2015 Act), which further amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410). The 2015 Act required Federal agencies to make annual inflationary adjustments to the civil monetary penalties (CMPs) within their jurisdiction, to be effective no later than January 15 of each year.

The Ethics in Government Act as amended, chapter 131, title 5 of the United States Code, provides for five CMPs. 1 Specifically, the Ethics in Government Act provides for penalties that can be assessed by an appropriate United States district court, based upon a civil action brought by the Department of Justice, for the following five types of violations:

(1) knowing and willful failure to file, report required information on, or falsification of a public financial disclosure report, 5 U.S.C. 13106(a)(1), 5 CFR 2634.701(b);

(2) knowing and willful breach of a qualified trust by trustees and interested parties, 5 U.S.C. 13104(f)(6)(C)(i), 5 CFR 2634.702(a);

(3) negligent breach of a qualified trust by trustees and interested parties, 5 U.S.C. 13104(f)(6)(C)(ii), 5 CFR 2634.702(b);

(4) misuse of a public report, 5 U.S.C. 13107(c)(2), 5 CFR 2634.703; and

(5) violation of outside employment/activities provisions, 5 U.S.C. 13145(a), 5 CFR 2636.104(a).

In compliance with the 2015 Act and guidance issued by the Office of Management and Budget (OMB), the U.S. Office of Government Ethics (OGE) made previous inflationary adjustments to the five Ethics in Government Act CMPs, and is issuing this rulemaking to effectuate the 2025 annual inflationary adjustments to those CMPs. In accordance with the 2015 Act, these adjustments are based on the percent change between the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October preceding the date of the adjustment, and the prior year's October CPI-U. Pursuant to OMB guidance, the cost-of-living adjustment multiplier for 2025, based on the CPI-U for October 2024, not seasonally adjusted, is 1.02598. To calculate the 2025 annual adjustment, agencies must multiply the most recent penalty by the 1.02598 multiplier, and round to the nearest dollar.

Applying the formula established by the 2015 Act and OMB guidance, OGE is amending the Ethics in Government Act CMPs through this rulemaking to:

(1) Increase the three penalties reflected in 5 CFR 2634.702(a), 2634.703, and 2636.104(a)—which were previously adjusted to a maximum of $24,496—to a maximum of $25,132;

(2) Increase the penalty reflected in 5 CFR 2634.702(b)—which was previously adjusted to a maximum of $12,249—to a maximum of $12,567; and

(3) Increase the penalty reflected in 5 CFR 2634.701(b)—which was previously adjusted to a maximum of $73,627—to a maximum of $75,540.

These adjusted penalty amounts will apply to penalties for violations that occurred after November 2, 2015 and that are assessed after January 15, 2025 (the effective date of this final rule). OGE will continue to make future annual inflationary adjustments to the Ethics in Government Act CMPs in accordance with the statutory formula set forth in the 2015 Act and OMB guidance.

Pursuant to 5 U.S.C. 553(b), as Director of the Office of Government Ethics, I find that good cause exists for waiving the general notice of proposed rulemaking and public comment procedures as to these technical amendments. The notice and comment procedures are being waived because these amendments, which concern matters of agency organization, procedure and practice, are being adopted in accordance with statutorily mandated inflation adjustment procedures of the 2015 Act, which specifies that agencies shall adjust civil monetary penalties notwithstanding Section 553 of the Administrative Procedure Act. It is also in the public interest that the adjusted rates for civil monetary penalties under the Ethics in Government Act become effective as soon as possible in order to maintain their deterrent effect.

As the Director of the Office of Government Ethics, I certify under the 5 U.S.C. 553(b) that this final rule would not have a significant economic impact on a substantial number of small entities because it primarily affects current Federal executive branch employees.

The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply because this regulation does not contain information collection requirements that require approval of the Office of Management and Budget.

For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. chapter 25, subchapter II), this rule would not significantly or uniquely affect small governments and will not result in increased expenditures by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (as adjusted for inflation) in any one year.

Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select the regulatory approaches that maximize net benefits (including economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The Office of Management and Budget has determined that rulemakings such as this implementing annual inflationary adjustments under the 2015 Act are not significant regulatory actions under Executive Order 12866.

As Director of the Office of Government Ethics, I have reviewed this rule in light of section 3 of Executive Order 12988, Civil Justice Reform, and certify that it meets the applicable standards provided therein.

For the reasons set forth in the preamble, the U.S. Office of Government Ethics is amending 5 CFR parts 2634 and 2636 as follows:

Table of Contents I. Background II. Discussion III. Rulemaking Procedure IV. Section-by-Section Analysis V. Regulatory Analysis VI. Regulatory Flexibility Act VII. Backfitting and Issue Finality VIII. Plain Writing IX. National Environmental Policy Act X. Paperwork Reduction Act XI. Congressional Review Act I. Background

Congress passed the Federal Civil Penalties Inflation Adjustment Act of 1990 (FCPIAA) to allow for regular adjustment for inflation of civil monetary penalties (CMPs), maintain the deterrent effect of such penalties and promote compliance with the law, and improve the collection of CMPs by the Federal government (Pub. L. 101-410, 104 Stat. 890; 28 U.S.C. 2461 note). Pursuant to this authority, and as amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-34, 110 Stat. 1321-373), the NRC increased via rulemaking the CMP amounts for violations of the Atomic Energy Act of 1954, as amended (AEA) (codified at § 2.205 of title 10 of the Code of Federal Regulations (10 CFR), “Civil penalties”) and Program Fraud Civil Remedies Act (codified at § 13.3, “Civil penalties and assessments”) on four occasions between 1996 and 2008. 1

On November 2, 2015, Congress amended the FCPIAA through the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Improvements Act) (Sec. 701, Pub. L. 114-74, 129 Stat. 599). The 2015 Improvements Act required that the head of each agency perform an initial “catch-up” adjustment via rulemaking, adjusting the CMPs enforced by that agency according to the percentage change in the Consumer Price Index (CPI) between the month of October 2015 and the month of October of the calendar year when the CMP amount was last established by Congress. The NRC published this catch-up rulemaking on July 1, 2016 (81 FR 43019).

The 2015 Improvements Act also requires that the head of each agency continue to adjust CMP amounts, rounded to the nearest dollar, on an annual basis. Specifically, each CMP is to be adjusted based on the percentage change between the CPI for the month of October, and the CPI for the month of October for the previous year. The NRC most recently adjusted its civil penalties for inflation according to this statutory formula on January 12, 2024 (89 FR 2112). This year's adjustment is based on the increase in the CPI from October 2023 to October 2024.

Section 234 of the AEA limits civil penalties for violations of the AEA to $100,000 per day, per violation (42 U.S.C. 2282). However, as discussed in Section I, “Background,” of this document, the NRC has increased this amount several times since 1996 per the FCPIAA, as amended. Using the formula in the 2015 Improvements Act, the $362,814 amount last established in January 2024 will increase by 2.598 percent, resulting in a new CMP amount of $372,240. This is based on the increase in the CPI from October 2023 (307.671) to October 2024 (315.664). Therefore, the NRC is amending § 2.205 to reflect a new maximum CMP under the AEA in the amount of $372,240 per day, per violation. This represents an increase of $9,426.

Monetary penalties under the Program Fraud Civil Remedies Act were established in 1986 at $5,000 per claim (Pub. L. 99-509, 100 Stat. 1938; 31 U.S.C. 3802). The NRC also has adjusted this amount (currently set at $13,946) multiple times pursuant to the FCPIAA, as amended, since 1996. Using the formula in the 2015 Improvements Act, the $13,946 amount last established in January 2024 will increase by 2.596 percent, resulting in a new CMP amount of $14,308. Therefore, the NRC is amending § 13.3 to reflect a new maximum CMP amount of $14,308 per claim or statement. This represents an increase of $362.

As permitted by the 2015 Improvements Act, the NRC may apply these increased CMP amounts to any penalties assessed by the agency after the effective date of this final rule (January 15, 2024), regardless of whether the associated violation occurred before or after this date (Pub. L. 114-74, 129 Stat. 600; 28 U.S.C. 2461 note). The NRC assesses civil penalty amounts for violations of the AEA based on the class of licensee and severity of the violation, in accordance with the NRC Enforcement Policy, which is available under ADAMS Accession No. ML24205A249.

The 2015 Improvements Act expressly exempts this final rule from the notice and comment requirements of the Administrative Procedure Act by directing agencies to adjust CMPs for inflation “notwithstanding section 553 of title 5, United States Code” (Pub. L. 114-74, 129 Stat. 599; 28 U.S.C. 2461 note). As such, this final rule is being issued without prior public notice or opportunity for public comment, with an effective date of January 15, 2024.

This final rule revises paragraph (j) by replacing “$362,814” with “$372,240.”

This final rule revises paragraphs (a)(1)(iv) and (b)(1)(ii) by replacing “$13,946” with “$14,308.”

This final rule adjusts for inflation the maximum CMPs the NRC may assess under the AEA and under the Program Fraud Civil Remedies Act of 1986. The formula for determining the amount of the adjustment is mandated by Congress in the FCPIAA, as amended by the 2015 Improvements Act (codified at 28 U.S.C. 2461 note). Congress passed this legislation on the basis of its findings that the power to impose monetary civil penalties is important to deterring violations of Federal law and furthering the policy goals of Federal laws and regulations. Congress has also found that inflation diminishes the impact of these penalties and their effect. The principal purposes of this legislation are to provide for adjustment of civil monetary penalties for inflation, maintain the deterrent effect of civil monetary penalties, and promote compliance with the law. Therefore, these are the anticipated impacts of this rulemaking. Direct monetary impacts fall only upon licensees or other persons subjected to NRC enforcement for violations of the AEA and regulations and orders issued under the AEA (§ 2.205), or those licensees or persons subjected to liability pursuant to the provisions of the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-3812) and the NRC's implementing regulations (10 CFR part 13).

The Regulatory Flexibility Act does not apply to regulations for which a Federal agency is not required by law, including the rulemaking provisions of the Administrative Procedure Act, 5 U.S.C. 553(b), to publish a general notice of proposed rulemaking (5 U.S.C. 604). As discussed in this notice under Section III, “Rulemaking Procedure,” of this document, this final rule is exempt from the requirements of 5 U.S.C. 553(b) and notice and comment need not be provided. Accordingly, the NRC also determines that the requirements of the Regulatory Flexibility Act do not apply to this final rule.

The NRC has not prepared a backfit analysis for this final rule. This final rule does not involve any provision that would impose a backfit, nor is it inconsistent with any issue finality provision, as those terms are defined in 10 CFR chapter I. As mandated by Congress, this final rule increases CMP amounts for violations of already-existing NRC regulations and requirements. This final rule does not modify any licensee systems, structures, components, designs, approvals, or procedures required for the construction or operation of any facility.

The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal agencies to write documents in a clear, concise, and well-organized manner. The NRC has written this document to be consistent with the Plain Writing Act as well as the Presidential Memorandum, “Plain Language in Government Writing,” published June 10, 1998 (63 FR 31885).

The NRC has determined that this final rule is the type of action described as a categorical exclusion in § 51.22(c)(1). Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this final rule.

This final rule does not contain a collection of information as defined in the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) and, therefore, is not subject to the requirements of the Paperwork Reduction Act of 1995.

This final rule is a rule as defined in the Congressional Review Act (5 U.S.C. 801-808). However, the Office of Management and Budget has not found it to be a major rule as defined in the Congressional Review Act.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; 28 U.S.C. 2461 note; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR parts 2 and 13:

The Federal Reserve Banks make primary and secondary credit available to depository institutions as a backup source of funding on a short-term basis, usually overnight. The primary and secondary credit rates are the interest rates that the twelve Federal Reserve Banks charge for extensions of credit under these programs. In accordance with the Federal Reserve Act, the primary and secondary credit rates are established by the boards of directors of the Federal Reserve Banks, subject to review and determination of the Board.

On December 18, 2024, the Board voted to approve a 0.25 percentage point decrease in the primary credit rate, thereby decreasing the primary credit rate from 4.75 percent to 4.50 percent. In addition, the Board had previously approved the renewal of the secondary credit rate formula, the primary credit rate plus 50 basis points. Under the formula, the secondary credit rate decreased by 0.25 percentage points as a result of the Board's primary credit rate action, thereby decreasing the secondary credit rate from 5.25 percent to 5.00 percent. The amendments to Regulation A reflect these rate changes.

The 0.25 percentage point decrease in the primary credit rate was associated with a 0.25 percentage point decrease in the target range for the federal funds rate (from a target range of 4 1/2 percent to 4 3/4 percent to a target range of 4 1/4 percent to 4 1/2 percent) announced by the Federal Open Market Committee on December 18, 2024, as described in the Board's amendment of its Regulation D published elsewhere in today's Federal Register .

In general, the Administrative Procedure Act (“APA”)  1 imposes three principal requirements when an agency promulgates legislative rules (rules made pursuant to Congressionally delegated authority): (1) publication with adequate notice of a proposed rule; (2) followed by a meaningful opportunity for the public to comment on the rule's content; and (3) publication of the final rule not less than 30 days before its effective date. The APA provides that notice and comment procedures do not apply if the agency for good cause finds them to be “unnecessary, impracticable, or contrary to the public interest.”  2 Section 553(d) of the APA also provides that publication at least 30 days prior to a rule's effective date is not required for (1) a substantive rule which grants or recognizes an exemption or relieves a restriction; (2) interpretive rules and statements of policy; or (3) a rule for which the agency finds good cause for shortened notice and publishes its reasoning with the rule. 3 The APA further provides that the notice, public comment, and delayed effective date requirements of 5 U.S.C. 553 do not apply “to the extent that there is involved . . . a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”  4

Regulation A establishes the interest rates that the twelve Reserve Banks charge for extensions of primary credit and secondary credit. The Board has determined that the notice, public comment, and delayed effective date requirements of the APA do not apply to these final amendments to Regulation A. The amendments involve a matter relating to loans and are therefore exempt under the terms of the APA. Furthermore, because delay would undermine the Board's action in responding to economic data and conditions, the Board has determined that “good cause” exists within the meaning of the APA to dispense with the notice, public comment, and delayed effective date procedures of the APA with respect to the final amendments to Regulation A.

The Regulatory Flexibility Act (“RFA”) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 5 As noted previously, a general notice of proposed rulemaking is not required if the final rule involves a matter relating to loans. Furthermore, the Board has determined that it is unnecessary and contrary to the public interest to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

In accordance with the Paperwork Reduction Act (“PRA”) of 1995, 6 the Board reviewed the final rule under the authority delegated to the Board by the Office of Management and Budget. The final rule contains no requirements subject to the PRA.

For the reasons set forth in the preamble, the Board is amending 12 CFR chapter II as follows:

3  The primary, secondary, and seasonal credit rates described in this section apply to both advances and discounts made under the primary, secondary, and seasonal credit programs, respectively.

For monetary policy purposes, section 19 of the Federal Reserve Act (“Act”) imposes reserve requirements on certain types of deposits and other liabilities of depository institutions. 1 Regulation D, which implements section 19 of the Act, requires that a depository institution meet reserve requirements by holding cash in its vault, or if vault cash is insufficient, by maintaining a balance in an account at a Federal Reserve Bank (“Reserve Bank”). 2 Section 19 also provides that balances maintained by or on behalf of certain institutions in an account at a Reserve Bank may receive earnings to be paid by the Reserve Bank at least once each quarter, at a rate or rates not to exceed the general level of short-term interest rates. 3 Institutions that are eligible to receive earnings on their balances held at Reserve Banks (“eligible institutions”) include depository institutions and certain other institutions. 4 Section 19 also provides that the Board may prescribe regulations concerning the payment of earnings on balances at a Reserve Bank. 5 Prior to these amendments, Regulation D established IORB at 4.65 percent. 6

The Board is amending § 204.10(b)(1) of Regulation D to establish IORB at 4.4 percent. The amendment represents a 0.25 percentage point decrease in IORB. This decision was announced on December 18, 2024, with an effective date of December 19, 2024, in the Federal Reserve Implementation Note that accompanied the FOMC's statement on December 18, 2024. The FOMC statement stated that the Committee decided to lower the target range for the federal funds rate to 4 1/4 to 4 1/2 percent.

The Federal Reserve Implementation Note stated:

As a result, the Board is amending § 204.10(b)(1) of Regulation D to establish IORB at 4.4 percent.

In general, the Administrative Procedure Act (“APA”)  7 imposes three principal requirements when an agency promulgates legislative rules (rules made pursuant to Congressionally-delegated authority): (1) publication with adequate notice of a proposed rule; (2) followed by a meaningful opportunity for the public to comment on the rule's content; and (3) publication of the final rule not less than 30 days before its effective date. The APA provides that notice and comment procedures do not apply if the agency for good cause finds them to be “unnecessary, impracticable, or contrary to the public interest.”  8 Section 553(d) of the APA also provides that publication at least 30 days prior to a rule's effective date is not required for (1) a substantive rule which grants or recognizes an exemption or relieves a restriction; (2) interpretive rules and statements of policy; or (3) a rule for which the agency finds good cause for shortened notice and publishes its reasoning with the rule. 9

The Board has determined that good cause exists for finding that the notice, public comment, and delayed effective date provisions of the APA are unnecessary, impracticable, or contrary to the public interest with respect to these final amendments to Regulation D. The rate change for IORB that is reflected in the final amendment to Regulation D was made with a view towards accommodating commerce and business and with regard to their bearing upon the general credit situation of the country. Notice and public comment would prevent the Board's action from being effective as promptly as necessary in the public interest and would not otherwise serve any useful purpose. Notice, public comment, and a delayed effective date would create uncertainty about the finality and effectiveness of the Board's action and undermine the effectiveness of that action. Accordingly, the Board has determined that good cause exists to dispense with the notice, public comment, and delayed effective date procedures of the APA with respect to this final amendment to Regulation D.

The Regulatory Flexibility Act (“RFA”) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 10 As noted previously, the Board has determined that it is unnecessary and contrary to the public interest to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

In accordance with the Paperwork Reduction Act (“PRA”) of 1995, 11 the Board reviewed the final rule under the authority delegated to the Board by the Office of Management and Budget. The final rule contains no requirements subject to the PRA.

For the reasons set forth in the preamble, the Board amends 12 CFR part 204 as follows:

The objective of this regulation is to adjust the maximum CMPs for inflation through a final rulemaking to retain the deterrent effect of such penalties.

The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 (1996 Act) and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act) (collectively, 1990 Act, as amended), requires all Federal agencies with the authority to enforce CMPs to evaluate and adjust, if necessary, those CMPs each year to ensure that they continue to maintain their deterrent value and promote compliance with the law. Section 3(2) of the 1990 Act, as amended, defines a civil monetary penalty  1 as any penalty, fine, or other sanction that: (1) either is for a specific monetary amount as provided by Federal law or has a maximum amount provided for by Federal law; (2) is assessed or enforced by an agency pursuant to Federal law; and (3) is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts. 2

The FCA imposes and enforces CMPs through the Farm Credit Act  3 and the FDPA, as amended. 4 FCA's regulations governing CMPs are found in 12 CFR parts 622 and 623. Part 622 establishes rules of practice and procedure applicable to formal and informal hearings held before the FCA, and to formal investigations conducted under the Farm Credit Act. Part 623 prescribes rules regarding persons who may practice before the FCA and the circumstances under which such persons may be suspended or debarred from practice before the FCA.

Section 5.32(a) of the Farm Credit Act provides that any Farm Credit System (System) institution or any officer, director, employee, agent, or other person participating in the conduct of the affairs of a System institution who violates the terms of an order that has become final pursuant to section 5.25 or 5.26 of the Farm Credit Act must pay a maximum daily amount of $1,000, 5 for each day such violation continues. This CMP maximum was set by the Farm Credit Amendments Act of 1985, which amended the Farm Credit Act. Orders issued by the FCA under section 5.25 or 5.26 of the Farm Credit Act include temporary and permanent cease-and-desist orders. In addition, section 5.32(h) of the Farm Credit Act provides that any directive issued under sections 4.3(b)(2), 4.3A(e), or 4.14A(i) of the Farm Credit Act “shall be treated” as a final order issued under section 5.25 of the Farm Credit Act for purposes of assessing a CMP.

Section 5.32(a) of the Farm Credit Act also states that “[a]ny such institution or person who violates any provision of the [Farm Credit] Act or any regulation issued under this Act shall forfeit and pay a civil penalty of not more than $500  6 per day for each day during which such violation continues.” This CMP maximum was set by section 423 of the Agricultural Credit Act of 1987, which was enacted in 1988 and amended the Farm Credit Act. Current inflation-adjusted CMP maximums are set forth in existing § 622.61 of FCA regulations. 7

The FCA also enforces the FDPA, as amended, which requires FCA to assess CMPs for a pattern or practice of committing certain specific actions in violation of the National Flood Insurance Program. The FDPA states that the maximum CMP for a violation of that Act is $2,000. 8 9

The 2015 Act required all Federal agencies to adjust the CMPs yearly, starting January 15, 2017.

Under section 4(b) of the 1990 Act, as amended, annual adjustments are to be made no later than January 15. 10 Section 6 of the 1990 Act, as amended, states that any increase to a civil monetary penalty under this 1990 Act applies only to civil monetary penalties, including instances in which an associated violation predated the annual increase, which are assessed after the date the increase takes effect.

Section 5(b) of the 1990 Act, as amended, defines the term “cost-of-living adjustment” as the percentage (if any) for each civil monetary penalty by which (1) the Consumer Price Index (CPI) for the month of October of the calendar year preceding the adjustment, exceeds (2) the CPI for the month of October one year before the month of October referred to in (1) of the calendar year in which the amount of such civil monetary penalty was last set or adjusted pursuant to law. 11

The increase for each CMP adjusted for inflation must be rounded using a method prescribed by section 5(a) of the 1990 Act, as amended, by the 2015 Act. 12

If a civil monetary penalty is subject to a cost-of-living adjustment under the 1990 Act, as amended, but is adjusted to an amount greater than the amount of the adjustment required under the Act within the 12 months preceding a required cost-of-living adjustment, the agency is not required to make the cost-of-living adjustment to that CMP in that calendar year. 13

The adjustment requirement affects two provisions of section 5.32(a) of the Farm Credit Act. For the 2025 yearly adjustments to the CMPs set forth by the Farm Credit Act, the calculation required by the 2024 White House Office of Management and Budget (OMB) guidance  14 is based on the percentage by which the CPI for October 2024 exceeds the CPI for October 2023. The OMB set forth guidance, as required by the 2015 Act, 15 with a multiplier for calculating the new CMP values. 16 The 2024 OMB multiplier for the 2025 CMPs is 1.02598.

The adjustment also affects the CMPs set by the Flood Disaster Protection Act of 1973, as amended. The adjustment multiplier is the same for all FCA enforced CMPs, set at 1.02598. The maximum CMPs for violations were created in 2012 by the Biggert-Waters Act, which amended the Flood Disaster Protection Act of 1973.

The inflation-adjusted CMP currently in effect for violations of a final order occurring on or after January 15, 2024, is a maximum daily amount of $2,830. 17 Multiplying the $2,830 CMP by the 2024 OMB multiplier, 1.02598, yields a total of $2,903.52. When that number is rounded as required by section 5(a) of the 1990 Act, as amended, the inflation-adjusted maximum increases to $2,904. Thus, the new CMP maximum is $2,904, for violations that occur on or after January 15, 2025.

The inflation-adjusted CMP currently in effect for violations of the Farm Credit Act or regulations issued under the Farm Credit Act occurring on or after January 15, 2024, is a maximum daily amount of $1,280. 18 Multiplying the $1,280 CMP maximum by the 2024 OMB multiplier, 1.02598, yields a total of $1,313.25. When that number is rounded as required by section 5(a) of the 1990 Act, as amended the inflation-adjusted maximum increases to $1,313. Thus, the new CMP maximum is $1,313, for violations that occur on or after January 15, 2025.

The existing maximum CMP for a pattern or practice of flood insurance violations pursuant to 42 U.S.C. 4012a(f)(5) occurring on or after January 15, 2024, is $2,661. Multiplying $2,661 by the 2024 OMB multiplier, 1.02598, yields a total of $2,730.13. When that number is rounded as required by section 5(a) of the 1990 Act, as amended, the new maximum assessment of the CMP for violating 42 U.S.C. 4012a(f)(5) is $2,730. Thus, the new CMP maximum is $2,730, for violations that occur on or after January 15, 2025.

Section 4(b)(2) of the 1990 Act, as amended by section 701 of the 2015 Act (28 U.S.C. 2461 note), provides an exemption from the Administrative Procedure Act notice and comment requirements in 5 U.S.C. 553. Further, these revisions are ministerial, technical, and noncontroversial. For these reasons, the FCA has determined to adopt this rule in final form.

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), the FCA hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities. Each of the banks in the System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, System institutions are not “small entities” as defined in the Regulatory Flexibility Act.

For the reasons stated in the preamble, part 622 of chapter VI, title 12 of the Code of Federal Regulations is amended to read as follows:

Every Federal agency, including the NCUA, is required by law to adjust its maximum CMP amounts each year to account for inflation. Prior to this being an annual requirement, agencies were required to adjust their CMPs at least once every four years. The previous four-year requirement stemmed from the Debt Collection Improvement Act of 1996, 1 which amended the Federal Civil Penalties Inflation Adjustment Act of 1990. 2

The current annual requirement stems from the Bipartisan Budget Act of 2015, 3 which contains the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 amendments). 4 This legislation provided for an initial “catch-up” adjustment of CMPs in 2016, followed by annual adjustments. The catch-up adjustment reset CMP maximum amounts by setting aside the inflation adjustments that agencies made in prior years and instead calculated inflation with reference to the year when each CMP was enacted or last modified by Congress. Agencies were required to publish their catch-up adjustments in an interim final rule by July 1, 2016, and make them effective by August 1, 2016. 5 The NCUA complied with these requirements in a June 2016 interim final rule, followed by a November 2016 final rule to confirm the adjustments as final. 6

The 2015 amendments also specified how agencies must conduct annual inflation adjustments after the 2016 catch-up adjustment. Following the catch-up adjustment, agencies must make the required adjustments and publish them in the Federal Register by January 15 each year. 7 For 2017, the NCUA issued an interim final rule on January 6, 2017, 8 followed by a final rule issued on June 23, 2017. 9 For each of the years 2018 through 2024, the NCUA issued a final rule to satisfy the agency's annual requirements. 10 This final rule satisfies the agency's requirement for the 2025 annual adjustment.

The law provides that the adjustments shall be made notwithstanding the section of the Administrative Procedure Act (APA) that requires prior notice and public comment for agency rulemaking. 11 The 2015 amendments also specify that each CMP maximum must be increased by the percentage by which the consumer price index for urban consumers (CPI-U)  12 for October of the year immediately preceding the year the adjustment is made exceeds the CPI-U for October of the prior year. 13 Thus, for the adjustment to be made in 2025, an agency must compare the October 2023 and October 2024 CPI-U figures.

An annual adjustment under the 2015 amendments is not required if a CMP has been amended in the preceding 12 months pursuant to other authority. Specifically, the statute provides that an agency is not required to make an annual adjustment to a CMP if in the preceding 12 months it has been increased by an amount greater than the annual adjustment required by the 2015 amendments. 14 The NCUA did not make any adjustments in the preceding 12 months pursuant to other authority. Therefore, this rulemaking adjusts all of the NCUA's CMPs pursuant to the 2015 amendments.

This section applies the statutory requirements and the Office of Management and Budget's (OMB) guidance to the NCUA's CMPs and sets forth the Board's calculation of the 2025 adjustments.

The 2015 amendments directed OMB to issue guidance to agencies on implementing the inflation adjustments. 15 OMB is required to issue its guidance each December and, with respect to the 2025 annual adjustment, did so on December 17, 2024. 16 For 2025, Federal agencies must adjust the maximum amounts of their CMPs by the percentage by which the October 2024 CPI-U (315.664) exceeds the October 2023 CPI-U (307.671). The resulting increase can be expressed as an inflation multiplier (1.02598) to apply to each current CMP maximum amount to determine the adjusted maximum. The OMB guidance also addresses rulemaking procedures and agency reporting and oversight requirements for CMPs. 17

The following table presents the adjustment calculations. The current maximums are found at 12 CFR 747.1001, as adjusted by the final rule that the Board approved in January 2024. This amount is multiplied by the inflation multiplier to calculate the new maximum in the far-right column. Only these adjusted maximum amounts, and not the calculations, will be codified at 12 CFR 747.1001 under this final rule. The adjusted amounts will be effective upon publication in the Federal Register and can be applied to violations that occurred on or after November 2, 2015, the date the 2015 amendments were enacted. 18

One major source of demand for consumer credit is derived from the mismatch of when American workers receive compensation for their labor and when they incur expenses. While there have long been sources of credit for consumers to pay expenses in advance of receiving their compensation, there are a number of new offerings that seek to provide additional choices for consumers.

Instead of being paid daily or upfront, American workers generally provide services before employers pay for those services some time later—typically on a biweekly or semi-monthly wage cycle. 1 Employers have a strong incentive to delay payment, since these delays reduce working capital needs. Nearly three-quarters of non-farm payroll employees remain paid biweekly or even less frequently, and the remainder are generally paid their wages weekly. To address liquidity challenges, many consumers therefore turn to credit products, such as payday loans, personal installment loans, and credit cards. In recent years, American consumers have significantly expanded their use of products sometimes marketed as “earned wage access” or “earned wage advance.”  2 As these paycheck advance products generally have features that make them subject to the CFPB's jurisdiction, the CFPB has sought to understand these and other products, particularly those offered online, by engaging in ongoing monitoring of the market, including, for example, collecting and analyzing data, engaging with stakeholders ( e.g., market participants, consumer groups, and States), tracking and studying market developments, and conducting market research, among other things.

While many of these products have similarities to payday loans, there are important distinctions. The CFPB has found that there are two emerging models of earned wage products: employer-partnered and direct-to-consumer.

For “employer-partnered” products, providers contract with employers to offer funds in amounts not exceeding accrued wages. Those funds are recovered via one or more payroll deductions, lowering the consumer's paychecks accordingly, with other recourse options generally unavailable to the provider. In contrast, “direct-to-consumer” products provide funds to employees in amounts that are not as strictly limited by accrued wages. Some of these products limit advances to an amount estimated to be below accrued wages and do not consider other factors. Others consider estimated accrued wages as one of several factors when determining the amount to advance. Still others do not expressly state that estimated accrued wages are a factor considered despite being marketed as earned wage products. Regardless of the exact model, funds are generally recovered via automated withdrawal from the consumer's bank account, 3 and generally without limit to the provider's ability to seek further recourse as necessary. 4

Some of the differences between these two types of earned wage products, however, are starting to erode. For example, some direct-to-consumer providers are now connecting directly to payroll records and recouping funds from payroll deductions, and ongoing State legal developments may cause them to limit their recourse options as well. 5

Before the CFPB's market monitoring of these products intensified, the CFPB issued an advisory opinion in November 2020, 6 that described how one particular type of earned wage product does not involve the offering or extension of “credit” as that term is defined in the Truth in Lending Act (TILA) and Regulation Z (2020 Advisory Opinion). 7 The opinion explained that an earned wage product is not TILA or Regulation Z credit if it meets all of several identified conditions, including: providing the consumer with no more than the amount of accrued wages earned; provision by a third party fully integrated with the employer; no consumer payment, voluntary or otherwise, beyond recovery of paid amounts via a payroll deduction from the next paycheck, and no other recourse or collection activity of any kind; and no underwriting or credit reporting. 8 The 2020 Advisory Opinion was silent about whether earned wage products that do not meet all of these conditions are credit under TILA and Regulation Z. 9

In July 2024, the CFPB proposed an interpretive rule on this same topic (2024 Proposed Interpretive Rule) and voluntarily sought public comment. The comment period closed on August 30, 2024.

The CFPB is rescinding the 2020 Advisory Opinion for two fundamental reasons: (i) its legal analysis is significantly flawed in numerous respects; and (ii) it engendered substantial regulatory uncertainty.

Section 1026.2(a)(14) of Regulation Z defines “credit” as “the right to defer payment of debt or to incur debt and defer its payment.”  10 TILA defines “credit” virtually identically as “the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.”  11 However, TILA and Regulation Z do not define “debt.” Regulation Z provides that undefined terms “have the meanings given to them by state law or contract.”  12

The first analytical flaw of the 2020 Advisory Opinion is that its consideration of the meaning of “debt” under state law was insufficient. It did not mention the Regulation Z rule of construction that undefined terms have the meanings given to them by state law or contract. It only cited a portion of the definition of debt in a recent edition of Black's Law Dictionary, and did not survey the definitions of debt in state laws, or other relevant bodies of law, including applicable circuit court case law on the definition of “debt” in TILA and Regulation Z. 13

Second, the 2020 Advisory Opinion inferred that the consumer does not incur a liability when using the narrowly limited type of earned wage product covered by the opinion, but did not sufficiently justify the inference. The main rationale provided for the inference was that this type of product “ functionally operates like an employer that pays its employees earlier than the scheduled payday.”  14 The opinion did not elaborate on what constitutes functional operation, or the relevance of the fact that the employer is not literally paying the employee's wages early.

Third, the 2020 Advisory Opinion did not consider all relevant factors as part of the “totality of the circumstances” approach it applied to determine what is “credit.” The opinion stated only that “features often found in credit transactions are absent from” this type of product and that transactions involving this type of product are “[u]nlike many credit transactions. . . .”  15 The 2020 Advisory Opinion, however, did not consider any of the features of wage advance products commonly found in credit transactions, including a consumer's receipt of funds, consumer repayment of those funds, and the wage garnishment tool used to effectuate repayment. Nor did the 2020 Advisory Opinion explain how its “totality of the circumstances” approach derived from the definition of “credit.”

Fourth, the opinion's claim that it was supported by certain statements in the 2017 Payday Rule is unpersuasive. The Payday Rule did not make a determination as to whether earned wage products are credit, stating only that some product constructs “may not be” credit. The CFPB declined to perform the more detailed analysis necessary to come to a considered conclusion on the boundaries of TILA and Regulation Z at that time because the rulemaking was based on the CFPB's UDAAP authority, not TILA and Regulation Z. Some earned wage products may not be covered by the Payday Rule because of its “wage advance” and “no cost advance” exclusions. 16 However, these exclusions can only apply to earned wage products to the extent that such products are TILA and Regulation Z credit. As a result, the CFPB's earlier decision to exclude certain earned wage product constructs from the Payday Rule has no impact on the credit status of such products under TILA or Regulation Z.

With the Framework for Artificial Intelligence Diffusion interim final rule, the Commerce Department's Bureau of Industry and Security (BIS) revises the Export Administration Regulations' (EAR) controls on advanced computing integrated circuits (ICs) and adds a new control on artificial intelligence (AI) model weights for certain advanced closed-weight dual-use AI models. In conjunction with the expansion of these controls, which BIS has determined are necessary to protect U.S. national security and foreign policy interests, BIS is adding new license exceptions and updating the Data Center Validated End User authorization to facilitate the export, reexport, and transfer (in-country) of advanced computing ICs to end users in destinations that do not raise national security or foreign policy concerns.Together, these changes will cultivate secure ecosystems for the responsible diffusion and use of AI and advanced computing ICs.

On January 15, 2025, BIS will host a public briefing to address the details of this rule. The virtual public briefing will be held on January 15, 2025. The virtual public briefing will begin at 12 p.m. EST and conclude at 1 p.m. EST.

To participate in the public meeting virtually, register at: https://events.gcc.teams.microsoft.com/event/a0c17530-aae8-43e0-b64c-e2f9bafbbcf4@44cf3ec3-840c-4086-b7de-e3bc9a6c2db4 no later than 9 a.m. EST on January 15, 2025, for virtual participation. This web page will also display the agenda of the public meeting and any other necessary information.

For any special accommodation needs, please send an email to: rpd2@bis.doc.gov.

On May 6, 2021, the Department of Labor (“DOL” or “Department”) issued a notice of proposed rulemaking (“NPRM”) in the Federal Register (“FR”) to amend its regulations regarding the adjudication of temporary and seasonal need for employers seeking herding or production of livestock on the range job opportunities under the H-2A program. See Adjudication of Temporary and Seasonal Need for Herding and Production of Livestock on the Range Applications Under the H-2A Program, 86 FR 24368 (May 6, 2021) (“NPRM”). The NPRM was open for public comment for 30 days until June 7, 2021. See Adjudication of Temporary and Seasonal Need for Herding and Production of Livestock on the Range Applications Under the H-2A Program, 86 FR 71373, 71376 (Dec. 16, 2021) (“Final Rule”). On December 16, 2021, DOL published the Final Rule in the FR. See Final Rule, 86 FR 71373. The Final Rule went into effect on January 18, 2022. Id.

Since publication of the Final Rule, a question has been raised in litigation concerning whether a separate rule, Adverse Effect Wage Rate Methodology for the Temporary Employment of H-2A Nonimmigrants in the Non-Range Occupations in the United States, 88 FR 12760 (Feb. 28, 2023), was approved by the Attorney General in consultation with the Secretary of Labor and the Secretary of Agriculture. 8 U.S.C. 1188, Statutory Note. 1 With respect to the Final Rule, prior to its issuance on December 16, 2021, the Final Rule was provided to the Departments of Homeland Security and Agriculture through the interagency review process prescribed by Executive Order 12866. Further, on December 31, 2024, the Secretary of Homeland Security, in consultation with the Secretary of Labor and Secretary of Agriculture, approved the Final Rule.

To resolve any possible uncertainty with respect to the Final Rule, the Department, through its Assistant Secretary for Employment and Training, is ratifying the Final Rule. Under established case law, an agency may, through ratification, “purge[ ] any residual taint or prejudice left over from” a potential defect in a prior governmental action. 2 The Department is issuing this ratification out of an abundance of caution, and this ratification is not a statement that the Final Rule is invalid absent this ratification.

By virtue of the authority vested in the Secretary of Labor by law, including by the Immigration and Nationality Act of 1952, as amended, 8 U.S.C. 1101 et seq. (“INA”), and as delegated to the Assistant Secretary for Employment and Training, 75 FR 66268, I am affirming and ratifying a prior action by Angela Hanks, Acting Assistant Secretary for Employment and Training. On December 16, 2021, the Employment and Training Administration published in the FR the Final Rule codifying amendments to the Department's regulations regarding the adjudication of temporary need for employers seeking to employ nonimmigrant workers in job opportunities covering the herding or production of livestock on the range. 86 FR 71373 (Dec. 16, 2021).

The Final Rule was signed by Acting Assistant Secretary Hanks. I have full and complete knowledge of the Final Rule action taken by former Acting Assistant Secretary Hanks. Subsequent to the Secretary of Homeland Security's documented approval of the Final Rule dated December 31, 2024, in consultation with the Secretary of Labor and Secretary of Agriculture, and out of an abundance of caution and to avoid any doubt as to its validity, I have independently evaluated the Final Rule and the basis for adopting it. I have determined that the amendments to the regulations in the Final Rule are consistent with the Secretary of Labor's statutory responsibility to certify that there are insufficient able, willing, and qualified U.S. workers available to perform the needed work and that the employment of H-2A workers will not adversely affect the wages and working conditions of workers in the United States similarly employed. I have also determined that the changes adopted in the Final Rule strike an appropriate balance between the statute's competing goals of providing employers with an adequate supply of legal agricultural labor and protecting the wages of workers in the United States similarly employed by ensuring the Department's adjudication of temporary or seasonal need is conducted in the same manner for all applications for temporary agricultural labor certification, consistent with statute's requirements. I also agree with the Department's certification that the Final Rule does not have a significant economic impact on a substantial number of small entities. See Final Rule, 86 FR 71382.

Therefore, pursuant to my authority as the Assistant Secretary for Employment and Training, and based on my independent review of the action and the reasons for taking it, I hereby affirm and ratify the Final Rule, as of January 10, 2025, including all regulatory analysis certifications contained therein. This action is taken without prejudice to any right to litigate the validity of the Final Rule as approved and published on December 16, 2021. Nothing in this action is intended to suggest any legal defect or infirmity in the approval or publication of the Final Rule.

On April 15, 2015, the Department of Labor (“DOL” or “Department”) issued a notice of proposed rulemaking (“NPRM”) in the Federal Register (“FR”) to amend its regulations regarding the certification of temporary employment of nonimmigrant workers in temporary or seasonal agricultural employment in herding or the production of livestock on the range in the United States. See Temporary Agricultural Employment of H-2A Foreign Workers in the Herding or Production of Livestock on the Open Range in the United States, 80 FR 20300 (Apr. 15, 2015) (“NPRM”). The NPRM was open for public comment for 45 days until June 1, 2015. See Temporary Agricultural Employment of H-2A Foreign Workers in the Herding or Production of Livestock on the Range in the United States, 80 FR 62958 (Oct. 16, 2015) (“Final Rule”). On October 16, 2015, DOL published a final rule in the FR. See Final Rule, 80 FR at 62958. The Final Rule went into effect on November 16, 2015. Id.

Since publication of the Final Rule, a question has been raised in litigation concerning whether a separate rule, Adverse Effect Wage Rate Methodology for the Temporary Employment of H-2A Nonimmigrants in the Non-Range Occupations in the United States, 88 FR 12760 (Feb. 28, 2023), was approved by the Attorney General in consultation with the Secretary of Labor and the Secretary of Agriculture. 8 U.S.C. 1188, Statutory Note. 1 With respect to the Final Rule, prior to its issuance on October 15, 2015, the Final Rule was provided to the Departments of Homeland Security and Agriculture through the interagency review process prescribed by Executive Order 12866. Further, on December 31, 2024, the Secretary of Homeland Security, in consultation with the Secretary of Labor and Secretary of Agriculture, approved the Final Rule.

To resolve any possible uncertainty with respect to the Final Rule, the Department, through its Assistant Secretary for Employment and Training, is ratifying the Final Rule. Under established case law, an agency may, through ratification, “purge[ ] any residual taint or prejudice left over from” a potential defect in a prior governmental action. 2 The Department is issuing this ratification out of an abundance of caution, and this ratification is not a statement that the Final Rule is invalid absent this ratification.

By virtue of the authority vested in the Secretary of Labor by law, including by the Immigration and Nationality Act of 1952, as amended, 8 U.S.C. 1101 et seq. (“INA”), and as delegated to the Assistant Secretary for Employment and Training, 75 FR 66268, I am affirming and ratifying a prior action by Portia Wu, Assistant Secretary for Employment and Training. On October 16, 2015, the Employment and Training Administration published in the FR the Final Rule codifying amendments to the Department's regulations regarding the certification of temporary employment of nonimmigrant workers employed in temporary or seasonal agricultural employment, establishing standards and procedures for employers seeking to hire foreign temporary agricultural workers for job opportunities in herding and production of livestock on the range. 80 FR 62958 (Oct. 16, 2015).

The Final Rule was signed by Assistant Secretary Wu. I have full and complete knowledge of the Final Rule action taken by former Assistant Secretary Wu. Subsequent to the Secretary of Homeland Security's documented approval of the Final Rule dated December 31, 2024, in consultation with the Secretary of Labor and Secretary of Agriculture, and out of an abundance of caution and to avoid any doubt as to its validity, I have independently evaluated the Final Rule and the basis for adopting it. I have determined that the amendments to the regulations in the Final Rule are consistent with the Secretary of Labor's statutory responsibility to certify that there are insufficient able, willing, and qualified U.S. workers available to perform the needed work and that the employment of H-2A workers will not adversely affect the wages and working conditions of workers in the United States similarly employed. I have also determined that the changes adopted in the Final Rule strike an appropriate balance between the statute's competing goals of providing employers with an adequate supply of legal agricultural labor and protecting the wages of workers in the United States similarly employed by establishing regulatory standards and procedures applicable to the employment of workers in these unique occupations, which occur in remote areas and require workers to be on call for long periods of time. I also agree with the Department's certification that the Final Rule has a significant economic impact on a substantial number of small entities. See Final Rule, 80 FR 63039.

Therefore, pursuant to my authority as the Assistant Secretary for Employment and Training, and based on my independent review of the action and the reasons for taking it, I hereby affirm and ratify the Final Rule, as of January 10, 2025, including all regulatory analysis certifications contained therein. This action is taken without prejudice to any right to litigate the validity of the Final Rule as approved and published on October 16, 2015. Nothing in this action is intended to suggest any legal defect or infirmity in the approval or publication of the Final Rule.

Since 1994, the regulations governing the Federal acknowledgment process, located at 25 CFR part 83 (part 83), have included an express prohibition on re-petitioning (ban). When the Department revised the part 83 regulations in 2015 (2015 regulations), the Department decided to retain the ban; however, two Federal district courts held that the Department's stated reasons for doing so, as articulated in the final rule updating the regulations, were arbitrary and capricious under the Administrative Procedure Act. The courts remanded the ban to the Department for further consideration. In a 2022 notice of proposed rulemaking (2022 proposed rule), the Department initially proposed to retain the ban. Subsequently, in a second notice of proposed rulemaking published at 89 FR 57097 on July 12, 2024 (2024 proposed rule), the Department proposed to create a limited exception to the ban, through implementation of a re-petition authorization process. In this final rule, the Department adopts a limited exception to the ban.

Congress granted the Secretary of the Interior, as delegated to the Assistant Secretary—Indian Affairs (AS-IA), authority for “the management of all Indian affairs and of all matters arising out of Indian relations.”  1 This authority includes the authority to implement an administrative process to acknowledge Indian Tribes. 2 As the congressional findings that support the Federally Recognized Indian Tribe List Act of 1994 indicate, Indian Tribes may be recognized “by the administrative procedures set forth in part 83 of the Code of Federal Regulations.”  3

Part 83 codifies the process through which a group may petition the Department for acknowledgment as a federally recognized Indian Tribe. Part 83 requires groups petitioning for Federal acknowledgment to meet seven mandatory criteria, the satisfaction of which has been central to the Federal acknowledgment process since its inception. 4 The Department refers to the seven criteria as the (a) “Indian Entity Identification” criterion, (b) “Community” criterion, (c) “Political Authority” criterion, (d) “Governing Document” criterion, (e) “Descent” criterion, (f) “Unique Membership” criterion, and (g) “Congressional Termination” criterion. 5

First promulgated in 1978 at 25 CFR part 54 (1978 regulations), 6 the Federal acknowledgment regulations were subsequently moved to part 83  7 and revised in 1994 (1994 regulations), 8 in part, “to clarify requirements for acknowledgment and define more clearly standards of evidence.”  9 The 1994 regulations also implemented procedural changes to the acknowledgment process, including “an independent review” of a final determination on a part 83 petition by the Interior Board of Indian Appeals and an “opportunity for a formal hearing on proposed findings.”  10 In the final rule promulgating the 1994 regulations, the Department explained that, notwithstanding the revisions, “the standards of continuity of tribal existence that a petitioner must meet remain unchanged” and that “none of the changes . . . will result in the acknowledgment of petitioners which would not have been acknowledged under the [1978] regulations.”  11

The Department revised part 83 again in 2015 (2015 regulations). In the final rule promulgating the 2015 regulations (2015 final rule), the Department explained that the purpose of the revision was to “increase timeliness and efficiency, while maintaining the integrity and substantive rigor of the [Federal acknowledgment] process.”  12 To that end, the Department introduced several process-related reforms, including a two-phased review of the seven mandatory criteria. In Phase I, the Office of Federal Acknowledgment (OFA) reviews criteria (d) (Governing Document) through (g) (Congressional Termination), and in Phase II, OFA evaluates criteria (a) (Indian Entity Identification) through (c) (Political Authority). 13 If a petitioner does not satisfy any of the Phase I criteria, then, instead of moving to Phase II, OFA publishes a negative proposed finding, which can then serve as the basis for a final determination on the Phase I criteria alone, 14 saving time and resources. 15 Additionally, to promote efficiency, the Department limited the number of technical assistance reviews that OFA can provide to a petitioner, permitting only one during each phase. 16

The Department emphasized in the 2015 final rule that the rule “clarifies the criteria” but “does not substantively change the Part 83 criteria, except in two instances.”  17 In the first instance, the Department revised criterion (a) (Indian Entity Identification) to accept “the petitioner's own contemporaneous records, as evidence that the petitioner has been an Indian entity since 1900,”  18 not only the records of external observers. 19 Second, the Department revised a provision under criterion (b) (Community) describing how the Department evaluates evidence of endogamy (that is, marriages within a petitioner's membership). 20 Other changes to the criteria in the 2015 regulations include the following:

1. A new evaluation start date for criterion (b) (Community) and (c) (Political Authority), from 1789 or the time of first sustained contact, to 1900, consistent with the 1900 start date for criterion (a) (Indian Entity Identification);  21

2. A change to criterion (e) (Descent) to emphasize the “great weight” that the Department places on “tribal Federal rolls prepared at the direction of Congress or by the Department” during the evaluation of the criterion;  22

3. The deletion of a condition in criterion (f) (Unique Membership) that required a petitioner to show that its members do not maintain a “bilateral political relationship” with a federally recognized Indian tribe, in the event that the petitioner's membership is composed principally of members of the federally recognized tribe;  23 and

4. The insertion of a new provision under criteria (b) (Community) and (c) (Political Authority), clarifying that evidence of “land set aside by a State for the petitioner or collective ancestors of the petitioner” may be used to satisfy the criteria. 24

In proposed rules published in April 2022 and July 2024, the Department discussed each of the changes identified above, 25 as well as the Department's view that none of the 2015 final rule's changes to part 83 “would affect the outcome of the Department's previous, negative final determinations.”  26 The 2022 and 2024 proposed rules are discussed in subsequent sections of this rule.

The 1978 regulations were silent on the question of re-petitioning, but since the 1994 revision of part 83, the Federal acknowledgment regulations have expressly prohibited petitioners that receive a negative final determination from the Department from re-petitioning. 27 The final rule updating the regulations in 1994 notes that although some commenters had expressed concern that “undiscovered evidence which might change the outcome of decisions could come to light in the future,” the Department reasoned that “there should be an eventual end to the present administrative process.”  28 Additionally, the Department pointed out that “petitioners who were denied went through several stages of review with multiple opportunities to develop and submit evidence.”  29 The Department also explained that “[t]he changes in the regulations are not so fundamental that they can be expected to result in different outcomes for cases previously decided.”  30 Finally, the Department observed that “[d]enied petitioners still have the opportunity to seek legislative recognition if substantial new evidence develops.”  31

In a 2014 notice of proposed rulemaking (2014 proposed rule), the Department proposed giving previously denied petitioners a conditional opportunity to re-petition. 32 The 2014 proposed rule would have allowed re-petitioning only if:

(i) Any third parties that participated as a party in an administrative reconsideration or Federal Court appeal concerning the petitioner has consented in writing to the re-petitioning; and

(ii) The petitioner proves, by a preponderance of the evidence, that either:

(a) A change from the previous version of the regulations to the current version of the regulations warrants reconsideration of the final determination; or

(b) The “reasonable likelihood” standard was misapplied in the final determination. 33

In the preamble of the 2014 proposed rule, the Department explained that the requirement of third-party consent would “recognize[ ] the equitable interests of third parties that expended sometimes significant resources to participate in the adjudication [of a final determination in a reconsideration or appeal] and have since developed reliance interests in the outcome of such adjudication.”  34 The Department did not discuss the extent to which the third-party consent condition might limit the number of re-petitioners. 35

Similarly, the Department did not specify the extent to which the other conditions listed above—requiring an unsuccessful petitioner to prove that either a change in the regulations or a misapplication of the reasonable likelihood standard warrants reconsideration—might limit the number of re-petitioners. However, as a general matter, the Department noted that “the changes to the regulations are generally intended to provide uniformity based on previous decisions” (that is, uniformity between decisions predating and postdating the revision), so the circumstances in which re-petitioning might be “appropriate” would be “limited.”  36 The proposed rule did not identify any change to the seven mandatory criteria that “would likely change [any negative] previous final determination[s].”  37

Ultimately, in the 2015 final rule updating part 83, the Department expressly retained the ban on re-petitioning. 38 In the preamble of the rule, the Department summarized its reasoning as follows: “The final rule promotes consistency, expressly providing that evidence or methodology that was sufficient to satisfy any particular criterion in a previous positive decision on that criterion will be sufficient to satisfy the criterion for a present petitioner. The Department has petitions pending that have never been reviewed. Allowing for re-petitioning by denied petitioners would be unfair to petitioners who have not yet had a review, and would hinder the goals of increasing efficiency and timeliness by imposing the additional workload associated with re-petitions on the Department, and OFA in particular. The part 83 process is not currently an avenue for re-petitioning.”  39

In 2020, two Federal district courts—one in a case brought by a former petitioner seeking acknowledgement as the Chinook Indian Nation  40 and one in a case brought by a former petitioner seeking acknowledgement as the Burt Lake Band of Ottawa and Chippewa Indians  41 —held that the Department's reasons for implementing the ban, as articulated in the preamble to the 2015 final rule revising part 83, were arbitrary and capricious under the Administrative Procedure Act (APA). As an initial matter, both courts agreed with the Department that the Department's authority over Indian affairs generally authorized a re-petition ban. 42 Additionally, both courts noted that their review was highly deferential to the agency's decision under applicable tenets of administrative law. 43 As a result, the narrow question left for the courts to decide was whether the Department, in retaining the ban, “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a `rational connection between the facts found and the choice made.' ”  44

Both courts concluded that the Department had not satisfied this standard. The Chinook court held that the Department's reasons were “illogical, conclusory, and unsupported by the administrative record,” as well as not “rationally connect[ed] . . . to the evidence in the record.”  45 Similarly, the Burt Lake court concluded that the Department's reasons were “neither well-reasoned nor rationally connected to the facts in the record.”  46 Both courts concluded that, despite the Department's argument that the 2015 revisions to part 83 did not make any substantive changes to the criteria other than those specifically identified, the Department had failed to explain why the Department could permissibly maintain the ban given those changes and others, after having proposed a limited re-petition process in the 2014 proposed rule. 47 The Chinook court focused in particular on a provision introduced in the 2015 final rule that sought to promote consistent implementation of the criteria and stated that “[t]here is no reason why new petitioners should be entitled to this `consistency' while past petitioners are not.”  48 The Burt Lake court linked reform of the Federal acknowledgment process generally with an “opportunity to re-petition and to seek to satisfy the new criterion.”  49

Neither the Chinook nor Burt Lake courts struck down the 2015 final rule in whole or in part. Rather, both courts remanded the ban to the Department for further consideration. 50

Pursuant to the courts' orders, on December 18, 2020, the Department announced an intent to reconsider the ban and invited federally recognized Indian Tribes to consult on whether to allow or deny re-petitioning. On February 25, 2021, the Department held a Tribal consultation session. The Department also solicited written comments on the ban through March 31, 2021. On April 27, 2022, the Department published a proposed rule (2022 proposed rule) to retain the ban, albeit based on revised justifications in light of the courts' rejection of the reasoning set forth in the 2015 final rule. 51 The 2022 proposed rule highlighted the following in proposing to retain the ban:

(1) The substantive integrity of the Department's previous, negative determinations;

(2) The due process that has already been afforded to unsuccessful petitioners;

(3) The non-substantive nature of the revisions to part 83 in the 2015 final rule;

(4) The interests of the Department and third parties in finality; and

(5) The inappropriateness of allowing re-petitioning based on new evidence. 52

Following publication of the 2022 proposed rule, the Department held two Tribal consultation sessions with federally recognized Indian Tribes and a listening session with present, former, and prospective petitioners for Federal acknowledgment. The Department also solicited written comments through July 6, 2022, and received approximately 270 comments from federally recognized Indian Tribes and a wide range of stakeholders, including former and prospective part 83 petitioners, various State and local government representatives, individuals, and others.

After reviewing the written comments, as well as the transcripts of the consultation and listening sessions, the Department engaged in further deliberation of three options: (1) keeping the ban in place; (2) creating a limited avenue for re-petitioning; and (3) creating an open-ended avenue for re-petitioning, with few or no limitations. On July 12, 2024, the Department published a proposed rule (2024 proposed rule) to create a limited exception to the ban, 53 in line with the second option, through implementation of a re-petition authorization process. 54 In the preamble of the rule, the Department explained that its proposal “reflect[ed] a reconsidered policy on re-petitioning for Federal acknowledgment.”  55

Following publication of the 2024 proposed rule, the Department again held two Tribal consultation sessions with federally recognized Indian Tribes and a listening session with present, former, and prospective petitioners for Federal acknowledgment. The Department also solicited written comments through September 13, 2024, and received 163 comments from federally recognized Indian Tribes and a wide range of stakeholders. 56 What follows is a summary of this final rule, as well as a discussion of the comments that informed the Department's deliberations.

This final rule appends a new subpart titled “Subpart D—Re-Petition Authorization Process” to the end of the current part 83 regulations. The new subpart applies to “unsuccessful petitioner[s],” which is a new term defined in § 83.1. 57 Pursuant to the new subpart, an unsuccessful petitioner that seeks to re-petition must first plausibly allege that the outcome of the previous, negative final determination would change to positive on reconsideration based on one or both of the following: (1) a change in part 83 (from the 1978 or 1994 regulations to the 2015 regulations); and/or (2) new evidence. 58

This standard, requiring a petitioner to state a plausible claim for re-petitioning based on one of the conditions above, is similar to the standard for surviving a motion to dismiss, 59 except that the Department may conduct limited fact-finding to assess the reasonableness of the claim (for example, cross-referencing alleged facts with facts discussed during the original evaluation of a petition, if able to be done in a timely manner). Under the standard, a petitioner's allegations regarding changes in part 83 and/or new evidence must address the deficiencies that, according to the Department, prevented the petitioner from satisfying all seven mandatory criteria (located at § 83.11(a) through (g) in the 2015 regulations). Otherwise, even if the allegations were taken as true, they would not change the previous, negative outcome and, therefore, would not justify reconsideration. That is, because Federal acknowledgment requires satisfaction of all seven criteria, 60 the petitioner's re-petition request must address all of the criteria that the petitioner did not satisfy. For example, if the Department determined in the previous, negative final determination that the petitioner did not satisfy criteria (a) (Indian Entity Identification), (b) (Community), and (c) (Political Authority), then the petitioner must plausibly allege that application of the 2015 regulations, consideration of new evidence, or both would address the deficiencies relating to all three criteria, not only one or two.

A decision granting authorization to re-petition (grant of authorization to re-petition) is not the same as a final agency decision granting Federal acknowledgment. Rather, a decision granting authorization to re-petition simply permits the petitioner to proceed with a new documented petition through the Federal acknowledgment process. 61 Upon authorization to re-petition, the petitioner must submit a complete documented petition under § 83.21 to request Federal acknowledgment and will then receive substantive review of the petitioner's claims and evidence.

In the interest of finality, any petitioner denied prior to the effective date of this final rule must request to re-petition within five years of the effective date of the rule. 62 Any petitioner denied after the effective date of the final rule will have to request to re-petition within five years of the date of issuance of the petitioner's negative final determination. 63 However, the five-year time limit applicable to a petitioner denied after the effective date of the final rule will be tolled during any period of judicial review of the negative final determination. 64 Additionally, any petitioner denied authorization to re-petition under the re-petition authorization process—or denied Federal acknowledgment upon re-petitioning, after receiving authorization to do so—will be prohibited from submitting a new re-petition request based on new evidence. 65

In many respects, the Department's processing of a re-petition request will mirror the processing of a group's documented petition, particularly the procedures relating to notice and comment. To initiate the re-petition authorization process, an unsuccessful petitioner must submit a complete re-petition request to OFA, explaining how the petitioner meets the conditions of §§ 83.47 through 83.49. 66 Upon receipt of a request containing all of the documentation required under § 83.50, OFA will publish notice of the request in the Federal Register and on the OFA website. 67 Additionally, OFA will provide notice to certain third parties, including specific government officials of the State in which the petitioner is located, federally recognized Indian Tribes that may have an interest in the petitioner's acknowledgment determination, and any third parties that participated in an administrative reconsideration or Federal Court appeal concerning the petitioner's original documented petition. 68 OFA will also provide notice to individuals and entities that had interested-party or informed-party status under the 1994 regulations, 69 with the understanding that those individuals and entities previously “request[ed] to be kept informed of general actions regarding a specific petitioner” and presumably wish to remain informed. 70 The Department will then allow for comment on the re-petition request and give the petitioner an opportunity to respond to comments received. 71

After the close of the comment-and-response period, the Department will consider the re-petition request ready for active consideration, and within 30 days of the close of the comment-and-response period, OFA will place the request on a register listing all requests that are ready for active consideration. 72 The order of consideration of re-petition requests will be determined by the date on which OFA places each request on OFA's register.

Pursuant to § 83.23(a)(2), the Department's highest priority is to complete reviews of documented petitions already under review, and those reviews will take precedence over reviews of re-petition requests. 73 Pursuant to this final rule, the Department will also prioritize review of documented petitions awaiting review and new documented petitions over review of re-petition requests, at least initially. 74 Re-petition requests pending on OFA's register for more than two years will have priority over any subsequently filed documented petitions. 75

Once AS-IA is ready to begin review of a specific request, OFA will notify the petitioner and third parties accordingly. 76 In making a decision, AS-IA will consider the claims and evidence in the re-petition request and in any comments and responses received. 77 AS-IA may also consider other information, 78 such as documentation contained in the record associated with the petitioner's denied petition and additional explanations and information requested by AS-IA from commenting parties or the petitioner. Any such additional material considered by AS-IA will be added to the record and shared with the petitioner. 79 The petitioner then will have an opportunity to respond to any additional material considered. 80

AS-IA will issue a decision on a re-petition request within 180 days of the date on which OFA notifies the petitioner that AS-IA has begun review, subject to any suspension period. 81 AS-IA will grant the petitioner authorization to re-petition if AS-IA finds that the petitioner meets the conditions of §§ 83.47 through 83.49. 82 Conversely, AS-IA will deny authorization to re-petition if AS-IA finds that the petitioner has not met the conditions of §§ 83.47 through 83.49. 83 OFA will then provide notice of AS-IA's decision to the petitioner and third parties. 84 Additionally, OFA will publish notice of the decision in the Federal Register and on the OFA website. 85

AS-IA's decision will become effective immediately and will not be subject to administrative appeal. 86 Furthermore, a grant of authorization to re-petition is not final for the Department. Rather, as noted above, it simply permits the petitioner to proceed through the Federal acknowledgment process with a new documented petition. 87 By contrast, a decision denying a re-petition request (denial of authorization to re-petition) represents the consummation of the Department's decision-making about the petitioner's recognition status, is final for the Department, and is a final agency decision under the APA. 88

Consistent with the introduction of a new re-petition authorization process, this final rule inserts new definitions for “re-petition authorization process” and “re-petitioning” in § 83.1, as well as a new definition for “unsuccessful petitioner,” as noted above. This rule also makes a change to § 83.4(d), the provision that previously prohibited re-petitioning. The change notes a limited exception to the re-petition ban for unsuccessful petitioners that meet the conditions of §§ 83.47 through 83.49, as determined by AS-IA in the re-petition authorization process.

This final rule also gives any petitioner currently proceeding under the 1994 regulations the choice to proceed instead under the 2015 regulations. 89 In doing so, the rule presents a choice similar to the one given to pending petitioners in the 2015 regulations. 90 Absent the choice, a petitioner proceeding under the 1994 regulations that wants to proceed under the 2015 regulations would have to await a final determination and then receive authorization to re-petition if the determination is negative. By allowing a petitioner to switch directly to the current regulations, the relevant provision promotes efficiency.

Finally, this final rule clarifies the Department's position on the severability of the provisions in the regulations promulgated here. 91 Notwithstanding the Department's position that the provisions, taken together, properly balance competing interests, the Department considered whether the provisions could stand alone and has concluded that they could. Specifically, the Department considered whether, if one of the conditions on re-petitioning set forth at §§ 83.47 through 83.49 were held to be invalid, the other conditions should remain valid. The Department's position is that they should because each provision could “function sensibly” without the others. 92 For example, a change in part 83 would remain a valid basis for a re-petition request under § 83.48(a) even if a court held § 83.48(b) (allowing new evidence to be basis for a re-petition request) to be invalid, and vice versa. The Department also considered whether the provisions describing the processing of a re-petition request, set forth at §§ 83.50 through 83.61, could stand alone, and the Department's position is that they could. For example, provisions relating to notice and comment and the order of priority for review could each function independently if other requirements were determined to be invalid.

Finally, this final rule makes technical revisions to the legal authority citation for part 83 because 25 U.S.C. 479a-1 has been transferred to 25 U.S.C. 5131 and Public Law 103-454 Sec. 103 (Nov. 2, 1994) has been reprinted in the United States Code at 25 U.S.C. 5130 note (Congressional Findings). This final rule also makes a technical revision to the mailing address listed in § 83.9.

The Department conducted three virtual sessions to seek input on the 2024 proposed rule. The Department hosted two virtual consultation sessions with federally recognized Indian Tribes and a listening session with present, former, and prospective petitioners. In each virtual session, the AS-IA engaged with participants, provided background on the proposed changes to part 83, and provided a detailed explanation of the proposed changes.

The sessions and written comment period (which closed on September 13, 2024) garnered comments from the following federally recognized Indian Tribes: (1) Santa Ynez Band of Chumash Mission Indians; (2) the Morongo Band of Mission Indians; (3) the Puyallup Tribe; (4) the Confederated Tribes of Siletz Indians; (5) the Yuhaaviatam of San Manuel Nation; (6) the Tunica-Biloxi Indian Tribe; (7) the Tulalip Tribes; (8) the Eastern Band of Cherokee Indians; (9) the Swinomish Indian Tribal Community; (10) the Suquamish Indian Tribe; (11) the Muckleshoot Indian Tribe; (12) the Shawnee Tribe; (13) the Seneca Nation of Indians; (14) the Delaware Nation; (15) the Federated Indians of Graton Rancheria; and (16) the Shinnecock Indian Nation.

Others that participated in the listening session and that submitted written comments included State-recognized Tribes; non-federally recognized groups (including unsuccessful petitioners for Federal acknowledgment); national associations (including inter-Tribal organizations), State and local government representatives, congressional delegations and coalitions; and individuals associated with educational institutions, including Yale University, Stanford University, and the Indian Legal Clinic of Arizona State University's College of Law.

The federally recognized Indian Tribes that commented either verbally or through written comments generally oppose re-petitioning, with the exception of the Tunica-Biloxi Indian Tribe and the Shinnecock Indian Nation. By contrast, non-federally recognized groups (including unsuccessful petitioners) support an avenue for re-petitioning.

State and local government representatives mostly aligned with the federally recognized Indian Tribes that oppose re-petitioning. Those commenters noted the resources already expended to oppose petitions for Federal acknowledgment and that would have to be spent opposing requests to re-petition. They also highlighted the potential consequences of Federal acknowledgment on local communities, including detrimental economic impacts. However, not all of the State and local government representatives who submitted comments oppose re-petitioning. A Connecticut State senator and group of State representatives submitted a letter in support of the 2024 proposed rule, as well as in support of three unsuccessful petitioners based in Connecticut: the Golden Hill Paugussett Tribe, the Schaghticoke Tribal Nation, and the Eastern Pequot Indians. The Mayor of Charlestown, Indiana, also submitted a comment in support of the 2024 proposed rule and of unsuccessful petitioners, stating that “[i]t is important for . . . all of Indiana to acknowledge and respect the legacy and resilience of the Indigenous communities that occupied the land where our cities were established.” Indiana Senators Todd Young and Mike Braun similarly submitted a letter in support of the 2024 proposed rule, while also asserting that the rulemaking has taken too much time to complete.

Over one hundred individuals submitted either written comments or verbal comments in support of re- petitioning, often in support of specific groups previously denied Federal acknowledgment. Many individual commenters expressed support for the Golden Hill Paugussett Tribe, the Schaghticoke Tribal Nation, and the Eastern Pequot Indians. Individual commenters also expressed support for the Chinook Indian Nation, the Muwekma Ohlone Tribe, and the Ma-Chis Lower Creek Indian Tribe.

The consultations, listening session, and comment period provided a valuable opportunity for federally recognized Indian Tribes and stakeholders, including non-federally recognized groups and State and local government representatives, to offer comments on whether the Department should implement a re-petition authorization process. The comments ranged from wholly supportive to strongly opposed. Although most federally recognized Indian Tribes that commented oppose re-petitioning, many offered constructive feedback on the 2024 proposed rule. The majority of non-Tribal commenters were supportive of a re-petition authorization process.

What follows is a summary of the comments received, organized by issue, and the Department's responses to the comments.

Numerous commenters cited fairness as a justification for allowing re-petitioning. Commenters emphasized the significant impact of Federal recognition on the lives of a petitioner's members, for example, linking recognition with increased access to federal funding for housing, healthcare, and education. Some cited the potential economic benefit of recognition, like a boost in tourism that would benefit surrounding communities as well, while others focused on the “dignity and respect” accorded through Federal acknowledgment. The Indian Legal Clinic of Arizona State University's College of Law commented that a “lack of recognition can negatively impact a Tribe's ability to exercise its self-determination in areas such as defending sovereignty, protecting culture, accessing resources, and ensuring the survival of tribal ways of life.” The Shinnecock Indian Nation commented that leaving any Tribe entitled to acknowledgment off of the Department's list of federally recognized Indian Tribes is a “horrible mistake that lasts for generations.” The Haliwa-Saponi Indian Tribe (a State-recognized Tribe in North Carolina) relatedly stated that the re-petitioning process “safeguards against unintentional error in the evaluation of evidence from petitioners.” The MOWA Band of Choctaw Indians (an unsuccessful petitioner) stated that implementing a re-petition authorization process “not only aligns with the principles of justice and fairness but also provides a necessary administrative pathway for tribes to seek reconsideration without resorting to the courts.”

Several commenters stated that prohibiting unsuccessful petitioners denied under the previous regulations from re-petitioning under the 2015 regulations would be unfair given that the changes in the 2015 regulations were intended to promote consistency, efficiency, and fairness. For example, one unsuccessful petitioner (the Muwekma Ohlone Tribe) stated that the proposed process will ensure “equal protection to all tribal petitioners.” Echoing that point, another unsuccessful petitioner (the Miami Nation of Indians) asserted that “all petitioners” should be allowed to avail themselves of the process set forth in the 2015 regulations. The Alliance of Colonial Era Tribes, an inter-Tribal organization, similarly stated that “all petitions” should be “measured against the same written standards,” to “improve the consistency and integrity of the process as a whole.”

Others asserted that the Department should allow re-petitioning because of the difficulty of satisfying the seven mandatory criteria under the previous regulations. The Tunica-Biloxi Indian Tribe, for example, stated that many unsuccessful petitioners “may not have had the resources or expertise required to meet the [Department's] evidentiary standards at the time of their initial petitions.”

Several petitioners claimed that they were treated unfairly during the review of their respective petitions. Based on the allegedly unfair treatment of unsuccessful petitioners, a number of commenters expressed support for a re-petition process broader than that in the 2024 proposed rule. For example, the Steilacoom Tribe (an unsuccessful petitioner) stated that all petitioners “harmed by this broken system should have an opportunity to re-petition.” Other unsuccessful petitioners shared similar comments, as did individual supporters of those petitioners.

By contrast, those opposed to re-petitioning defended the integrity of the Federal acknowledgment process. The Swinomish Indian Tribal Community explained that the process afforded to unsuccessful petitioners was “extensive, lengthy, [and] fact-intensive” and involved “an exhaustive review of facts and claims.” Quoting language from the preambles of the 2022 proposed rule and 2024 proposed rules, the Eastern Band of Cherokee Indians similarly stated that the Department's previous, negative determinations are “substantively sound.” The Tribe emphasized that unsuccessful petitioners had ample opportunities to address apparent deficiencies in their materials, respond to the Department's preliminary findings, and appeal their negative determinations administratively and in Federal court. The Santa Ynez Band of Chumash Mission Indians and the Morongo Band of Mission Indians likewise noted that unsuccessful petitioners had opportunities for redress through the Federal courts, and they noted that unsuccessful petitioners retain the option to seek Federal recognition through Congress. The Connecticut Towns of Ledyard, North Stonington, and Preston (Connecticut Towns) echoed that point, asserting the Department “ignore[d] that unsuccessful petitioners still have the option of seeking congressional acknowledgment.”

The Connecticut Towns otherwise described the re-petition authorization process in the 2024 proposed rule as “illogical, unfair, and time-consuming.” Other commenters shared that sentiment and proposed alternatives to the process. The Eastern Band of Cherokee Indians, for example, stated that, to comply with the Chinook and Burt Lake decisions, “the Department need only provide a fuller, more detailed explanation for its already sound policy” banning re-petitioning. Another commenter suggested that, instead of removing the ban, the Department should withdraw the 2015 final rule revising the regulations and reinstate the 1994 regulations.

Response: As the Department explained in the 2024 proposed rule, the Department considers fairness to unsuccessful petitioners to be a valid justification for implementing a re-petition authorization process, particularly given the high-stakes nature of the Federal acknowledgment process. Even if the reasons for upholding the ban in the 2022 proposed rule were valid, the Department has decided to create a conditional, time-limited opportunity to re-petition based on a reconsidered policy that reflects greater consideration of the interests of unsuccessful petitioners. The Department's reconsidered policy, in turn, aligns more closely with the decisions in Chinook and Burt Lake than the policy underlying the 2022 proposed rule. Both courts suggested that fairness is a valid justification for re-petitioning, particularly given the Department's references to “reforms” made in the 2015 revision to part 83. 93 The Burt Lake court noted, for example, that the plaintiff in that case “persuasively contend[ed] that the only way for previously-denied petitioners to get `fair' and `consistent' results would be by allowing them to re-petition.”  94 Additionally, “although it is true that, in the absence of a re-petition authorization process, unsuccessful petitioners could still `seek legislative recognition if substantial new evidence develops,”  95 the Department believes that the part 83 process, as conditioned by this rule, “should continue to be an option given the Department's familiarity with the petitioner, expertise in evaluating evidence, and management of all Indian affairs, including decisions regarding Federal acknowledgment.”  96

In response to comments recommending that the Department withdraw or vacate the 2015 final rule, the Department rejects that suggestion in light of the interests in fairness mentioned above. As stated in the preamble of the 2015 final rule, there was “wide agreement by the public” that the part 83 process prior to the 2015 revision was “broken,”  97 a point that both the Chinook and Burt Lake courts highlighted. 98 Although the Department does not adopt that characterization and maintains the validity of Department's process under the previous regulations, as well as the validity of Departmental precedent, the Department is nevertheless willing to give unsuccessful petitioners a path for arguing why reconsideration under the 2015 regulations is warranted. Furthermore, the Department considers a threshold, re-petition authorization process an appropriate way to balance interests in re-petitioning with third-party interests in keeping the ban in place. Those interests are discussed further below.

Most federally recognized Indian Tribes and State and local government representatives that submitted comments on the 2024 proposed rule oppose re-petitioning. Numerous Tribes recommended that the Department keep in place the Department's longstanding ban on re-petitioning.

Several Tribes explained that the re-petition authorization process undermines their ability to protect their respective Tribal identities. The Shawnee Tribe, for example, commented that the appropriation of Shawnee Tribal identity by non-federally recognized groups is an ongoing problem and that “the Federal acknowledgment process provides some protection against groups . . . that make false claims” to Shawnee sovereignty and culture. Similarly, the Eastern Band of Cherokee Indians highlighted the threat posed by “six groups that have falsely and fraudulently claimed to be Cherokee and that have already undergone and completed the Part 83 process.” The Tribe expressed concern about the burden that opposing re-petition requests will impose on the Tribe's resources, resources that the Tribe “should be able to utilize . . . to improve the lives of [its] citizens rather than . . . to repeatedly defend our identifies against fraudulent groups.”

Several other Tribes echoed the Eastern Band of Cherokee Indians' concern about the threat that re-petitioning would pose to their limited resources. The Santa Ynez Band of Chumash Mission Indians asserted that re-petitioning would unfairly subject third parties to “the burden of responding to petitioners' arguments,” even though those third parties already expended considerable resources to oppose the petitions. The Tribe also highlighted the considerable resources that State and local governments in Connecticut expended to oppose petitions submitted by various Connecticut-based petitioners. Additionally, the Tribe highlighted the resources that several Tribes in Washington expended to monitor or oppose petitions that potentially threaten their “sovereignty, membership, and/or treaty fishing rights.” The Morongo Band of Mission Indians similarly emphasized the considerable investment of “time, energy, and resources over many years” by Tribes and other third parties “to protect their legitimate interests” in safeguarding “their economies, jurisdiction, or membership.”

Consistent with the concerns discussed above, the Tulalip Tribes described the 2024 proposed rule as “fatally flawed” and asserted that it “contravenes settled expectations of finality for those parties who fought—sometimes for decades—in favor of negative final determinations.” The Suquamish Indian Tribe, Muckleshoot Indian Tribe, and Puyallup Tribe likewise asserted that the finality interests of third parties weigh strongly against what they perceive as “[e]ndless” opportunities to re-petition. They stated that, “[a]fter almost 50 years of decisions under the Part 83 process, States, local governments, federally recognized Indian Tribes, and the federal government have a compelling interest in repose and the finality of tribal acknowledgment decisions.”

State and local government representatives in Connecticut shared similar concerns about the perceived threat that re-petitioning would pose to their interests in finality. The Connecticut Attorney General asserted that the 2024 proposed rule fails to “meaningfully consider or address any of the consequences Federal acknowledgment has on State and local communities.” The commenter identified “renewed threats resulting from acknowledged tribes,” including “extensive land claims, federal trust and reservation land, loss of state and local government jurisdiction and tax base, adverse environmental and land use impacts, casino development, and other issues.” Connecticut's congressional delegation expressly supported the Connecticut Attorney General's comments. Other Connecticut-based commenters (the Kent School and the Town of Kent) stated that they “have spent over three decades and hundreds of thousands of dollars reluctantly participating in DOI's acknowledgment process and a lands claim suit filed by the Schaghticoke Tribal Nation,” an unsuccessful petitioner.

Numerous commenters objected to the notion that third-party interests should influence the Department's decision on whether to implement a re-petition authorization process. For example, the Muwekma Ohlone Tribe (an unsuccessful petitioner) stated in the listening session that the interests of groups denied Federal acknowledgment outweigh those of third parties and expressed support for the 2024 proposed rule. Other unsuccessful petitioners, like the Chinook Indian Nation and Eastern Pequot Indians, contended that third parties should not be allowed to exert political influence on the proposed re-petition authorization process. The Chinook Indian Nation stated that third-party involvement should be limited to commenting on re-petition requests and that the Department should prohibit “ex parte contacts or other attempts to influence the agency's decision” on a re-petition request or on a subsequently filed re-petition.

Response: The Department recognizes that third parties often expended considerable time and resources participating in the Federal acknowledgment process and agrees that third parties have significant, legitimate interests in the finality of the Department's final determinations. As explained in the 2024 proposed rule, those interests informed the Department's decision not to give unsuccessful petitioners an open-ended opportunity to re-petition that might “make[ ] worthless” third parties' substantial past investment. 99 Relevant here, a petitioner's disagreement with the Department's evaluation of the petitioner's claims and evidence in a previous, negative final determination is not a basis for requesting to re-petition. By maintaining the integrity of the Department's past determinations, the Department by extension recognizes the value of third-party investment in the Federal acknowledgment process, specifically, the value of third-party comments and evidence that informed those past determinations.

Although the Department's proposal in the 2022 proposed rule (which would have retained the longstanding, blanket ban on re-petitioning) would have aligned more closely with third-party interests in finality, the approach that the Department adopts in this final rule seeks to balance those interests with competing, compelling interests in re-petitioning (discussed above). The re-petition authorization process will subject prospective re-petitioners to a threshold review. By limiting the types of arguments that unsuccessful petitioners can raise in the threshold review, the Department seeks to minimize the burden on third parties that choose to participate in the process and respond to those arguments. Additionally, by imposing a limit on the amount of time that unsuccessful petitioners will have to request to re-petition, the Department seeks to account for third-party interests in finality.

By subjecting prospective re-petitioners to a threshold review, this final rule not only seeks to balance third-party interests with denied petitioners' interests but also seeks to be responsive to the Chinook court's “skeptic[ism] that res judicata is applicable in a situation such as this where legal standards changed between the 1994 and 2015 regulations.”  100 As discussed at length in the 2022 proposed rule, 101 and as stated in the 2024 proposed rule, 102 the Department maintains that the legal standards in the 2015 regulations are not significantly different from those in the previous regulations and do not compel the Department to allow re-petitioning. However, in the interest of fairness to unsuccessful petitioners, the Department has decided to give those petitioners an opportunity to argue that specific changes warrant reconsideration of their respective negative final determinations.

Finally, in response to third-party concerns about the potential consequences of Federal acknowledgment on local communities (for example, land claims, loss of tax bases, and gaming development), affected third parties will be able to avail themselves of due process afforded in connection with those specific issues. 103 A review of a re-petition request, a grant of authorization to re-petition, or even a positive final determination would not result in the adverse impacts described by third parties. In general, the part 83 process concerns only whether a group constitutes a distinct social and political entity entitled to a government-to-government relationship with the United States. 104

Several commenters expressed concern about the impact of re-petitioning on the Department's workload and ability to process petitions and re-petition requests efficiently. For example, the Burt Lake Band of Ottawa and Chippewa Indians (an unsuccessful petitioner) generally supports a re-petition process but fears that the process proposed in the 2024 proposed rule would result in significant delays. The commenter estimated that the time frame to receive a decision on a re-petition request “could approach 44 years,” a time frame that would provide “insufficient justice for re-petitioners.”

Among those that oppose re-petitioning, the Swinomish Indian Tribal Community commented that re-petitioning would create “an ongoing cycle of review” that would exhaust not only the resources of federally recognized Indian Tribes but also Departmental resources and delay or prevent the review of new petitions. The Shawnee Tribe similarly commented on the amount of additional work required to implement a re-petition authorization process, stating that the process would “more than double[ ] the amount of resources required.” According to the Tribe, “[t]he Department and Indian country would be better served by allocation of the Department's precious, limited resources to existing areas of need—of which there are many,” as well as to the review of new and pending petitions.

The Eastern Band of Cherokee Indians likewise asserted that re-petitioning would be “unfair to pending and future petitioners who may have legitimate petitions.” According to the Tribe, “[r]equiring groups with valid claims to wait their turn for review of their original documented petitions while [re-petition] requests from unsuccessful petitioners are considered would be an affront to legitimate sovereign nations whose status has not yet been recognized by the United States.”

Response: The Department considers implementation of a threshold review, limiting the types of arguments that unsuccessful petitioners can raise in their re-petition requests, to be an appropriate way to address concerns about the effect of re-petitioning on the Department's workload. By allowing prospective re-petitioners to raise only certain arguments in their re-petition requests, namely, arguments relating to (1) changes in the 2015 regulations or (2) the availability of new evidence—both developments likely to postdate the date of the petitioners' previous, negative final determinations—the Department seeks to avoid the overwhelming administrative burdens that would be associated with an open-ended re-petitioning process, including the potential reopening of decades-old administrative records that “rang[e] in excess of 30,000 pages to over 100,000 pages.”  105

This document contains amendments to the Procedure and Administration Regulations under 26 CFR part 301 to implement section 7803(e) of the Internal Revenue Code (Code), which Congress enacted in the TFA (final regulations). The final regulations are issued under section 7805(a) of the Code, which expressly delegates to the Secretary of the Treasury or her delegate (Secretary) the authority to “prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.”

Section 7803(e)(3) provides that it is the function of Appeals to resolve Federal tax controversies without litigation on a basis that is fair and impartial to both the Government and the taxpayer, promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and enhances public confidence in the integrity and efficiency of the IRS. Section 7803(e)(4) states that the resolution process to resolve Federal tax controversies described in section 7803(e)(3) “shall be generally available to all taxpayers.”

On September 13, 2022, the Treasury Department and the IRS published in the Federal Register (87 FR 55934) a notice of proposed rulemaking (REG-125693-19) proposing amendments to implement section 7803(e) (proposed regulations). The proposed regulations proposed to adopt the function of Appeals as stated in section 7803(e)(3) and that the Appeals resolution process is generally available to all taxpayers to resolve Federal tax controversies as stated in section 7803(e)(4). The proposed regulations defined what constitutes a Federal tax controversy involving disputes over administrative determinations made by the IRS and, consistent with the historical practice and functions of Appeals, listed certain additional topics involving disputes over administrative determinations by the IRS that are treated as Federal tax controversies. Proposed § 301.7803-2(c)(1) through (24) also proposed an exclusive list of twenty-four exceptions to consideration of a Federal tax controversy by Appeals, almost all of which existed before the enactment of the TFA. This preamble refers to the exceptions in proposed § 301.7803-2(c), such as proposed § 301.7803-2(c)(1), (2), and (3), for example, as “Exception 1,” “Exception 2,” and “Exception 3.”

Additionally, the proposed regulations proposed certain procedural and timing rules that must be met before Appeals consideration is available: the originating IRS office must have completed its review; a taxpayer must have submitted the request for Appeals consideration in the prescribed time and manner; and Appeals must have had sufficient time remaining on the appropriate limitations period for it to consider the matter. Further, if a Federal tax controversy is eligible for consideration by Appeals and the procedural and timing requirements are followed, a taxpayer would generally have only one opportunity for Appeals consideration. The proposed regulations also proposed two special rules for docketed cases. First, if Appeals issued a notice of deficiency, notice of liability, or other determination, without having fully considered one or more issues because of an impending expiration of the statute of limitations on assessment, Appeals may choose to have the Office of Chief Counsel (Chief Counsel) return the case to Appeals for full consideration of the issue or issues once the case is docketed in the United States Tax Court (Tax Court). Second, Appeals and Chief Counsel may determine how settlement authority is transferred between the two offices. Similar prerequisites to Appeals consideration as those described in this paragraph existed before the enactment of the TFA.

Besides soliciting public comments on the rules in the proposed regulations, the Treasury Department and the IRS also solicited public comments in the proposed regulations on whether certain exclusions from Appeals' consideration currently provided in the Internal Revenue Manual (IRM) relating to requests for relief under §§ 301.9100-1 through 301.9100-22 (9100 relief) and requests for a change in accounting method (CAM) should be included in the list of exceptions in the regulations.

Lastly, the proposed regulations proposed requirements to implement section 7803(e)(5). Enacted by the TFA, section 7803(e)(5) requires the IRS to follow the special notification procedures set forth in section 7803(e)(5) if a taxpayer who is in receipt of a notice of deficiency under section 6212 of the Code requests to have the Federal tax controversy referred to Appeals and that request is denied.

The Summary of Comments and Explanation of Revisions of these final regulations summarizes the provisions of the proposed regulations, which are explained in greater detail in the preamble to the proposed regulations. In response to the proposed regulations, the Treasury Department and the IRS received fourteen comments. A public hearing was requested and held on November 29, 2022.

After careful consideration of the comments and hearing testimony, the Treasury Department and the IRS adopt the proposed regulations, as modified by this Treasury decision, in response to such comments as described in the Summary of Comments and Explanation of Revisions. The final regulations also include minor typographical and editorial edits, including non-substantive clarifications, to the proposed regulations.

Numerous comments addressed the scope of the proposed exceptions to Appeals consideration in proposed § 301.7803-2(c) or the authority of the Treasury Department and the IRS to make exceptions that exclude or limit access to Appeals.

Several comments agreed that the TFA generally authorizes the Treasury Department and the IRS to provide exceptions to Appeals consideration. A comment agreed that the statutory text and legislative history of the TFA confirm Congress did not intend for Appeals access to be universally available. This comment supported the proposed regulations' identification of particular situations in which Appeals access should not be available. While disagreeing with Exception 19 (Challenges Alleging That a Treasury Regulation Is Invalid) and Exception 20 (Challenges Alleging That a Notice or Revenue Procedure Is Invalid) and exceptions for 9100 relief and CAMs, another comment generally agreed with the Treasury Department and the IRS that not every case is appropriate for Appeals consideration. The comment also stated that the TFA did not require that the IRS grant all requests for Appeals to consider any dispute because the Secretary may provide exceptions to Appeals consideration. Another comment stated there was “ample reason, rooted in logic and past practice, for the majority of [the] proposed exceptions.” It opined that some of the proposed exceptions, which were not identified, were not necessary to the proper administration of the Appeals process or were not consistent with the statute's mandate that the Appeals process be generally available. Another comment stated that some of the historic exclusions in the proposed regulations should be accepted and specifically mentioned penalties and determinations under sections 6702 or 6682 of the Code. Other comments stated that the proposed exceptions or exceptions framework laid out in the proposed regulations generally ran afoul of the intent of the TFA by limiting access to Appeals, or that certain proposed exceptions such as Exception 18 (Challenges Alleging That a Statute Is Unconstitutional), Exception 19, and Exception 20 did so. These comments gave several reasons in support of their arguments, as described in greater detail in section I.D. of this Summary of Comments and Explanation of Revisions. Two comments claimed that providing exceptions to review by Appeals would deny taxpayers a statutory right to Appeals, and two comments claimed exceptions to review by Appeals would inappropriately restrict Appeals access and suggested the proposed regulations should instead expand Appeals access.

As explained in more detail in section I.C. of the proposed regulations' Explanation of Provisions, Congress did not provide for an absolute right to administrative consideration by Appeals, which is reflected in the statute and the TFA's legislative history. Rather, Appeals review is “generally available,” under section 7803(e)(4) and the Treasury Department and the IRS may provide reasonable exceptions in their discretion, whether existing or new. In addition to this statutory language, TFA's legislative history also reflects the intention of Congress that the Treasury Department and the IRS retain their historical discretion to determine whether the resolution of particular types of disputes is appropriate for the Appeals resolution process, and for the IRS to retain the discretion to determine whether a particular Federal tax controversy is appropriate for the Appeals resolution process:

Contrary to one comment's suggestion, the Committee reports for the IRS Restructuring and Reform Act of 1998, Public Law 105-206 (112 Stat. 685, 689 (July 22, 1998)), and any earlier version of the TFA that Congress did not enact, are not informative when interpreting the TFA. The legislative history of the TFA reflects Congressional intent that the Treasury Department and the IRS retain their historical discretion to determine whether the resolution of particular types of disputes is appropriate for Appeals, and the discretion of the IRS to determine whether a particular Federal tax controversy is appropriate for the Appeals resolution process. See House TFA Report, at 29.

Several comments expressed concern that excluding a matter from Appeals consideration adversely affects the independence or impartiality of Appeals. Some of the comments specifically asserted that prohibiting Appeals from considering validity challenges to a regulation, notice, or revenue procedure as set forth in Exception 19 or Exception 20 undermines its independence. The Treasury Department and the IRS disagree with this comment. Exceptions from review by Appeals do not inhibit the independence or impartiality of Appeals for matters or issues under consideration. If a matter is not reviewed by Appeals, there is no independent analysis to be performed. Appeals still would be free to settle a Federal tax controversy that is referred to it using its own standards and an exception to review by Appeals would have no bearing on the cases or issues that are referred to Appeals.

One comment opined that the proposed exceptions in general are not reasonable or narrowly construed. The Treasury Department and the IRS disagree with this comment. As reflected in the proposed regulations' Explanation of Provisions in section I.C., the proposed exceptions are narrowly tailored and are based on reasonable rationales. Additionally, the proposed regulations and these final regulations reinforce the statutory presumption that Federal tax controversies may be considered by Appeals and require a regulatory exception for consideration to be unavailable.

The same comment suggested there would be no “whipsaw” if Appeals settles any of the cases or issues outlined in the proposed exceptions because Appeals settlements are not binding on any other taxpayer or on Chief Counsel's litigation position. It is unclear what is intended by this comment. The term whipsaw refers to the situation produced when the Government is subjected to conflicting claims of taxpayers. The issue of whipsaw has no bearing on the Appeals exceptions listed in the proposed regulations nor on the rationales set forth in the proposed regulations that support these exceptions and so the Treasury Department and the IRS do not agree that revisions to the proposed regulations are necessary.

A few comments focused on costs and opined that Congress intended for Appeals to resolve Federal tax controversies without expensive litigation. A comment asserted the establishment of Appeals was an attempt by Congress to make resolving controversies less cost-prohibitive for lower income individuals. Another comment stated the proposed regulations' approach granting exceptions to Appeals consideration would be a waste of resources of the Government and taxpayers. The Treasury Department and the IRS agree that part of Appeals' mission is to resolve Federal tax controversies without litigation, but do not agree that exceptions to review by Appeals will result in a waste of resources. There is no reason to assume that the cost to litigate a particular Federal tax controversy will significantly increase as a result of the proposed regulations, or that litigation expenses will increase at all in circumstances in which an exception existed before the TFA. Appeals consideration will still be available for most cases, which can be resolved without litigation (or without further litigation if the taxpayer has petitioned the Tax Court). The proposed regulations' procedural requirements, timing requirements, and almost all of the exceptions to consideration by Appeals already exist in previously established guidance regarding Appeals. As in the past, the proposed exceptions are limited in number and scope. The vast majority of taxpayers, including low-income taxpayers, will have the opportunity to have Appeals consider their Federal tax controversies.

Similarly, two comments asserted that Exception 18, Exception 19, and/or Exception 20 waste taxpayer and Government resources. As discussed in more detail in sections I.D.11.a. and 12. of this Summary of Comments and Explanation of Revisions, in contrast to a single decision by Appeals that is applicable and communicated only to one taxpayer, a final decision from a Federal court is publicly available and applied consistently to all taxpayers. As a result, these exceptions promote efficiency rather than wasting taxpayer and Government resources. Furthermore, even if Appeals were to review the matter covered by these exceptions, there is no guarantee that Appeals would settle or resolve it.

One comment recommended that the Treasury Department and the IRS should take a conservative approach to Appeals exceptions because recent Supreme Court decisions such as CIC Services, LLC v. Internal Revenue Service, 593 U.S. 209 (2021) and Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022) defined limits on the IRS's contentions concerning its prerogatives under the Administrative Procedure Act (APA), equitable tolling, and Tax Court jurisdiction. The Treasury Department and the IRS disagree with the premise of this comment that a more conservative approach is needed or that the referenced cases are relevant in construing section 7803(e). The exceptions in these regulations are reasonable and narrowly tailored to achieve their purposes. None of the cited cases addressed the meaning of section 7803(e) or the availability of Appeals review. Instead, these cases address different issues and have no bearing on these regulations.

Another comment noted that litigation arguing that the TFA provides taxpayers with access to Appeals is pending in the Hancock and Rocky Branch cases in the United States Court of Appeals for the Eleventh Circuit (Eleventh Circuit), implying that the regulations should be withheld due to the litigation. The Treasury Department and the IRS disagree that these two cases serve to limit or prevent the publication of regulations. Neither case is pending any longer. In Hancock, the U.S. District Court for the Northern District of Georgia held that the taxpayer had no absolute right to Appeals consideration under the circumstances. The Eleventh Circuit upheld the decision on Anti-Injunction Act grounds ( see section 7421 of the Code), and the Supreme Court denied certiorari. See Hancock County Land Acquisitions LLC, et. al. v. United States, 553 F. Supp. 3d 1284, 1294 fn. 9 (N.D. Ga. 2021), aff'd 130 AFTR 2d 2022-5529 (11th Cir. Aug. 17, 2022), cert. denied 143 S.Ct. 577 (January 9, 2023). Rocky Branch has facts similar to the facts in Hancock, and as in Hancock the Eleventh Circuit upheld the decision on Anti-Injunction grounds, and the Supreme Court denied certiorari. See Rocky Branch Timberlands LLC, et. al. v. United States, 129 AFTR 2d 2022-2137 (N.D. Ga. 2022), aff'd 132 AFTR 2d 2023-5788 (11th Cir. Sept. 6, 2023), cert. denied 144 S.Ct. 812 (Feb. 20, 2024).

One comment asserted that some of the exceptions in the proposed regulations, in particular, Exception 3 (Whistleblower Awards); Exception 4 (Administrative Determinations Made by Other Agencies); Exception 7 (Denial of Access Under the Privacy Act); and Exception 14 (Authority Over the Matter Rests With Another Office) leave a taxpayer without any administrative recourse. The comment suggested an interagency discussion over how and whether administrative appeals processes, whether residing in the IRS Independent Office of Appeals or outside of the IRS, could be developed for these types of cases. The Treasury Department and the IRS agree with the comment's premise that the language of section 7803(e) does not cover Exception 3, Exception 4, and Exception 7, or cover Exception 14 with respect to referrals to the Department of Justice (Justice Department). See sections I.D.2., 3., 4., and 8. of this Summary of Comments and Explanation of Revisions. The disputes involved in Exception 3, Exception 4, and Exception 7 are not Federal tax controversies, and Appeals lacks settlement authority after a referral of a case to the Justice Department, as described in Exception 14. The inclusion of Exception 3, Exception 4, Exception 7, and Exception 14 in the list of proposed exceptions in proposed § 301.7803-2(c) was to clarify these points. These exceptions to Appeals consideration all existed before the TFA. Expanding the role of Appeals as suggested is not administratively feasible and is outside the scope of these regulations and section 7803. Furthermore, lack of consideration by Appeals does not leave the taxpayer without an administrative option to resolve a controversy as issues can always be resolved during an examination. Accordingly, these final regulations do not adopt this comment.

Section 7803(e)(3) provides that the function of Appeals is “to resolve Federal tax controversies without litigation,” without defining the term “Federal tax controversy.” Proposed § 301.7803-2(b)(1), consistent with the statutory text of section 7803(e)(4), provides that the Appeals resolution process is generally available to all taxpayers to resolve Federal tax controversies. Proposed § 301.7803-2(b)(2) defined a Federal tax controversy as a dispute over an administrative determination with respect to a particular taxpayer made by the IRS in administering or enforcing the internal revenue laws, related Federal tax statutes, and tax conventions to which the United States is a party (collectively referred to as internal revenue laws) that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer's income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws.

As proposed in the proposed regulations and consistent with the statute, the definition of a Federal tax controversy is broad. Although the proposed definition does not specifically refer to tax-exempt organizations, it includes an IRS determination that an organization is not tax-exempt because the determination concerns whether the organization has or will have a tax liability in some amount. Similarly, determinations of private foundation or qualified employee plan status and tax-exempt or other tax-advantaged bond status are included in the proposed regulations' definition of a Federal tax controversy because these determinations concern whether there is or will be a tax liability for the foundation; plan, or its participants; or bond issuers or holders. In these final regulations, the Treasury Department and the IRS have modified the definition of a Federal tax controversy to clarify that such determinations are included in the definition.

Consistent with section 7803(e), the definition of Federal tax controversy means that determinations that Appeals historically may not have considered may now be considered by Appeals. These determinations include the classification or reclassification of a non-exempt charitable trust under section 4947(a)(1) of the Code as described in section 509(a)(3) of the Code; the classification or reclassification of the organization as an exempt operating foundation under section 4940(d)(2) of the Code; relief from retroactive revocation or modification of a determination letter under section 7805(b) of the Code; denials of relief requested under § 301.9100-3 to permit the organization to be recognized and treated as tax-exempt effective as of a date earlier than the date of application; and pursuant to section 7611 of the Code relating to restrictions on church tax inquiries and examinations, revocation of the exempt or church status of an organization that is listed as, or claims to be, a church.

Proposed § 301.7803-2(b)(3) provided that notwithstanding the definition of a Federal tax controversy, disputes over administrative determinations made by the IRS with respect to a particular person regarding certain topics listed in proposed § 301.7803-2(b)(3) are treated as Federal tax controversies.

As explained previously in section I.B. of this Summary of Comments and Explanation of Revisions, the final regulations clarify that the definition of Federal tax controversy includes determinations concerning the status of tax-exempt organizations, private foundations, and qualified plans, and the status of tax-exempt or other tax-advantaged bonds. Accordingly, the final regulations delete these items from proposed § 301.7803-2(b)(3)(iv) through (vi), because inclusion would be unnecessary and duplicative. The final regulations retain the language in proposed § 301.7803-2(b)(3)(vi) referring to arbitrage claims, because such claims do not involve a tax and therefore do not meet the definition of a Federal tax controversy, as defined in § 301.7803-2(b)(2). That language is now included in the final regulations and redesignated as § 301.7803-2(b)(3)(iv).

One comment was received on proposed § 301.7803-2(b)(3)(ii) relating to a request under the Freedom of Information Act (5 U.S.C. 552) (FOIA). This comment recommended removing proposed § 301.7803-2(b)(3)(ii) because FOIA does not affect the collection of taxes or the liability for taxes of the FOIA requester. The Treasury Department and the IRS do not adopt this recommendation. Appeals consideration of IRS administrative determinations listed in proposed § 301.7803-2(b)(3), including in proposed § 301.7803-2(b)(3)(ii), is consistent with the historical practice and functions of Appeals as codified in section 7803(e)(3). See § 301.7803-2(b)(3)(i) through (vi). As a matter of tax policy and administration, it is important that FOIA requesters have, consistent with past practice, the opportunity for consideration by Appeals. The TFA does not prohibit Appeals from reviewing determinations by the IRS that are not Federal tax controversies, and retaining the ability for review by Appeals is beneficial to the public.

The Treasury Department and the IRS received several comments concerning the exceptions to Appeals consideration listed in proposed § 301.7803-2(c)(1) through (24). The exceptions that were subject to the greatest number of comments were Exception 19 and Exception 20.

Two comments were received on Exception 1 and Exception 2. Exception 1 provides that Appeals consideration is not available for an administrative determination made by the IRS with respect to a particular taxpayer in which the IRS rejects a frivolous position. Similarly, Exception 2 provides that Appeals consideration is not available regarding a penalty assessed by the IRS with respect to a particular taxpayer for asserting a frivolous position, for making a frivolous submission, or for providing false information.

One comment agreed with excepting from Appeals consideration penalties and determinations under section 6702 or section 6682 of the Code. A second comment alleged the exceptions would curtail the independence of Appeals by eliminating its right to review determinations of frivolousness because such determinations are not infallible. That comment recommended Appeals should have the option, but not the obligation, to decide whether positions have been wrongly labeled frivolous to strike a balance between its independence and the IRS's need to weed out frivolous arguments.

The Treasury Department and the IRS do not adopt this recommendation to give Appeals the option to consider whether the IRS has mistakenly labeled a taxpayer's position as frivolous or wrongly imposed a frivolous filing penalty. Referring every frivolous argument to Appeals upon the request of a taxpayer, for Appeals to then determine whether or not to grant consideration, would be unnecessarily resource intensive and inconsistent with the historic, reasonable limitations on access to Appeals. Section I.C.1. of the proposed regulations' Explanation of Provisions identified similar existing restrictions precluding the consideration of frivolous positions by Appeals that can be found in § 601.106(b) of the Statement of Procedural Rules (26 CFR part 601) (regarding appeal procedures not extending to cases involving solely the failure or refusal to comply with tax laws because of frivolous moral, religious, political, constitutional, conscientious, or similar grounds), IRM 5.14.3.3(1) (10-20-2020) (relating to installment agreement requests made to delay collection action), and IRM 8.22.5.5.3 (11-08-2013) (relating to frivolous issues). There are sound policy reasons for these historic limitations. As explained in sections I.C.1. and 2. of the proposed regulations' Explanation of Provisions, Appeals consideration of frivolous positions would facilitate abuse of the tax system by allocating IRS and Appeals resources to reviewing positions that have already been designated as frivolous. Penalties imposed under section 6702 or section 6682 are designed to deter frivolous behavior or improper conduct by a taxpayer. If Appeals does not consider the merits of a taxpayer's frivolous position, it follows that Appeals should not consider the IRS's assessment of a penalty with respect to the taxpayer as well. The exceptions are consistent with the restriction in section 7803(e)(5)(D) that the notice and protest procedures under section 7803(e)(5) do not apply to a request if the issue is frivolous within the meaning of section 6702(c). Also, as explained in section I.A. of this Summary of Comments and Explanation of Revisions, excluding a matter from Appeals consideration has no bearing on its independence.

Two comments were received on Exception 3, which provides that Appeals consideration is not available for any administrative determination made by the IRS under section 7623 of the Code relating to awards to whistleblowers.

The first comment suggested creating an interagency administrative review process, and it is discussed in section I.A. of this Summary of Comments and Explanation of Revisions.

The second comment asserted that the authority relied upon for Exception 3 is the proposed definition of Federal tax controversy in the proposed regulations and alleged that the language of the TFA authorizes Appeals to review whistleblower matters. The Treasury Department and the IRS do not adopt this comment. The exception for whistleblower awards under section 7623 in Exception 3 is a historic exception that has existed before the enactment of the TFA. For example, section 7623 was one of the exclusions listed in section 4 of Rev. Proc. 2016-22, 2016-15 IRB 577 (April 11, 2016), which provides procedures for Chief Counsel referrals of cases docketed in the Tax Court to Appeals for settlement. Its inclusion in the list of proposed exceptions was to clarify the point that section 7803(e) does not cover whistleblower awards because they do not involve a Federal tax controversy. In a whistleblower case, the IRS determination involves whether the whistleblower is entitled to an award. The whistleblower's tax liability is not at issue, and Appeals is not reviewing a determination by the IRS in its examination, collection, or execution of other activities with respect to the whistleblower's tax liability. This award determination is separate and distinct from a determination of tax liability.

One comment concerned Exception 4, which provides that Appeals consideration is not available for an administrative determination issued by an agency other than the IRS. An example is a determination by the Alcohol and Tobacco Tax and Trade Bureau (TTB) concerning an excise tax administered by and within its jurisdiction. The comment suggested creating an interagency administrative review process, and it is discussed in section I.A. of this Summary of Comments and Explanation of Revisions.

One comment was received on Exception 7, which provides that Appeals consideration is not available for any dispute regarding a determination of the IRS resulting in denial of access under the Privacy Act (5 U.S.C. 552a(d)(1)) (relating to access to records) to a particular person. The comment suggested creating an interagency administrative review process, and it is discussed in section I.A. of this Summary of Comments and Explanation of Revisions.

Exception 9 provides that Appeals consideration is not available regarding the application of section 7122(f) of the Code when the IRS erroneously returns or rejects a taxpayer's offer in compromise (OIC) submitted under section 7122 as nonprocessable. As explained in section I.C.9. of the proposed regulations' Explanation of Provisions, Exception 9 includes, for example, the claim that the IRS's mistaken rejection or return was in bad faith. Because the IRS returned or rejected the offer without making a determination regarding the OIC, there is no administrative determination made by the IRS for Appeals to review.

Two comments were received concerning OICs. The first comment recommended that Appeals should be authorized to review when the IRS erroneously returns or rejects a taxpayer's OIC as nonprocessable or no longer processable. The comment stated that such a return or rejection is an administratively reviewable determination, that not allowing Appeals review is a significant loss of rights for the taxpayer including low-income taxpayers in particular, that excepting this issue from Appeals review circumvents section 7122(f), and that Appeals review would promote consistency.

The Treasury Department and the IRS do not adopt this comment. Appeals has not historically reviewed such returned or rejected OICs. Exception 9 is narrow, and it is consistent with the pre-existing OIC regulations. Section 301.7122-1(f)(5)(ii) states, in part, that if an OIC is returned following a “determination” that the offer was nonprocessable, that return of the OIC “does not constitute a rejection of the offer for purposes of this provision and does not entitle the taxpayer to appeal the matter to appeals under the provisions of this paragraph (f)(5) . . .” Also, the comment's recommendation is not consistent with the function of Appeals, which is to weigh litigation hazards in applying the law to specific facts. Reviewing the completeness of an OIC is not a weighing of hazards. There would be no hazards of litigation for Appeals to consider or merits to weigh—either the OIC request is complete or not complete. Further, the recommendation, if adopted, would conflict with the OIC regulations. The return of an OIC as nonprocessable is an example of a premature review in § 301.7803-2(d)(1) because the originating IRS office has not completed its action. It has been a longstanding practice of the IRS to return incomplete or otherwise nonprocessable OICs that taxpayers fail to perfect. See for example, sec. 5 of Rev. Proc. 2003-71, 2003-36 I.R.B. 517 (September 8, 2003) (relating to offers in compromise).

The second comment opined that Exception 9 is too loosely defined and its focus should be limited to those taxpayers who are abusing the process such as by creating undue delay. This comment is not adopted. Exception 9 is narrowly limited to a case in which the IRS erroneously returns or rejects an OIC as nonprocessable or no longer processable and the taxpayer requests Appeals consideration to assert that the OIC should be deemed to be accepted under section 7122(f). This exception is narrowly defined to sufficiently meet the administrative goals of the rule.

One comment was submitted on Exception 10, which provides that Appeals consideration is not available for a Federal tax controversy with respect to a taxpayer while a criminal prosecution or a recommendation for criminal prosecution is pending against the taxpayer for a tax-related offense other than with the concurrence of Chief Counsel and the Justice Department, as applicable.

The comment recommended that the final regulations should limit Exception 10 to only cases in which the pending criminal matter pertains to the same subtitle of the Code and that Exception 10 not be applied to matters within a single subtitle that are completely unrelated to each other and do not involve common facts or tax transactions. The Treasury Department and the IRS do not adopt this comment. Exception 10 allows for Appeals consideration with the concurrence of Chief Counsel and the Justice Department, as applicable. Such concurrence is fact-based and case specific and would accommodate the situations addressed in the comment because if they were to arise, Chief Counsel and/or the Justice Department could determine whether concurrence would be appropriate under the facts and circumstances of the particular case. Limiting the exception as suggested in the comment could require that Appeals consideration be afforded, when such consideration could interfere with a pending criminal matter. It would also be contrary to regulations under 26 CFR part 601, which provide general procedural rules for Appeals functions and limit Appeals' authority to act in a case in which criminal prosecution is recommended, except with the concurrence of Chief Counsel. See § 601.106(a)(2)(vi).

One comment was received on Exception 12, which provides that consideration by Appeals is not available for the certification or issuance of a notice of certification of a seriously delinquent Federal tax debt of a particular taxpayer to the Department of State (State Department) under section 7345 of the Code (relating to the revocation or denial of a taxpayer's passport in the case of serious tax delinquencies). According to the comment, if Appeals consideration is not available for certification or issuance of a notice of certification of a seriously delinquent tax debt, the taxpayer lacks an important check on the automated system and does not have an opportunity to contest whether the statutory requirements for passport certification have been met under section 7345(b).

The Treasury Department and the IRS do not adopt this comment. In the event of a mistake in the automated process, a taxpayer has the opportunity to contact the IRS personnel identified in the notice, which provides a check on the automated process. Specifically, the taxpayer receives Notice CP508C, Notice of certification of your seriously delinquent Federal tax debt to the State Department, informing the taxpayer to contact the IRS at the phone number in that notice to request reversal of the certification if the taxpayer contends the certification is erroneous. The role of Appeals is to review administrative determinations and to weigh the hazards of litigation, not to provide a backstop to an automated process. This exception existed before the TFA. See Notice 2018-1, 2018-3 I.R.B. 299 (January 16, 2018).

The comment also alleged Exception 12 violates the Taxpayer Bill of Rights (TBOR). See https://www.irs.gov/taxpayer-bill-of-rights. The Treasury Department and the IRS do not adopt this comment; this exception is consistent with the TBOR. The TBOR does not grant new enforceable rights but instead it obligates the IRS to ensure that its employees are familiar with and act in accord with rights established in other Code provisions. See Facebook, Inc. v. Internal Revenue Service, 2018 WL 2215743, at *13-14 (N.D. Cal. 2018). See also Hancock County Land Acquisitions LLC, et. al. v. United States, 553 F. Supp. 3d 1284, 1296 n. 11 (N.D. Ga. 2021). As discussed in section I.A. of this Summary of Comments and Explanation of Revisions, section 7803(e)(4) does not confer an absolute right to Appeals consideration.

One comment was received on Exception 14. Exception 14 provides that consideration by Appeals is not available for any case, determination, matter, decision, request, or issue with respect to a particular taxpayer that Appeals lacks the authority to settle. Proposed § 301.7803-2(c)(14)(i) through (v) provides a non-exclusive list of examples illustrating this rule, including the example in proposed § 301.7803-2(c)(14)(i) that Appeals does not have authority to resolve an issue with respect to a particular taxpayer in a docketed case after a referral has been made to the Justice Department. The comment suggested creating an interagency administrative review process, which is discussed in section I.A. of this Summary of Comments and Explanation of Revisions. The settlement authority for any litigation under the jurisdiction of the Justice Department already vests with the Justice Department.

One comment was submitted concerning Exception 15 and Exception 16. Exception 15 provides that Appeals consideration is not available for certain adverse actions related to the initial or continuing recognition of tax-exempt status, an entity's classification as a foundation, the initial or continuing determination of employee plan qualification, or a determination involving an obligation and the issuer of an obligation under section 103 of the Code, when the adverse action is based upon a technical advice memorandum (TAM) issued by an Associate Office of Chief Counsel (Associate Office) before an appeal is requested. Similarly, Exception 16 provides that Appeals consideration is not available for any case docketed in the Tax Court if the notice of deficiency, notice of liability, or final adverse determination letter is based upon a TAM issued by an Associate Office in that case involving an adverse action described in Exception 15.

The comment asserted that granting an exception for an appeal in cases of tax-exempt status in which a TAM has been issued would unnecessarily narrow an already small area of appeal rights, and suggested that it would be beneficial to all parties to bring the matter to Congress' attention if this is more a matter in need of statutory clarification.

The Treasury Department and the IRS do not adopt this comment, which suggested a change but did not provide a rationale for a change, refute the rationale given in the proposed regulations, or explain its conclusion that the two proposed exceptions would unnecessarily narrow Appeals review. As reflected in the proposed regulations' Explanation of Provisions in sections I.C.15. and 16., these two exceptions are supported by reasonable rationales and are narrowly tailored to achieve their purposes. If the legal issues and determinations in Exception 15 and Exception 16 are the subject of a TAM from an Associate Office, they are excepted from Appeals consideration because traditionally Chief Counsel has exclusive authority over the dispute administratively or upon litigation. A TAM is advice furnished by an Associate Office in a memorandum that responds to any request for assistance on any technical or procedural legal question involving the interpretation and proper application of any legal authority that is submitted in accordance with an applicable revenue procedure. Chief Counsel's decision with respect to the issues related to the initial or continuing recognition of tax-exempt status, an entity's classification as a foundation, the initial or continuing determination of employee plan qualification, or a determination involving an obligation and the issuer of an obligation under section 103 is the legal position of the IRS with respect to the particular facts and circumstances that are the subject of the TAM. These exceptions are important to preserving Chief Counsel's authority to resolve these sensitive legal issues. As noted in section I.C.15. of the proposed regulations' Explanation of Provisions, these exceptions are consistent with historical practice as found in § 601.106(a)(1)(v)( a ) and IRM 8.1.1.2.1(1)(c.) (02-10-2012) (currently found in IRM 8.1.1.3.1 (01-09-2024)). Furthermore, a broad range of tax-exempt status issues are reviewable by Appeals under these final regulations.

Two comments were received on Exception 17, which excepts from Appeals consideration a decision by an Associate Office regarding whether to issue a letter ruling or the content of a letter ruling. However, the subject of the letter ruling may be considered by Appeals if all other requirements in § 301.7803-2 are met. For example, if the taxpayer subsequently files a return taking a position that is contrary to the letter ruling and that position is examined by the IRS, Appeals could consider that Federal tax controversy if all other requirements in § 301.7803-2 are met.

The first comment stated that the provision in Exception 17 helpfully makes clear that the subject of the letter ruling may be considered by Appeals if all other requirements in proposed § 301.7803-2 are met, and recommended that this provision should be strengthened to offer an affirmative safe harbor for appeals for taxpayers who in good faith attempt to fulfill the terms of § 301.7803-2. The Treasury Department and the IRS do not adopt this recommendation. The criteria for a “safe harbor” would not be practical because meeting some but not all of the requirements would not be sufficient. A taxpayer must comply with all the requirements in § 301.7803-2 in order to have Appeals consider the taxpayer's Federal tax controversy. The second comment on Exception 17 relates to 9100 relief and CAMs and is discussed in section I.H. of this Summary of Comments and Explanation of Revisions.

Exception 18 provides that Appeals consideration is not available for any issue based on a taxpayer's argument that a statute violates the United States Constitution unless there is an unreviewable decision from a Federal court holding that the cited statute is unconstitutional. Exception 18 does not preclude Appeals from considering a Federal tax controversy based on arguments other than the constitutionality of a statute, such as whether the statute applies to the taxpayer's facts and circumstances.

Proposed § 301.7803-2(c)(18) defined the phrase unreviewable decision as a decision of a Federal court that can no longer be appealed to any Federal court because all appeals in a case have been exhausted or the time to appeal has expired and no appeal was filed, and no further action can be taken in the case by any Federal court once there is an unreviewable decision. An unreviewable decision means an unreviewable decision of any Federal court, regardless of where the taxpayer resides. The proposed language “and no further action can be taken in the case by any Federal court once there is an unreviewable decision” has been deleted in the final regulations because it is inaccurate in certain circumstances. For example, even if a district court grants a motion to dismiss and the decision is appealed and a reversal of that motion becomes unreviewable, the case would have further action such as discovery, dispositive motions, or trial. See § 301.7803-2(c)(18).

The Treasury Department and the IRS received several comments on Exception 18. One comment agreed with Exception 18 to not allow Appeals to consider constitutional challenges to Federal tax statutes unless there is an unreviewable court decision. It recommended the final regulations should strengthen the concept of an “unreviewable decision.” See section I.D.11.a. of this Summary of Comments and Explanation of Revisions regarding the phrase unreviewable decision.

Two comments objected to Exception 18 as inconsistent with the TFA and recommended Appeals should be allowed to consider constitutional challenges to Federal tax statutes in the absence of an unreviewable decision. One objected that denial of Appeals consideration in Exception 18 strips taxpayers of a statutory right to Appeals. The other objected that Exception 18 improperly restricts access to Appeals and forces taxpayers to sacrifice legal arguments.

The Treasury Department and the IRS do not adopt these two comments; Exception 18 is consistent with the TFA. As discussed previously, the TFA does not provide an absolute statutory right to an administrative appeal. Rather, the Treasury Department and the IRS have the statutory authority to provide exceptions to Appeals consideration. Exception 18 is one such exception, and it is narrowly tailored and supported with reasonable rationales. As proposed, Exception 18 does not exclude the constitutionality issue from Appeals consideration totally but merely provides that Appeals will not be the first forum to hear such a challenge because it is not the appropriate forum without a final decision from a Federal court. The Treasury Department and the IRS still agree with the rationales in section I.C.18. of the proposed regulations' Explanation of Provisions, namely that questions within the IRS regarding the constitutionality of a statute, and positions taken by the IRS in light of such questions, are determinations of general applicability resolved at the highest levels of the Treasury Department and the IRS, in consultation with the Office of Legal Counsel of the Justice Department, and subject to the ultimate resolution by a court of relevant jurisdiction. Moreover, a constitutional determination should be communicated and applied consistently to all taxpayers. It would be inappropriate for Appeals to consider the constitutionality of a statute for a particular taxpayer in the absence of an unreviewable court decision, which is accessible to all taxpayers and the IRS.

A comment asserted Appeals has historically analyzed legal arguments concerning tax statutes, regulations, and IRS procedures and so Appeals is capable of considering these arguments. This comment insinuated that Exception 18, Exception 19, and Exception 20 are premised on Appeals' training, skills, or competency to review legal arguments related to statutes, regulations, or IRS procedures. The rationales for Exception 18, Exception 19, and Exception 20 provided in sections I.C.18., 19., and 20. of the proposed regulations' Explanation of Provisions do not relate to Appeals' training, skills, or competency. Appeals will continue to review taxpayer arguments about whether the relevant statutes, regulations, or IRS procedures apply to the taxpayer's factual circumstances just as Appeals has historically done.

A comment construed the definition of an unreviewable decision to mean an unreviewable decision only from a Federal court within the circuit in which the taxpayer resides. Neither the proposed regulations, nor these final regulations, require the unreviewable decision to be in the taxpayer's own circuit. Another comment recommended eliminating Exception 19 and Exception 20 but, in the alternative, it recommended clarifying the phrase unreviewable decision. The comment interpreted the phrase as the proposed regulations intended, that is, as an unreviewable decision of any Federal court, regardless of where the taxpayer resides, but stated it was unclear and should be clarified. In response to these comments, the language in the proposed regulations, “a decision of a Federal court,” is clarified in the final regulations to “a decision of any Federal court regardless of where the taxpayer resides.” See § 301.7803-2(c)(18).

A comment recommended the final regulations modify the definition of unreviewable decision to provide the decision must be one that would govern the taxpayer's case. In other words, the final regulations should ensure, according to the comment, that Appeals access is available only if there is a relevant decision that would bind the taxpayer and the Government if the dispute proceeded to litigation. The Treasury Department and the IRS do not adopt this comment because it is too limiting. If the only unreviewable decision that Appeals should consider is one that is binding on the IRS and the taxpayer, then it would not be a matter of Appeals weighing the hazards of litigation because that decision would be controlling on the taxpayer. Also, such a rule would prevent Appeals from weighing the hazards of litigation by evaluating how a court in another circuit ruled on the issue. Like the proposed regulations would have done, the final regulations allow Appeals to consider that final decision in considering the hazards of litigation.

A comment stated that the Treasury Department and the IRS have no basis to hold Appeals to a different, and higher standard than that of the Justice Department or the Solicitor General. The comment's reference to the Justice Department and Solicitor General appeared to be a reference to those offices resolving cases in a manner that Appeals could not under Exception 19 and Exception 20. The comment appeared to suggest that Appeals should be able to do the same in fulfilling its function of considering hazards of litigation.

The Treasury Department and the IRS do not adopt this comment because the authority of employees of the Justice Department and the Solicitor General to take certain actions in fulfilling their distinct functions and roles does not mean employees of Appeals, like Appeals Officers (AO), can take the same actions. As explained in section I.D.12. of this Summary of Comments and Explanation of Revisions, questions regarding the validity of a regulation, or the procedural validity of a notice or revenue procedure, involve determinations of general applicability resolved at the highest levels of the Treasury Department and the IRS and must be followed by all IRS employees, including AOs. Such validity decisions should be communicated and applied consistently to all taxpayers. It would be inappropriate for Appeals to act in contravention with those decisions in a specific case involving one taxpayer and consider validity issues in the absence of an unreviewable court decision.

Three comments recommended Appeals be allowed to consider the hazards of litigation on a validity issue for a notice or regulation based on a similar or analogous court decision on a different notice or regulation. The comments mentioned Green Valley Investors v. Commissioner, 159 T.C. 5 (2022) (Tax Court setting aside Notice 2017-10, 2017-4 IRB 544 for failure to comply with the Administrative Procedure Act's (APA's) notice and comment requirements) as an example and suggested that if a court decision invalidated a notice for the same APA reason that a taxpayer is raising to challenge the validity of other guidance, Appeals should consider the hazards of litigation in the taxpayer's analogous case.

The Treasury Department and the IRS do not adopt these comments because it would defeat the purposes of Exception 18, Exception 19, and Exception 20. Appeals consideration is limited to unreviewable decisions involving the validity of the particular regulation, notice, or revenue procedure being challenged. As described previously, in this Summary of Comments and Explanation of Revisions and sections I.C.18., 19., and 20. of the proposed regulations' Explanation of Provisions, the promulgation of a regulation, notice, or revenue procedure consists of multiple levels of review at the highest levels within the Treasury Department and the IRS, and taxpayers are not well-served by confidential decisions by Appeals on a validity matter that is applicable to only a single taxpayer. Appeals does not have the authority to unilaterally contradict the decisions made through the regulatory or subregulatory process. In addition, there may be other defenses to APA challenges that the IRS might assert, and therefore the Tax Court having ruled on an unrelated notice or regulation is not a reason to provide the carve-out suggested here.

A comment recommended eliminating the unreviewable decision requirement and allowing Appeals to consider a judicial decision in weighing the hazards of a case. Similarly, another comment recommended allowing Appeals to consider hazards pending the appeal of a decision. The Treasury Department and the IRS do not adopt these recommendations because they would defeat the purpose of the unreviewable decision rule in Exception 18, Exception 19, and Exception 20. Until the pending decision becomes unreviewable by a Federal court, as described in proposed § 301.7803-2(c)(18), it would not be sufficiently final. The finality of the judicial decision is important because the judicial branch is charged with independently interpreting Federal statutes and a Federal court's decision on the merits may reject the determinations made by the Treasury Department or the IRS. There must be a final decision, however, before Appeals can weigh the hazards of litigation with respect to these specific challenges because a lower court decision that is not final might be overturned on appeal and the challenges under Exception 18, Exception 19, and Exception 20 relate to determinations of general applicability resolved at the highest levels of the Treasury Department and the IRS. Until a judicial decision is unreviewable and final, Appeals must respect the decision of the Secretary and the Commissioner of Internal Revenue (Commissioner). In that regard, the final regulations clarify that the definition of unreviewable decision includes decision of any Federal court regardless of where the taxpayer resides.

Exception 19 provides that Appeals consideration is not available for any issue based on a taxpayer's argument that a Treasury regulation is invalid unless there is an unreviewable decision from a Federal court invalidating the regulation as a whole or the provision in the regulation that the taxpayer is challenging. Exception 20 provides that Appeals consideration is not available for any issue based on a taxpayer's argument that a notice or revenue procedure published in the Internal Revenue Bulletin is procedurally invalid unless there is an unreviewable decision from a Federal court holding it to be invalid. As proposed, Exception 19 and Exception 20 do not preclude Appeals from considering a Federal tax controversy based on arguments other than the validity of a regulation, or procedural validity of a notice or revenue procedure, such as whether the regulation, notice, or revenue procedure applies to the taxpayer's facts and circumstances.

The Treasury Department and the IRS received several comments on Exception 19 and Exception 20. In response to these comments, the Treasury Department and the IRS have modified the language in proposed § 301.7803-2(c)(19) and (20), as explained below.

A comment agreed with the rationales described in the proposed regulations for Exception 19 and Exception 20 that Appeals should not consider these types of challenges. Another comment made the same objection it made to Exception 18 that denial of Appeals consideration in Exception 19 and Exception 20 strips taxpayers of a statutory right to Appeals. Another comment made the same objection it made to Exception 18 that Exception 19 and Exception 20 improperly restrict access to Appeals and forces taxpayers to sacrifice legal arguments.

Like Exception 18, Exception 19 and Exception 20 are consistent with the TFA, which does not provide an absolute statutory right to an administrative appeal, and permits the Treasury Department and the IRS to provide exceptions. The rationales for Exception 19 and Exception 20 are similar to the rationales for Exception 18, as discussed previously. See sections I.C.18., 19., and 20. of the proposed regulations' Explanation of Provisions. Questions regarding the validity of a regulation, or the procedural validity of a notice or revenue procedure, involve determinations of general applicability resolved at the highest levels of the Treasury Department and the IRS and must be followed by IRS employees, including AOs. Such validity decisions also should be communicated and applied consistently to all taxpayers. It therefore would be inappropriate for Appeals to act in contravention with those institutional decisions in a specific case involving one taxpayer and consider the validity issues in the absence of an unreviewable court decision.

A comment stated Exception 19 and Exception 20 are not narrowly tailored because they encompass any challenge to almost any level of published guidance. The Treasury Department and the IRS do not adopt this comment. Exception 19 and Exception 20 are narrowly tailored and expressly allow Appeals to consider arguments other than the validity of a regulation, or procedural validity of a notice or revenue procedure, such as whether the regulation, notice, or revenue procedure applies to the taxpayer's facts and circumstances. They do not exclude the validity challenges from Appeals consideration totally but merely provide Appeals will not be the first forum to hear these challenges because it is not the appropriate forum for such challenges without an unreviewable decision of a court. Further, Exception 20 is even narrower in scope, applying only to a taxpayer's argument that a notice or revenue procedure published in the Internal Revenue Bulletin is procedurally invalid.

A comment asserted that Exception 19 and Exception 20 did not exist prior to the TFA and taxpayers historically could at least raise validity challenges to published IRS guidance and have those challenges be considered by Appeals; therefore Exception 19 and Exception 20 appear contrary to the TFA's intent to expand taxpayer access to Appeals. As explained previously, Exception 19 and Exception 20 are consistent with the intent of the TFA to grant the Treasury Department and the IRS the authority to make exceptions, which includes the authority to provide new exceptions that did not exist before the enactment of the TFA.

A comment asserted that Exception 19 and Exception 20 are contrary to Appeals' mission or function because they will force the parties into litigation instead of providing an opportunity for Appeals to resolve the case. Another comment similarly stated that Exception 20 tries to cast the validity determination as a high-level policy decision, while Appeals' function is to hear and settle cases and in doing so it is not making policy.

The Treasury Department and the IRS do not adopt these comments. Unlike most Appeals analyses that weigh litigation hazards in applying the law to specific facts, Appeals' potential consideration of the validity of a regulation or the procedural validity of a notice or revenue procedure does not necessarily involve taxpayer-specific facts. As explained in section I.C.20. of the proposed regulations' Explanation of Provisions, the issue of whether an IRS notice or revenue procedure is procedurally valid involves a determination regarding whether specific IRS subregulatory guidance complied with administrative law requirements, such as notice and comment under 5 U.S.C. 553. Whether a notice or revenue procedure was properly issued involves facts solely related to the Treasury Department and the IRS and is unlike the application of the tax law to a taxpayer's specific facts. Furthermore, the procedurally validity of a notice or revenue procedure is a determination of general applicability resolved at the highest levels of the Treasury Department and the IRS and such a determination would not be appropriate for Appeals to consider in a specific case involving one taxpayer.

The latter comment regarding Exception 20 did not address the other rationale in support of Exception 20, namely, that the issue of whether a notice or revenue procedure failed to comply with administrative law requirements should be communicated and applied consistently. As explained in the proposed regulations, an unreviewable decision of a Federal court is the appropriate means of accomplishing this objective because a settlement before Appeals is specific to a taxpayer and cannot be made available to other taxpayers. An unreviewable decision makes information accessible to all taxpayers and the IRS regarding whether a notice or revenue procedure was prescribed in accordance with applicable Federal law. A determination by the judicial branch on the merits of the validity challenge may reject the determinations made by the Treasury Department or the IRS with regard to the validity of a regulation or the procedural validity of a notice or revenue procedure, thereby providing a basis for Appeals to consider those issues. If no unreviewable decision has been issued on the validity challenge, Appeals would not be weighing hazards with respect to that particular guidance of general applicability because it has not been successfully challenged in court yet. Instead, absent an unreviewable decision, Appeals would be contravening the decision made at the highest levels of the Treasury Department and the IRS.

Four comments related to Appeals' competency to consider validity challenges to a regulation, notice, or revenue procedure. A comment alleged Appeals has historically analyzed legal arguments concerning statutes, tax regulations, and IRS procedures. A similar comment asserted that under Exception 19 and Exception 20 Appeals is unable to assess the hazards of litigation in a way that a Chief Counsel trial attorney is not restricted and that specialists within Appeals are competent to consider these arguments when evaluating other hazards of litigation in the case. A comment stated that AOs have the training and qualifications to consider all hazards of litigation, including challenges to the validity of regulations, notices, or revenue procedures, or if they lack such training and qualifications, the IRS should provide them instead of preventing Appeals from considering these issues. Another comment asserted Appeals is familiar with considering all arguments made by a taxpayer regarding the applicability of regulations, notices, and revenue procedures, and it should be able to consider in docketed cases credible arguments about hazards involving validity challenges to a regulation, notice, or revenue procedure because the APA and ordinary judicial methods for review of legislative rules apply to tax cases.

The Treasury Department and the IRS do not adopt these comments. None of these exceptions relate to Appeals' training, skills, or competency. Appeals' competency does not pertain to the rationales of Exception 19 and Exception 20 to prevent a decision for one taxpayer regarding guidance of general applicability, which has been approved at the highest levels within the Treasury Department and the IRS. Also, like Appeals employees, Chief Counsel attorneys handling docketed cases in Tax Court must follow regulations, notices, and revenue procedures. See Chief Counsel Directives Manual (CCDM) or IRM 32.1.1.2.5(1) (08-02-2018) (relating to Treasury decisions); CCDM/IRM 32.2.2.10 (08-11-2004) (relating to force and effect of specified publications). Further, Appeals applying the APA and ordinary judicial methods to invalidate guidance would lack consistency because Appeals' action, unlike an unreviewable decision, is not public and is applicable to only that taxpayer challenging the guidance. A final court decision is applicable to, and accessible by, all taxpayers and the IRS, which promotes consistency. Furthermore, a final, unreviewable court decision ensures that Appeals does not act in contravention of a decision made at the highest levels of the Treasury Department and the IRS. In the absence of an unreviewable decision, Appeals would not have a court decision with respect to a particular document to weigh or evaluate any hazards.

Two comments recommended that if the Justice Department has conceded that an unrelated notice was invalid on the same basis as in the holding by the United States Court of Appeals for the Sixth Circuit (Sixth Circuit) in Mann Construction Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022) (holding a different notice invalid because it was required to follow APA notice and comment procedures and failed to do so), Appeals should consider the hazards of litigation on a notice validity issue in a taxpayer's case involving a different notice. Similarly, another comment recommended allowing Appeals to consider the hazards of litigation on a regulation validity issue in a taxpayer's case if the Justice Department has settled or conceded that an unrelated regulation was invalid.

The Treasury Department and the IRS do not adopt these comments for the same reasons they disagree with the similar comments regarding analogous court decisions. See section I.D.11.a. of this Summary of Comments and Explanation of Revisions. If adopted, these recommendations would defeat the purposes of Exception 19 and Exception 20. Moreover, there are numerous factors that go into determining whether a case should be settled, and a recommendation for a settlement in one case may not dictate the same result in another case. There may be other defenses to APA challenges that the IRS might assert and therefore the Justice Department having settled an issue based on hazards of litigation involving an unrelated notice or regulation is not a reason to provide the suggested carve-out. Regarding the transaction in the case cited by the comment, for cases within the Sixth Circuit, the Treasury Department and the IRS have represented in court that APA matters conceded by the Government in the Mann case would not be subject to examination by the IRS in other listed transaction cases and therefore such cases would not come up for Appeals review.

A comment agreed with the policy expressed in Exception 19, but with a caveat that “invalidity” should be further defined. Specifically, the comment asked whether a change in the law would make regulations invalid or would fit within the provision in proposed § 301.7803-2(c)(19) that states Exception 19 would not prevent a taxpayer from arguing that a regulation does not apply to their position. Generally, a regulation would still be valid for prior tax years before any repeal of or amendment to the statute upon which the regulation is based, and a change in the statute would have precedent over the regulation for tax years after the change. These regulations do not prohibit a taxpayer from arguing whether the statute applies to the taxpayer's own facts and circumstances. In that case, Appeals is considering the applicability of the statute to the taxpayer for the relevant period. In response to this comment, the Treasury Department and the IRS have revised the language in Exception 19 and Exception 20 by adding a reference to the statute to clarify that Appeals may consider arguments based on whether a statute applies to the taxpayer's facts and circumstances. See § 301.7803-2(c)(19) and (20). Also, for the sake of clarity, Exception 19 is revised to define the term invalid. See § 301.7803-2(c)(19).

The same comment asked that if regulations overlap in a factual situation whether reconciliation of such a situation would involve a determination that a regulation is invalid. As proposed, Exception 19 would still allow Appeals to consider whether the regulations apply to a taxpayer's facts and circumstances, but to the extent the taxpayer argues that the regulations are invalid, Exception 19 would preclude Appeals from considering that validity issue in the absence of an unreviewable decision. The concern raised in this comment appeared to relate to ensuring consistency. Appeals is not the only administrative function within the IRS; there are other offices and other ways within the IRS to ensure such consistency short of consideration by Appeals or litigating the issue.

A comment on Exception 20 expressed some confusion as to the meaning of the term procedurally invalid and stated the comment had little concern regarding Exception 20 if its intent is only that Appeals would not be allowed to consider whether a notice or revenue procedure was properly adopted or promulgated. As explained in section I.C.20. of the proposed regulations' Explanation of Provisions, the term procedurally invalid in proposed § 301.7803-2(c)(20) was intended to mean challenges to procedural determinations regarding notices and revenue procedures, including determinations regarding compliance with administrative law requirements. This comment recommended defining the term procedurally invalid for the sake of clarity. The Treasury Department and the IRS adopt this recommendation and have defined the term to mean “any determination regarding whether a notice or revenue procedure failed to comply with administrative law requirements, such as notice and comment under 5 U.S.C. 553.” See § 301.7803-2(c)(20).

The same comment noted that the rationale behind Exception 19 is generally sound but opined that that rationale does not support Exception 20 because a notice or revenue procedure does not undergo the public notice and comment process under the APA, lacks the same approval process, and does not carry the same weight or level of authority of a regulation. The Treasury Department and the IRS do not adopt this comment. The same rationale for Exception 19 applies to Exception 20 because whether a notice or revenue procedure is procedurally valid is a determination of general applicability resolved at the highest levels of the Treasury Department and the IRS. As discussed previously, such a determination would not be appropriate for Appeals to consider in a specific case involving one taxpayer.

A comment asserted that Appeals has historically heard arguments about the application of Treasury regulations and that the meaning of a regulation, notice, or revenue procedure is not exclusively determined by senior officials at the Treasury Department and the IRS. This comment appears to misperceive the scope of Exception 19 and Exception 20. These exceptions do not preclude Appeals from considering a Federal tax controversy based on arguments other than the validity of a Treasury regulation or procedural validity of a notice or revenue procedure. As stated in the text of Exception 19 and Exception 20, such arguments include whether the Treasury regulation, notice, or revenue procedure applies to the taxpayer's facts and circumstances. Appeals may resolve the Federal tax controversy by weighing the likelihood a court would agree with the position of the taxpayer or the Government. As for the comment's suggestion that guidance is not exclusively determined by senior officials at the Treasury Department and the IRS, the final regulations do not adopt this comment. While employees of all levels of the Treasury Department and the IRS have a role in promulgating a regulation, notice, or revenue procedure, such guidance is reviewed and approved by senior officials in the Treasury Department and the IRS, including the Assistant Secretary of the Treasury (Tax Policy) and the Deputy Commissioner of the IRS as appropriate. See generally IRM 32.1.1 (November 13, 2019).

Two comments related to consistency by Appeals. A comment alleged the proposed regulations did not explain why consistency cannot be accomplished if Appeals reviews the validity issues. The same comment argued Exception 19 and Exception 20 will result in bad policy because they will make the Appeals process more inconsistent, random, and less responsive to legal developments, causing additional costs and delay for taxpayers who otherwise could access Appeals while invalidity arguments work through the court system. Another comment stated that Appeals can reach a coordinated position on validity challenges and forcing taxpayers to litigate will decrease uniformity of tax administration because the IRS can settle or concede issues to avoid adverse opinions and because years may pass before there is an unreviewable judicial decision deciding the validity challenge.

Sections I.C.18., 19., and 20. of the proposed regulations' Explanation of Provisions, provides the Treasury Department and the IRS' position on consistency. Any determinations with respect to constitutional challenges to a statute, the validity of a regulation, or procedural validity of a revenue procedure or notice should be communicated and applied consistently to all taxpayers. An unreviewable decision of a Federal court is the appropriate means of making information accessible to taxpayers, and the Treasury Department and the IRS do not agree that Exception 19 and Exception 20 will result in bad policy. A court's unreviewable decision on the validity of a regulation, or procedural validity of a revenue procedure or notice ensures the judicial branch decides questions of law. The Treasury Department and the IRS recognize the deliberateness of the judicial process, but absent that process, Appeals lacks the authority to take actions contrary to the reasoned decisions of the Secretary and the Commissioner. An unreviewable decision is publicly available, and generally applicable, to all taxpayers and the IRS, which promotes consistency and uniformity. Having Appeals weigh hazards of litigation based on an unreviewable decision that is publicly available and generally applicable to all taxpayers is sounder policy than a confidential decision by Appeals on a matter that is applicable to only a single taxpayer. The question of whether Appeals can reach a coordinated position on validity challenges is irrelevant because under these exceptions the issues would not be considered by Appeals in the first place in the absence of an unreviewable decision.

A comment opined that Appeals should have the right to determine all hazards of litigation, including challenges to all levels of IRS published guidance on an unlimited basis and including rationale from all court opinions because this approach is consistent with the Treasury Department's 2019 Policy Statement on the Tax Regulatory Process (Policy Statement). Policy Statement on the Tax Regulatory Process (March 5, 2019), https://home.treasury.gov/policy-issues/tax-policy/tax-regulatory-process. The Treasury Department and the IRS do not adopt this comment. An unreviewable decision is necessary because it is publicly available to the IRS and taxpayers and generally applicable, which promotes consistency and uniformity. The Policy Statement is unrelated to Exception 19 and Exception 20 because it concerns the tax regulatory process and does not address Appeals or its function. The Policy Statement also explicitly states it does not create any right or benefit, either substantive or procedural.

A comment alleged that Exception 19 and Exception 20 undercut the key focus area for Appeals in fiscal year 2023 to improve taxpayer experience. To the contrary, Exception 19 and Exception 20 are consistent with the TFA as it relates to taxpayer experience. Section 1101 of the TFA requires the IRS to develop a comprehensive strategy for customer service and submit the plan to Congress. The strategy will include best practices of customer service provided in the private sector, including, online services, telephone call back, and training of employees, and the strategy must incorporate best practices of businesses to meet reasonable customer expectations. The strategic plan, updated guidance, and training materials must also be available to the public. The taxpayer experience requirement does not address whether a taxpayer can have the taxpayer's case or issue considered by Appeals. The strategic plan addresses topics like communications with the IRS and taxpayer information services, such as expanded digital services, guides to taxpayer resources and IRS communication channels, and outreach and education. See Publication 5426, Taxpayer First Act Report to Congress (January 2021).

A comment alleged that Appeals' consideration of all of a taxpayer's arguments, including validity challenges, does not harm the Government but instead provides the taxpayer and the Government the opportunity to resolve the issue without litigation. Appeals' consideration of validity challenges would harm the Government because in the absence of an unreviewable decision, such consideration would undermine the decisions based on the regulatory and subregulatory guidance process as described in sections I.C.19. and I.C.20. of the proposed regulations' Explanation of Provisions, and result in a decision by Appeals for one taxpayer on an issue that is not related to the taxpayer's specific facts and that would not be publicly available to other taxpayers and the IRS.

Another comment recommended that Appeals should consider APA challenges as part of its weighing of hazards of litigation. The comment argued that Treasury regulations are not necessarily in compliance with the APA because they go through an extensive review process involving numerous offices within the Treasury Department and the IRS. The comment alleged that challenges to a regulation's validity is taxpayer specific because any controversy before Appeals will involve the IRS enforcing an agency rule against a taxpayer based on that taxpayer's facts. Finally, the comment also suggested that the exceptions would prove unworkable because final, unreviewable decisions may be limited to one district court or circuit.

The Treasury Department and the IRS do not adopt this comment. As explained previously in this section and section I.D.12. of this Summary of Comments and Explanation of Revisions, the promulgation of a regulation, or publication of a notice or revenue procedure goes through multiple levels of review within the Treasury Department and the IRS. An individual AO does not have the authority to unilaterally contradict the decisions made through the regulatory or subregulatory process. Furthermore, as explained above and in section I.C.20. of the proposed regulations' Explanation of Provisions, the validity of a regulation or the procedural validity of a notice of revenue procedure does not involve taxpayer-specific facts. The validity of a regulation or the procedurally validity of a notice or revenue procedure is a determination of general applicability and does not involve the application of tax law to a specific set of facts and circumstances. Lastly, as explained in section I.D.11. of this Summary of Comments and Explanation of Revisions, the Treasury Department and the IRS have clarified the final regulations to specify that an unreviewable decision means “a decision of any Federal court regardless of where the taxpayer resides.” See § 301.7803-2(c)(18).

Four comments were received on Exception 21, which provides that Appeals consideration is not available for any case or issue designated for litigation, or withheld from Appeals consideration in a Tax Court case, in accordance with guidance regarding designating or withholding a case or issue. As proposed, designation for litigation means that the Federal tax controversy, comprising an issue or issues in a case, will not be resolved without a full concession by the taxpayer or by decision of the court.

A comment proposed that Chief Counsel attorneys should have the flexibility to refer all docketed cases to Appeals for resolution. This comment is not adopted. To the extent this comment invites a Chief Counsel attorney to disregard the Office of Chief Counsel's decision to designate or withhold a case, trial attorneys do not operate independently of managerial direction. In addition, such flexibility would defeat the exception's purpose. As explained in section I.C.21. of the proposed regulations' Explanation of Provisions, cases are designated for litigation or withheld in the interest of sound tax administration to establish judicial precedent, promote consistency, conserve resources, or reduce litigation costs for the taxpayers and the IRS. Moreover, section 3.01 of Rev. Proc. 2016-22 provides that docketed cases are not referred to Appeals if Appeals issued the notice of deficiency or made the determination that is the basis of the Tax Court's jurisdiction. This exclusion also is set forth in Exception 22, see § 301.7803-2(c)(22), and prevents duplicative review by Appeals.

Two comments stated that Exception 21 provides too much deference to Chief Counsel and recommended that the exception delete the reference to withheld cases. The Treasury Department and the IRS do not adopt these comments. The withholding of cases or issues from Appeals has been, and will continue to be, limited and rare. 1 The determination to withhold a case or issue from Appeals requires a high-level review, with the decision ultimately resting with the Division Counsel or a higher-level Chief Counsel official. See section 3.03 of Rev. Proc. 2016-22. When Congress enacted the TFA, it was aware of the historic exceptions to Appeals consideration, including Chief Counsel's authority to designate a case for litigation or withhold a case from Appeals consideration on the basis of a referral not being in the interest of sound tax administration under Rev. Proc. 2016-22. Congress recognized that the Treasury Department and the IRS retain their historical discretion to determine whether the resolution of particular types of disputes is appropriate for Appeals, and the discretion of the IRS to determine whether a particular Federal tax controversy is appropriate for the Appeals resolution process. As proposed, Exception 21 is narrowly tailored, and it does not encroach on Appeals' independence for the reasons discussed previously in section I.A. of this Summary of Comments and Explanation of Revisions.

Two comments that objected to Exception 19 and Exception 20, in the alternative, recommended the regulations provide notice and protest rules for any taxpayer with a case or issue withheld or designated for litigation. One of the comments recommended at least requiring meetings with Chief Counsel executives to explain the decision. Similarly, another comment recommended that low-income taxpayers should receive a written explanation and given an opportunity to object.

The Treasury Department and the IRS do not adopt these comments. If Chief Counsel determines that a docketed case or issue will be withheld from Appeals, Chief Counsel will notify the taxpayer that the case will not be referred to Appeals. See section 3.03 of Rev. Proc. 2016-22. Taxpayer cases that are withheld from Appeals consideration under Exception 21 and meet the requirements of proposed § 301.7803-3 already would receive a written notice detailing the facts of the case, the reason for the denial, and the opportunity to protest the denial pursuant to section 7803(e)(5). As discussed in section 2 of this Summary of Comments and Explanation of Revisions, section 7803(e)(5) only requires notice and denial protest rights be given to a taxpayer in receipt of a notice of deficiency. Consistent with the statute, these final regulations do not extend notice and denial protest rights to taxpayers who did not receive a notice of deficiency. With respect to situations involving low-income taxpayers, as described by the comment, such taxpayers would similarly receive an explanation and opportunity to protest under proposed § 301.7803-3 after they receive a notice of deficiency.

Another comment alleged that the designation of cases or issues for litigation is not rare and prevents sound tax administration in thousands of cases because Appeals could arrive at the correct amount of tax or a deduction and the IRS's approach of settling a designated case only if taxpayers concede all issues, including all penalties, has created a backlog in the IRS and the court. The comment is factually incorrect because designation of a case or issue is rare. The IRS has designated fewer than 10 cases since 2013.

A comment recommended the IRS make public a list of all designated cases docketed in Tax Court and all designated issues and publish the total number of taxpayers affected by cases or issues being designated for litigation. The Treasury Department and the IRS do not adopt this comment. The comment raises potential disclosure concerns under section 6103 of the Code relating to the prohibition of the disclosure of return information. Even if such disclosure was not prohibited by law, it is beyond the scope of these regulations.

One comment was received on Exception 23. Exception 23 provides that Appeals consideration is not available for a case in which timely consideration by Appeals must be requested before a petition is filed in the Tax Court because exhaustion of administrative review, including Appeals consideration, is a prerequisite for the Tax Court's jurisdiction, and the taxpayer failed to timely request Appeals consideration.

The comment opined the heading for this exception in the proposed regulations' preamble (that is, Appeals Consideration is a Prerequisite to the Jurisdiction of Tax Court ) did not mention whether there could be exceptions to the requirement to exhaust administrative remedies. The comment recommended adding language to the regulation's text to explicitly indicate that Exception 23 does not apply when there is an exception to the requirement to exhaust administrative remedies as provided in a statute or other guidance. The Treasury Department and the IRS do not adopt this recommendation. The text of the regulation adequately covers the comment's point, as the text makes clear that this exception applies only when timely Appeals consideration itself is a prerequisite to the Tax Court's jurisdiction.

One comment was received on proposed § 301.7803-2(e), which provides the procedural and timing requirements that a taxpayer must meet before Appeals may consider the taxpayer's Federal tax controversy. Specifically, proposed § 301.7803-2(e) provides that a request for Appeals consideration must be submitted in the time and manner prescribed in applicable forms, instructions, or other administrative guidance and that all procedural requirements must be complied with for Appeals to consider a Federal tax controversy.

The comment recommended that the final regulations explicitly direct the IRS to list specific requirements that the IRS must meet for accessibility, to explain the processes in a way that is easy to understand for the unrepresented taxpayer and feasible for all taxpayers, including low-income taxpayers who may face financial and other barriers to following traditional mailing processes. The comment suggested including notices with appeal rights delivered by mail and to a taxpayer's online IRS account if they have one; deadlines to file an appeal should be clearly and accurately stated in plain language on the first page of a notice that has an appeal right; the IRS should have an easy-to-understand fill-in form that contains all required elements to request an appeal, and the form should be available for every level of appeal; each notice from the IRS that carries an appeal right should enclose a copy of the simple form along with an envelope and instructions for certified mailing to prove the mailing date; and each notice from the IRS that carries an appeal right should also include both a simple URL link and QR code link to the online simplified form, the form should be easily fillable on a computer or a smartphone and be available in multiple languages, and the taxpayer should be able to submit this form online to meet the deadline for the Appeals request.

The Treasury Department and the IRS do not adopt this comment's recommendations because they are outside the scope of these final regulations. The comment is better suited to be addressed in the specific correspondence sent from the IRS to taxpayers. Promoting taxpayer communication, understanding, and efficiency, including in accessing Appeals, are important topics that the IRS will continue to look at as it improves and develops its systems and procedures. In that regard, the IRS will carefully consider the suggestions in this comment as part of that process.

One comment was received with a suggestion relating to the general rule of one opportunity for Appeals consideration in proposed § 301.7803-2(f)(1). Another comment was received on the exceptions to that general rule. Those comments are addressed in this section I.F. of the Summary of Comments and Explanation of Revisions.

Proposed § 301.7803-2(f)(1) provides that if a Federal tax controversy is eligible for consideration by Appeals and the procedural and timing requirements are followed, a taxpayer generally has one opportunity for Appeals to consider such matter or issue in the same case for the same period or in any type of future case for the same period. The comment on proposed § 301.7803-2(f)(1) recommended that the final regulations should explicitly include the situation in which the taxpayer and the Government have run out of time for Appeals consideration prior to the expiration of the statute of limitations and a notice of deficiency being issued, thereby confirming that a taxpayer's case can be heard by Appeals either before or after a case is docketed (although not both).

The Treasury Department and the IRS agree that if there is insufficient time remaining on the limitations period for Appeals consideration, a taxpayer in receipt of a notice of deficiency would have the opportunity to have Appeals consider the taxpayer's case after the taxpayer has filed a petition with the Tax Court and the case is docketed, assuming the issue being considered by Appeals is not subject to an exception described in the final regulations. An example has been added to § 301.7803-2(e) to illustrate this point, which is a more appropriate place in the regulations for this addition.

There are several exceptions to the general rule in proposed § 301.7803-2(f)(1). Proposed § 301.7803-2(f)(1) provides an exception to the proposed general rule in a case in which the Tax Court remands a collection due process (CDP) case for reconsideration. Proposed § 301.7803-2(f)(2) provides an exception for a taxpayer that participated in an Appeals early consideration program but did not reach an agreement with Appeals. Proposed § 301.7803-2(f)(2) also provides an exception to the general rule in proposed § 301.7803-2(f)(1) for taxpayers who provide new information to the IRS and who meet the conditions and requirements for audit reconsideration or for reconsideration of liability issues previously considered by Appeals. Appeals may consider the new information.

A comment recommended clarifying in proposed § 301.7803-2(f)(2) that a new development in the law is “new information” that would allow Appeals reconsideration of the same matter. The Treasury Department and the IRS recognize that the original phrasing in the paragraph was unclear. For purposes of these final regulations, new information is intended to mean additional facts that the taxpayer did not provide during the original examination. It is not intended to mean a new development in the law. Additional language has been added to § 301.7803-2(f)(2) in the final regulations to clarify the intended meaning.

A comment suggested that Chief Counsel delaying Appeals review of a case was tantamount to a denial of Appeals review. The Treasury Department and the IRS disagree. As explained in section I.H.2. of the proposed regulations' Explanation of Provisions regarding the special rule in proposed § 301.7803-2(g), Chief Counsel may delay forwarding a docketed case to Appeals when Chief Counsel anticipates filing a dispositive motion such as a motion for summary or partial summary judgment, or a motion to dismiss for lack of jurisdiction, in which case Chief Counsel will retain jurisdiction over the case until the Tax Court rules on the motion. This flexibility to respond to the needs of specific Federal tax controversies promotes the efficient disposition of a taxpayer's case, including developing or narrowing the issues in dispute. The taxpayer will continue to be eligible for consideration by Appeals if the litigation continues and all other requirements in § 301.7803-2 are met. Accordingly, these final regulations do not adopt this comment.

The list of exclusions in proposed § 301.7803-2(c) does not include certain exclusions from Appeals consideration currently provided in the IRM relating to requests for 9100 relief and CAMs. In the proposed regulations, the Treasury Department and the IRS requested comments on whether these items should be included in the list of exclusions. Specifically, comments were requested on whether the binary nature of decisions by an Associate Office regarding 9100 relief or CAM requests makes these decisions unsuitable for Appeals review; whether a different review standard should apply if Appeals considers the decisions; and what impact would Appeals review of the decisions have on later years that are not before Appeals.

In response, the Treasury Department and the IRS received four comments. One comment in support of adopting an Appeals exception recommended that Exception 17 relating to letter rulings issued by an Associate Office be finalized as proposed so that the regulations ensure, consistent with the historical IRS position, that Appeals not be permitted to consider an Associate Office decision concerning whether to issue 9100 relief or CAM letter rulings. See section I.D.10. of this Summary of Comments and Explanation of Revisions regarding Exception 17. According to this comment, letter ruling decisions regarding 9100 relief and CAMs should not be considered by Appeals for the reasons described in the proposed regulations that apply to other types of letter rulings. In particular, a letter ruling interprets internal revenue laws and applies them to the taxpayer's specific set of facts. A voluntary request for a letter ruling is not an administrative determination that is a part of the IRS's compliance function. A taxpayer receiving a letter ruling is not obligated to file a return consistent with that letter ruling. Generally, the program is designed instead to provide taxpayers with information regarding whether the IRS will accept a position to be taken on the taxpayer's return. For letter rulings responding to a taxpayer's request for a CAM, the letter ruling grants or denies consent under section 446(e) of the Code. The Treasury Department and the IRS adopt this recommendation for those reasons and added language to clarify this point that Exception 17 includes Associate Office decisions on 9100 relief requests and CAM requests. See § 301.7803-2(c)(17). While Appeals cannot consider an Associate Office's decision on whether to issue a letter ruling or the content of a letter ruling, Exception 17 recognizes that Appeals may consider the subject of the letter ruling if all other requirements in § 301.7803-2 are met. For example, if an Associate Office issues an adverse letter ruling to a taxpayer, the taxpayer cannot immediately appeal the issuance of the adverse letter ruling. If the taxpayer later files a return taking a position that is contrary to the letter ruling and that position is examined by the IRS, Appeals can consider that Federal tax controversy if all other requirements in § 301.7803-2 are met.

The comment also recommended a separate exclusion for Appeals consideration of decisions by an Associate Office regarding 9100 relief or CAM requests. The Treasury Department and the IRS do not adopt this recommendation. As previously described, if a taxpayer files a tax return contrary to the Associate Office's decision and a Federal tax controversy arises that involves the subject of the adverse decision, Appeals could consider the subject of that Associate Office's decision in the dispute if all other requirements in § 301.7803-2 are met.

Another comment suggested the final regulations should empower Appeals to consider an Associate Office's decisions regarding 9100 relief or CAM requests because Appeals consideration would protect taxpayer rights. Two comments suggested the final regulations should allow Appeals to consider such cases because judicial review is costly and time consuming and Appeals consideration would reduce litigation. The Treasury Department and the IRS agree Appeals review as described in the preceding paragraph is consistent with the function of Appeals to resolve Federal tax controversies without litigation and is consistent with the provision that such resolution be generally available to all taxpayers. A comment suggested the final regulations should empower Appeals to consider such cases because Appeals consideration would promote impartial resolution. The Treasury Department and the IRS disagree with this reasoning because, as explained previously in this Summary of Comments and Explanation of Revisions, impartiality presupposes that the matter is being considered by Appeals in the first place. Once a Federal tax controversy is referred to Appeals, Appeals will consider the hazards of litigation while impartially considering the positions of the taxpayer and of the IRS.

A comment asserted accounting method issues do not have to be viewed as binary and noted Appeals already reviews adjustments initiated by the IRS through an examination. According to this comment, Appeals should review accounting method issues consistently regardless of whether the originating function was through an IRS examination or an Associate Office. Similarly, another comment asserted that Appeals consideration of a CAM letter ruling denial that was issued on the basis that the requested change would not clearly reflect income or would otherwise not be in the interest of sound tax administration would allow Appeals review of the substantive positions in these cases, similar to Appeals review of the substantive issue in cases arising in examination or a docketed case, and that foreclosing Appeals consideration would create inconsistencies and be counterproductive to tax administration. The Treasury Department and the IRS agree that Appeals should have the ability to review accounting method issues arising in an examination, even when the accounting method issue relates to an Associate Office's denial of a CAM letter ruling request.

Another comment suggested Appeals consideration of an Associate Office's decisions regarding 9100 relief or CAM requests would promote consistent application of laws and public confidence in the IRS. Appeals consideration of an Associate Office's decisions regarding 9100 relief or CAM requests would promote public confidence in the IRS and is consistent with the purpose of the TFA.

A comment asserted the ultimate decision may be binary, in that an Associate Office either does or does not permit 9100 relief or a CAM. According to this comment, the binary nature of decisions on these matters should not automatically exclude them from Appeals review. To the extent an Associate Office's decision regarding a 9100 relief or CAM request is viewed as a binary decision, the Treasury Department and the IRS agree with the comment's general premise that the binary nature of such decisions would not automatically exclude them from Appeals review. If a taxpayer files a tax return contrary to the Associate Office's decision and a Federal tax controversy arises that involves the subject of the adverse decision, Appeals may consider the subject of that Associate Office's decision in the dispute if all other requirements in § 301.7803-2 are met.

The IRM currently provides that Appeals will not partially or fully concede an issue in a case in which an Associate Office's decision would be reviewed by a court using an abuse of discretion standard. One comment urged that if Appeals is permitted to consider a decision by an Associate Office that denied a 9100 relief or a CAM request, then the final regulations should apply a different standard of review than the abuse of discretion standard used for other administrative determinations. The comment recommended that Appeals should only be permitted to make concessions if it determines there is a significant risk that, if litigated, a court would find that the IRS abused its discretion in issuing an adverse letter ruling. Another comment observed that a CAM request may be denied by an Associate Office for many different reasons, including, for example, on the basis of substantive issues or due to procedural issues when the Associate Office determines that the taxpayer has not complied with all the procedural terms and conditions, such as filing requirements and deadlines. The comment urged the Treasury Department and the IRS to look through the superficial similarities of these denials to the underlying legal issues when determining whether Appeals review is warranted. The Treasury Department and the IRS agree that an Associate Office may issue a denial letter on a 9100 relief request or CAM request for a variety of different reasons, which are generally expressed in the applicable statute, regulations, or other guidance published in the Internal Revenue Bulletin. A decision to deny such a request, whether on a procedural or a substantive basis, is based on all the facts and circumstances. The final regulations do not provide a standard of review because it is outside the scope of these regulations, and the Treasury Department and the IRS expect the existing review standard would be used by Appeals for such cases.

A comment stated Appeals may need to enter into closing agreements with taxpayers to ensure that future taxable years are consistent with the request that was denied by the Associate Office, but that closing agreements would be more difficult for the taxpayer and the Government to reverse in future years compared to a letter ruling issued by an Associate Office. These regulations do not alter the authority delegated to the Associate Offices over 9100 relief or CAM requests or to restrict Appeals' ability to use its existing settlement authority to review or settle such cases. See, e.g., Rev. Proc. 2002-18, 2002-1 C.B. 678 (regarding procedures relating to the settling of method change issues). Likewise, these regulations do not alter the IRS's authority to review these issues during an examination of a taxpayer's Federal income tax return.

A comment expressed concern that the proposed regulations could make the Appeals review process more confusing and stressful for taxpayers, including low-income taxpayers, but did not specify how or why this could happen. The Treasury Department and the IRS disagree with this comment. The procedural requirements, timing requirements, and almost all of the exceptions to consideration by Appeals already exist in previously established guidance regarding Appeals. As in the past, the proposed exceptions are limited in number and the vast majority of taxpayers, including low-income taxpayers, would have the opportunity to have Appeals consider their Federal tax controversies.

The same comment suggested considering the impact of the regulations on closed cases in Appeals. To the extent this comment is suggesting these regulations should cover procedures for reopening a closed case, that topic is beyond the scope of these regulations. Procedures for reopening closed Appeals cases already exist in other guidance. See IRM 8.6.1.7 (09-25-2019).

A comment suggested that the proposed regulations overlap with § 601.106. To the extent that the Treasury Department and the IRS are not repealing or revising § 601.106, the comment recommended Treasury explicitly harmonize areas of overlap and consolidate all Appeals regulations into adjacent sections of the regulations to prevent ambiguity and controversy. In the alternative, even if no actual or perceived conflict exists, the comment recommended adding cross-references in § 301.7803-2 to avoid creating a trap for the unwary.

The Treasury Department and the IRS do not agree with this comment and do not adopt these recommendations. The Statement of Procedural Rules, 26 CFR part 601, are procedural rules governing internal IRS affairs. Those rules do not concern the substantive resolution of Federal tax controversies by Appeals.

Two comments recommended additional funding, including funding for Appeals in order to more effectively and fairly serve taxpayers, and limit the need for the exceptions in these regulations. The recommendation addresses operational matters of Appeals and is beyond the scope of these regulations because it does not address the proposed regulations or recommend any changes.

One comment addressed the Interim Guidance (IG) Memorandum (Control Number AP-08-0922-0011) that Appeals issued on September 14, 2022, relating to validity challenges to regulations and relating to procedural validity challenges to notices or revenue procedures. This comment alleged that the IRS has already begun to make the substance of Exception 19 and Exception 20 effective even though, as proposed in the proposed regulations, they would not take effect until 30 days after the publication of a final regulation. The comment recommended that Appeals pause using these exceptions before the regulations are finalized.

The Treasury Department and the IRS decline to adopt the comment's recommendation because it is outside the scope of these regulations. The IG Memorandum provides interim guidance by Appeals to AOs and does not have bearing on these final regulations.

Two comments were received on proposed § 301.7803-3, which implements the notice and protest procedures of section 7803(e)(5). As proposed, these procedures apply if any taxpayer requests Appeals consideration of a matter or issue, the request is denied, and the taxpayer meets the requirements of proposed § 301.7803-3(a)(1) through (5). Proposed § 301.7803-3(a)(1) adopts the statutory language in section 7803(e)(5)(A), which refers to any taxpayer in receipt of a notice of deficiency authorized under section 6212 (relating to notice of deficiency).

The comments recommended that the notice and protest procedures should not be limited to taxpayers in receipt of a notice of deficiency. The Treasury Department and the IRS do not adopt this recommendation because it is contrary to the TFA. Section 7803(e)(5) does not grant the right to notice and protest a denial to all taxpayers. That statute requires the provision of such rights when the taxpayer is in receipt of a notice of deficiency, the taxpayer requests referral to Appeals, and that request is denied. Thus, a taxpayer would not be entitled to notice and protest procedures under section 7803(e)(5) and proposed § 301.7803-3 in the absence of a notice of deficiency.

A comment described the notice and protest procedures in proposed § 301.7803-3 as not applying when a taxpayer is ineligible for Appeals consideration because one of the exceptions listed in proposed § 301.7803-2(c) applies to the taxpayer. This description is incorrect. As written and intended, proposed § 301.7803-3 does not except such cases or issues from the notice and protest procedures. Thus, that one of the exceptions listed in proposed § 301.7803-2(c) applies to a taxpayer does not prevent these procedures from applying if the taxpayer otherwise meets the requirements of proposed § 301.7803-3(a)(1) through (5), although it may be a reason why the request for referral to Appeals was denied. In response to the comments, the final regulations make clarifying edits to the text of § 301.7803-3(a).

Although the Explanation of Provisions of the proposed regulations discussed other new sections of the TFA, such as section 7803(e)(6) relating to Appeals' authority to obtain legal assistance and advice from Chief Counsel attorneys with regard to cases pending at Appeals, the proposed regulations stated that sections 7803(e)(4) and 7803(e)(5) were the primary focus of the guidance provided in the proposed regulations. Some comments received in response to the proposed regulations concerned topics and issues that are outside the scope of these final regulations.

One such comment recommended that these final regulations include the assurances currently provided in subregulatory guidance regarding the ex parte rules; limitations on the IRS examination function or Appeals raising new issues; conference rights; or the longstanding policies regarding the reopening of mutual concession cases. A comment was offered on access to administrative files under new section 7803(e)(7). Another comment recommended that the Treasury Department should adopt the National Taxpayer Advocate's proposal that a taxpayer has the right to a conference with Appeals that does not include personnel from Chief Counsel or the IRS examination function unless the taxpayer specifically consents to the participation of those parties in the conference, and another comment recommended that neither Appeals nor any IRS personnel involved in the Appeals conference should offer “nuisance” settlement offers of zero or small numbers.

The Treasury Department and the IRS do not adopt these comments because their topics are outside the scope of sections 7803(e)(4) and 7803(e)(5), which were the primary focus of the proposed regulations. Section 7803(e)(4) provides for the general availability of Appeals consideration for taxpayers and section 7803(e)(5) provides for the limitation on designation of cases as not eligible for referral to Appeals. These comments do not address those areas and are already contained in other existing guidance. The IRS will consider and evaluate the comments for inclusion in the IRM or other guidance, as appropriate.

Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required.

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

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

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

Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking was submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business, and no comments were received.

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

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

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Office of Information and Regulatory Affairs designated this rule as not a major rule as defined by 5 U.S.C. 804(2).

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

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

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

On June 21, 2021, OSHA issued an Emergency Temporary Standard (ETS) to protect workers in healthcare settings, finding that COVID-19 presented a grave danger to those workers and that the ETS was necessary to protect them (86 FR 32376). 1 As of that date, nearly a half million healthcare workers had contracted COVID-19 and more than 1600 of those workers had died. Under the Occupational Safety and Health Act of 1970 (OSH Act or Act) (29 U.S.C. 655(c)(3)), the ETS served as a proposed rule for a rulemaking on occupational exposure to COVID-19 in healthcare settings. OSHA is now terminating the rulemaking via this rule because the public health emergency is over and any ongoing risk by COVID-19 or other coronavirus hazards faced by healthcare workers would be better addressed at this time in a rulemaking addressing infectious diseases more broadly.

OSHA issued the healthcare ETS under section 6(c) of the Act (29 U.S.C. 655(c)) ( Occupational Exposure to COVID-19; Emergency Temporary Standard, 86 FR 32376 (June 21, 2021), codified at 29 CFR 1910.502, 1910.504-.505, and 1910.509). Pursuant to section 6(c)(3) (29 U.S.C. 655(c)(3)), an ETS initiates rulemaking proceedings under section 6(b) and the ETS “as published shall also serve as a proposed rule for the proceeding.” ( Id. § 655(c)).

When the COVID-19 pandemic started in 2020, OSHA initially responded to COVID-19 in the workplace by creating guidance documents and using its existing enforcement tools. The agency pursued a two-pronged strategy: (1) enforcing existing standards such as those for Personal Protective Equipment (PPE), Respiratory Protection, and Bloodborne Pathogens, as well as the General Duty Clause of the OSH Act (29 U.S.C. 654(a)(1)), and (2) working proactively to assist employers by developing guidance documents addressing how to reduce occupational COVID-19 hazards.

On January 21, 2021, President Biden issued Executive Order 13999 directing OSHA to consider whether “any emergency temporary emergency standards on COVID-19” were necessary (86 FR 7211). On June 21, 2021, the agency promulgated the COVID-19 ETS applicable to healthcare. 2 Because, under the OSH Act, this ETS also served as a proposal for a final standard, OSHA received 481 unique public comments on the ETS during the first open comment period between June 2021 and August 2021 (Docket OSHA-2020-0004). 3

Following the issuance of the ETS, OSHA received petitions urging the agency to adopt a permanent standard to protect healthcare workers from COVID-19 from the American Nurses Association, the International Association of Fire Chiefs, the Service Employees International Union (SEIU), and National Nurses United (NNU) (Document ID 1518; 1519; 1521; 1522; 1524; 2175). Over forty unions and organizations supported the NNU petition urging OSHA to adopt a permanent standard for COVID-19 in healthcare establishments and to also issue a separate, broader Infectious Diseases standard.

On December 27, 2021, OSHA announced on its website that it would be unable to finalize a COVID-19 standard for healthcare “in a timeframe approaching the one contemplated by the OSH Act” (see Document ID 2491) and since the end of December 2021, OSHA has not enforced the ETS beyond the recordkeeping and reporting requirements in 29 CFR 1910.502(q) and (r). Instead, OSHA has relied on existing standards and the General Duty Clause of the OSH Act (29 U.S.C. 654(a)) to protect workers in workplaces that were previously covered by the ETS. OSHA emphasized in the website announcement that the agency “continues to work expeditiously to issue a final standard that will protect healthcare workers from COVID-19 hazards and will do so as it also considers its broader infectious disease rulemaking.”

On January 5, 2022, several labor organizations, including NNU, filed a petition with the United States Court of Appeals for the District of Columbia Circuit seeking a writ of mandamus compelling OSHA to issue a permanent COVID-19 standard for healthcare within 30 days and to continue enforcement of the ETS in the meantime. On August 26, 2022, the court issued a decision denying NNU's petition in part and dismissing it in part for lack of jurisdiction, while also noting that the ETS would continue to serve as a proposed rule for the rulemaking proceedings ( In re National Nurses United, 47 F.4th 746, 754 (D.C. Cir. 2022)). The court determined that while the OSH Act created an obligation for OSHA to follow the issuance of an ETS with a notice and comment rulemaking process, “that process may result in a determination that no permanent standard is necessary.” (Id.)

While the NNU case was ongoing, OSHA continued its efforts to finalize a permanent COVID-19 standard for healthcare. However, after the ETS comment period closed on August 20, 2021, the available COVID-19 scientific literature, approaches to controls, and CDC guidance evolved significantly, based in part on the emergence of the Delta and Omicron variants. OSHA determined that it needed to reopen the record to ensure that the agency relied on the best available evidence and that the public had an opportunity to provide and comment on new data and information. On March 23, 2022, OSHA published a Federal Register notice announcing a limited re-opening of the comment period for 30 days (until April 22, 2022) and announcing public hearings beginning on April 27, 2022 (87 FR 16426, March 23, 2022).

The reopening of the comment period and the hearing and post-hearing comment period allowed OSHA to revise and provide notice of potential changes to policy options and regulatory provisions to reflect up-to-date science, control approaches, and perspectives, as well as supporting analyses required for a final standard. At the closing of the comment period on April 22, 2022, OSHA had received approximately 250 additional comments.

The public hearings were held April 27-29 and May 2, 2022. Participating stakeholders included labor organizations, workers, employers, industry/trade groups, professional associations, public health experts, and concerned individuals, with some 39 organizations or individuals presenting their perspectives in the hearings (Document ID 2153; 2156; 2168; 2171). The presiding Administrative Law Judge permitted stakeholders to submit post-hearing comments and briefs until May 23, 2022. OSHA received nearly 150 additional comments from stakeholders during the post-hearing comment period. In total, over the three different comment periods, OSHA received 873 timely public comments on this rulemaking.

OSHA submitted a draft final COVID-19 rule to the White House Office of Management and Budget (OMB) on December 7, 2022. On April 10, 2023, President Biden signed into law House Joint Resolution 7, which terminated the national emergency related to the COVID-19 pandemic. While the COVID-19 draft remained under review at OMB, OSHA pushed ahead with development of an Infectious Diseases standard for healthcare workers.

OSHA always intended for an Infectious Diseases standard for healthcare workers to supplant any COVID-19 healthcare standard, and that a COVID-19 standard would be an interim measure pending the completion of the Infectious Diseases healthcare standard. OSHA concludes that the most effective and efficient use of agency resources to protect healthcare workers from occupational exposure to COVID-19, as well as a host of other infectious diseases, is to focus its resources on the completion of an Infectious Diseases rulemaking for healthcare rather than a disease-specific standard.

In addition, even if OSHA were to finalize a separate COVID-19 standard at this time, the agency would need to conduct an additional review and possibly supplement the record again before it could issue a final rule to ensure the rule reflects the most current science. For example, guidance from the Centers for Disease Control and Prevention and other experts has changed since OSHA submitted its draft rule to OMB. Moreover, focusing on a separate COVID-19 standard would likely consume agency staff time and other agency resources in a way that would inhibit the promulgation of a more broadly protective Infectious Diseases healthcare standard. For these independently sufficient reasons, OSHA is terminating this rulemaking. In sum, the agency will have a greater impact at this time by adopting a standard that would provide protections to healthcare workers from occupational exposure to many different infectious diseases, including COVID-19 and future variants.

Douglas L. Parker, Assistant Secretary of Labor for Occupational Safety and Health, authorized the preparation of this document under the authority granted by sections 4, 6, and 8 of the Occupational Safety and Health Act of 1970 (29 U.S.C. 653, 655, 657); 5 U.S.C. 553, Secretary of Labor's Order No. 8-2020 (85 FR 58393), and 29 CFR part 1911.

The VFC Program gives plans and fiduciaries a ready means to correct violations of ERISA, without the transaction costs and burden associated with enforcement actions for violations of the fiduciary standards in title I of ERISA. As an enforcement policy, the VFC Program simultaneously promotes compliance with the law, correction of violations, and the efficient use of scarce enforcement resources. The Department also has the authority under ERISA section 408(a) to issue exemptions from the prohibited transaction rules in ERISA sections 406 and 407 and Internal Revenue Code (Code) section 4975. 1 Accordingly, in tandem with an amendment to the VFC Program published elsewhere in this issue of the Federal Register , the Department is publishing this associated amendment to Prohibited Transaction Exemption (PTE) 2002-51, which implements important components of the VFC Program.

The Department of Labor's Employee Benefits Security Administration (EBSA) originally adopted the VFC Program in 2002, and later revised it in 2005 and 2006. 2 EBSA designed the VFC Program to encourage employers and plan fiduciaries to voluntarily comply with ERISA and allow those potentially liable for certain specified fiduciary breaches under ERISA to voluntarily apply for relief from enforcement actions and certain penalties, provided they meet the VFC Program's criteria and follow the procedures outlined in the VFC Program.

The VFC Program describes how to apply for relief and lists the specific transactions covered and the acceptable methods for correcting fiduciary breaches under the Program. The most frequently corrected transaction under the Program is the correction of delinquent participant contributions. The Program provides a model application form, a checklist, and an online calculator for determining amounts to be restored to plans. The VFC Program has been, and will continue to be, administered in EBSA's Regional Offices.

The Department granted PTE 2002-51 in connection with the VFC Program. Some of the breaches that may be corrected under the VFC Program are also prohibited transactions subject to excise tax under Code section 4975. Reorganization Plan No. 4 of 1978 transferred the authority of the Secretary of Treasury to issue exemptions from the prohibited transaction provisions of Code section 4975 to the Secretary of Labor. 3 The exemption allows excise tax relief for certain specified breaches under the VFC Program. PTE 2002-51 is subject to several general conditions, including that the breach be appropriately corrected and the party applying must satisfy all the conditions of the VFC Program. The exemption also includes certain transaction-specific conditions.

On November 21, 2022, the Department published in the Federal Register proposed revisions to the VFC Program with a request for public comments. 4 The 2022 VFC Program proposed revisions would establish a self-correction feature for certain delinquent participant contributions and loan repayments to pension plans (the SCC). On the same date, the Department also published in the Federal Register a proposed amendment to PTE 2002-51 that would make certain conforming amendments to the class exemption. 5 The Department received seven comments on the proposed amendment.

On February 14, 2023, the Department reopened the comment period on both the 2022 Program VFC Program proposed revisions and the proposed amendment to PTE 2002-51 in light of section 305(b)(2) of the SECURE 2.0 Act of 2022 (SECURE 2.0 Act. 6 This provision requires the Department to treat eligible inadvertent failures related to participant loans that are self-corrected under the Employee Plans Compliance Resolution System  7 (IRS's EPCRS) as meeting the requirements of the VFC Program “if, with respect to the violation of the fiduciary standards of the ERISA, there is a similar loan error eligible for correction under EPCRS and the loan error is corrected in such manner.” The Department requested comments on what revisions, if any, it should make to the VFC Program and exemption to reflect the treatment of corrections of loans to participants as described in SECURE 2.0 Act. Only one commenter addressed PTE 2002-51 in response and stated that no further amendments are required to the exemption.

The Department is finalizing the amendment to the VFC Program elsewhere in this edition of the Federal Register . With these amendments, EBSA intends to facilitate more efficient and less costly corrections of fiduciary breaches under the VFC Program, encourage greater participation in the VFC Program, and respond to requests from stakeholders for adjustments based on their experiences using the VFC Program. In this regard, the amendments are designed to simplify the VFC Program and make it easier to use by employers and others who wish to avail themselves of the relief provided. Notably, the new self-correction procedures will apply to the transaction most frequently corrected under the VFC Program—the delinquent transmittal of participant contributions and loan repayments to pension plans—as well as to certain participant loan failures that are self-corrected under the IRS's EPCRS. The Department anticipates that many users of the amended Program will find it improved and less resource intensive to comply with, without sacrificing protections of their affected plans.

The 2025 VFC Program retains the fundamentals of the 2006 VFC Program. The Program describes how to apply for relief, lists the specific transactions covered, and sets forth acceptable methods for correcting fiduciary breaches under the VFC Program. It also provides examples of potential breaches and related permissible corrective actions. The VFC Program defines the term “Breach” to mean any transaction that is or may be a violation of the fiduciary responsibilities contained in part 4 of title I of ERISA. The VFC Program also provides a model application form, a checklist, and an Online Calculator for determining correction amounts. The VFC Program will continue to be administered in EBSA Regional Offices. Eligible applicants that satisfy the terms and conditions of the VFC Program application process receive a “no action” letter from EBSA and are not subject to civil monetary penalties for the corrected transactions.

The most significant changes in the 2025 VFC Program involve the addition of two new self-correction features. The first is in section 7.1(b) for certain failures to timely transmit participant contributions (and participant loan repayments) to pension plans, 8 and the second is in section 7.3(c) for certain participant loan failures that are self-corrected under the IRS's EPCRS. The other 2025 VFC Program amendments: (1) clarify existing transactions eligible for correction under the VFC Program; (2) expand the scope of certain transactions currently eligible for correction; and (3) simplify certain administrative or procedural requirements for participation in the VFC Program and correction of transactions under the VFC Program.

The Department is amending PTE 2002-51 to provide excise tax relief for transactions that are corrected pursuant to the SCC in the 2025 VFC Program and to make certain administrative or procedural changes for participation in, and correction of, transactions under the VFC Program. 9

The 2025 VFC Program establishes the SCC for certain delinquent contributions to pension plans. The SCC allows “self-correctors” to make a plan whole and receive relief under the VFC Program without submitting an application to EBSA and receiving a no-action letter. Instead, self-correctors provide a notice (the SCC notice) to EBSA through an electronic tool on EBSA's website and receive an email acknowledgement from EBSA of a properly completed and submitted SCC notice.

The Department is amending PTE 2002-51 to allow excise tax relief to self-correctors. The Department is adding transactions that are corrected under the SCC to section I.A. These transactions must comply with the applicable exemption conditions, including the requirement that delinquent contributions may not have been transmitted to the plan more than 180 calendar days from the date they were either received by the employer or otherwise would have been payable to the participant in cash. The Department is also amending section III.B of the exemption, which provides that the exemption will apply only if the applicant receives an EBSA no-action letter pursuant to the VFC Program. Since self-correctors will receive an email acknowledgement instead of a no-action letter from EBSA, this condition is amended to add a specific reference to the email acknowledgement of a properly completed and submitted SCC notice.

Historically, PTE 2002-51 was generally not available to VFC Program applicants that had taken advantage of the relief provided by the VFC Program and the exemption for a similar type of transaction within the previous three years. The Department proposed to eliminate the three-year limitation to encourage greater use of the VFC Program.

The Department requested comment in the proposal regarding whether the proposed removal of the three-year limitation would encourage greater use of the VFC Program without loss of meaningful protections for participants and beneficiaries. Several commenters supported the proposal and stated that the existing limitation was unnecessary to protect participants. However, one commenter disagreed with the proposal and cautioned that removing the three-year limitation may encourage more employers to delay depositing employee contributions and instead use that money for business expenses. This commenter suggested that if the Department chose to eliminate the three-year limitation period, it should do so on a trial basis so that the Department could monitor how often employers are using the VFC Program. After considering this comment, the Department has decided to finalize the amendment as proposed; however, it will monitor how frequently plan fiduciaries rely on the VFC Program (including the SCC) and may consider further amendments in the future.

Section I.D. of PTE 2002-51 applies to the sale of real property to a plan by the sponsoring employer and the leaseback of such property to the same employer if it is corrected as required under the VFC Program. The Department is amending this section as proposed. The amendment expands the covered transactions in section I.D. to include affiliates of plan sponsors, which reflects a change made in the 2025 VFC Program. Accordingly, the amended exemption is available for a sale of real property by an affiliate of the employer sponsoring the plan, to the plan, and a leaseback of such property to the affiliate of the sponsoring employer.

As amended, the term “affiliate” of a person is defined as follows—

The Department is deleting section II.E. of the exemption as proposed. The condition related to all the covered transactions under section I and required that “the transaction was not part of an agreement, arrangement or understanding designed to benefit a disqualified person.” The Department believes that this condition is unnecessary in light of the other, more specific conditions of the exemption, including the requirement that the transaction must have been corrected in accordance with the applicable requirements of the VFC Program for the exemption to apply.

Section IV governs notice to interested persons. VFC Program applicants generally must inform interested persons of the prohibited transaction(s) that occurred and the steps taken to correct those violations. The notice must give participants and beneficiaries the opportunity to comment on the transactions and corrections to the applicable EBSA Regional Office.

The Department proposed two key changes to the notice requirement for VFC Program applicants. First, the Department proposed that the notice could not be provided through posting alone. The Department explained that although section IV.B. had historically allowed notice through “posting, regular mail, or electronic mail, or any combination thereof,” the Department no longer believed that posting is reasonably calculated to ensure that interested persons actually receive the notice. Therefore, the Department is finalizing this provision as proposed.

The Department also included a model notice to interested persons as an appendix to the proposal. The Department drafted this model notice after reviewing several notices to interested persons that were submitted to the Regional Offices but did not meet the applicable requirements of section IV. The Department is publishing the model notice as an appendix to the final amendment to ensure that participants and beneficiaries receive meaningful notice of transactions for which relief is sought by their plans. The only change to the model notice from the proposal is that the final model notice states that you may “contact” the appropriate EBSA Regional Office instead of “mail.” The Department intends for the model notice to facilitate compliance with the exemption, but it is not requiring VFC Program applicants to use the model notice.

Regardless of whether a VFC Program applicant uses the model notice, the notice must be written in a manner reasonably calculated to be understood by the average Plan participant or beneficiary. In this regard, if a plan fiduciary knows or has reason to know that the average Plan participant or beneficiary covered by its plan would not understand a notice written in English, the fiduciary must take appropriate action to ensure that these interested parties have a reasonable opportunity to become informed of their rights described in the notice. 11 As a compliance aid, the Department is making the model notice available on its website in twelve non-English languages.

In light of the streamlined procedure for self-correction and the SCC's limitation to corrections when the amount of lost earnings is $1,000 or less, the proposed exemption provided that self-correctors would not have to provide notice to interested persons. Instead, they would be required to pay the amount of the excise tax that would otherwise be imposed by Code section 4975 to the plan. Self-correctors would be required to retain a completed Form 5330 or other written documentation that shows the calculation of the amount of otherwise applicable excise taxes and proof they paid that amount to the plan. However, there would no requirement to provide this documentation to EBSA. The Department is finalizing the special notice rule for self-correctors as proposed.

Some commenters expressed concern that this contribution requirement would discourage use of the SCC and suggested that the Department should allow self-correctors to choose whether (a) to provide notice to interested persons (but not to EBSA) or (b) make the plan contribution. After considering these comments, the Department has not made this change. Self-correctors have a streamlined procedure for self-correction and the amount of otherwise applicable excise taxes that will be owed to their plans will be small due to the $1,000 limitation on lost earnings. The Department has determined that requiring these amounts to be paid to the plan is the most beneficial to and protective of participants in plans that self-correct under the SCC.

The Department is finalizing certain ministerial changes to PTE 2002-51 to improve readability. For example, the Department is replacing references “to sections of the Code” to instead refer to “Code section.”

Under Executive Order 12866 (as amended by Executive Order 14094), the Office of Management and Budget (OMB)'s Office of Information and Regulatory Affairs determines whether a regulatory action is significant and, therefore, subject to the requirements of the Executive order and review by OMB. 58 FR 51735. As amended by Executive Order 14094, section 3(f) of Executive Order 12866 defines a “significant regulatory action” as a regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $200 million or more; or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, territorial, or Tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations of recipients thereof; or (4) raise legal or policy issues for which centralized review would meaningfully further the President's priorities or the principles set forth in the Executive order. OMB has determined that this amendment is a significant regulatory action under Executive Order 12866. 12

Executive Order 13563 directs agencies to propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; the regulation is tailored to impose the least burden on society, consistent with achieving the regulatory objectives; and in choosing among alternative regulatory approaches, the agency has selected those approaches that maximize net benefits. Executive Order 13563 recognizes that some benefits are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitative values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts. See the 2025 VFC Program amendment published elsewhere in this issue of the Federal Register for the regulatory impact analysis.

In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), the Department solicited comments concerning the information collection request (ICR) included in the 2022 VFC Program proposed revisions. At the same time, the Department also submitted the ICR to OMB, in accordance with 44 U.S.C. 3507(d).

The Department received comments that addressed the burden estimates used in the analysis of the 2022 VFC Program proposed revisions. The Department reviewed these public comments in developing the paperwork burden analysis.

The changes made by these final rules affect the existing OMB control number, 1210-0118. A copy of the ICR for OMB Control Number 1210-0118 may be obtained at RegInfo.gov ( reginfo.gov/public/do/PRAMain ) or by contacting the PRA addressee:

See the 2025 VFC Program amendment published elsewhere in this issue of the Federal Register for the paperwork burden of the amended VFC Program and the amended PTE 2002-51.

The Regulatory Flexibility Act (RFA)  13 imposes certain requirements with respect to Federal rules that are subject to the notice and comment requirements of section 553(b) of the Administrative Procedure Act, or any other law, and are likely to have a significant economic impact on a substantial number of small entities. 14 Pursuant to section 605 of the RFA, the Department certifies that these proposed amendments to PTE 2002-51 will not have a significant economic impact on a substantial number of small entities. 15 See the 2025 VFC Program amendment published elsewhere in this issue of the Federal Register for the factual basis for the certification.

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption under Code section 4975(c)(2) does not relieve a fiduciary or other disqualified person with respect to a plan from certain other provisions of ERISA and the Code, including any prohibited transaction provisions to which the exemption does not apply, the requirement that all assets of an employee benefit plan be held in trust by one or more trustees, and the general fiduciary responsibility provisions of ERISA which require, among other things, that a fiduciary discharge their duties respecting the plan solely in the interests of the participants and beneficiaries of the plan and in a prudent fashion; nor does it affect the requirement of Code section 401(a) that the plan must operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries.

(2) The amendment to PTE 2002-51 does not extend to transactions prohibited under Code section 4975(c)(1)(F).

(3) The Department finds that the amendment is administratively feasible, in the interests of plans and their participants and beneficiaries, and protective of the rights of participants and beneficiaries of such plans.

(4) The exemption, as amended, is supplemental to, and not in derogation of other provisions of ERISA and the Code, including statutory or administrative exemptions and transitional rules. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption is not dispositive of whether the transaction is in fact a prohibited transaction.

(5) The exemption, as amended, is applicable to a transaction only if the conditions specified in the class exemption are satisfied.

The Department has republished the entire text of the amended PTE 2002-51 for the convenience of readers.

Under Code section 4975(c)(2) and in accordance with the procedures set forth in 29 CFR 2570, subpart B (76 FR 66637, October 27, 2011), the Department amends and restates PTE 2002-51 as set forth below.

The sanctions resulting from the application of Code section 4975(a) and (b), by reason of Code section 4975(c)(1)(A) through (E), shall not apply to the following eligible transactions described in section 7 of the Voluntary Fiduciary Correction (VFC) Program, as amended, provided that the applicable conditions set forth in sections II, III, and IV are met:

A. Failure to forward participant contributions and/or loan repayments to a pension plan for investment within the time frames determined with reference to the principles of the Department's regulation at 29 CFR 2510.3-102 so that the employer retains such contributions or loan repayments for a longer period of time. ( See VFC Program, sections 7.1(a) and (b).)

B. Loan at a fair market interest rate to a disqualified person with respect to a plan. ( See VFC Program, section 7.2(a).)

C. Purchase or sale of an asset (including real property) between a plan and a disqualified person at fair market value. ( See VFC Program, sections 7.4(a) and (b).)

D. Sale of real property to a plan by the employer or an affiliate of such an employer and the leaseback of the property to the employer or the affiliate, at fair market value and fair market rental value, respectively. ( See VFC Program, section 7.4(c).)

E. Purchase of an asset (including real property) by a plan, where the asset has later been determined to be illiquid as described under the VFC Program in a transaction which was a prohibited transaction pursuant to Code section 4975(c)(1), or in which the asset was acquired from an unrelated third party, and/or the subsequent sale of such asset in a transaction prohibited pursuant to Code section 4975(c)(1). ( See VFC Program, section 7.4(f).)

F. Use of plan assets to pay expenses, including commissions or fees, to a service provider ( e.g., attorney, accountant, recordkeeper, actuary, financial advisor, or insurance agent) for services provided in connection with the establishment, design or termination of the plan (settlor expenses), which relate to the activities of the plan sponsor in its capacity as settlor, provided that the payment of the settlor expense was not expressly prohibited by a plan provision relating to the payment of expenses by the plan. ( See VFC Program, section 7.6(b).)

A. With respect to a transaction involving participant contributions or loan repayments to pension plans described in section I.A., the contributions or repayments were transmitted to the pension plan not more than 180 calendar days from the date the amounts were received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the date the amounts otherwise would have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant's wages).

B. With respect to the transactions described in sections I.B., I.C., I.D., or I.E., the plan assets involved in the transaction, or series of related transactions, did not, in the aggregate, exceed 10 percent of the fair market value of all the assets of the plan at the time of the transaction.

C. The fair market value of any plan asset involved in a transaction described in sections I.C., I.D., or I.E., was determined in accordance with section 5 of the VFC Program.

D. The terms of a transaction described in sections I.B., I.C., I.D., I.E., or I.F., were at least as favorable to the plan as the terms generally available in arm's-length transactions between unrelated parties.

E. With respect to a transaction involving a sale of an illiquid asset under the VFC Program described in section I.E., the plan paid no brokerage fees, or commissions in connection with the sale of the asset.

F. With respect to any transaction described in section I.F., the amount of plan assets involved in the transaction or series of related transactions did not, in the aggregate, exceed the lesser of $10,000 or five (5) percent of the fair market value of all the assets of the plan at the time of the transaction.

A. The applicant or self-corrector, as applicable, has met all applicable requirements of the VFC Program.

B. EBSA has issued a no-action letter to the applicant pursuant to the VFC Program with respect to a transaction described in section I, other than for transactions corrected pursuant to the SCC of the VFC Program. For transactions corrected pursuant to the SCC of the VFC Program, the terms of this section will be satisfied if EBSA has acknowledged receipt of the SCC notice in accordance with section 6.2 of the VFC Program.

A. Written notice of the transaction(s) for which the applicant is seeking relief pursuant to the VFC Program, and this exemption, and the method of correcting the transaction, was provided to interested persons within 60 calendar days following the date of the submission of an application under the VFC Program. A copy of the notice was provided to the appropriate Regional Office of the United States Department of Labor, Employee Benefits Security Administration, within the same 60-day period, and the applicant indicated the date upon which notice was distributed to interested persons. Plan assets were not used to pay for the notice. The notice included an objective description of the transaction and the steps taken to correct it, written in a manner reasonably calculated to be understood by the average Plan participant or beneficiary. The notice provided for a period of 30 calendar days, beginning on the date the notice was distributed, for interested persons to provide comments to the appropriate Regional Office, and it included the address and telephone number of such Regional Office. The Model Notice to Interested Persons contained in Appendix A may be used to satisfy the written notice requirement contained in this section IV.

B. The notice to interested persons described in section IV.A. was provided in a manner that was reasonably calculated, taking into consideration the circumstances of the plan, to result in the receipt of such notice by interested persons, including but not limited to regular mail, or electronic mail, or any combination thereof. The notice informed interested persons of the applicant's participation in the VFC Program and intention of availing itself of relief under the exemption.

C. Notwithstanding the foregoing and solely with respect to applicants seeking relief with respect to the VFC Program other than through the SCC, section IV.A. and IV.B. shall not apply to a transaction described in section I.A., provided that: (1) the applicant under the VFC Program has met all of the other applicable Program requirements; (2) the amount of the excise tax that otherwise would be imposed by Code section 4975 with respect to any transaction(s) described in section I.A would be less than or equal to $100; (3) the amount of the excise tax that otherwise would be imposed by Code section 4975 was paid to the plan and allocated to the individual accounts of participants and beneficiaries in the same manner as provided under the plan with respect to plan earnings; and (4) the applicant under the VFC Program provides a copy of a completed IRS Form 5330 or written documentation containing the information required by IRS Form 5330 and proof of payment with the submission of the application to the appropriate EBSA Regional Office. For the sole purpose of determining whether the excise tax due under Code section 4975 on the “amount involved” with respect to the prohibited transaction involving the failure to timely transmit participant contributions and loan repayments is less than or equal to $100, an applicant may calculate the excise tax due based upon the Lost Earnings amount computed using the online calculator provided under the Program.

D. Notwithstanding the foregoing and solely with respect to self-correctors seeking relief with respect to transactions corrected pursuant to the SCC of the VFC Program, section IV.A. and B. shall not apply, and additionally the self-corrector must: (1) pay to the plan the amount of the excise tax that otherwise would be imposed by Code section 4975 and allocate such amount to the individual accounts of participants and beneficiaries in the same manner as provided under the plan with respect to plan earnings, and (2) retain a copy of a completed IRS Form 5330 or written documentation regarding the determination of the otherwise applicable excise tax and proof of payment of the amounts paid to the plan pursuant to the VFC Program and this exemption and (3) provide to the plan administrator a copy of such documentation. Self-correctors must calculate the excise tax otherwise due based upon the Lost Earnings amount computed using the online calculator provided under the Program.

A. For purposes of this exemption the term “affiliate” of a person means (1) any person directly, or indirectly through one or more intermediaries, controlling, controlled by, or under common control with the person; (2) any officer, director, partner, employee, member of the family (as defined in Code section 4975(e)(6)) of the person; or (3) any corporation or partnership of which such person is an officer, director, partner or employee.

B. For purposes of this section V, the term “control” means the power to exercise a controlling influence over the management or policies of a person other than an individual.

Section 503(a) of SMCRA permits a State to assume primacy for the regulation of surface coal mining and reclamation operations on non-Federal and non-Indian lands within its borders by demonstrating that its program includes, among other things, State laws and regulations that govern surface coal mining and reclamation operations in accordance with SMCRA and consistent with the Federal implementing regulations. See 30 U.S.C. 1253(a)(1) and (7); 30 CFR 730.5 and 732.15(a). On the basis of these criteria, the Secretary of the Interior conditionally approved the Montana program on April 1, 1980. You can find background information on the Montana program, including the Secretary's findings, the disposition of comments, and conditions of approval of the Montana program in the April 1, 1980, Federal Register (45 FR 21560). You can also find later actions concerning the Montana program and program amendments at 30 CFR 926.15.

By letter dated June 1, 2023 (Administrative Record No. MT-042-01), Montana sent us an amendment to its program under SMCRA (30 U.S.C. 1201 et seq. ). We found Montana's proposed amendment to be administratively complete on June 5, 2023. Montana submitted the proposed amendment to us, on its own volition, after the Montana legislature passed HB 576 during the 2023 legislative session. HB 576 amends the Montana Strip and Underground Mine Reclamation Act (MSUMRA) as well as sections 82-4-203 and 82-4-222 of the Montana Code Annotated (MCA). Among other things, HB 576 also directed the Montana Department of Environmental Quality (MDEQ) to amend the Administrative Rules of Montana (ARM) to “remove the two subsections defining `material damage' and the subsection defining `material damage to the quantity or quality of water'.”

Specifically, Montana proposes several changes to MCA sec. 82-4-203(32), which defines and describes “material damage” for both underground and surface coal mining operations (referred to herein as “coal mining and reclamation operations”). As currently approved by OSMRE, this section dictates how “material damage” applies to the protection of the hydrologic balance. Montana now proposes to create three subsections under section 82-4-203(32) to define how “material damage” is defined with respect to: (a) protection of the hydrologic balance; (b) an alluvial valley floor; and (c) subsidence caused by an underground coal mining operation.

Proposed section 82-4-203(32)(a) would create two requirements for an action or inaction to be considered “material damage” to the hydrologic balance. The first requirement is that the coal mining operation would cause significant, lasting, or permanent adverse changes to water quality or quantity that affect the beneficial uses of, or rights to, the water outside the permit area. This requirement incorporates the current language of section 82-4-203(32) but modifies it to replace the phrase “degradation or reduction” with “significant long term or permanent adverse change.” The second requirement for an action or inaction to be considered “material damage” to the hydrologic balance is that a coal mining or reclamation operation would cause a lasting or permanent exceedance of a water quality standard (WQS) outside a permit area. There is an exception to this second requirement for water bodies for which the WQSs are stricter than the baseline conditions as determined by MDEQ's assessment of the cumulative hydrologic impact findings conducted pursuant to section 82-4-222. For those water bodies, this second requirement is met if the coal mining and reclamation operation causes an adverse effect to land use, beneficial uses of water, or water rights.

Proposed section 82-4-203(32)(b) would apply when determining if an alluvial valley floor is “materially damaged.” Montana proposes to modify the definition of “material damage” by adding language that accounts for the degradation or a reduction of water quality or quantity supplied to an alluvial valley floor by a coal mining and reclamation operation, but only if those actions or inactions significantly decrease the alluvial valley floor's ability to support agricultural activities.

Proposed section 82-4-203(32)(c) would apply when determining if subsidence caused by underground coal mining operation is “material damage.” Subsidence caused by underground coal mines would constitute “material damage” when there are (1) significant impairments to surface lands, features, and structures; (2) physical changes that have significant adverse effects on a lands current and reasonably foreseeable uses, production, or income; or (3) when there is any significant change to a structure's pre-subsidence condition, appearance, or utility.

Next, Montana proposes to amend its coal mine operation permit requirements related to hydrologic information by removing two sentences from section 82-4-222(1)(m). The first sentence Montana proposes to remove states that the applicant's determination of the probable hydrologic consequences of a coal mining and reclamation operation is not required until the necessary hydrologic information is made available from an appropriate Federal or State agency. The second sentence that Montana proposes to remove prohibits the MDEQ from approving a coal mining permit application until the necessary hydrologic information is incorporated into the application.

Lastly, HB 576 adds four contingencies to the proposed amendments of sections 82-4-203(32) and 82-4-222(1)(m) that are not codified into the MCA but apply to the sections amended by the legislation. Section 4 of HB 576 states that if any or all parts of HB 576 is found invalid, any parts found valid will remain in effect. Section 5 of HB 576 states that if the Secretary of the Interior disapproves any provision of the HB 576, then that portion is void. Section 6 of HB 576 states that HB 576 is effective upon passage and approval. Last, Section 7 of HB 576 states that HB 576 applies retroactively to actions for judicial review or other actions challenging permits, amendments, license, arbitration, action, certificate, or inspection that are pending on or after the effective date.

We announced receipt of the proposed amendment in the August 7, 2023, Federal Register (88 FR 52084). In the same document, we opened the public comment period and provided an opportunity for a public hearing or meeting on the adequacy of the amendment. After a request from several public interest groups, we announced a 60-day extension of the comment period until November 6, 2024, in the September 20, 2023, Federal Register (88 FR 64853). We also held a Public Hearing on November 1, 2023, in Billings, MT, where we received testimony from 23 individuals. (Administrative Record No. MT-042-23). We also received 232 written comments on the proposed rule. On March 28, 2024, OSMRE sent a letter to MDEQ detailing concerns that OSMRE had with the proposed amendment (Administrative Record No. MT-042-34). The letter offered two options for MDEQ: suspend the amendment to allow MDEQ to make necessary changes or proceed to the Final Rule stage with no changes. MDEQ responded on April 26, 2024, that, because the proposed amendments were the result of legislative action, MDEQ is unable to submit further modifications to address OSMRE's concerns. While OSMRE's letter only solicited a response from MDEQ, several individuals and organizations sent OSMRE responses to the letter as well. Due to the increased interest generated by OSMRE's March 28, 2024, letter to MDEQ, and, in the interest of fairness for public participation, OSMRE announced the re-opening of the public comment period for 15 days, ending August 14, 2024. (Administrative Record No. MT-042-39).

OSMRE reviewed Montana's submittal according to the requirements of SMCRA and the Federal regulations at 30 CFR 730.5, 732.15, and 732.17. As described below, we are approving Montana's submittal in part and disapproving it in part. The severability clause in section 4 of HB 576 indicates that it was the legislature's intent for any parts of the law that are not disapproved by OSMRE to remain in effect. The legislature did not define “part,” but in analyzing this proposed amendment, OSMRE analyzed the smallest reasonable elements of the proposed amendment, usually a section, and treated those as individual parts for purposes of severability.

For each part, OSMRE evaluated the cumulative effect of the changes to determine whether each part is in accordance with SMCRA and consistent with the Federal implementing regulations. The individual parts evaluated by OSMRE were MCA sections 82-4-203(32)(a), (b), and (c), and MCA 82-4-222(1)(m). We are approving only those parts of the amendment determined to be in accordance with SMCRA and consistent with the requirements of the Federal regulations, and we are disapproving those sections of the amendment that are not in accordance with SMCRA or are not consistent with the requirements of the Federal regulations.

Specifically, we are: (1) approving Montana's decision to move the currently approved definition of material damage “with respect to protection of the hydrologic balance” to subsection (a) of 84-4-203(32) but disapproving any proposed changes to that definition; (2) approving the addition of the proposed definition of material damage “with respect to an alluvial valley floor” at section 84-4-203(32)(b); and (3) disapproving the proposed definition of material damage “with respect to subsidence caused by underground coal mining operation” at proposed section 84-4-203(23)(c). We are also disapproving the proposed changes to section 82-4-222(1)(m).

For section 82-4-203(32)(a), Montana proposes several changes to its definition of “material damage” as it relates to impacts to the hydrologic balance from surface and underground coal mining operations. Existing section 82-4-203(32) of the MCA defines “material damage” with respect to protection of the hydrologic balance as the “degradation or reduction by coal mining and reclamation operations of the quality or quantity of water outside of the permit area in a manner or to an extent that land uses or beneficial uses of water are adversely affected, water quality standards are violated, or water rights are impacted. Violation of a water quality standard, whether or not an existing water use is affected, is material damage.” This definition was previously determined by OSMRE to be in accordance with SMCRA and consistent with the Federal implementing regulations when OSMRE conditionally approved Montana's Permanent coal program. 45 FR 21560.

Montana's proposed revision would define “material damage” with respect to protection of the hydrologic balance as: “(i) significant long-term or permanent adverse change by coal mining and reclamation operations to the quality or quantity of water outside of the permit area in a manner or to an extent that land uses or beneficial uses of water are adversely affected or water rights are impacts; and (ii) long-term or permanent exceedances of a water quality standard outside a permit area if caused by coal mining or reclamation operations, except that in water bodies for which the water quality standard is more stringent than baseline conditions as determined by the department's assessment of the cumulative hydrologic impact findings conducted pursuant to 82-4-222.” In addition, the definition would specify that “[f]or those water bodies, a significant, long-term adverse change to the baseline condition of water quality outside of a permit area is material damage if coal mining or reclamation operations cause adverse effects to and use, beneficial uses of water, or water rights.”

Under this proposed revision, for an event or condition to be considered “material damage to the hydrologic balance” there must be significant and adverse change to the quality and quantity of water outside the permit area caused by a coal mining and reclamation operation; the change must be long-term or permanent; and there must be a long-term or permanent exceedance of a WQS outside the permit area. The proposed revision would provide an exception for long-term or permanent exceedance of a WQS for water bodies where WQSs are more stringent than baseline conditions. Those areas instead must show long-term adverse change to the baseline condition of water where coal mining and reclamation operations cause adverse effects to land use, beneficial uses of water, or water rights.

The phrase “material damage to the hydrologic balance outside the permit area” appears in SMCRA and within the Federal regulations (30 CFR 816.41) and these references, and other elements of SMCRA and the Federal regulations, provide parameters for interpreting this phase. As a threshold matter, SMCRA's performance standards require that all surface coal mining and reclamation operations “minimize the disturbances to the prevailing hydrologic balance at the mine-site and in associated offsite areas and to the quality and quantity of water in surface and ground water systems both during and after surface coal mining operations and during reclamation.” 30 U.S.C. 1265(b)(10). This standard is accomplished by avoiding acid forming materials, preventing “to the extent possible using the best technology currently available” contributions of material to streams but under no circumstances allowing violations of any State or Federal water quality laws, and other practices designed to protect the existing hydrologic systems. Id. Similarly, SMCRA requires that underground coal mining operations “minimize the disturbances to the prevailing hydrologic balance at the minesite and in associated offsite areas and to the quantity of water in surface ground water systems both during and after surface coal mining operations and during reclamation.” 30 U.S.C. 1266(b)(9).

Section 510(b)(3) of SMCRA also states that no application for surface coal mining operations, defined at 30 U.S.C. 1291(28) as including activities related to surface coal mining and reclamation operations and surface effects from underground coal mining and reclamation operations, can be approved unless the application affirmatively demonstrates, and the regulatory authority finds in writing based on the application and available information, that “the assessment of the probable cumulative impact of all anticipated mining in the area on the hydrologic balance specified in Section 507(b) has been made by the regulatory authority and the proposed operation thereof has been designed to prevent material damage to the hydrologic balance outside the permit area.” 30 U.S.C. 1260(b)(3). Section 507(b)(11) requires that an applicant submit “a determination of the probable hydrologic consequences of the mining and reclamation operations, both on and off the mine site, with respect to the hydrologic regime, quantity and quality of water in surface and ground water systems including the dissolved and suspended solids under seasonal flow conditions and the collection of sufficient data for the mine site and surrounding areas so that an assessment can be made by the regulatory authority of the probable cumulative impacts of all anticipated mining in the area upon the hydrology of the area and particularly upon water availability.” 30 U.S.C. 1257(b)(11).

In addition to the statutory standards, the Federal regulations add additional contours to the meaning of “material damage to the hydrologic balance outside the permit area.” First, the regulations at 30 CFR 773.15(e) require the regulatory authority to perform an assessment to determine if “the proposed operation has been designed to prevent material damage to the hydrologic balance outside the permit area.” Second, the regulations at 30 CFR 780.21(g) and 784.14(f) require a finding that the Cumulative Hydrologic Impact Assessment (CHIA) is “sufficient to determine, for the purposes of permit approval, whether the proposed operation has been designed to prevent material damage to the hydrologic balance outside the permit area.” Third, the regulations at 30 CFR 780.21(h) and 784.14(g) require a permit applicant to provide a Hydrologic Reclamation Plan. These sections state, in relevant part, that the plan must “contain the steps to be taken during mining and reclamation through bond release to minimize disturbance to the hydrologic balance within the permit and adjacent areas; to prevent material damage outside the permit area; [and] to meet applicable Federal and State water quality laws and regulations.” Id. The fact that the Hydrologic Reclamation Plan must outline how an operation will (1) minimize disturbance to the hydrologic balance within the permit area and the adjacent areas, (2) prevent material damage outside the permit area, and (3) meet all applicable Federal and State water quality laws indicates that each element provides a distinct protective benefit and that merely satisfying one element is not sufficient.

Fourth, the regulations at 30 CFR 816.41(a) and 817.41(a) require that all surface and underground mining and reclamation activities must be conducted “to minimize disturbance to the hydrologic balance within the permit and adjacent areas [and] . . . prevent material damage to the hydrologic balance outside the permit area,” and that the “regulatory authority may require additional preventative, remedial or monitoring measures to assure that material damage to the hydrologic balance outside the permit area is prevented.” Last, the regulations at 30 CFR 816.41(c) and (e), as well as section 817.41(c) and (e), authorize the regulatory authority to modify the monitoring requirements, including parameters and frequency, if the monitoring data demonstrate that the operation has “minimized disturbance to the hydrologic balance in the permit and adjacent area and prevented material damage to the hydrologic balance outside the permit area.”

While neither SMCRA nor the current Federal regulations define “material damage to the hydrologic balance outside a permit area,” for the Federal and Indian lands programs, OSMRE has defined the phrase, as recently as 2024 in various CHIAs as meaning “any quantifiable adverse impact from surface coal mining and reclamation operations on the quality or quantity of surface water or groundwater that would preclude any existing or reasonably foreseeable use of surface water or groundwater outside the permit area.” See Cumulative Hydrologic Impact Assessment for the Pacific Coast Coal Company John Henry No. 1 Mine, p. 2 (Jan. 2014); Cumulative Hydrologic Impact Assessment of the Navajo Mine and Pinabete Permit Areas, p. 14 (Mar. 2015); Cumulative Hydrologic Impact Assessment of the Peabody Western Coal Company Kayenta Mine Complex, App. A (Sept. 2016); Review and Analysis of Navajo Aquifer Material Damage Criteria for Peabody Western Coal Company's Kayenta Mine Complex, p. 14 (Aug. 2024). These documents recognize that surface coal mining operations will cause hydrologic impacts but indicate OSMRE's interpretation that disturbances to the hydrologic balance within the permit area should be minimized and material damage outside the permit area should be prevented. Id. The CHIAs also direct that material damage criteria for both groundwater and surface water quality should be related to existing standards that generally are based on the maintenance and protection of specified water uses such as public and domestic water supply, agriculture, industry, aquatic life, recreation, and other parameters of local significance to water use. OSMRE also provided a definition of material damage to the hydrologic balance in a 2016 rule (81 FR 93066); however, that rule was disapproved under the Congressional Review Act in 2017 and is no longer in effect.

SMCRA and the Federal program, thus, require that: (1) the regulatory authority must make a written finding that the operation is designed to prevent material damage to the hydrologic balance outside the permit area before the permit can be issued; (2) a permit application must include a plan that shows the operation has been designed to prevent such damage; (3) the operation must be conducted in a manner to prevent such damage; (4) the water monitoring requirements can be modified if warranted to determine whether or not such damage is occurring; and (5) applicable Federal and State water quality laws and regulations must be followed.

With this background in mind, we have evaluated the proposed amendment to the Montana program in relation to Federal statutory and regulatory requirements for preventing “material damage to the hydrologic balance outside the permit area” and determined that Montana's proposed changes to section 82-4-203(32)(a) are not in accordance with SMCRA and not consistent with the Federal regulations.

First, Montana's proposed requirement that an impact must be a “significant long-term or permanent adverse change . . . to the quality of water outside of the permit area” to be considered material damage is not in accordance with the requirements of SMCRA and not consistent with the Federal regulations. The phrase “long-term or permanent” is not defined in the Montana code or regulations. Without a definition or guidance on what constitutes a “long-term or permanent” adverse change, it would be very difficult to establish a metric for what constitutes a long-term impact, and such a metric would likely exclude significant short-term impacts to the quality or quantity of water outside the permit area from ever being considered material damage to the hydrologic balance. As a result, this proposed change to the definition would appear to explicitly authorize minor, short-term adverse changes caused by coal mining and reclamation operations to the quality or quantity of water outside the permit area, which is contrary to SMCRA's requirement that all surface coal mining and reclamation operations must de designed to “minimize the disturbance to the prevailing hydrologic balance . . . both during and after” mining, without limit to duration. 30 U.S.C. 1265(b)(10). Thus, this proposed change renders the definition of material damage to the hydrologic balance less stringent than SMCRA and less effective than the Federal regulations.

Second, the requirement that material damage to the hydrologic balance can only be found where there are also “long-term or permanent exceedances of a water quality standard outside a permit area” caused by coal mining or reclamation operation is not in accordance with SMCRA or consistent with the Federal regulations. A violation of a State or Federal WQS as a result of a surface coal mining and reclamation operation is not allowed under SMCRA and would constitute material damage to the hydrologic balance. However, material damage to the hydrologic balance could also occur without a long-term or permanent exceedance of a WQS outside the permit area. Requiring that an impact be a “significant long-term or permanent adverse change” and also a long-term or permanent exceedance of a WQS would significantly weaken the standard for material damage to the hydrologic balance. Therefore, this change would make Montana's program neither in accordance with SMCRA nor consistent with the Federal regulations.

A regulatory authority will set and monitor WQSs to ensure that surface coal mining operations are preventing “material damage to the hydrologic balance.” These standards are underpinned by a combination of State and Federal water quality laws and regulations. General effluent limitations for coal mining are promulgated by the U.S. Environmental Protection Agency (EPA) as set forth in 40 CFR part 434, and the individualized standards for an operation are determined by the regulatory authority based on the information provided in a permit application. As required in 30 CFR 780.21(i) and (j), a surface coal mining operation permit application must include both a groundwater monitoring plan and surface water monitoring plan. These plans identify the water quality and quantity parameters to be monitored, how often they are to be sampled, and where they are to be sampled. The sampling data are then used to assess the suitability of the water for current and approved postmining land uses and to meet the objectives for protection of the hydrologic balance, as described in 30 CFR 780.21(h), which includes preventing “material damage to the hydrologic balance outside the permit area.”

In a 1983 rulemaking, commenters urged OSMRE to define “material damage to the hydrologic balance” or establish guidelines to evaluate whether material damage would occur from a proposed operation. In response, OSMRE stated that it agreed that a regulatory authority should establish guidelines, but, “because the gauges for measuring material damage may vary from area to area and from operation to operation, [OSMRE] has not established fixed criteria, except for those established under §§ 816.42 and 817.42 related to compliance with water-quality standards and effluent limitations. ” 48 FR 43973 (emphasis added). Thus, OSMRE intended the WQSs set by 30 CFR 816.42 and 817.42 to be used as criteria for determining “material damage to the hydrologic balance,” and an exceedance of those WQSs is inherently “material damage to the hydrologic balance.”

Because a violation of a WQS is an established criterion for determining if “material damage to the hydrologic balance” has occurred, any regulations proposed by Montana must be in accordance with and consistent with this Federal standard. In Montana's proposal, it moves its requirement that violations of WQSs are “material damage to the hydrologic balance” to the newly created section 82-4-203(32)(a)(ii). The structure of the proposed new section makes the rule less effective than the Federal regulations because, for something to constitute “material damage to the hydrologic balance,” it would need to be both (1) a significant, long-term or permanent, adverse change to water quality or quantity, and (2) a long-term of permanent exceedance of a WQS (emphasis added). While, as discussed above, a violation of a WQS is an established criteria to categorize an event as causing “material damage to the hydrologic balance” in the Federal regulations, it is incorrect to assume that “material damage to the hydrologic balance” will always include an exceedance of a WQS. The determinations of Probable Hydrologic Consequences (PHC) and CHIA both require information on water quantity as well as water quality. 30 CFR 780.21. The CHIA and PHC are used to determine if a proposed operation is designed to prevent “material damage to the hydrologic balance,” and the permittee is required to operate the mine in such a way that prevents “material damage to the hydrologic balance.” Under the Federal regulations, both water quality and quantity issues can be used to determine if material damage to the hydrologic balance has occurred. There is nothing in the Federal regulations that suggests a water quantity violation on its own would not be considered “material damage to the hydrologic balance” or that some additional “significant, long-term or permanent, adverse change to water quality or quantity” must also be present to find that material damage has occurred. Thus, Montana's assertion that there must always be a violation of a WQS for an event or condition to be considered “material damage to the hydrologic balance” is inconsistent with the Federal regulations.

Finally, Montana's proposed changes would also add a requirement that an exceedance of a WQS must be “long-term or permanent” to be considered “material damage to the hydrologic balance.” As discussed above, any exceedance of a WQS caused by a surface coal mining and reclamation operation is a violation of SMCRA. Requiring that a water quality exceedance be “long-term or permanent” ignores the destructive capabilities of a single short-term disturbance event. For example, a large amount of a regulated pollutant could be accidently discharged into a river and cause a WQS exceedance. The pollutant could then quickly move downstream with the flow of water and adversely affect the water quality at the mine site and adjacent area; while of short duration, the event could negatively impact aquatic life, drinking water, or recreational uses. If this disturbance was instead an unintended groundwater capture leading to de-watering of local wells or increased sedimentation into a nearby creek causing channel diversions, the vagueness of the term “long-term” makes it unclear whether it would rise to the level of material damage to the hydrologic balance. Under no circumstances should a WQS violation caused by a mining or reclamation operation be “long-term,” and Montana's proposal to require that a water quality exceedance must be “long-term or permanent” to be considered material damage to the hydrologic balance would make the Montana program less effective than SMCRA and the Federal regulations. As an example, under this proposed amendment, an operator could repeatedly exceed WQSs outside of the permit area but attempt to avoid a determination that the impact was material damage to the hydrologic balance by MDEQ by starting and stopping pollution events before meeting the vague “long-term or permanent” threshold.

For the reasons above, we are disapproving the proposed changes to subsection (a) of Montana's new definition to material damage with respect to protection of the hydrologic balance. We are, however, approving the non-substantive restructuring of this section so that the prior definition of material damage to the hydrologic balance is included in subsection (a). All other proposed changes to section 82-4-203 (32)(a) are denied. Approved subsection (a) now states: “with respect to protection of the hydrologic balance, degradation or reduction-by coal mining and reclamation operations of the quality or quantity of water outside of the permit area in a manner or to an extent that land uses or beneficial uses of water are adversely affected, water quality standards are violated, or water rights are impacted. Violation of a water quality standard, whether or not an existing water use is affected, is material damage.”

We are approving the proposed changes to MCA section 82-4-203(32)(b) because we find that the changes to section 82-4-203(32)(b) are in accordance with SMCRA and consistent with the Federal regulations.

Section 82-4-203(32)(b) proposed to define “material damage” with respect to alluvial valley floors as “degradation or reduction by coal mining and reclamation operations of the water quality or quantity supplied to the alluvial valley floor that significantly decreases the capability of the alluvial valley floor to support agricultural activities[.]”

This proposed definition is nearly identical to the Federal definition of “materially damage the quantity or quality of water” in 30 CFR 701.5, which provides that, “with respect to alluvial valley floors, [material damage the quantity or quality of water is] to degrade or reduce by surface coal mining and reclamation operations the water quantity or quality supplied to the alluvial valley floor to the extent that resulting changes would significantly decrease the capability of the alluvial valley floor to support farming.” The biggest difference between the proposed State definition and the Federal regulation is that the Federal definition limits the definition to how the water supplied to the alluvial valley floor affects “farming,” while Montana's definition expands this to “agricultural activities.” Farming, with respect to alluvial valley floors, is defined in 30 CFR 701.5 and means “the primary use of those areas for the cultivation, cropping or harvesting of plants which benefit from irrigation, or natural subirrigation, that results from the increased moisture content in the alluvium of the valley floors. For purposes of this definition, harvesting does not include the grazing of livestock.” The term “Agricultural activities” is defined in 30 CFR 701.5 as, with respect to alluvial valley floors, “the use of any tract of land for production of animal or vegetable life based on regional agricultural practices, where the use is enhanced or facilitated by subirrigation or flood irrigation. These uses include, but are not limited to, farming and the pasturing or grazing of livestock. These uses do not include agricultural activities which have no relationship to the availability of water from subirrigation or flood irrigation practices.” Thus, under the Federal regulations, the term “agricultural activities” is broader than the term “farming” because it includes animal production in addition to cultivating crops.

Montana's approved program does not include a definition of farming or agricultural activities, making it difficult to understand the exact scope of activities included in Montana's definition. However, despite the lack of definition, the similarity in the language and common understanding that agricultural activities would at a minimum include farming lead OSMRE to determine that Montana's definition of material damage with respect to alluvial valley floors at section 82-4-203(32)(b) is in accordance with SMCRA and consistent with the Federal regulations.

We are denying the proposed addition of MCA section 82-4-203(32)(c). This proposed change would add paragraph (c) to section 82-4-203(32) to provide a definition of “material damage” resulting from subsidence caused by an underground coal mining operation. As proposed, this definition would mean: “any functional impairment of surface lands, features, or structures; (ii) any physical change that has a significant adverse impact on the affected land's capability to support any current or reasonably foreseeable uses or causes significant loss in production or income; or (iii) any significant change in the condition, appearance, or utility of any structure or facility from its presubsidence condition.” Following our review, we find that proposed section 82-4-203(32)(c) is inconsistent with the Federal regulations and are not approving this proposed change.

Montana's proposed definition of “material damage” caused by subsidence is nearly identical to the Federal definition of “material damage” as it relates to subsidence at 30 CFR 701.5. However, unlike the Federal regulations, Montana's definition does not include “facilities” in its list of features that can be considered functionally impaired by subsidence in proposed section 82-4-203(32)(c)(i). Montana has not provided clarification as to why “facilities” was omitted from this proposed paragraph. In deciding whether this proposed regulation can be approved, we must determine if grouping the term “facilities” within the term “structure” would make this paragraph as effective as the Federal regulations.

Neither the Federal nor the Montana regulations formally define “facility” or “structure,” so we use the plain language definition of both terms, as well as how they are used throughout the Federal regulations to determine their meanings. “Structure” generally is used to refer to a standalone, human-made formation that performs an intended job, such as a diversion, sediment pond, refuse pile, or road. Defined terms in § 701.5 of the Federal regulations that use the term “structure” in their definitions but not the term “facility” include: “head-of-hollow fill,” “impoundments,” and “valley fill.” “Facility,” on the other hand, generally is used to describe a place, or collection of structures that performs a more complex task. Defined terms in § 701.5 of the Federal regulations that use the term “facility” in their definitions but not “structure” include: “public office” and “coal preparation plant.” The two terms have distinct and separate meanings, and the plain language definition of “structure” does not fully encapsulate the meaning of “facilities” as there are facilities that do not contain structures. Furthermore, Montana uses the phrase “structure or facility” in proposed section 82-4-203(32)(c)(iii). Listing both terms here, and using “or” to connect them, indicates that Montana understands the two terms have distinct and separate meanings. Thus, omitting “facilities” from the list of features that can be considered functionally impaired by subsidence in proposed section 82-4-203(32)(c)(i) would not be in accordance with SMCRA or consistent with the requirements of the Federal regulations.

We are denying all proposed changes to MCA section 82-4-222(1)(m). HB 576, in part, modified MCA sec. 82-4-222(1)(m) to delete the following two sentences: “However, this determination is not required until hydrologic information on the general area prior to mining is made available from an appropriate Federal or State agency. The permit may not be approved until the information is available and is incorporated into the application.” Section 82-4-222 pertains to permit applications for the Montana program, and paragraph (1)(m) discusses the determination of the probable hydrologic consequences of coal mining and reclamation operations. By this change, Montana proposes to remove two requirements from section 82-4-222(1)(m). First, Montana proposes to remove the requirement that the permit applicant's determination of probable hydrologic consequences is not required until hydrologic information of the pre-mining area is made available from an appropriate Federal or State agency. Second, Montana proposes to remove the requirement that the relevant permit may not be approved until the hydrologic information is available and incorporated into the application.

The Federal counterparts to this requirement are found in 30 U.S.C. 1257(b)(11) and 30 CFR 780.21(c)(1), (c)(2), (f)(1), and (f)(2). The statutory provisions at 30 U.S.C. 1257(b)(11) require that a determination of probable hydrologic consequences of a mining operation “shall not be determined until hydrologic information on the general area prior to mining is made available from an appropriate Federal or State agency . . . .” The regulations at 30 CFR 780.21(c)(1) state that hydrologic and geologic information are necessary to assess probable cumulative hydrologic impacts and that, if the necessary hydrologic and geologic information is available from an appropriate Federal or State agency, then that information must be provided to the regulatory authority in order for it to assess probable cumulative hydrologic impacts. The regulations at 30 CFR 780.21(c)(2) state that, if the necessary hydrologic and geologic information is not available from a Federal or State agency, the operator may submit hydrologic and geologic information that it has collected on its own. The regulations at 30 CFR 780.21(f)(1) state that an application must have a PHC determination, and paragraph (f)(2) continues by providing that the PHC must be determined using hydrologic and geologic information that is collected for the permit application.

The removal of the two requirements from section 82-4-222(1)(m), as described above, would mean that the MDEQ's hydrological determination is not required until hydrologic information is available from an appropriate Federal or State agency and would also mean that the Montana program would no longer meet all of the requirements set forth in 30 U.S.C. 1257(b)(11) and would make the Montana program less effective than 30 CFR 780.21(f)(2). The regulations at 30 CFR 780.21(f)(2) require a determination of PHC to be made using the baseline hydrologic information that was collected for the permit application. By proposing to remove the provision that permit applicant's PHC determination is not required until hydrologic information of the pre-mining area is made available from an appropriate Federal or State agency, Montana's program would allow an applicant to make a PHC determination before all of the necessary hydrologic information is gathered, which could limit the quality of the PHC.

The regulations at 30 CFR 780.21(c)(3) state that a permit must not be approved until the necessary hydrologic and geologic information is available to the regulatory authority. Because this Federal regulation requires hydrologic and geographic information to be provided to a regulatory authority before an application is approved, Montana's proposed removal of the same requirement in section 82-4-222(1)(m) would make it inconsistent with the Federal regulations. Thus, we are denying all of Montana's proposed changes to section 82-4-222(1)(m) of the MCA.

During the 2023 legislative session, Montana passed HB 576, which modified sections 82-4-203(32) and 82-4-222(1)(m). HB 576 also added contingencies that are not codified into the MCA but that affect the amended parts of the MCA.

Section 4 of HB 576 states that if any part of HB 576 is found invalid, the remainder of the bill that is found valid will be severable from the invalid part and remain in effect. While this is legislative language and not part of Montana's surface mining program, we note that the Federal regulations at 30 CFR 732.17(h)(7) require the Director to consider all relevant information, using the criteria set forth in 30 CFR 732.15, to approve or disapprove the amendment. The Director may approve all or parts of an amendment that are in accordance with SMCRA and consistent with the Federal regulations. Here, notwithstanding section 4 of HB 576, OSMRE has identified the sections that are approved and the sections that are disapproved.

Section 5 of HB 576 states that, if the Secretary of the Interior disapproves of any provision of HB 576 under 30 CFR part 732, then that portion of the bill is void. Furthermore, MDEQ is required to notify the code commissioner of a disapproval within 15 days of the effective date of disapproval. Notwithstanding HB 576, the Federal regulations give the Director the authority to approve or disapprove all or part of a proposed amendment to a State program. 30 CFR 732.17(h)(7). Any program amendment or part of a program amendment disapproved by the Director would be void and would not become part of Montana's approved program.

Section 6 of HB 576 states that its provisions are effective on passage and approval of the bill. This provision is contrary to SMCRA and the Federal regulations that state that no change to law or programs can take effect for purposes of a State program until the amendment is approved by the Director. 30 CFR 732.17(g).

Section 7 of HB 576 states that amendments to the MCA apply retroactively to actions for judicial review, amendment, license, arbitration, action, certificate, or inspection that are pending but not yet decided on or after the effective date of HB 576. Section 7 of HB 576 attempts to make the proposed changes to sections 82-4-203(32) and 82-4-222(1)(m) apply retroactively to pending issues that have not been decided on or after the effective date of HB 576. As with the attempt to make the changes in HB 576 effective immediately, this section is contrary to SMCRA and the Federal regulations. Specifically, the Federal regulations at 30 CFR 732.17(g) mandate that no changes to laws will take effect until OSMRE approves the amendment, and section 723.17(i)(12) states that all decisions of the Secretary to approve or disapprove program amendments must be published in the Federal Register . The Administrative Procedure Act generally requires a 30-day delay before a rule becomes effective. 5 U.S.C. 553(d).

We asked for initial public comments on the amendment during a public comment period that ended on November 6, 2023. We received 232 written comments during our initial comment period, and we received testimony from 23 individuals at a public hearing held in Billings, MT on November 1, 2023. (Administrative Record No. MT-042-23). As mentioned above, on March 28, 2024, OSMRE sent a letter to MDEQ. (Administrative Record No. MT-042-34). The letter detailed concerns that OSMRE had with the proposed amendment, all of which is described in Section III above. While the letter only solicited a response from MDEQ, OSMRE received several unsolicited responses for other parties. Due to the increased interest in the proposed amendment generated by that letter, and, in the interest of fairness for public participation, OSMRE announced the re-opening of the public comment period for 15 days on July 30, 2024. (Administrative Record No. MT-042-39).

Due to the large number of comments, substantially similar comments and points have been consolidated to avoid redundancy. Over 190 commenters were opposed to the approval of this amendment and raised similar concerns, discussed below. Comments expressing generalized support for or opposition to the proposed amendment, generalized concerns about environmental impacts from mining operations, concerns about the mining industry, fossil fuel use, and the need for the United States to transition to renewable energy, general statements about the public's opposition to HB 576 and prior legislative efforts, comments about SB 392 and the topic of litigation and attorney's fees (which will be discussed in a separate Final Rule Notice (MT-043-FOR)), and other non-responsive comments are beyond the scope of this amendment and no response is necessary. To view comments in full, visit https://www.regulations.gov/.

Comment 1: There was consensus among the group of 190 commenters in opposition to the proposed amendment that the use of “significant long-term or permanent,” as applied to the definition of “material damage to the hydrologic balance,” was too ambiguous. They expressed concern that because these terms are not defined, MDEQ or a judge could interpret these terms too subjectively, and that the ambiguity of this language “all but guarantee[s] some degree of damage outside of a permit boundary.”

OSMRE Response: OSMRE agrees with commenters' concerns that, without a definition or guidance on what constitutes a “long-term or permanent” adverse change, it would be very difficult to establish a metric for what constitutes a long-term impact and that this proposed change renders the definition of material damage to the hydrologic balance not in accordance with SMCRA and inconsistent with the Federal regulations. Please see Section III(A) to see OSMRE's full discussion about the proposed definition of “material damage to the hydrologic balance.”

Comment 2: Similarly, commenters opposed to this proposed amendment repeatedly considered Montana's proposed changes to baseline condition requirements to be inadequate because the proposed amendment removes the requirement that an operation submit baseline water information while also having a determination of “material damage to the hydrologic balance” rely on baseline water information.

OSMRE Response: OSMRE agrees that Montana's proposed edits to section 82-4-222(1)(m) would make Montana's program not in accordance with SMCRA and inconsistent with the Federal regulations. Please see Section III(D) for OSMRE's discussion on the proposed changes to baseline hydrologic information.

Comment 3: Several commenters stated that the immediate effective date and retroactive applicability of the bill are inconsistent with Federal regulations, citing 30 CFR 732.17(g), which requires that no State coal regulations go into effect until approved by OSMRE, and 30 U.S.C. 1202(i), which requires all appropriate procedures are followed for public participation in the revision of a State's program.

OSMRE Response: We agree with these commenters on the proposed immediate effective date and retroactive applicability provisions; please see OSMRE's full discussion in Section III(E).

Comment 4: Some commenters opined that the proposed change of definition for “material damage to the hydrologic balance” is inadequate and pointed to Ohio River Valley Envtl. Coalition, Inc. v. Norton, 2005 WL 2428159 (S.D.W. Va. Sept. 30, 2005), a case where a court found similar language in a West Virginia Amendment to be less effective than the Federal regulations. They noted that the court found that West Virginia's amendment to its definition of “material damage” failed because it did not provide a reasoned analysis to explain how a subjective standard with vague terms (“long-term or permanent change”) can ensure that the State program amendment was not less effective than the Federal regulations. Commenters stated that HB 576 fails on the same grounds, as the proposed definition of “material damage to the hydrologic balance” and its use of the terms “long-term or permanent” does not give MDEQ clear standards when applying the definition. They stated that, as written, the Montana amendment would allow an operator to violate WQSs so long as they are not “long-term or permanent” violations.

OSMRE Response: OSMRE has disapproved this portion of Montana's proposed amendment. Please see OSMRE's discussion of the definition of “material damage to the hydrologic balance” and its effects on WQSs in Section III(A). Additionally, OSMRE notes that the West Virginia definition of “material damage to the hydrologic balance” that was discussed in Ohio River Valley Envtl. Coalition, Inc. v. Norton, 2005 WL 2428159 (S.D.W. Va. Sept. 30, 2005), was later approved by OSMRE in 2008, 73 FR 78979, and OSMRE's approval of the definition was upheld by the Fourth Circuit in Ohio River Valley Envtl. Coalition, Inc. v. Salazar, 466 Fed. Appx. 161, 167 (4th Cir. 2012). While OSMRE approved West Virginia's definition of “material damage of the hydrologic balance,” the definition was applied only in the context of a CHIA and, thus, is different from Montana's proposed definition in this amendment.

Comment 5: Commenters stated that, as proposed, the Montana amendment conflicts with 30 U.S.C. 1292(a)(4), a provision of SMCRA that prevents the law from altering the Clean Water Act (CWA). The preamble to the Federal rulemaking stated that there are no fixed criteria for “material damage” except for compliance with WQSs, and, as proposed, Montana would allow long term or permanent violations of water quality; thus, the commenters concluded that Montana would be violating the protections of the CWA.

OSMRE Response: OSMRE disagrees with the comment that the proposed change to “material damage to the hydrologic balance” would violate the CWA. As discussed in more detail below, the EPA submitted a comment on this amendment stating that the proposed amendment would not impact or alter MDEQ's obligations under the CWA. (Administrative Record No. MT-042-07). OSMRE does agree that requiring a “long-term or permanent” violation of WQSs in order to trigger “material damage to the hydrologic balance” would not be in accordance with SMCRA and would not be consistent with the Federal regulations, and we have denied this portion of Montana's proposal. Please see Section III(A) for our full discussion on this topic.

Comment 6: Commenters contended that the proposed changes to section 82-4-222(1)(m) conflict with SMCRA and that the proposed deletions violate 30 CFR 780.21(c)(1), (f), and (g)(1), and 30 U.S.C. 1257(b)(11).

OSMRE Response: We agree that Montana's proposed changes to section 82-4-222(1)(m) are inconsistent with the Federal regulations and have denied the portion of Montana's proposal. Please see our full discussion in Section III(D).

Public Comment 7: A commenter stated that HB 576 will further deepen ongoing issues around water quality and quantity for cattle and subsidence cracks.

OSMRE Response: OSMRE determined that the proposed definition for “material damage to the hydrologic balance” was neither in accordance with SMCRA nor consistent with the Federal regulations and denied substantive changes to the amendment. Please see Section III(A) and III(C) for OSMRE's discussion on Montana's proposed changes.

Public Comment 8: Commenters agreed with OSMRE's preliminary findings in its OSMRE's March 28, 2024, letter to MDEQ that the use of “significant” and “permanent or long-term” in the proposed definition of “material damage to the hydrologic balance” is less stringent and effective than SMCRA and the Federal regulations. They disagreed with industry comments to the effect that Montana's definition of “material damage to the hydrologic balance” cannot “run afoul” of Federal law because there is no Federal definition of the term. The commenters stated that this argument has been rejected by Federal courts, citing Ohio River Valley Envt'l Coal., Inc. v. Kempthorne, 473 F.3d 94, 103 (4th Cir. 2006).

OSMRE Response: Consistent with our preliminary findings in our March 28, 2024, letter to MDEQ, we have denied the proposed changes to the definition of “material damage to the hydrologic balance.” For further information, please see OSMRE's discussion of the use of “significant” and “long-term or permanent” within this definition in Section III(A), as well as our response to industry commenters below.

Public Comment 9: Commenters expressed concern that a requirement that harm to the hydrologic balance must be “permanent or long-term” to rise to the level of “material damage” and asserted that such an interpretation would contradict SMCRA requirements at 30 U.S.C. 1202(b), 1259, and 1307(b). Commenters raised concerns that HB 576 would allow short- or medium-term impacts of high magnitude to water quality and quantity, contrary to comments submitted by industry.

OSMRE Response: We are denying Montana's proposed definition of material damage with respect to protection of the hydrologic balance because it not in accordance with SMCRA and is inconsistent with the Federal regulations. Please see Section III(A) for the discussion of our decision.

Public Comment 10: Commenters expressed concern that HB 576 is inconsistent with the Montana Water Quality Act and the CWA because the proposal would allow pollution events that violate WQSs in short- and medium-term timeframes. Thus, commenters argue that HB 576 also violates SMCRA by superseding provisions of the CWA.

OSMRE Response: We note that the EPA found that the proposed changes would not violate the CWA because the statute could not supersede the EPA's regulations regarding WQSs. Nevertheless, for the reasons set forth in Section III(A) above, we are denying the portion of Montana's proposal that would change the current definition of material damage to the hydrologic balance because it is not in accordance with SMCRA and not consistent with the Federal regulations. Further discussion of EPA's comment can be found below.

Public Comment 11: Commenters stated that Montana's proposed definition is distinguishable from the Wyoming and West Virginia definitions. They allege that OSMRE's decision for Wyoming shows the agency's long-standing position that “material damage” cannot be “time limited” and that, unlike West Virginia, Montana's proposed definition of “material damage” is a performance standard as well as a reclamation standard and would have much broader applicability than the West Virginia definition.

OSMRE Response: Please see OSMRE's response to Industry Comment 2 below.

Public Comment 12: Commenters agreed with OSMRE's preliminary findings in our March 28, 2024, letter to MDEQ, that Montana's proposed requirement that water quality violations be “long-term or permanent” to be considered “material damage to the hydrologic balance” is inconsistent with SMCRA and the Federal regulations. The commenters noted that the proposed change to the definition of “material damage to the hydrologic balance” was not necessary to enable strip-mining adjacent to water bodies that had failed water quality standards prior to the permittee's mining, as long as the mine does not cause additional harms to water quality. The Montana Supreme Court in Montana Env't Info. Ctr. v. Westmoreland Rosebud Mining, LLC, 2023 MT 224, 68-70, 414 Mont. 80. 545 P.3d 623, held that under Montana's current definition of “material damage,” an existing impairment to a water body does not prevent additional mining unless the mining threatens to cause additional harm to water quality.

OSMRE Response: OSMRE is disapproving Montana's proposed definition of “material damage” with respect to protection of the hydrologic balance. Because other non-segregable elements of this definition rendered the proposed definition not in accordance with SMCRA and not consistent with the Federal regulations, we did not reach a determination of appropriateness about this provision. Please see OSMRE's discussion of the topic in Section III(A), as well as our response to Industry Comment 10.

Public Comment 13: Commenters concurred with OSMRE's preliminary finding in the March 28, 2024, letter that we sent to MDEQ that stated that the omission of “facilities” from the proposed definition of “material damage” in relation to subsidence is less stringent than SMCRA and less effective than the Federal regulations. Commenters noted that even if the omission of “facilities” was a mistake, the definition should not be approved because the provision, as written, is less protective than the Federal standards and courts and regulators are supposed to apply statutes as written, without adding or subtracting language.

OSMRE Response: OSMRE agrees. Please see OSMRE's discussion of “material damage” regarding subsidence in Section III(C).

Public Comment 14: Commenters supported OSMRE's preliminary finding in the March 28, 2024, letter that we sent to MDEQ that stated that Montana's proposed deletion of the requirement to obtain and submit baseline information from State and Federal agencies, and the prohibition on permit issuance until such information is available, is inconsistent with and less stringent than SMCRA. The commenters stated that industry comments indicating that the amendment would not allow permit issuance without the necessary information baseline information is without support.

OSMRE Response: Please see OSMRE's discussion of Montana's proposed changes to baseline hydrologic information in Section III(D), as well as our response to industry comments, below.

Public Comment 15: Commenters expressed support for OSMRE's preliminary finding in the March 28, 2024, letter that we sent to MDEQ that stated that State program amendments cannot be made immediately effective by an act of a State legislature because it is inconsistent with SMCRA. Commenters noted that section 505(a) of SMCRA is not a declaration of State law supremacy but is instead a clarification that State law may not be superseded by SMCRA, except when it is inconsistent with SMCRA or its regulations. Commenters added that W. Virginia Highlands Conservancy v. Norton, 137 F. Supp.2d 687, 697 (S.D.W. Va. 2001), supports their position that SMCRA does not violate the Tenth Amendment of the constitution and Federal law is not supplanted when a State gains primacy over its own coal program. Commenters argued that OSMRE possesses the statutory authority to determine whether sections 6 and 7 of HB 576 are inconsistent with the Federal regulations.

OSMRE Response: Please see OSMRE's discussion of the topic in Section III(E), as well as our response to Industry Comment 13, below.

Public Comment 16: Commenters stated that the fact that there is not a Federal definition of “material damage to the hydrologic balance” does not give states the ability to establish definitions of “material damage to the hydrologic balance” that conflict with other provisions of SMCRA or the Federal regulations. Citing 30 CFR 730.5, commenters stated that if a term is found to be less stringent or less effective than SMCRA or the Federal implementing regulations, then it may not be approved.

OSMRE Response: OSMRE agrees that any definition of “material damage to the hydrologic balance” must be in accordance with all provisions of SMCRA and consistent with all provision of the Federal regulations as those terms are defined in 30 CFR 730.5. The absence of a Federal definition of a term does not allow a State program to create definition that is in conflict with any provision in SMCRA or the Federal implementing regulations.

Public Comment 17: Commenters stated that every part of HB 576 is inconsistent with SMCRA, except Section 4, Severability, and Section 5, Contingent Voidness, and that, because all substantive portions of the bill should be disapproved by OSMRE, the entire amendment should be disapproved.

OSMRE Response: OSMRE, when processing program amendments, has the discretion to approve, disapprove, or approve portions of an amendment while disapproving other portions of an amendment. Here, OSMRE reviewed each proposed provision to determine if it was in accordance with SMCRA and consistent with the Federal regulations. After this analysis, OSMRE is disapproving the proposed changes to MCA 82-4-203(32)(a) and (c) and MCA 82-4-222(32)(1)(m) but approving the proposed definition at 82-4-203(32)(b) and approving the renumbering of the existing definition of material damage “with respect to protection of the hydrologic balance” from section 82-4-203(32) to section 82-4-203(32)(a).

Public Comment 18: Commenters stated that the proposed revisions to the requirements for hydrologic information for permit applications would allow mining to begin before necessary data collection and risk analyses are finished. They state that the requirements for hydrologic information are supposed to prevent unforeseen circumstances and dire effects to water quality and quantity, as most mining is detrimental to water pre-existing on the land before the mine is permitted. They stated that they were opposed to any changes that would allow for permit approval before hydrologic information is assessed.

OSMRE Response: We are denying the proposed changes to MCA 82-4-222(1)(m). Please see our full discussion in Section III(D).

Industry Comment 1: Industry commenters stated that the proposed definition of “material damage to the hydrologic balance” is more consistent with the plain meaning of “material damage” than the current definition. They alleged that removing the requirement that any water quality exceedance is per se “material damage” prevents a company from being accused of having caused “material damage” simply because they remain consistent with pre-existing exceedances of WQSs that are caused by factors other than coal mining. Commenters maintained that Montana's addition of “significant” to its definition of “material damage to the hydrologic balance” is consistent with SMCRA and the Federal regulations. Commenters pointed to the Federal definitions of “material damage” with respect to subsidence and alluvial valley floors, both of which use “significant” in their definitions.

OSMRE Response: OSMRE does not agree that the proposed definition of “material damage to the hydrologic balance” or that the addition of “significant” to the definition is in accordance with SMCRA or consistent with the Federal regulations, and we have disapproved the proposed change to that definition. For a complete discussion of OSMRE's analysis of the proposed definition, please look to Section III(A).

Industry Comment 2: Commenters noted that Montana's proposed definition of “material damage to the hydrologic balance” is very similar to the definitions used in Wyoming (WCWR 020-0006-1 (cf)) and West Virginia (W.Va. CSR 38-2-3(3.22.e)). Both definitions require that “material damage to the hydrologic balance” must be “significant” and “long-term.” Commenters stated that, like West Virginia, Montana's definition of “Material damage to the hydrologic balance,” is limited to CHIAs and the assessment of Probable Cumulative Impact (PCI). For Wyoming, commenters alleged that OSMRE erred in relying on an “informal clarification” provided by the Wyoming State program to approve the Wyoming definition. They claim that this extra-statutory evidence overrules the plain text of the State law, and that the plain language of Wyoming's definition encompassed both short and long-term events just as the plain language of Montana's proposed amendment would cover both short-term and long-term events.

OSMRE Response: We acknowledge that Montana's proposed definition of “material damage the hydrologic balance” is superficially similar to that of Wyoming and West Virginia, but upon closer examination, Montana's proposed use of “long-term or permanent” in its definition of “material damage of the hydrologic balance” is distinguishable. Wyoming, for instance, defines “material damage to the hydrologic balance” as “a significant long-term or permanent adverse change to the hydrologic regime.” WCWR 020-0006-1 (cf). Our approval of the Wyoming definition, however, was informed by Wyoming's clarification that this definition was not time-restricted and that “its regulations and statutes require, by common usage and definition, prevention of long- and short-term adverse changes and uses.” 45 FR 20940 (Mar. 31, 1980). Montana, to the contrary, has provided no similar clarity for its definition, so we interpreted the proposed change based on the plain meaning of the language provided to mean that it has a time-based restriction.

Similarly, West Virginia defines “material damage to the hydrologic balance” within its regulations on CHIAs to mean “any long term or permanent change in the hydrologic balance caused by surface mining operation(s), which has a significant adverse impact on the capability of the affected water resource(s) to support existing conditions and uses.” W.Va. CSR 38-2-3(3.22.e); see also 73 FR 78970, 78974 (Dec. 24, 2008). This definition of “material damage to the hydrologic balance” is limited to CHIAs and does not apply more broadly to the West Virginia program, such as determining whether a violation of the material damage to the hydrologic balance standard exists. This is an important distinction because CHIAs are cumulative assessments performed before issuing any coal mining permit, and thus it is reasonable that they would look to “long term or permanent” effects on the hydrologic balance. West Virginia's definition of “material damage to the hydrologic balance,” however, does not apply in other places within the regulations. Conversely, contrary to the assertions of this commenter, the way this proposal is drafted, the requirement that impacts must be “long-term or permanent” would be applied for all iterations of “material damage to the hydrologic balance.” Therefore, as discussed above, this would make Montana's regulations inconsistent with the Federal regulations.

Industry Comment 3: Commenters stated that the removal of language from section 82-4-222(1)(m) removes an implication that the issuance of a permit under MSUMRA requires input from some agency other than the MDEQ and, they opined that, as proposed, this section closely tracks the Federal regulations at 30 CFR 780.21(f). They also added that nothing in the proposed language compels MDEQ to issue permits absent the required information.

OSMRE Response: Please see Section III(D) to see OSMRE's findings about baseline hydrologic information. OSMRE disagrees with this commenter's statement that Montana's proposed changes to section 82-4-222(1)(m) remove an implication that the appropriate hydrologic information must be provided by an agency other than MDEQ. No such implication exists. Montana's current language requires that hydrologic information be “made available from an appropriate federal or state agency.” MDEQ is an appropriate State agency.

Industry Comment 4: Commenters stated that, because there is no Federal definition of “material damage to the hydrologic balance,” Montana has broad discretion to define the term. A member of the Montana Legislature made a similar comment.

OSMRE Response: We acknowledge that there is no Federal definition for this term, but any definition proposed by Montana must be in accordance with SMCRA and consistent with the Federal regulations. We have determined that Montana's proposed definition does not meet that standard, even though there is no definition of that term in the Federal regulations. Please see Section III(A) for a more thorough discussion of our analysis on this topic.

Industry Comment 5: Commenters stated that the proposed amendment clarifies the distinction between SMCRA's protection of the hydrologic balance and the CWA's application to point source pollution. They note that, on one hand, the NPDES program is a regulatory scheme that regulates the discharge of surface and stormwater that interacts with areas of mining activity and protects acute water quality issues, whether temporary or permanent, within the permit area. According to the commenters, SMCRA, on the other hand, protects the hydrologic balance of the area, which is an assessment of cumulative impacts from coal mining and its impact outside the permit area. Commenters state that by removing the current language in section 82-4-203(32), which provides that a WQS violation is considered material damage to the hydrologic balance, the proposed Montana regulations will better distinguish the separate roles of SMCRA and the CWA.

OSMRE Response: We are disapproving the proposed section of amendment. Please see Section III(A) for our discussion on the relationship between EPA WQSs and the definition of “material damage of the hydrologic balance.”

Industry Comment 6: Commenters opined that OSMRE should not dictate how a State implements SMCRA in its own program. They stated that OSMRE's role is to determine if a State's regulations are in accordance with and consistent with the provisions of SMCRA and that a State is consistent with SMCRA when it is no less stringent than, meets the requirements of, and include all applicable provisions of SMCRA.

OSMRE Response: This particular proposed amendment was submitted voluntarily by Montana. Under 30 CFR 732.17(b), a State with primacy over its coal regulatory program is required to submit any proposed amendments to its approved State program to OSMRE. OSMRE's role is then to determine, for regulatory program amendments, whether the proposed changes are in accordance with SMCRA and consistent with the Federal regulations as those terms are defined in 30 CFR 730.5. For more information on a State's and OSMRE's procedures and criteria for approving amendments, please refer to 30 CFR 732.17.

Industry Comment 7: After OSMRE sent a letter to MDEQ on March 28, 2024, an industry commenter noted that it disagreed with OSMRE's preliminary finding that Montana's proposed use of “long-term or permanent adverse impacts” did not meet the Federal standards. The commenter explained that, because there is no definition of the term in Federal regulations, Montana's definition cannot “run afoul” of Federal law and that OSMRE should not evaluate Montana's definition of “material damage to the hydrologic balance” until OSMRE either promulgates a definition of the term in the Federal regulations or Congress defines it. Further, the industry commenter alleged that OSMRE is using an improvised definition in its evaluation of Montana's proposed definition of “material damage to the hydrologic balance.”

OSMRE Response: As explained in Section III(A) and in response to Industry Comment 4, we do not agree with the contention that, because there is no current definition of “material damage to the hydrologic balance” in the Federal regulations, Montana's definition cannot “run afoul” Federal standards.

Industry Comment 8: The same industry commenter stated that the proposed amendment's use of the word “significant” is in line with the use of “significant” for the Federal definitions of material damage in the context of alluvial valley floors and subsidence.

OSMRE Response: Please see the response to State Representative Comment 2.

Industry Comment 9: The same industry commenter did not agree with OSMRE's concern that a “short-term high pollution event” could evade enforcement because of Montana's proposed definition. The commenter stated that a “short-term high pollution event” would still meet Montana's proposed definition of “material damage to the hydrologic balance” because it would cause long-term or permanent damage and that such events would be subject to enforcement under Montana's coal regulations and other Montana laws.

OSMRE Response: We disagree with the contention that a short-term pollution event like the one mentioned in our May 28, 2024, letter to MDEQ would necessarily be considered “long-term or permanent” damage under the plain language of the proposed definition of “material damage to the hydrologic balance” or that the fact that the proposed definition omits a less-than-long term or permanent event should not matter because it would be covered under other Montana coal regulations and laws. Please see Section III(A) for our discussion as to why the proposed definition is not in accordance with SMCRA or consistent with the Federal regulations.

Industry Comment 10: Industry commenters disagreed with OSMRE's preliminary finding in its March 28, 2024, letter to MDEQ, that Montana's use of “long-term or permanent” is too vague. The commenters stated that Montana's definition provides more context than the Federal regulations, which are “silent” on the issue, and that Montana added the requirement of “long-term or permanent exceedance of water quality standards” to its definition of “material damage to the hydrologic balance” to account for situations where water exceeded water quality standards due to historic mining or environmental conditions not caused by the permittee.

OSMRE Response: As stated above, the Federal regulations are not “silent” on the issue of “material damage to the hydrologic balance.” While there is no single, consolidated Federal definition of the term, the Federal regulations, and decades of experience, provide sufficient context into what the minimum standard for “material damage to the hydrologic balance” should be. For further discussion of this issue, please see Section III(A).

Industry Comment 11: Industry commenters stated that Montana's omission of the term “facilities” from its definition of “material damage” with respect to subsidence seems to be a mistake and that there is no basis to deny the entire section due to the omission of a single word. They suggested that the severability clause was a reason not to deny the entire section for the omission of this one word.

OSMRE Response: Please see our discussion of the omission of the word “facilities” in the proposed definition of “material damage” with respect to subsidence in Section III(C). We cannot verify that the omission of this term was a mistake as Montana had not provided any clarification about the omission, and we disagree that the omission of a single word cannot be a basis to deny an entire section. As discussed in Section III(C), the omission of “facilities” from the definition makes the entire definition inconsistent with the Federal regulations, which means that this section cannot be approved, in whole or in part, because of the missing critical term.

Industry Comment 12: Commenters stated that Montana's proposed changes to the hydrologic information section was intended to clarify who can submit the hydrologic information for the permit application. A commenter clarified their understanding that, unlike the Federal regulations at 30 CFR 780.21(c)(2), Montana's current regulations do not allow the permittee to submit the hydrologic information themselves; thus, Montana's proposal deletes the hydrologic information submittal language to align itself with the Federal regulations. The commenter explained that the changes cannot be reasonably construed to allow permit issuance without the gathering of hydrologic information; thus, OSMRE has no basis to disapprove of the proposed changes in this section.

OSMRE Response: We disagree with the commenter's assessment that the changes cannot be reasonably construed to allow permit issuances without gathering hydrologic information. As discussed in Section III(D), we found that the plain meaning of the provision after deletion did effectually allow permit issuance without hydrologic information being submitted to the regulatory authority. We agree that under Montana's current regulations a permittee is not able to submit hydrologic information collected by themselves to MDEQ, which is a standard more stringent than the Federal regulations at 30 CFR 780.21(c)(2).

Industry Comment 13: This commenter stated that the immediate effective date in House Bill 576 was a valid exercise of the State's sovereignty. The commenter stated that OSMRE's regulations at 30 CFR 732.17(g) are contrary to the principles of federalism and violate SMCRA. They also maintain that 30 U.S.C. 1255(a), which states that “no State law or regulation . . . shall be superseded by any provision of' SMCRA or its implementing regulations . . . except insofar as such State law or regulation is inconsistent with the provisions of this act[,]” supports their position. The commenter argues that under SMCRA, a State coal regulation may remain in place until it is found to be inconsistent with SMCRA. In support of this comment, the commenter cites to Bragg v. W.VA. Coal Ass'n, 248 F.3d 275, 295 (4th Cir. 2001), and the Tenth Amendment to the U.S. Constitution.

OSMRE Response: Please see Section III(E) for our discussion on this topic. We do not agree that OSMRE's regulations at 30 CFR 732.17(g) violate SMCRA or that 30 CFR 732.17(g) goes against the principles of federalism. The Supreme Court of the United States found that SMCRA does not violate the Tenth Amendment. Hodel v. Va. Surface Mining and Reclamation Ass'n, 452 U.S. 264 (1981). And 30 U.S.C. 1255 does not allow proposed changes to an approved State program to go into effect before OSMRE reviews those changes to determine whether a State law or regulation is consistent with the provisions of SMCRA. That statute confirms that “[n]o State law or regulation . . . which may become effective thereafter, shall be superseded by any provision of this Act or any regulation issued pursuant thereto, except insofar as such State law or regulation is inconsistent with the provisions of this act. ” 30 U.S.C. 1255(a) (emphasis added). The use of “may” in combination with the exception that changes to a State program must meet SMCRA and Federal regulation requirements demonstrates that SMCRA requires amendments to be approved before being effective.

State Representative Comment 1: A member of the Montana State Legislature commented that that the proposed exception to the “long-term or permanent exceedance of a water quality standard outside a permit area” was intended to protect downstream users, as it would require an applicant to demonstrate that there would be no change to the water quality classification for groundwater or beneficial use.

OSMRE Response: We appreciate being informed of at least one member of the legislature's intent for the change to material damage as it relates to the hydrologic balance; however, we must first review the plain language of the proposed amendment and, as described in Section III(A) above, the language of this portion of the proposed amendment is not in accordance with SMCRA or consistent with the Federal regulations. As such, we have denied the portion of the proposed amendment that would have included this phrase.

State Representative Comment 2: The commenter indicated that the definitions for “material damage with respect to the alluvial valley floor” and “material damage with respect to subsidence” mirror the Federal definitions at 30 CFR 701.5.

OSMRE Response: We agree with the comment that the proposed changes to “material damage” in the context of alluvial valley floors substantively mirrors the Federal definition at 30 CFR 701.5; thus, we have approved that portion of the proposed amendment. Please see Section III(B) for OSMRE's discussion on the topic. We disagree with the commenter that the proposed changes to “material damage” in the context of subsidence mirror the Federal definition at § 701.5 because it does not include the “facilities.” Therefore, we have disapproved that definition. Please see Section III(C) for OSMRE's discussion on this topic.

State Representative Comment 3: Similar to Industry Comment 3, the commenter explains that the current language from section 82-4-222(1)(m) that Montana proposes to remove had incorrectly implied that MDEQ must rely on baseline hydrologic information from another State or Federal agency. The commenter notes that, in practice, MDEQ is solely responsible for gathering such information and including it in its analysis. The commenter considered this change to be entirely clerical and not altering MDEQ's current or future practice.

OSMRE Response: The commenter is incorrect that MDEQ is the only agency responsible for gathering hydrologic information for a permit. Current, section 82-4-222(1)(m) requires that hydrologic information be “made available from an appropriate federal or state agency.” This language is substantively identical to the Federal requirements at 30 CFR 780.21(c). While we recognize that MDEQ is an appropriate State agency to gather baseline hydrologic information and may be the primary agency to do so, there is nothing in SMCRA or the Federal agency to suggest that MDEQ is the only appropriate State or Federal agency to do so.

State Representative Comment 4: The commenter quoted a portion of the EPA's comment (Administrative Record No. MT-042-07) stating that HB 576 does not appear to impact or alter MDEQ's obligations under the CWA to illustrate that the proposed changes to “material damage to the hydrologic balance” would still maintain water quality at the same level as pre-mining conditions.

OSMRE Response: OSMRE notes that the commenter misinterprets the EPA's comment. As explained below in the discussion of EPA's comments, while the EPA did find that the proposed amendment would not impact or alter MDEQ's obligations under the CWA, the EPA also stated that “[the revisions] likely alter substantive compliance requirements for surface and underground mines in the context of mine permitting in a way that could result in negative impacts on water quality.” (Administrative Record No. MT-042-07). The EPA's comments only offer confirmation that MDEQ's CWA obligations would still be required to be met under the proposed revisions, but that is not dispositive when determining whether the proposed revisions are in accordance with SMCRA and consistent with the Federal SMCRA implementing regulations.

State Representative Comment 5: The commenter expressed concern that OSMRE held a public hearing on the proposed amendment. The commenter asserted that, in the spirit of SMCRA's cooperative federalism principles, OSMRE should have instead relied on the public record created during the legislative session to pass HB 576.

OSMRE Response: OSMRE disagrees with this comment. The Federal regulations at 30 CFR 732.17(h)(5) specify that OSMRE may hold public hearings for State program amendments and states that comments provided at a public hearing will be considered in OSMRE's decision on a program amendment. Thus, OSMRE's actions were consistent with Federal law.

MDEQ Comments. On April 26, 2024, MDEQ sent us a response to our March 28, 2024, letter. (Administrative Record No. MT-042-35). MDEQ stated that because the proposed amendment was the result of legislative action, MDEQ is unable to submit any revision to address the concerns OSMRE identified and that MDEQ understood that OSMRE intends to proceed, as necessary, with the publication of its decision in the Federal Register .

MDEQ commented that it found OSMRE's proposed finding about Montana's proposed definition of “material damage to the hydrologic balance” to be inconsistent with OSMRE's application of the term in the Federal program. MDEQ specifically points to a 2016 CHIA for the Peabody Western Coal Company—Kayenta Mining Complex, and OSMRE's statement within the CHIA that “[t]he term `material damage to the hydrologic balance' may have various interpretations” and that “[t]he Permanent Program Regulations do not define `material damage' but do define `hydrologic balance' as `the relationship between the * * * water inflow to, water outflow from, and water storage in a hydrologic unit, such as a drainage basin, aquifer, soil zone, lake, or reservoir' (30 CFR 701.5).”

MDEQ states that OSMRE has not produced additional national guidance on CHIAs and the definition of “material damage to the hydrologic balance” since this draft document. They state that the definition of “material damage to the hydrologic balance” remains at the discretion of the regulatory authority, and OSMRE has created site specific criteria in their CHIAs.

Finally, MDEQ states that “material damage to the hydrologic balance” remains undefined in SMCRA since the Congressional disapproval of the Stream Protection Rule in 2017. MDEQ states further that, because of that lack of a definition, OSMRE's rejection of a more stringent program amendment request from MDEQ is contrary to OSMRE's actual implementation of this issue.

OSMRE Response: OSMRE disagrees with MDEQ's assertion that our findings on the proposed definition of “material damage to the hydrologic balance” are inconsistent with our use of the term in the Federal program. MDEQ is correct that OSMRE has not published a definition of the term in the Federal regulations and that OSMRE has stated that the term does not have fixed criteria since “material damage will vary from area to area and operation to operation,” ( see 48 FR 43973, Sept. 26, 1983). The lack of a definition for “material damage to the hydrologic balance” in the Federal regulations, however, does not mean that any definition will be acceptable. SMCRA and the Federal regulations require that a State program must have rules and regulations that are in accordance with SMCRA and consistent with the Federal regulations. 30 CFR 730.5. This analysis requires a comprehensive comparison between the entire State and Federal programs. While the Federal regulations do not have an official definition for “material damage to the hydrologic balance,” that term is used multiple times throughout the Federal regulations. Where the term appears in the Federal regulations and how it affects operations are guidelines for our assessment of the Montana program's proposed definition. Please see Section III(A) to see our detailed assessment of this issue.

Montana Department of Justice (MDOJ). On May 10, 2024, MDOJ sent a letter to OSMRE in response to our March 28, 2024, letter to MDEQ. MDOJ offered their support for comments provided by MDEQ and industry in response to our March 28, 2024, letter. (Administrative No. MT-042-35 and MT-042-36.). Next, MDOJ urged OSMRE to reconsider its preliminary analysis and to promptly approve the MT-042-FOR. MDOJ pointed specifically to the discussion in comments submitted by industry that alleged that OSMRE's concerns with the Montana amendment ignore the text of governing Federal statutory and regulatory provisions and that OSMRE's decision deviates from prior OSMRE decisions. Finally, MDOJ commented that OSMRE must give effect to the bill's severability clause by approving the remaining sections with which OSMRE did not find any issues.

OSMRE Response: For our discussion on the MDEQ letter and industry comments, please see our respective responses above. As for the severability clause, OSMRE structured its approval and disapproval of the provisions in the proposed amendment to accommodate the severability clause and allow individual sections that are found to be consistent with SMCRA and as effective as the Federal regulations to be effective despite the disapproval of other proposed sections.

On June 6, 2023, under 30 CFR 732.17(h)(11)(i) and section 503(b) of SMCRA, we requested comments on the amendment from various Federal agencies that have an actual or potential interest in the Montana program (Administrative Record No. MT-042-05). On August 28, 2023, following the extension of the comment period for a further 60 days, we sent an additional request for comments on the amendment (Administrative Record No. MT-042-13). We did not receive any comments.

Under 30 CFR 732.17(h)(11)(ii), we are required to get a written concurrence from EPA for those provisions of the program amendment that relate to air or water quality standards issued under the authority of the CWA (33 U.S.C. 1251 et seq. ) or the Clean Air Act (42 U.S.C. 7401 et seq. ). On June 6, 2023, under 30 CFR 732.17(h)(11)(i), we requested comments from the EPA on the amendment (Administrative Record No. MT-042-05). The EPA submitted its comment to us on August 1, 2023. (Administrative Record No. MT-042-07). On August 28, 2023, following the extension of the comment period for a further 60 days, we sent another request for comments on the Amendment (Administrative Record No. MT-042-13). No additional EPA comments were submitted in response to the extended comment period.

In its comment, the EPA interpreted Montana's proposed changes to MCA sec. 82-4-203(32)(a)(ii), “material damage to the hydrologic balance,” to mean a violation of a WQS alone is no longer “material damage.” Instead, any material damage would only be a long-term or permanent exceedances of a WQS.

Despite the change in definition, the EPA found that they did not have the authority and duty to approve or disapprove the change, as it is not deemed a new or revised WQS under section 303(c)(3) of the CWA. But the EPA did comment that, while the proposed changes are likely not WQS, they do likely alter substantive compliance requirements for coal mines in a way that could result in negative impacts on water quality.

The EPA ended its comment by stating that the proposed changes would likely not impact or alter MDEQ's obligations under the CWA. EPA-approved WQS would remain in effect in Montana, despite the language deletion here, and MDEQ must continue to implement those WQS programs despite the deletion.

OSMRE Response: We appreciate EPAs comments and agree that the proposed changes would likely substantively and negatively alter compliance requirements and water quality, but that MDEQ would still be obliged to comply with all CWA requirements because section 702 of SMCRA provides that nothing in SMCRA can be construed as superseding, amending, modifying, or repealing Federal laws related to water quality. 30 U.S.C. 1292(3). For the reasons explained in our response in Section III(A), we are denying Montana's proposed change to its current definition of “material damage to the hydrologic balance.”

Under 30 CFR 732.17(h)(4), we are required to request comments from the SHPO and ACHP on amendments that may have an effect on historic properties. On June 6, 2023, we requested comments on the amendment (Administrative Record No. MT-042-03, and MT-042-04). On August 28, 2023, following the extension of the comment period for a further 60 days, we sent another request for comments on the amendment (Administrative Record No. MT-042-11, and MT-042-12). The Montana SHPO responded on June 15, 2023, to say they have no comment and the ACHP did not comment (Administrative Record No. MT-042-06).

Based on the above findings, we are approving in part and disapproving in part Montana's proposed amendment (MT-042-FOR) sent to us on June 1, 2023 (Administrative Record No. MT-042-01).

To implement this decision, we are amending the Federal regulations, at 30 CFR part 926, that codify decisions concerning the Montana program. In accordance with the Administrative Procedure Act, this rule will take effect 30 days after the date of publication. Section 503(a) of SMCRA requires that the State's program demonstrate that the State has the capability of carrying out the provisions of the Act and meeting its purposes. SMCRA requires that a State program must have rules and regulations that are in accordance with SMCRA and consistent with Federal regulations.

This rule would not effect a taking of private property or otherwise have taking implications that would result in public property being taken for government use without just compensation under the law. Therefore, a takings implication assessment is not required. This determination is based on an analysis of the corresponding Federal regulations.

Executive Order 12866, as amended by Executive Order 14094, provides that the Office of Information and Regulatory Affairs in the Office of Management and Budget (OMB) will review all significant rules. Pursuant to OMB guidance, dated October 12, 1993 (OMB Memo M-94-3), the approval of State program and/or plan amendments is exempted from OMB review under Executive Order 12866. Executive Order 13563, which reaffirms and supplements Executive Order 12866, retains this exemption.

State program and/or plan amendments are not regulatory actions under Executive Order 13771 because they are exempt from review under Executive Order 12866.

The Department of the Interior has reviewed this rule as required by Section 3 of Executive Order 12988. The Department determined that this Federal Register document meets the criteria of section 3 of Executive Order 12988, which is intended to ensure that the agency review proposed regulations to eliminate drafting errors and ambiguity; that the agency write its regulations to minimize litigation; and that the agency's regulations provide a clear legal standard for affected conduct rather than a general standard, and promote simplification and burden reduction. Because Section 3 focuses on the quality of Federal regulations, the Department limited its review under this Executive Order to the quality of this Federal Register document and to changes to the Federal regulations. The review under this Executive Order did not extend to the language of the State regulatory program amendment that Montana drafted.

This rule has potential Federalism implications, as defined under section 1(a) of Executive Order 13132. Executive Order 13132 directs agencies to “grant the States the maximum administrative discretion possible” with respect to Federal statutes and regulations administered by the States. Montana, through its approved regulatory program, implements and administers SMCRA and its implementing regulations at the State level. This rule approves an amendment to the Montana program submitted and drafted by the State, and thus is consistent with the direction to provide maximum administrative discretion to States.

The Department of the Interior strives to strengthen its government-to-government relationship with Tribes through a commitment to consultation with Tribes and recognition of their right to self-governance and tribal sovereignty. We have evaluated this rule under the Department's consultation policy and under the criteria in Executive Order 13175 and have determined that it has no substantial direct effects on federally recognized Tribes or on the distribution of power and responsibilities between the Federal government and Tribes. Therefore, consultation under the Department's tribal consultation policy is not required. The basis for this determination is that our decision is on the Montana State program that does not include the regulation of Indian lands or regulation of activities on Indian lands as that term is defined in 30 U.S.C. 1291(9). Indian lands are regulated independently under the applicable, approved Federal Indian lands program, with the exception of the Crow Tribe's “Ceded Strip” in Montana, which represents a unique and special situation because under the terms of the MOU, the Department of the Interior and Montana agreed to coordinate the administration of applicable surface mining requirements in the Crow Ceded Strip. However, as we are disapproving the majority of the substantive changes made by this proposed amendment, our action will not have any significant effects on the regulation of surface coal mining operations within the Crow Ceded Strip. The Department's consultation policy also acknowledges that our rules may have Tribal implications where the State proposing the amendment encompasses ancestral lands in areas with mineable coal. We are currently working to identify and engage appropriate Tribal stakeholders to devise a constructive approach for consulting on these amendments.

Executive Order 13211 requires agencies to prepare a Statement of Energy Effects for a rulemaking that is (1) considered significant under Executive Order 12866, and (2) likely to have a significant adverse effect on the supply, distribution, or use of energy. Because this rule is exempt from review under Executive Order 12866 and is not a significant energy action under the definition in Executive Order 13211, a statement of energy effects is not required.

This rule is not subject to Executive Order 13045 because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.

Consistent with sections 501(a) and 702(d) of SMCRA (30 U.S.C. 1251(a) and 1292(d), respectively) and the U.S. Department of the Interior Departmental Manual, part 516, section 13.5(A), a State program amendment is a not major Federal action within the meaning of section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4332(2)(C).

Section 12(d) of the National Technology Transfer and Advancement Act (15 U.S.C. 3701 et seq. ) directs OSMRE to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. (OMB Circular A-119 at p. 14). This action is not subject to the requirements of section 12(d) of the NTTAA because application of those requirements would be inconsistent with SMCRA.

This rule does not include requests and requirements of an individual, partnership, or corporation to obtain information and report it to a Federal agency. As this rule does not contain information collection requirements, a submission to OMB under the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ) is not required.

This rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The State submittal, which is the subject of this rule, is based on corresponding Federal regulations for which an economic analysis was prepared, and certification made that such regulations would not have a significant economic effect upon a substantial number of small entities. In making the determination as to whether this rule would have a significant economic impact, the Department relied upon the data and assumptions for the corresponding Federal regulations.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule: (a) does not have an annual effect on the economy of $100 million; (b) will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; and (c) does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This determination is based on an analysis of the corresponding Federal regulations, which were determined not to constitute a major rule.

This rule does not impose an unfunded mandate on State, local, or Tribal governments, or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local, or Tribal governments or the private sector. This determination is based on an analysis of the corresponding Federal regulations, which were determined not to impose an unfunded mandate. Therefore, a statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq. ) is not required.

For the reasons set out in the preamble, 30 CFR part 926 is amended as set forth below:

This document and additional information concerning OFAC are available from OFAC's website ( https://ofac.treasury.gov/ ).

Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, 104 Stat. 890; 28 U.S.C. 2461 note), as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74, 129 Stat. 599, 28 U.S.C. 2461 note) (the FCPIA Act), requires each federal agency with statutory authority to assess civil monetary penalties (CMPs) to adjust CMPs annually for inflation according to a formula described in section 5 of the FCPIA Act. One purpose of the FCPIA Act is to ensure that CMPs continue to maintain their deterrent effect through periodic cost-of-living-based adjustments.

OFAC has adjusted its CMPs ten times since the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 went into effect on November 2, 2015: an initial catch-up adjustment on August 1, 2016 (81 FR 43070, July 1, 2016); an additional initial catch-up adjustment related to CMPs for failure to comply with a requirement to furnish information, the late filing of a required report, and failure to maintain records (“recordkeeping CMPs”) that were inadvertently omitted from the August 1, 2016 initial catch-up adjustment on October 5, 2020 (85 FR 54911, September 3, 2020); and annual adjustments on February 10, 2017 (82 FR 10434, February 10, 2017); March 19, 2018 (83 FR 11876, March 19, 2018); June 14, 2019 (84 FR 27714, June 14, 2019); April 9, 2020 (85 FR 19884, April 9, 2020); March 17, 2021 (86 FR 14534, March 17, 2021); February 9, 2022 (87 FR 7369, February 9, 2022); January 13, 2023 (88 FR 2229, January 13, 2023); and January 12, 2024 (89 FR 2139, January 12, 2024).

The method of calculating CMP adjustments applied in this final rule is required by the FCPIA Act. Under the FCPIA Act and the Office of Management and Budget guidance required by the FCPIA Act, annual inflation adjustments subsequent to the initial catch-up adjustment are to be based on the percent change between the Consumer Price Index for all Urban Consumers (“CPI-U”) for the October preceding the date of the adjustment and the prior year's October CPI-U. As set forth in Office of Management and Budget Memorandum M-25-02 of December 17, 2024, the adjustment multiplier for 2024 is 1.02598. In order to complete the 2025 annual adjustment, each current CMP is multiplied by the 2025 adjustment multiplier. Under the FCPIA Act, any increase in CMP must be rounded to the nearest multiple of $1.

OFAC imposes CMPs pursuant to the penalty authority in five statutes: the Trading With the Enemy Act (50 U.S.C. 4301-4341, at 4315) (TWEA); the International Emergency Economic Powers Act (50 U.S.C. 1701-1706, at 1705) (IEEPA); the Antiterrorism and Effective Death Penalty Act of 1996 (18 U.S.C. 2339B) (AEDPA); the Foreign Narcotics Kingpin Designation Act (21 U.S.C. 1901-1908, at 1906) (FNKDA); and the Clean Diamond Trade Act (19 U.S.C. 3901-3913, at 3907) (CDTA).

The table below summarizes the existing and new maximum CMP amounts for each statute.

In addition to updating these maximum CMP amounts, OFAC is also updating two references to one-half the IEEPA maximum CMP from $184,068 to $188,850, and is adjusting the recordkeeping CMP amounts found in OFAC's Economic Sanctions Enforcement Guidelines in appendix A to 31 CFR part 501. The table below summarizes the existing and new maximum CMP amounts for OFAC's recordkeeping CMPs.

The FCPIA Act expressly exempts this final rule from the notice and comment requirements of the Administrative Procedure Act by directing agencies to adjust CMPs for inflation “notwithstanding section 553 of title 5, United States Code” (Pub. L. 114-74, 129 Stat. 599; 28 U.S.C. 2461 note). As such, this final rule is being issued without prior public notice or opportunity for public comment, with an effective date of January 15, 2025.

Because no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) do not apply.

This rule is not a significant regulatory action as defined in section 3.f. of Executive Order 12866 of September 30, 1993, “Regulatory Planning and Review” (58 FR 51735, October 4, 1993), as amended.

The Paperwork Reduction Act does not apply because this rule does not impose information collection requirements that would require the approval of the Office of Management and Budget under 44 U.S.C. 3501 et seq.

For the reasons set forth in the preamble, OFAC amends 31 CFR chapter V as follows:

The Federal Civil Penalties Inflation Adjustment Act of 1990, Public Law 101-410, 104 Stat. 890 (28 U.S.C. 2461, note), as amended by the Debt Collection Improvement Act of 1996, Public Law 104-134, April 26, 1996, and further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act), Public Law 114-74, November 2, 2015, required agencies to annually adjust the level of CMPs for inflation to improve their effectiveness and maintain their deterrent effect. The 2015 Act required that not later than July 1, 2016, and not later than January 15 of every year thereafter, the head of each agency must adjust each CMP within its jurisdiction by the inflation adjustment described in the 2015 Act. The inflation adjustment is determined by increasing the maximum CMP or the range of minimum and maximum CMPs, as applicable, for each CMP by the cost-of-living adjustment, rounded to the nearest multiple of $1. The cost-of-living adjustment is the percentage (if any) for each CMP by which the Consumer Price Index (CPI) for the month of October preceding the date of the adjustment, exceeds the CPI for the month of October in the previous calendar year.

The initial catch up adjustments for inflation to the DoD's CMPs were published as an interim final rule in the Federal Register on May 26, 2016 (81 FR 33389-33391), and became effective on that date. The interim final rule was published as a final rule without change on September 12, 2016 (81 FR 62629-62631), effective that date. The revised methodology for agencies for 2017 and each year thereafter provides for the improvement of the effectiveness of CMPs and to maintain their deterrent effect. The Department of Defense is adjusting the level of all civil monetary penalties under its jurisdiction by the Office of Management and Budget (OMB) directed cost-of-living adjustment multiplier for 2025 of 1.02598 prescribed in OMB Memorandum M-25-02, “Implementation of Penalty Inflation Adjustments for 2025, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” dated December 19, 2024. The DoD's 2025 adjustments for inflation to CMPs apply only to those CMPs, including those whose associated violation predated such adjustment, which are assessed by the DoD after the effective date of the new CMP level.

Pursuant to 5 U.S.C. 553(b)B, there is good cause to issue this rule without prior public notice or opportunity for public comment because it would be impracticable and unnecessary. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 2461) requires agencies, effective 2017, to make annual adjustments for inflation to CMPs notwithstanding 5 U.S.C. 553. Additionally, the methodology used, effective 2017, for adjusting CMPs for inflation is established in statute, with no discretion provided to agencies regarding the substance of the adjustments for inflation to CMPs. The DoD is charged only with performing ministerial computations to determine the dollar amount of adjustments for inflation to CMPs. Accordingly, prior public notice and an opportunity to comment are not required for this rule. For the same reasons, there is good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effective date.

Further, there are no significant costs associated with the regulatory revisions that would impose any mandates on the DoD, Federal, State or local governments, or the private sector. Accordingly, prior public notice and an opportunity for public comment are not required for this rule. The benefit of this rule is the DoD anticipates that civil monetary penalty collections may increase in the future due to new penalty authorities and other changes in this rule. However, it is difficult to accurately predict the extent of any increase, if any, due to a variety of factors, such as budget and staff resources, the number and quality of civil penalty referrals or leads, and the length of time needed to investigate and resolve a case.

Executive Orders 12866 (as amended by Executive Order 14094) 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; distribution of impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated not significant, under section 3(f) of Executive Order 12866, as amended by E.O. 14094.

The Congressional Review Act, 5 U.S.C. 801 et seq., generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. A major rule may take effect no earlier than 60 calendar days after Congress receives the rule report or the rule is published in the Federal Register , whichever is later. This rule is not a major rule, as defined by 5 U.S.C. 804(2).

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532) requires agencies to assess anticipated costs and benefits before issuing any rule the mandates of which require spending in any year of $100 million in 1995 dollars, updated annually for inflation. This rule will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs.

The Under Secretary of Defense (Comptroller) certified that this rule is not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. Therefore, the Regulatory Flexibility Act, as amended, does not require DoD to prepare a regulatory flexibility analysis.

The Paperwork Reduction Act was enacted to minimize the paperwork burden for individuals; small businesses; educational and nonprofit institutions; Federal contractors; State, local and Tribal governments; and other persons resulting from the collection of information by or for the Federal Government. The Act requires agencies obtain approval from the OMB before using identical questions to collect information from ten or more persons. This rule does not impose reporting or recordkeeping requirements on the public.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has federalism implications. This final rule will not have a substantial effect on State and local governments.

It has been determined that this rule will not have a substantial effect on Indian Tribal governments. This rule does not impose substantial direct compliance costs on one or more Indian Tribes, preempt tribal law, or effect the distribution of power and responsibilities between the Federal Government and Indian Tribes.

Accordingly, 32 CFR part 269 is amended as follows:

In this final rule, the Department uses the term “income-contingent repayment plans” to include the original Income-Contingent Repayment (ICR) plan established by the Department in 1994 as well as the Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and the Saving on a Valuable Education (SAVE) plans.

Implementation Date of These Regulations: These regulations are effective on July 1, 2026. Section 482(c) of the HEA requires that regulations affecting programs under title IV of the HEA be published in final form by November 1, prior to the start of the award year (July 1) to which they apply. However, that section also permits the Secretary to designate any regulation as one that an entity subject to the regulations may choose to implement earlier, as well as the conditions for early implementation.

As described in the interim final rule (IFR) (89 FR 90221), the Secretary exercised the authority under section 482(c) of the HEA to designate the regulatory changes to 34 CFR part 685 included in the IFR (and reaffirmed in this document) for early implementation on December 16, 2024, for the reasons set forth in the IFR and Background and Need for Regulatory Action sections of this document.

The regulations in the November 15, 2024, interim final rule enact a time-limited fix to make certain the Department meets its obligations under section 455(d)(1) of the HEA. That section requires the Secretary of Education (Secretary) to offer Federal Direct Loan borrowers a variety of student loan repayment plans, including an “income-contingent repayment plan,” under which a borrower makes payments “based on the borrower's income” for “an extended period of time prescribed by the Secretary, not to exceed 25 years.”  1 On November 15, 2024, the Department published an IFR to satisfy the Department's statutory obligation under the HEA to offer borrowers an income-contingent repayment plan. 2 This final rule and the IFR that preceded it allow the Department to comply with this requirement. The rule titled “Improving Income Driven Repayment for the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program” that took effect on July 1, 2024 (income-driven repayment [IDR] final rule), limited new enrollments in the PAYE and ICR plans for student borrowers so that they would have one clear option under this authority—the Saving on a Valuable Education (SAVE) plan (88 FR 43820). However, legal challenges to the SAVE plan resulted in an injunction pending appeal from the Eighth Circuit that prevents the Department from implementing significant aspects of the SAVE plan. 3 The Department cannot immediately execute the operational work needed to conform the SAVE plan to the court's Eighth Circuit's injunction pending appeal, so we have placed borrowers who had enrolled in the SAVE plan in a forbearance to avoid violating that injunction. With SAVE not available and other ICR plans closed to new enrollments, the Department was therefore not in compliance with the statutory requirement to offer an income-contingent repayment plan to borrowers.

The IFR announced the reopening of the PAYE and ICR plans to new enrollments until July 1, 2027. This reopening allows the Department to offer borrowers an income-contingent repayment option as required under the HEA.

This final rule adopts without change the provisions in the IFR, which—

• Adjust the date after which borrowers cannot begin to repay a loan under the PAYE plan unless they are already enrolled in the plan as provided in § 685.209(c)(4)(iv) from July 1, 2024, to July 1, 2027.

• Revise the date after which borrowers cannot begin to repay a loan under the ICR plan unless they are already enrolled in that plan or have a consolidation loan that repaid a Parent PLUS loan as provided in § 685.209(c)(5)(i)(B) from July 1, 2024, to July 1, 2027.

As further detailed in the Regulatory Impact Analysis (RIA), this final rule does not create significant budgetary costs for the Department. For existing borrowers, the Department already assumes in our budget baseline that borrowers who would receive more benefit from being enrolled in PAYE or ICR rather than SAVE over the long term are already in those plans. The budget baseline also assumes that borrowers seeking Public Service Loan Forgiveness (PSLF) would continue to make payments. So, a borrower who leaves SAVE to join PAYE or ICR so they can qualify for forgiveness under PSLF does not generate additional costs. The final rule provides some non-monetary benefits to the Department by allowing it to comply with requirements in the HEA. For borrowers, the final rule provides benefits to those who now enroll in PAYE or ICR and make payments that allow them to reach forgiveness sooner than they would by staying in forbearance. The Department anticipates these benefits would be most likely to occur for borrowers seeking PSLF due to the shorter number of required payments before receiving forgiveness.

Section 455(d)(1) of the HEA directs the Secretary to offer borrowers a range of loan repayment plans, including an income-contingent repayment plan. The Secretary first met this requirement by issuing final regulations for the original ICR plan in 1994, 4 and then expanded the options available to borrowers under this authority with the creation of PAYE and REPAYE as income-contingent repayment plans in 2012 and 2015, respectively. 5 On July 10, 2023, the Department published the IDR final rule amending the terms of REPAYE and renaming it the SAVE plan. 6 Among other changes, that rule prevented student borrowers from enrolling in the PAYE or ICR plans after July 1, 2024, if they were not already enrolled in those plans or if they were a parent PLUS borrower with a consolidation loan looking to enroll in the ICR plan. The Department explained this change on the grounds that the SAVE plan was the best option for most borrowers. Because the SAVE plan would be available to all student borrowers, the Department would fulfill its obligations under Sec. 455(d)(1) of the HEA to offer an income-contingent repayment plan.

The changes made in the IDR final rule were challenged in Federal court following publication. On August 9, 2024, the Eighth Circuit issued an injunction pending appeal that, among other things, enjoins changes in loan repayment terms that would: increase the amount of income protected from payments; decrease the share of income borrowers pay on undergraduate loans; and cease charging monthly interest that is not covered by a borrower's payment. 7

The Department is undertaking efforts to implement a version of the SAVE plan compliant with the Eighth Circuit injunction. However, until that work is complete, the regulatory limitations affecting access to older plans meant that the Department was not complying with the HEA requirement to offer borrowers an income-contingent repayment plan.

The IFR and this final rule address this problem through a time-limited reopening of the PAYE and ICR plans to new enrollments. Under the IFR and this final rule, borrowers may select these plans until July 1, 2027. As explained in the IFR, we chose this date to also allow time for the Department to offer an income-contingent repayment plan that is compliant with the Eighth Circuit's injunction pending appeal and to issue any new regulations that may be needed.

In response to our invitation in the IFR, 107 parties submitted comments on the IFR. In this preamble, we respond to those comments, which we have grouped by subject. Generally, we do not address technical or other minor changes.

Analysis of Comments and Changes: An analysis of the public comments and of changes since publication of the IFR follows.

Comments: Several commenters appreciated that the Department re-opened the PAYE and ICR plans to borrowers. One commenter, a borrower who is currently affected by the litigation putting the SAVE plan on hold, expressed the view that reinstitution of PAYE is a critically necessary and sensible step. This commenter noted borrowers have made innumerable financial and other decisions that were dependent on the continued availability of PAYE and PSLF. There are specific terms to the PAYE and SAVE programs that make the availability of at least one of them crucial for households like the commenter's. The commenter also urged the Department to proceed expeditiously with processing applications for the PAYE and ICR plans as the current state of uncertainty around student loan repayment imposes a substantial burden on borrowers. Another commenter expressed the hope that the Department would process ICR and PAYE applications within three months of receiving the application.

Another commenter stated that reopening more income-contingent repayment plans would not only make for a better repayment system for most borrowers, but it would improve the fairness and accuracy of loan repayments. This commenter stated that the current repayment option has proved inaccurate when considering those who are primarily affected by student loan debt. By implementing this new rule, they said many will be able to pay off their debt by affordable means. Implementation of the rule would also result in a fairer consideration of income, global issues like inflation, and overall financial stability when determining monthly payment amounts. Similarly, one commenter suggested that by implementing this new rule the income-contingent repayment options will help borrowers pay off their debts, as well as help improve the fairness and accuracy of loan repayments.

One association agreed that the Department should offer borrowers an income-contingent repayment option during these uncertain times. This association urged the Department to be transparent and clear about all future action on IDR plans. This association also stated that many borrowers would benefit more from the provisions of the 2015 REPAYE plan until the courts issue a final decision on the SAVE plan.

Discussion: We appreciate the commenters' support. The Department does not regulate the processing time for repayment plan applications but will work through pending applications as quickly as possible. The Department is working to build a version of the SAVE plan that complies with the Eighth Circuit's injunction. That plan would generally have the same terms as the 2015 REPAYE rule with respect to the monthly payment amounts for borrowers. At this time, the Department anticipates that such work will not be completed until at least the early fall of 2025.

Changes: None.

Comments: Several commenters noted that they did not find the reopening of PAYE and ICR to be sufficient to address borrower challenges with loan repayment. Many noted that they were enrolled in the REPAYE plan before it converted to SAVE and had no issues with payments under REPAYE. They asked for a restoration of the REPAYE terms or asked to be placed on an alternative payment plan with the same payments that they had previously. Many stated that being placed in forbearance when they had not requested forbearance was unfair.

Discussion: The Department is working to create a version of the SAVE plan that complies with the terms of the Eighth Circuit injunction. This plan will be largely similar to the terms of the REPAYE plan, with the exception that the injunction prevents the Department from providing the interest benefits that were also provided under the REPAYE plan. Both the 2015 REPAYE plan and the SAVE plan provided that a borrower with a subsidized loan would not be charged any unpaid interest for the first three years while enrolled in the plan and that all borrowers with subsidized or unsubsidized loans would only be charged 50 percent of unpaid interest after the first three years enrolled in the plan. Until that revised plan is available, the Department will keep borrowers who remain enrolled in the SAVE plan in forbearance and interest will not accrue.

Changes: None.

Comments: One commenter believed that the regulations in the IFR represented an inadequate solution to a problem that ultimately was created from another inadequate solution: the Department moved people who were enrolled in the REPAYE plan into the SAVE plan and ultimately forced those borrowers into forbearance. This commenter recommended that the Department simply roll back the SAVE regulations and bring back REPAYE. This commenter asserted that by forcing people into SAVE, millions of borrowers will be left with no option but to default shortly otherwise.

Commenters also suggested that REPAYE be reinstated and that borrowers who were previously enrolled in the REPAYE plan automatically be re-enrolled in that plan.

Discussion: We disagree with commenters regarding their proposed changes to IDR plans. As we explained in the 2023 IDR final rule, the changes to the REPAYE plan that resulted in renaming it the SAVE plan made it the best choice for the vast majority of borrowers. And, for borrowers with a non-zero payment enrolled in REPAYE, the new SAVE plan would provide them with more affordable monthly payments. Automatically providing those benefits to borrowers without requiring the borrower to switch plans was simpler and more efficient.

Regarding the requests to restore REPAYE, the Department is working to update the SAVE plan to make it compliant with the Eighth Circuit's injunction. That would result in monthly payment amounts that are similar to those that were available to borrowers enrolled in REPAYE.

Changes: None.

Comments: Several commenters noted the reopening of PAYE would not benefit them because they did not qualify for that plan because their loans were older. Many noted that being ineligible for PAYE meant that the IDR options available to them would result in much higher payments than what they had owed while enrolled in REPAYE. Some commenters called for the Department to expand eligibility for PAYE to older loans that are not currently eligible for that plan or to make Direct Consolidation Loans made after 2007 eligible. Others said that if the Department did not make REPAYE available then it should expand the eligibility for PAYE.

Discussion: In pursuing changes through the IFR the Department considered narrow and time-limited solutions that address the current situation, and the IFR therefore restored the eligibility for other repayment plans to what was in effect prior to the issuance of the IDR final rule. The reopening of PAYE and ICR to borrowers not previously enrolled in those plans fulfills the Department's obligations because a borrower who is ineligible for PAYE could still choose ICR. We recognize that the ICR plan may not result in the lowest payment for many borrowers. However, as explained in the IFR, we are making a time-limited and narrow change to address the Department's compliance with the HEA. Any other changes to PAYE would need to be considered through the full regulatory process.

Changes: None.

Comments: One commenter argued that if the Department cannot provide equivalent repayment options regardless of loan origination date, then the Department should write off those older loans.

Discussion: The commenter did not identify a legal basis for writing off the loans they addressed. The eligibility dates for PAYE were established through a separate rulemaking process conducted in 2012 and a similar process would be needed to adjust the eligibility dates for PAYE. 8

Changes: None.

Comments: Several commenters raised concerns about the inability of borrowers to make progress on PSLF while enrolled in the SAVE forbearance. They called for the Department to make that forbearance eligible for PSLF.

Discussion: As the Department has indicated, we do not have the ability to award credit toward forgiveness on PSLF during the SAVE-related forbearance. The reopening of the PAYE and ICR plans provides a path for some additional PSLF borrowers to make payments that will count toward forgiveness.

Changes: None.

Comments: One group strongly opposed the Department's rule to exclude the “double consolidation loophole” for consolidation loans that repaid a parent PLUS loan from repayment plans and argued that it was contrary to the HEA. They called for the Department to at least extend the deadline after which double consolidated parent PLUS loans could not access repayment plans besides ICR from July 1, 2025.

Discussion: The Department declines to adopt any changes to the treatment of parent PLUS borrowers in this final rule. As noted in the IFR, the Department is focused on a narrow change to make sure that we are meeting our obligation to offer borrowers an income-contingent repayment plan under section 455(d)(1) of the HEA. The Department already met this obligation with respect to Parent PLUS borrowers with a consolidation loan because there was no deadline for them to access the ICR plan. The Eighth Circuit's injunction does not affect the ability of borrowers to consolidate their loans as processing of those applications continues. As such, we see no grounds for extending that deadline.

The Department also declines to change the overall eligibility for consolidated Parent PLUS borrowers. This issue was carefully considered during negotiated rulemaking and the notice and comment process that produced the IDR final rule.

Changes: None.

Under Executive Order 12866, the Office of Management and Budget (OMB) must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive Order and subject to review by OMB. Section 3(f) of Executive Order 12866, as amended by Executive Order 14094, defines a “significant regulatory action” as an action likely to result in a rule that may—

(1) Have an annual effect on the economy of $200 million or more (adjusted every 3 years by the Administrator of the Office of Information and Regulatory Affairs (OIRA) at OMB for changes in gross domestic product), or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, territorial, or Tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impacts of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise legal or policy issues for which centralized review would meaningfully further the President's priorities, or the principles stated in the Executive Order, as specifically authorized in a timely manner by the Administrator of OIRA in each case.

This proposed regulatory action is a significant regulatory action subject to review by OMB under section 3(f)(4) of Executive Order 12866, as amended by Executive Order 14094. However, the proposed annual net budget effect is not larger than $200 million, and as a result this regulatory action is not significant under section 3(f)(1) of Executive Order 12866, as amended by Executive Order 14094. We have assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action and have determined that the benefits will justify the costs.

We have also reviewed these regulations under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—

(1) Propose or adopt regulations only on a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);

(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and considering—among other things and to the extent practicable—the costs of cumulative regulations;

(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);

(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and

(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.

Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” OIRA has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”

We are issuing these final regulations only on a reasoned determination that their benefits would justify their costs. In choosing among alternative regulatory approaches, we selected those approaches that in the Department's estimation best balance the size of the estimated transfer and qualitative benefits and costs. Based on the analysis that follows, the Department believes that these final regulations are consistent with the principles in Executive Order 13563.

We have also determined that this regulatory action will not unduly interfere with State, local, territorial, and Tribal governments in the exercise of their governmental functions.

Consistent with Circular A-4, we compare the final regulations to the current regulations. In this regulatory impact analysis, we discuss the need for regulatory action and summarize key provisions, potential costs and benefits, net budget impacts, and the regulatory alternatives we considered.

Elsewhere in this section under Paperwork Reduction Act, we identify and explain burdens specifically associated with information collection requirements.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), OIRA has found that this rule does not meet the criteria in 5 U.S.C. 804(2).

As discussed earlier in this document, these regulations allow the Department to offer at least one repayment option under the income-contingent repayment authority to borrowers on a time-limited basis while the Department actively works to carry out the operational steps necessary to offer an injunction-compliant version of the SAVE plan.

None of the submitted comments addressed the RIA, and there are no changes from the interim final rule to the final rule.

This rule finalizes an adjustment to the eligibility requirements that allow borrowers to enroll in the ICR and PAYE plans until July 1, 2027, an extension from the prior date of July 1, 2024.

As described further in the Net Budget Impact section of this RIA, the Department does not estimate a significant budgetary impact from this regulation. For existing borrowers, the Department already assumes in our budget baseline that borrowers who would benefit from PAYE or ICR over SAVE in the long term are already enrolled in those plans. As noted in the IDR Final Rule that established the SAVE plan, 9 the Department's budget modeling assigns IDR borrowers to specific plans based on a comparison of the net present value of the payments the borrower makes under the various plans for which they are eligible. For future borrowers, we anticipate continued availability of the SAVE plan and do not evaluate borrowers having the choice of ICR or PAYE against income-based repayment (IBR) in the absence of SAVE. Moreover, the time-limited nature of these changes means that only a future borrower who enters repayment by July 1, 2027, would be able to select the ICR or PAYE plans.

The primary benefit of these changes for the Department is that they allow us to meet our statutory obligation under the HEA to offer payments under the income-contingent repayment authority. There may also be secondary benefits to the Department. One is the possibility that borrowers will choose to enroll in PAYE or ICR instead of becoming delinquent or going into default. Another is a possible reduction in questions or concerns from borrowers, such as those seeking PSLF forgiveness, who are trying to determine how to make qualifying monthly payments.

Borrowers who elect to enroll in the PAYE or ICR plans during this time-limited period may also see benefits, which could include additional certainty about their payment amounts in the face of litigation as well as the ability to make progress toward certain types of forgiveness during the time until the pending cases are resolved. For instance, there are approximately 200,000 borrowers enrolled in the SAVE plan who have certified at least some employment toward PSLF, and who are eligible for the PAYE plan, but who are not eligible for the terms of the IBR plan offered to borrowers who first took out a loan on or after July 1, 2014. If these individuals choose to sign up for PAYE, they would be able to continue making progress toward PSLF by making payments equal to 10 percent of their discretionary income. By contrast, if these borrowers did not have access to PAYE, they would have to choose a version of the IBR plan that sets their payments at 15 percent of discretionary income. For instance, a single borrower who makes $60,000 a year would pay $318 a month when enrolled in PAYE instead of $477 if enrolled in the older IBR plan, a savings of $159. It is possible that there may be other borrowers enrolled in SAVE who would consider a switch on a temporary basis, such as a borrower who would have a $0 payment when enrolled in either PAYE or ICR. There were also just over 800,000 borrowers who switched from either of these plans into SAVE after its creation.

Beyond borrowers currently enrolled in SAVE, there are approximately 13.9 million borrowers who are in repayment and who do not have Parent PLUS loans who are not currently enrolled in an income-contingent repayment plan. 10 While the Department cannot speculate on how many of these borrowers may want to sign up for either ICR or PAYE, depending on their eligibility, the Department is not currently meeting its obligations under the HEA to provide these borrowers with an income-contingent repayment option.

The monthly payment savings described above would be similar for any borrower with older loans that are not eligible for the version of IBR for newer borrowers but who is eligible for PAYE. This could include borrowers who have recently returned to repayment through the Department's Fresh Start Initiative, which allowed borrowers to take certain steps to get their loans out of default. It also could include borrowers with older loans who are now considering IDR plans.

The IFR anticipated administrative costs of $400,000 to reflect the costs of updating systems to allow borrowers to access PAYE and ICR. Those costs have already been incurred and paid as we implemented the IFR. There are no additional administrative costs from this final rule.

The ability to select PAYE or ICR could also create costs in the form of transfers if borrowers are able to select plans that produce lower payments over the borrower's time in repayment. The nature and extent of these costs depends on baseline policy, namely what other plans are available and the terms of those plans. We do not anticipate these costs will be significant, as we discuss in the Net Budget Impact section.

There may be additional costs related to the potential that borrowers may have a harder time choosing among repayment plans. However, we think several factors mitigate this concern. One is that, until a version of the SAVE plan that is compliant with the court injunction is available, the number of options for borrowers to make payments while enrolled in an income-contingent repayment plan will not be appreciably larger. For some borrowers, the ICR plan may be their only option, while the choice for borrowers who are eligible for PAYE and ICR should be simple, because the former generally produces lower payments for most borrowers. Over the long run, the time-limited nature of these changes means that eventually borrowers will go back to choosing the SAVE plan, or the ICR plan if they have a consolidation loan that repaid a Parent PLUS loan. The Department will also continue working to improve and update tools available to help borrowers choose their repayment plan.

As the Department expects the SAVE plan to be available and advantageous to most borrowers in the long run, we do not estimate a significant budget impact from making PAYE and ICR available again to eligible borrowers, including those who had chosen SAVE. As was noted in the IDR final rule that created the SAVE plan (88 FR 43820), the Department's budget modeling assigns IDR borrowers to specific plans based on a comparison of the net present value of the payments the borrower makes under the various plans for which they are eligible. 11 That means the borrowers we estimate would be better off enrolled in PAYE or ICR are already in that plan in the President's Budget for FY 2025 (PB2025) baseline. These borrowers are generally going to be those who have graduate school related debt and those with incomes that are expected to rise to the point where their calculated payment would eventually be equal to or greater than what they would owe while enrolled in the 10-year standard repayment plan. These borrowers might be better off enrolled in PAYE because the terms of PAYE, absent the current injunction, provide for forgiveness after 20 years of payments instead of the 25 years when enrolled in IBR if the loan was borrowed before July 1, 2014, or the 25 years for graduate borrowers enrolled in SAVE. 12 In addition, PAYE caps payments at the amount determined under the 10-year standard plan for borrowers so long as their payments were below that level when they first enrolled. By contrast, there is no payment cap in SAVE. With this assumption that borrowers know their income and family profile trajectories over the life of their loans and choose the plan that offers the lowest lifetime, present-discounted payments, the regulation provides borrowers with an option to enroll in a non-SAVE income-contingent repayment plan that does not have a significant scoreable budgetary impact.

However, there is considerable uncertainty regarding when borrowers who enroll in SAVE may see their payments resume due to ongoing litigation. A lengthy forbearance for borrowers enrolled in the SAVE plan could lead some borrowers to decide to enroll in a different income-contingent repayment plan if that would result in a lower net present value of payments. To evaluate this, the Department has done a sensitivity analysis that includes a nine-month forbearance in FY 2025 that does not count toward IDR forgiveness with the PB2025 baseline SAVE borrowers and compared that to a run with the SAVE or PAYE/ICR choice redone to include that forbearance in the choice decision. As is the case for the baseline choice decision, the plan choice for the sensitivity is based on the net present value (NPV) at a 30 percent discount rate between the cashflow streams for each plan generated for the borrower sample. This is the approach the Department has used for modeling IDR plan choice decisions and considers changes across the entire payment stream. This approach assumes borrowers know their income and family profile trajectories over the life of their loans and choose the plan that offers the lowest lifetime, present-discounted payments. The Department recognizes that borrowers may use different logic when choosing a repayment plan, such as comparing near-term monthly payments, and will not have information about their future incomes and family patterns to match this type of analysis, but we believe any decision logic would result in a relatively small percentage of borrowers choosing to revert to PAYE or ICR long-term. The sensitivity run resulted in a cost of $70.5 million, which represents the effect of the change in payments on the estimated net present value of all future non-administrative Federal costs associated with cohorts of loans.

Consistent with OMB Circular A-4, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of these regulations. These effects occur over the lifetime of the first ten loan cohorts following implementation of this rule. The cashflows are discounted to the year of the origination cohort in the modeling process and then those amounts are discounted at two percent to the present year in this Accounting Statement. This table provides our best estimate of the changes in annualized monetized transfers that result from these final regulations. Expenditures are classified as transfers from the Federal government to affected student loan borrowers.

The Department considered one alternative in issuing this final rule. We considered further adjusting the eligibility dates of PAYE to allow borrowers with older loans to access this plan. Doing so would have been responsive to commenters who noted that they are not currently eligible for PAYE and that their options while enrolled in IBR would result in significant payment increases, and that the entire situation was created by reasons outside of their control. However, we determined such a change would need to be made by following a full rulemaking process.

The Secretary certifies, under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), that this final regulatory action will not have a significant economic impact on a substantial number of “small entities.”  13

These regulations will not have a significant impact on a substantial number of small entities because they are focused on arrangements between individual borrowers and the Department. There are no small entities that are impacted by this rule. This rule does not affect institutions of higher education in any way, and those entities are typically the focus of the Regulatory Flexibility Act analysis for the Department of Education.

We have determined that there are no Paperwork Reduction Act of 1995 implications specifically associated with regulations in this final rule. Borrowers who wish to sign up for PAYE or ICR repayment plans under this Final Rule will be completing the form that already exists for enrollment in other IDR plans, OMB Control Number 1845-0102. To accommodate the changes made to the programs in the IDR final rule and the court challenges, we are separately updating the current IDR form and will be providing a public comment period. We do not estimate any new burden to 1845-0102 from this final rule.

This program is subject to Executive Order 12372 and the regulations in 34 CFR part 79. One of the objectives of the Executive Order is to foster an intergovernmental partnership and a strengthened Federalism. The Executive Order relies on processes developed by State and local governments for coordination and review of proposed Federal financial assistance.

In the IFR we requested comments on whether the proposed regulations would require transmission of information that any other agency or authority of the United States gathers or makes available. Based on the response to the IFR and on our review, we have determined that these final regulations do not require transmission of information that any other agency or authority of the United States gathers or makes available.

Executive Order 13132 requires us to provide meaningful and timely input by State and local elected officials in the development of regulatory policies that have Federalism implications. “Federalism implications” means substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. The regulations do not have Federalism implications.

Accessible Format: On request to the program contact person(s) listed under FOR FURTHER INFORMATION CONTACT , individuals with disabilities can obtain this document in an accessible format. The Department will provide the requestor with an accessible format that may include Rich Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, Braille, large print, audiotape, or compact disc, or another accessible format.

Electronic Access to This Document: The official version of this document is the document published in the Federal Register . You may access the official edition of the Federal Register and the Code of Federal Regulations at www.govinfo.gov. You can view this document, as well as all other Department documents published in the Federal Register , in text or Adobe Portable Document Format (PDF) at this site. To use PDF, you must have Adobe Acrobat Reader, which is available free at the site.

You may also access Department documents published in the Federal Register by using the article search feature at www.federalregister.gov. Specifically, through the advanced search feature at this site, you can limit your search to documents published by the Department.

A copy of this Federal Register notice, the petitions for reconsideration, the letters denying the petitions and the accompanying decision document describing the full basis for the partial denial of these petitions are available in the docket the EPA established under Docket ID No. EPA-HQ-OAR-2023-0072. In addition, an electronic copy of this final action will be available on the internet at https://www.epa.gov/stationary-sources-air-pollution/greenhouse-gas-standards-and-guidelines-fossil-fuel-fired-power.

This final action may be challenged in the United States Court of Appeals for the District of Columbia Circuit. Pursuant to CAA section 307(b)(1), petitions for judicial review of this action must be filed in that court within 60 days after the date notice of this final action is published in the Federal Register .

Section 307(b)(1) of the Clean Air Act (CAA) governs judicial review of final actions by the EPA. This section provides, in part, that “a petition for review of action of the Administrator in promulgating . . . any standard of performance or requirement under section [111] of [the CAA],” or “any other nationally applicable regulations promulgated, or final action taken, by the Administrator under [the CAA] may be filed only in the United States Court of Appeals for the District of Columbia.” This final action is “nationally applicable” within the meaning of CAA section 307(b)(1) because it denies or partially denies petitions to reconsider the “New Source Performance Standards for Greenhouse Gas Emissions From New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions From Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule,” which is a nationally applicable final action promulgating standards of performance and requirements under section 111 of the CAA. 89 FR 39798 (May 9, 2024) (“Carbon Pollution Standards”). This final action is nationally applicable because the result of this denial or partial denial of the petitions identified herein is that the Carbon Pollution Standards remain in place and undisturbed, and because any judicial order disturbing the EPA's reasoning herein would affect regulated entities throughout the nation.

Thus, any petitions for review of this final action denying or partially denying petitioners' requests for reconsideration must be filed in the United States Court of Appeals for the District of Columbia Circuit by March 17, 2025.

On May 9, 2024, pursuant to CAA section 111 of the CAA, the EPA published a final action titled “New Source Performance Standards for Greenhouse Gas Emissions From New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions From Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule.” 89 FR 39798 (May 9, 2024). Following publication of this final action, the Administrator received petitions for reconsideration of certain aspects of the Carbon Pollution Standards pursuant to the Administrative Procedure Act and Clean Air Act. 1

The EPA carefully reviewed and evaluated each of these issues raised in the petitions for reconsideration based on the CAA section 307(d)(7)(B) criteria for reconsideration, as well as under section 553(e) of the Administrative Procedure Act (APA). For the reasons explained below, the EPA is denying, in part or whole, two petitions for reconsideration; specifically, the objections raised regarding EPA's treatment of grid reliability, financing assertions related to new baseload natural gas-fired electric generation units (EGUs), and the inclusion of an enforceable backstop emissions rate in conjunction with mass-based compliance flexibilities for existing coal-fired steam-generating EGUs.

We discuss each of the petitions we are denying or partially denying and the basis for those denials in the accompanying decision document titled “The EPA's Basis for Denying, in Part or Whole, Petitions for Reconsideration of the New Source Performance Standards for Greenhouse Gas Emissions From New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions From Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule,” available in the rulemaking docket. At this time, the EPA is not addressing other grounds for reconsideration that have been raised by these or other petitioners.

The Environmental Quality Improvement Act, as amended (Pub. L. 91-224, Title II, April 3, 1970; Pub. L. 97-258, September 13, 1982; and Pub. L. 98-581, October 30, 1984) established the Management Fund to receive advance payments from other agencies or accounts that may be used solely to finance (1) study contracts that are jointly sponsored by the Office of Environmental Quality (OEQ) and one or more other Federal agencies; and (2) Federal interagency environmental projects (including task forces) in which OEQ participates. 42 U.S.C. 4375(a). The statute requires the Director of the Office of Environmental Quality (OEQ) to promulgate regulations setting forth policies and procedures for operation of the OEQ Management Fund. 42 U.S.C. 4375(c). 1

The CEQ Chair approved internal policies and procedures for operation of the Management Fund in January 1985. On October 4, 2002, the CEQ Chair promulgated regulations governing the operation of the Management Fund. 2

CEQ is amending its Management Fund regulations to clarify their meaning, including for consistency with the Plain Writing Act of 2010 (Pub. L. 111-274) and the Federal Plain Language Guidelines, 3 modernize them to reflect developments in CEQ's practices in administering the Management Fund since CEQ first adopted its regulations, and make administrative changes.

Section 1518.1 — Purpose. CEQ revises this section to describe the purpose of the Office of Environmental Quality Management Fund as well as the purpose of part 1518, which is to set forth CEQ's procedures for administering the Management Fund.

Section 1518.2 — Definitions. CEQ revises this section to define key terms that appear throughout part 1518. In particular, CEQ removes the definitions of the terms “advance payment,” which the prior regulations defined but did not use elsewhere in part 1518, and “source,” which no longer appears in the regulations as revised. CEQ adds definitions for “environmental project” and “study contract” to clarify the meaning of those terms. These definitions are consistent with CEQ's authorities under National Environmental Policy Act of 1969 (NEPA) and the Environmental Quality Improvement Act of 1970. CEQ also adds a definition of “personnel costs” to clarify the types of expenditures that CEQ may make from the Management Fund. Finally, CEQ adds definitions for “payment” and “reallocation” to clarify how the regulations use those terms to describe the movement of funds to and from the Management Fund.

Section 1518.3 — Policy and general requirements. CEQ revises this section to more clearly explain the internal policies and procedures by which CEQ administers the Management Fund, including the types of expenditures that CEQ may make from the Management Fund, and to eliminate outdated provisions that no longer reflect CEQ's business processes.

Section 1518.4 — Charters. CEQ revises this section, which describes the purpose of charters for environmental projects and study contracts that receive support from the Management Fund, to more clearly set forth what a charter must contain and to better explain the roles of the Director and the Project Officer in approving and amending a charter.

Section 1518.5 — Finances and accounting. CEQ moves the provisions on Management Fund finances and accounting from the previous 40 CFR 1518.4(b) to § 1518.5. This section explains how agencies make payments into the Management Fund and specifies procedures for making expenditures from the Management Fund. CEQ makes clarifying changes to this section to improve its readability and better reflect current practices. Paragraph (a) requires the Project Officer for each environmental project or study contract receiving support from the Management Fund to prepare a budget estimate and update it annually. CEQ adds a new provision in paragraph (c)(1) that, consistent with longstanding practice, requires the Director to transmit a letter to an agency when requesting a payment into the Management Fund.

This rule relates to a matter of agency management or personnel and is a rule of agency organization, procedure, or practice. As such, this rule is exempt from the usual requirements of prior notice and comment and a 30-day delay in effective date. See 5 U.S.C. 553(a)(2), (b), and (d). The rule is effective upon signature.

The Regulatory Flexibility Act (RFA), as amended, 5 U.S.C. 601 et seq., and E.O. 13272, Proper Consideration of Small Entities in Agency Rulemaking, 4 require agencies to assess the impacts of rules on small entities. Under the RFA, small entities include small businesses, small organizations, and small governmental jurisdictions. An agency must prepare a final regulatory flexibility analysis unless it determines and certifies that a final rule, if promulgated, would not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b).

This rule relates to a matter of agency management or personnel and is a rule of agency organization, procedure, or practice. Accordingly, CEQ hereby certifies that the rule will not have a significant economic impact on a substantial number of small entities.

Section 201 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1531), requires Federal agencies to assess the effects of their regulatory actions on state, local, and Tribal governments, and the private sector to the extent that such regulations incorporate requirements specifically set forth in law. Before promulgating a rule that may result in the expenditure by a state, Tribal, or local government, in the aggregate, or by the private sector of $100 million, adjusted annually for inflation, in any 1 year, an agency must prepare a written statement that assesses the effects on state, Tribal, and local governments and the private sector. 2 U.S.C. 1532. This rule relates to a matter of agency management or personnel and is a rule of agency organization, procedure, or practice, and accordingly will not result in expenditures of $100 million or more for state, local, and Tribal governments, in the aggregate, or the private sector in any 1 year. This rule also does not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of 2 U.S.C. 1531 through 1538.

E.O. 12866, as supplemented and affirmed by E.O. 13563 and amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs will review any regulatory action that qualifies as a “significant regulatory action” within the meaning of the E.O. 5 The rule does not qualify as a significant regulatory action.

Under section 3(a) of E.O. 12988, 6 agencies must review their regulations to eliminate drafting errors and ambiguities, draft them to minimize litigation, and provide a clear legal standard for affected conduct. Section 3(b) provides a list of specific matters that agencies must consider when conducting the review required by section 3(a). CEQ has conducted this review and determined that this rule complies with the requirements of E.O. 12988.

This rule does not impose any new information collection burden that would require additional review or approval by OMB under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq.

The National Environmental Policy Act of 1969 (NEPA) (Pub. L. 118-5, 42 U.S.C. 4321 et seq. ), as amended, and the CEQ regulations that implement NEPA, 40 CFR parts 1500 through 1508, require consideration of the environmental effects of proposed actions in agency decision making. NEPA provides for three levels of review. First, agencies may establish in their agency-specific NEPA procedures categorical exclusions (CEs) for categories of actions that normally do not have a significant effect on the human environment, individually or in the aggregate, and apply CEs to individual actions, as appropriate. 7 If an agency proposes to take an action that does not fall within a CE but is not likely to have significant environmental effects (or the significance of whose effects is unknown), CEQ's NEPA regulations direct the agency to prepare an environmental assessment (EA). 8 If, as a result of this assessment, the agency determines that the proposed action will not have significant effects, the agency may make a finding of no significant impact (FONSI), in which case the agency may proceed with the action. 9 Otherwise, the agency must prepare an environmental impact statement (EIS). 10

CEQ has not established a CE for the preparation, revision, and adoption of regulations generally. Accordingly, CEQ has prepared an EA to determine whether the revisions to the Management Fund regulations would have a significant effect on the human environment. Because, as set forth below, the regulation will likely have no discernable effect on the use of resources in CEQ's administration of the Management Fund, CEQ finds that the regulation will have no significant impact on the human environment and that it is therefore unnecessary to prepare an EIS.

Purpose and Need: As set forth in the Background (part I of this preamble) and Summary of the Final Rule (part II of this preamble), CEQ adopted its Management Fund regulations in 2010 and has not updated them to reflect developments in CEQ's practices in administering the Management Fund since then. Furthermore, clarifying the regulations and making administrative changes will make the regulations easier to understand and use.

Proposed Action and Alternatives: A summary of the proposed action is set forth above in the Summary of the Final Rule. Under a “no action” alternative, CEQ would continue to operate under its current regulations, resolving ambiguities and addressing inconsistencies between the regulations and current CEQ practices on a case-by-case basis. CEQ has decided that this approach is undesirable because it requires CEQ staff to address ambiguities and inconsistencies that CEQ can obviate by updating the regulation.

CEQ's preferred alternative is to amend its regulations as set forth in this Final Rule, for the reasons set forth in part II of this preamble.

Environmental Effects of Alternatives: CEQ's administration of the Management Fund affects the environment primarily through CEQ's use of energy and other office resources. CEQ's use of resources for these purposes has remained within the range typical of the operations of a small office. CEQ anticipates that the amendments set forth in this rulemaking will have minimal or no discernable effects on its use of resources in administering the Management Fund.

List of Agencies and Persons Consulted: CEQ's NEPA staff reviewed and commented on this EA and this final rulemaking.

Based on the foregoing EA, CEQ finds that implementation of the regulations in this notice would have minimal or no discernable effects on CEQ's use of energy and other office resources in CEQ's administration of the Management Fund. Thus, there would be no significant effects associated with implementation of the proposed action, and it is not necessary for CEQ to prepare an EIS.

CEQ further finds that the action is not one that normally requires the preparation of an EIS, closely similar to such an action, or an action without precedent.

For the reasons discussed in the preamble, the Council on Environmental Quality amends 40 CFR part 1518 by revising and republishing it to read as follows:

GSA published a proposed rule at 89 FR 4268 on January 23, 2024, which proposed FTR changes to relocation MEA. This rule finalizes those proposed changes as summarized above, and as set forth in greater detail below.

Pursuant to 5 United States Code (U.S.C.) 5738, the Administrator of General Services is authorized to prescribe regulations necessary to implement laws regarding Federal employees when assigned a temporary change of station (TCS) or when otherwise transferred in the interest of the Government. The overall implementing authority is the FTR, codified in title 41 of the Code of Federal Regulations, chapters 300 through 304.

GSA's OGP continually reviews and adjusts policies and regulations under its purview to address Government relocation needs and to incorporate best practices, where appropriate, as a part of its ongoing mission to provide policies for travel by Federal civilian employees and others authorized to travel at Government expense.

Pursuant to 5 U.S.C. 5724a(f) and 5737(a)(6), an employee transferred in the interest of the Government from one official station to another, assigned to a TCS location, or who has completed a TCS assignment and returned to their previous official station is authorized a relocation MEA.

The purpose of the relocation MEA is to defray some of the costs incurred due to relocating. The allowance is related to expenses that are common to living quarters, such as fees for disconnecting and connecting appliances; cutting and fitting rugs, draperies, and curtains moved from one residence to another; utility fees or deposits that are not offset by eventual refunds; forfeiture of medical, dental, and other non-transferrable contracts; and the cost of changing automobile registration(s) and driver's licenses.

The FTR provides that a relocation MEA may be paid using one of two methods: lump sum or actual expense. Under the lump sum method, the agency pays a lump sum amount without requiring employee documentation of expenses. Under the current regulatory language, the lump sum amounts are “either $650 or the equivalent of one week's basic gross pay, whichever is the lesser amount” for an employee without immediate family members relocating with them, and “$1300 or the equivalent of two weeks' basic gross pay, whichever is the lesser amount” for an employee with immediate family members relocating with them.

Under the actual expense method, the agency may authorize the employee to claim actual costs depending on the type of expenses incurred, in an amount in excess of the prescribed lump sum amount. The employee justifies any actual expenses by itemizing with supporting documentation. Reimbursement is limited to one or two weeks' basic gross pay depending on whether or not the employee has immediate family relocating with them, not to exceed the maximum rate payable for a position at GS-13, Step 10, of the General Schedule (base) (see 5 U.S.C. 5332).

This final rule amends the FTR by removing the relocation MEA lump sum amounts from the FTR and directing readers to an FTR bulletin with the relocation MEA lump sum amounts. GSA will publish the initial FTR bulletin with the relocation MEA lump sum amounts concurrent with the final rule's effective date. Agencies are advised that the relocation MEA lump sum amounts are expected to increase since they were last updated in 2011. Moving forward, GSA will publish FTR bulletins to update the relocation MEA lump sum amounts, as needed, based on changes to the Consumer Price Index (CPI). The final rule also clarifies in the regulatory text that “basic gross pay”, as referenced in FTR part 302-16, does not include “locality pay.” See 5 U.S.C. 5302 and 5304.

This final rule also updates and clarifies the relocation MEA sections in the FTR and rearranges them into a more sequential order, to include replacing the table at FTR § 302-16.2 with an updated list of examples for which the relocation MEA may be authorized, and updating the list of examples for which the relocation MEA may not be authorized. It also removes the relocation MEA employee eligibility table at FTR § 302-16.3 and reformats it as an employee eligibility listing.

GSA has not made any significant changes to the regulatory language from the proposed to final rule.

GSA received one comment to the proposed rule suggesting that the relocation MEA lump sum match the amounts listed in the Department of State Standardized Regulations (DSSR) and urged that the relocation MEA lump sum amounts remain in the FTR instead of being published in a bulletin due to intra-agency distribution concerns. In response, GSA notes that it will determine the lump sum amounts based on the Consumer Price Index (CPI). While GSA expects its relocation MEA lump sum amounts to be similar to the DSSR's, the CPI fluctuates. Accordingly, the amounts to be determined by GSA in the present day may not exactly match the DSSR amounts since those were last updated in 2019. In response to the commenter's distribution concerns, publication of the relocation MEA lump sum in an FTR Bulletin affords GSA the flexibility to update the relocation MEA lump sum as needed to more fairly compensate travelers in line with the CPI. If GSA were to continue publishing the amounts in the FTR, such numbers can only be updated via a regulatory amendment, by which time, it may not accurately reflect the current CPI. Also, a bulletin takes less time and administrative effort to publish than a rule. Finally, note 1 to § 302-16.6 includes a direct link to GSA's FTR Bulletins for ease of distribution, in addition to the fact that notices of FTR Bulletins are published in the Federal Register and include a link to the Bulletin. GSA's OGP also emails all Federal agencies' travel and relocation operations and policy program managers to inform them of all FTR rules and bulletins when they are published, and recommends that such information be shared with relevant offices within their agency. GSA's OGP also briefs FTR changes to agency Senior Travel Official Council (STOC) members at regular intervals. Therefore, GSA will not change the final rule based on this comment.

This rule does not result in cost impacts to the public. However, the changes may result in a slight increase in cost to the Federal Government as the relocation MEA lump sum amounts are expected to increase. Specifically, GSA will publish an FTR bulletin containing the relocation MEA lump sum amounts for an employee relocating without immediate family members and for an employee relocating with immediate family members. As detailed in the proposed rule, GSA expects the average relocation MEA lump sum amount across Federal agencies to increase to $1,125, for an estimated total increase of $312,973 per year agencywide (for those agencies subject to the FTR). 1

Executive Order (E.O.) 12866 (Regulatory Planning and Review) directs 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 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. E.O. 14094 (Modernizing Regulatory Review) amends section 3(f) of E.O. 12866 and supplements and reaffirms the principles, structures, and definitions governing contemporary regulatory review established in E.O. 12866 and E.O. 13563. The Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) determined that the proposed rule was a significant regulatory action; however, after further discussion between GSA and OIRA, OIRA has determined that this final rule is not a significant regulatory action, and therefore, it is not subject to review under section 6(b) of E.O. 12866.

OIRA has determined that this rule is not a “major rule” under 5 U.S.C. 804(2). Title II, Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, unless excepted, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. This rule is excepted from CRA reporting requirements prescribed under 5 U.S.C. 801 as it relates to agency management or personnel under 5 U.S.C. 804(3)(B).

This final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. This final rule is also exempt from the Administrative Procedure Act pursuant to 5 U.S.C. 553(a)(2) because it applies to agency management or personnel. Therefore, an Initial Regulatory Flexibility Analysis was not performed.

The Paperwork Reduction Act does not apply because the changes to the FTR do not impose recordkeeping or information collection requirements, or the collection of information from offerors, contractors, or members of the public that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501, et seq.

For reasons set forth in the preamble, GSA revises 41 CFR part 302-16 to read as follows:

This is a summary of the Commission's Order, DA 25-5, adopted and released on January 3, 2025. The complete text of this document is available for download at https://docs.fcc.gov/public/attachments/DA-25-5A1.pdf. To request this document in accessible formats for people with disabilities ( e.g., Braille, large print, electronic files, audio format, etc.) or to request reasonable accommodations ( e.g., accessible format documents, sign language interpreters, CART, etc.), send an email to fcc504@fcc.gov or call the FCC's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice).

The Bipartisan Budget Act of 2015 included, as section 701 thereto, the Inflation Adjustment Act, which amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410), to improve the effectiveness of civil monetary penalties and maintain their deterrent effect. Under the Inflation Adjustment Act, agencies are required to make annual inflationary adjustments by January 15 each year, beginning in 2017. The adjustments are calculated pursuant to Office of Management and Budget (OMB) guidance. OMB issued guidance on December 17, 2024, and this Order follows that guidance. The Commission therefore updates the civil monetary penalties for 2024, to reflect an annual inflation adjustment based on the percent change between each published October's CPI-U; in this case, October 2024 CPI-U (315.664)/October 2023 CPI-U (307.671) = 1.02598. The Commission multiplies 1.02598 by the most recent penalty amount and then rounds the result to the nearest dollar.

For 2025, the adjusted penalty or penalty range for each applicable penalty is calculated by multiplying the most recent penalty amount by the 2025 annual adjustment (1.02598), then rounding the result to the nearest dollar. The adjustments in civil monetary penalties that we adopt in this Order apply only to such penalties assessed on and after January 15, 2025.

The Order also re-codifies the text of a footnote to Table 1 of § 1.80(b)(11) that was inadvertently removed. The footnote text specifies that the base forfeiture amount for “misrepresentation/lack of candor” is the statutory maximum. Because the prior removal of this language was inadvertent, we find good cause to make this re-codification of the footnote text effective immediately upon publication in the Federal Register , pursuant to section 553(d)(3) of the APA.

This document does not contain new or modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget, concurs that this rule is non-major under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of this Order to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 1 as follows:

On August 24, 2022, PHMSA published a final rule titled “Safety of Gas Transmission Pipelines: Repair Criteria, Integrity Management Improvements, Cathodic Protection, Management of Change, and Other Related Amendments” (2022 Gas Transmission Final Rule)  1 amending the federal pipeline safety regulations at 49 CFR part 192 to improve the safety of onshore gas transmission pipelines. The 2022 Gas Transmission Final Rule updated and expanded requirements pertaining to corrosion control, repair criteria and timelines for various pipeline integrity anomalies (including various manifestations of metal loss, cracking, and denting), and other integrity management improvements.

The Interstate Natural Gas Association of America (INGAA) filed a petition for judicial review challenging several provisions of the 2022 Gas Transmission Final Rule. On August 16, 2024, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) ordered the following provisions vacated:  2

(1) Monitoring and mitigation of internal corrosive constituents at § 192.478;

(2) The immediate repair criterion for cracks or crack-like anomalies with predicted failure pressures below 1.25 × maximum allowable operating pressure (MAOP) at §§ 192.714(d)(1)(v)(C) and 192.933(d)(1)(v)(C); and

(3) High-frequency electric resistance welded seams as one of the seam types qualifying for the immediate repair criterion of preferential metal loss on certain seam types at §§ 192.714(d)(1)(iv) and 192.933(d)(1)(iv). 3

This notice removes those vacated provisions and makes conforming revisions to align the federal pipeline safety regulations to the result of judicial review. 4