Unknown. Final rule amendments

5,665 words·~26 min read·/register/2004/07/28/04-17200

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

--- schema: federal-register doc_type: fedreg source_file: FR-2004-07-28.xml --- 69 144 Wednesday, July 28, 2004 Contents Agricultural Agricultural Marketing Service PROPOSED RULES Kiwifruit grown in— California, 44975-44981 04-17271 Agriculture Agriculture Department See Agricultural Marketing Service See Animal and Plant Health Inspection Service See Forest Service See Rural Utilities Service Animal Animal and Plant Health Inspection Service NOTICES Meetings: Horse protection technology, 45004 04-17152 Army Army Department PROPOSED RULES Personnel:

Decorations, medals, ribbons, and similar devices, 45113-45170 04-16226 NOTICES Agency information collection activities; proposals, submissions, and approvals, 45023 04-17164 Centers Centers for Disease Control and Prevention NOTICES Grants and cooperative agreements; availability, etc.: Human immunodeficiency virus (HIV)— Botswana; psychosocial support and peer counseling service to HIV-infected women and their families; expansion; correction, 45112 C4-16412 Coast Guard Coast Guard RULES Pollution:

Ballast water— Mandatory management program for U.S. waters, 44952-44961 04-17096 Commerce Commerce Department See Industry and Security Bureau See International Trade Administration See National Institute of Standards and Technology See National Oceanic and Atmospheric Administration CITA Committee for the Implementation of Textile Agreements NOTICES Cotton, wool, and man-made textiles: Vietnam, 45021-45022 04-17154 Commodity Commodity Futures Trading Commission PROPOSED RULES Confidential information and commission records and information, 44981-44988 04-17051 Comptroller Comptroller of the Currency RULES Risk-based capital:

Consolidated asset-backed commercial paper program assets— Capital treatment, 44908-44925 04-16818 Consumer Consumer Product Safety Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, 45022-45023 04-17109 Customs Customs and Border Protection Bureau NOTICES Tariff Suspension and Trade Act: 2004 FINA World Swimming Championships; duty-free treatment of imported articles, 45072 04-17116 Defense Defense Department See Army Department RULES Civilian health and medical program of uniformed services (CHAMPUS):

TRICARE program— Individual Case Management Program terminated, Persons with Disabilities Program renamed, and extended and custodial care policies clarified, 44942-44952 04-16932 PROPOSED RULES Grant and agreement regulations; OMB policy directives, 44990-45002 04-16933 Education Education Department NOTICES Grants and cooperative agreements; availability, etc.: Special education and rehabilitative services— Children with disabilities; services and results improvement, 45023-45024 04-17104 Vocational and adult education:

National Research Centers; project period extension and waivers, 45024-45026 04-17173 Energy Energy Department See Federal Energy Regulatory Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, 45026 04-17160 Atomic energy agreements; subsequent arrangements, 45026 04-17161 EPA Environmental Protection Agency RULES Air quality implementation plans; approval and promulgation; various States: Illinois, 44967-44970 04-17165 Wyoming, 44965-44967 04-17167 PROPOSED RULES Air quality implementation plans; approval and promulgation; various States:

Illinois, 45003 04-17166 Washington; correction, 45112 C4-12302 NOTICES Pesticide, food, and feed additive petitions: Abamectin, 45037-45042 04-16852 Carfentrazone-ethyl, 45042-45047 04-16719 Spiromesifen, 45047-45051 04-16720 Pesticide programs: Risk assessments— 2,4-DB (4-(2,4-dichlorophenoxy) butyric acid, etc., 45035-45037 04-17187 Pesticides; experimental use permits, etc.: Syngenta Seeds, Inc., 45051-45053 04-17168 Reports and guidance documents; availability, etc.: Green Construction Specs;

Federal Guide, 45053-45055 04-16946 Farm Farm Credit Administration RULES Farm credit system: Loan policies and operations, etc.— Other financial institutions lending, 44925 04-17120 Federal Accounting Federal Accounting Standards Advisory Board NOTICES Reports and guidance documents; availability, etc.: Reclassification of statement of social insurance; proposal to defer effective date, 45055-45056 04-17125 FAA Federal Aviation Administration RULES Airworthiness directives: Rolls-Royce plc, 44925-44927 04-16548 FCC Federal Communications Commission RULES Common carrier services:

Individuals with hearing and speech disabilities; telecommunications relay and speech-to-speech services Captioned telephone providers; waiver deadlines reminder, 44970-44971 04-17238 FDIC Federal Deposit Insurance Corporation RULES Risk-based capital: Consolidated asset-backed commercial paper program assets— Capital treatment, 44908-44925 04-16818 Federal Energy Federal Energy Regulatory Commission NOTICES Electric rate and corporate regulation filings, 45032-45033 E4-1661 Environmental statements; availability, etc.:

Fall River Rural Electric Cooperative, Inc., 45033-45034 E4-1656 Hydroelectric applications, 45034-45035 E4-1665 Meetings: Northern Natural Gas Co.; settlement conference, 45035 E4-1663 *Applications, hearings, determinations, etc.:* ANR Pipeline Co., 45027 E4-1664 CenterPoint Energy Gas Transmission Co., 45027-45028 E4-1676 Chandeleur Pipe Line Co., 45028 E4-1666 Equitrans, L.P., 45028-45029 E4-1674 E4-1675 Iroquois Gas Transmission System, L.P., 45029 E4-1667 Midwestern Gas Transmission Co., 45029-45030 E4-1672 National Fuel Gas Supply Corp., 45030 E4-1668 North Baja Pipeline, LLC, 45030 E4-1670 Viking Gas Transmission Co., 45030-45031 E4-1669 E4-1671 West Texas Gas, Inc., 45031-45032 E4-1673 FMC Federal Maritime Commission NOTICES Agreements filed, 45056 04-17191 Ocean transportation intermediary licenses:

A A Shipping LLC et al., 45056-45057 04-17192 Amoy Line et al., 45057 04-17193 Delta Line International, Inc., et al., 45057 04-17194 Senior Executive Service: Performance Review Board; membership, 45057 04-17195 Federal Reserve Federal Reserve System RULES Risk-based capital: Consolidated asset-backed commercial paper program assets— Capital treatment, 44908-44925 04-16818 NOTICES Agency information collection activities; proposals, submissions, and approvals, 45057-45058 04-17123 Banks and bank holding companies:

Change in bank control, 45058 04-17121 Formations, acquisitions, and mergers, 45058-45059 04-17122 FTC Federal Trade Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, 45059-45060 04-17158 Premerger notification waiting periods; early terminations, 45060-45063 04-17159 Prohibited trade practices: Aspen Technology, Inc., 45063-45066 04-17155 Nutramax Laboratories, Inc., 45066-45067 04-17156 Senior Executive Service: Performance Review Board; membership, 45067 04-17157 Financial Financial Management Service See Fiscal Service Fiscal Fiscal Service RULES Marketable book-entry Treasury bills, notes, and bonds:

Plain Language Uniform Offering Circular; sale and issue, 45201-45224 04-17012 Food Food and Drug Administration RULES Color additives: D&C Black No. 2; cosmetics coloring, 44927-44930 04-17153 NOTICES Human drugs: New drug applications— Schering Corp. et al.; approval withdrawn; correction, 45068 04-17110 Forest Forest Service NOTICES Meetings: Resource Advisory Committees— Eastern Arizona, 45004 04-17117 Lake County, 45005 04-17190 Government Government Ethics Office RULES Certificates of divestiture, 44893-44896 04-17200 Health Health and Human Services Department See Centers for Disease Control and Prevention See Food and Drug Administration See National Institutes of Health NOTICES Agency information collection activities; proposals, submissions, and approvals, 45067-45068 04-17115 Homeland Homeland Security Department See Coast Guard See Customs and Border Protection Bureau Housing Housing and Urban Development Department NOTICES Agency information collection activities; proposals, submissions, and approvals, 45072-45075 04-17198 04-17199 Industry Industry and Security Bureau NOTICES Export transactions:

List of unverified persons in foreign countries, guidance to exporters as to “red flags“ (Supplement No. 3 to 15 CFR part 732); update, 45008-45010 04-17186 IRS Internal Revenue Service RULES Income taxes: Charitable contributions; allocation and apportionment of deductions, 44930-44932 04-17079 PROPOSED RULES Income taxes: Charitable contributions; allocation and apportionment of deductions, 44988-44990 04-17080 International International Trade Administration NOTICES Antidumping:

Frozen concentrated orange juice from— Brazil, 45012 04-17202 Preserved mushrooms from— China, 45012-45017 04-17201 Antidumping and countervailing duties: Administrative review requests, 45010-45012 04-17203 International International Trade Commission NOTICES Import investigations: Audio digital-to-analog converters and products containing same, 45075 04-17172 Sebacic acid from— China, 45075-45076 04-17171 Stainless steel plate from— Various countries, 45076-45077 04-17169 Stainless steel wire rod from— Various countries, 45077 04-17170 U.S.-Bahrain Free Trade Agreement; potential economywide and selected sectoral effects, 45077-45078 04-17326 Justice Justice Department See Justice Programs Office RULES Executive Office for Immigration Review:

Definitions; fees; powers and authority of Department of Homeland Security officers and employees in removal proceedings, 44903-44908 04-17118 Justice Justice Programs Office NOTICES Agency information collection activities; proposals, submissions, and approvals, 45078-45081 04-17137 04-17138 Labor Labor Department See Occupational Safety and Health Administration National Archives National Archives and Records Administration NOTICES Agency records schedules; availability, 45084-45085 04-17151 National Highway National Highway Traffic Safety Administration NOTICES Motor vehicle safety standards:

Exemption petitions, etc.— Ford Motor Co., 45109-45110 04-17107 Yokohama Tire Corp., 45110 04-17108 Nonconforming vehicles— Importation eligibility; determinations, 45110-45111 04-17189 National Institute National Institute of Standards and Technology NOTICES Committees; establishment, renewal, termination, etc.: Advanced Technology Program Advisory Committee, 45018 04-17102 Advanced Technology Visiting Committee, 45017-45018 04-17100 Malcolm Baldrige National Quality Award Board of Overseers, 45018-45019 04-17098 Malcolm Baldrige National Quality Award Judges Panel, 45019-45020 04-17101 Manufacturing Extension Partnership National Advisory Board, 45020 04-17099 Meetings:

Help America Vote Act; National Voluntary Laboratory Accreditation Program; workshop, 45020-45021 04-17103 NIH National Institutes of Health NOTICES Agency information collection activities; proposals, submissions, and approvals, 45068-45069 04-17127 Meetings: National Institute of Allergy and Infectious Diseases, 45071 04-17134 National Institute of Dental and Craniofacial Research, 04-17128 45069-45070 04-17129 04-17130 National Institute of Neurological Disorders and Stroke, 45070 04-17131 National Institute on Aging, 45070-45071 04-17133 Scientific Review Center, 45071-45072 04-17132 NOAA National Oceanic and Atmospheric Administration RULES Fishery conservation and management:

Alaska; fisheries of Exclusive Economic Zone— Deep-water species, 44973 04-17177 Northern rockfish, 44973-44974 04-17178 NOTICES Permits: Scientific research, 45021 04-17185 National Science National Science Foundation NOTICES Meetings; Sunshine Act, 45085-45086 04-17253 Nuclear Nuclear Regulatory Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, 45086-45087 04-17143 Environmental statements; availability, etc.: King's College, Wilkes-Barre facility, PA, 45088-45089 04-17144 University of Texas, Austin, TX, 45089-45091 04-17142 *Applications, hearings, determinations, etc.:* Kennecott Uranium Co., 45087-45088 04-17140 Union Electric Co., 45088 04-17141 Occupational Occupational Safety and Health Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, extension, 45081-45083 04-17174 04-17175 Postal Postal Service RULES Persons with disabilities; access to Postal Service programs, activities, facilities, and electronic and information technology, 44962-44965 04-17126 PROPOSED RULES International Mail Manual:

International Priority Mail and International Surface Air Lift mailers; discontinuance of volume discount rates, 45002-45003 04-17124 Public Public Debt Bureau See Fiscal Service RUS Rural Utilities Service RULES Grants: Broadband Grant Program; eligibility and application requirements, review and approval process, and administration procedures, 44896-44903 04-17105 NOTICES Grants and cooperative agreements; availability, etc.: Community Connect Program, 45005-45008 04-17106 SEC Securities and Exchange Commission PROPOSED RULES Investment advisers:

Hedge fund advisers; registration, 45171-45200 04-16888 Securities: Trust and fiduciary activities exception; exemptions and defined terms (Regulation B), 44988 04-17112 NOTICES Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC, 45091-45102 04-17113 Chicago Board Options Exchange, Inc., 45102-45103 04-17114 National Association of Securities Dealers, Inc., 45103-45104 04-17176 Pacific Exchange, Inc., 45104-45106 04-17111 SBA Small Business Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 45106 04-17145 Small business size standards:

Nonmanufacture rule; waivers— Miscellaneous electrical equipment and component manufacturing, 45106 04-17146 Other communications equipment manufacturing, 45107 04-17148 Paint and paint manufacturing, 45107-45108 04-17149 Power-driven handtool manufacturing, 45106-45107 04-17147 State State Department NOTICES Art objects; importation for exhibition: Dead Sea Scrolls, 45108 04-17182 Totems to Turquoise: Native North American Jewelry Arts of the Northwest and Southwest, 45108 04-17180 Grants and cooperative agreements; availability, etc.:

U.S.-Egypt Science and Technology Program, 45108-45109 04-17183 04-17184 Surface Surface Transportation Board NOTICES Railroad operation, acquisition, construction, etc.: Peoria, IL, et al., 45111 04-16931 Textile Textile Agreements Implementation Committee See Committee for the Implementation of Textile Agreements Thrift Thrift Supervision Office RULES Risk-based capital: Consolidated asset-backed commercial paper program assets— Capital treatment, 44908-44925 04-16818 Transportation Transportation Department See Federal Aviation Administration See National Highway Traffic Safety Administration See Surface Transportation Board RULES Organization, functions, and authority delegations:

Director of Intelligence and Security, 44971-44973 04-16723 Treasury Treasury Department See Comptroller of the Currency See Fiscal Service See Internal Revenue Service See Thrift Supervision Office RULES Terrorism Risk Insurance Program: Litigation management, 44932-44942 04-17235 Separate Parts In This Issue Part II Defense Department, Army Department, 45113-45170 04-16226 Part III Securities and Exchange Commission, 45171-45200 04-16888 Part IV Treasury Department, Fiscal Service, 45201-45224 04-17012 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.

To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 69 144 Wednesday, July 28, 2004 Rules and Regulations OFFICE OF GOVERNMENT ETHICS 5 CFR Part 2634 RIN 3209-AA00 Revisions to the Certificates of Divestiture Regulation AGENCY: Office of Government Ethics (OGE). ACTION: Final rule amendments.

SUMMARY: In this final rule, the Office of Government Ethics has rewritten its regulation concerning Certificates of Divestiture in plain language. This rule also revises certain procedures for issuing Certificates of Divestiture and the definition of permitted property into which proceeds of the sale of property are reinvested. DATES: *Effective Date:* August 27, 2004. FOR FURTHER INFORMATION CONTACT: Deborah J. Bortot, Office of Government Ethics; Telephone: 202-482-9300; TDD: 202-482-9293;

FAX: 202-482-9237. SUPPLEMENTARY INFORMATION: I. Background Section 1043 of the Internal Revenue Code of 1986, 26 U.S.C. 1043, was enacted as part of the Ethics Reform Act of 1989 (Pub. L. 101-194). Section 1043 authorizes the Director of OGE to issue a Certificate of Divestiture to an eligible person who is divesting property in order to comply with a Federal conflict of interest law, regulation, rule, or Executive order, or if requested by a congressional committee as a condition of confirmation.

A person who receives a Certificate of Divestiture may defer payment of capital gains tax as long as he or she timely purchases certain permitted property with the proceeds of the sale. OGE published an interim rule on April 18, 1990 (at 55 FR 14407-14409) implementing section 1043. On June 25, 1996, the Office of Government Ethics published a final rule at 61 FR 32633-32636. The final rule was based on comments to the interim rule and on OGE's experience under the interim rule and the May 1990 Technical Corrections to the Ethics Reform Act of 1989 (Pub. L. 101-280), which amended section 1043 of the Internal Revenue Code of 1986.

The OGE Certificates of Divestiture executive branchwide regulation is now codified at subpart J of 5 CFR part 2634. On January 13, 2004, OGE published a set of proposed amendments to the regulation, proposing to make certain improvements. See 69 FR 1954-1957. The proposed rule provided a 60-day comment period. The Office of Government Ethics received one comment letter from an organization. After a careful review of the comment letter and making some additional plain language modifications, OGE is publishing this final rule.

II. Summary of Comments and Revisions We have attempted to improve the current Certificates of Divestiture regulation by: Organizing the material more logically; using shorter sentences; eliminating unnecessary technical language; and stating the rule's requirements more clearly. The one comment letter suggested many changes to make the regulation even simpler. After careful review, OGE has adopted some of the suggestions. In particular, we have redrafted §§ 2634.1001 and 2634.1003 of the proposed rule to make them easier to understand.

Consequently, § 2634.1001 of the proposed rule is now divided into §§ 2634.1001 and 2634.1002, and proposed sections 2634.1002-2634.1007 have been renumbered in this final rule accordingly. The final rule retains the same revisions as set forth in the proposed rule. First, we changed the meaning of a “diversified investment fund,” in paragraph

(2)of the definition of permitted property in new (renumbered) § 2634.1003, to track the definition of diversified mutual fund and diversified unit investment trust as those terms are used in 5 CFR 2640.102. 1 Second, several changes will streamline and simplify the procedure OGE uses to issue a Certificate of Divestiture. The final rule clarifies the information related to financial disclosure that needs to be submitted as part of the Certificate of Divestiture request and simplifies the procedure related to the timing of a submission of a request to OGE. 1 When the Certificate of Divestiture rule was first published in April 1990, the definition of “diversified investment fund” included common trust funds maintained by banks. At that time, common trust funds were required to be diversified under rules published by the Comptroller of the Currency. However, in December 1996, the Office of the Comptroller of the Currency eliminated the diversification requirement. *See* 61 FR 68543, 68551. Therefore, common trust funds are not a suitable alternative for permitted property and have been deleted from the definition of diversified investment fund. Eligible persons who invested in common trust funds as permitted property prior to the effective date of this final rule may continue to hold those funds. III. Matters of Regulatory Procedure Executive Order 12866 In promulgating this final regulation, the Office of Government Ethics has adhered to the regulatory philosophy and the applicable principles of regulation set forth in section 1 of Executive Order 12866, Regulatory Planning and Review. This regulation has also been reviewed by the Office of Management and Budget under that Executive order. Moreover, in accordance with section 6(a)(3)(B) of E.O. 12866, the preambles to the proposed and final revisions, to be codified in a revised subpart J of 5 CFR part 2634, note the legal basis and benefits of as well as the need for the regulatory action. There should be no appreciable increase in costs to OGE or the executive branch of the Federal Government in administering this regulation, once it becomes effective, since the provisions only clarify and improve the Certificates of Divestiture regulatory procedures. Finally, this rulemaking is not economically significant under the Executive order and will not interfere with State, local or tribal governments. Executive Order 12988 As Acting Director of the Office of Government Ethics, I have reviewed this final amendatory regulation in light of section 3 of Executive Order 12988, Civil Justice Reform, and certify that it meets the applicable standards provided therein. Regulatory Flexibility Act As Acting Director of the Office of Government Ethics, I certify under the Regulatory Flexibility Act (5 U.S.C. chapter 6) that this amendatory rule will not have a significant economic impact on a substantial number of small entities because it primarily affects Federal executive branch employees and members of their immediate families. Paperwork Reduction Act The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply to this final amended regulation because it does not contain any information collection requirements that require the approval of the Office of Management and Budget. Unfunded Mandates Reform Act For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. chapter 25, subchapter II), this final rule will 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. Congressional Review Act The Office of Government Ethics has determined that this rulemaking involves a nonmajor rule under the Congressional Review Act (5 U.S.C. chapter 8) and will submit a report thereon to the U.S. Senate, House of Representatives and General Accounting Office in accordance with that law at the same time this rulemaking document is sent to the Office of the Federal Register for publication in the **Federal Register** . List of Subjects in 5 CFR Part 2634 Certificates of divestiture, Conflict of interests, Financial disclosure, Government employees, Penalties, Privacy, Reporting and recordkeeping requirements, Trusts and trustees. Approved: July 21, 2004. Marilyn L. Glynn, Acting Director, Office of Government Ethics. Accordingly, for the reasons set forth in the preamble, the Office of Government Ethics is amending 5 CFR part 2634 as follows: PART 2634—EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS, AND CERTIFICATES OF DIVESTITURE 1. The authority citation for part 2634 continues to read as follows: Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 26 U.S.C. 1043; Pub. L. 101-410, 104 Stat. 890, 28 U.S.C. 2461 note (Federal Civil Penalties Inflation Adjustment Act of 1990), as amended by Sec. 31001, Pub. L. 104-134, 110 Stat. 1321 (Debt Collection Improvement Act of 1996); E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306. 2. Subpart J of part 2634 is revised to read as follows: Subpart J—Certificates of Divestiture Sec. 2634.1001 Overview. 2634.1002 Role of the Internal Revenue Service. 2634.1003 Definitions. 2634.1004 General rule. 2634.1005 How to obtain a Certificate of Divestiture. 2634.1006 Rollover into permitted property. 2634.1007 Cases in which Certificates of Divestiture will not be issued. 2634.1008 Public access to a Certificate of Divestiture. Subpart J—Certificates of Divestiture § 2634.1001 Overview.

(a)*Scope.* 26 U.S.C. 1043 and the rules of this subpart allow an eligible person to defer paying capital gains tax on property sold to comply with conflict of interest requirements. To defer the gains, an eligible person must obtain a Certificate of Divestiture from the Director of the Office of Government Ethics before selling the property. This subpart describes the circumstances when an eligible person may obtain a Certificate of Divestiture and establishes the procedure that the Office of Government Ethics uses to issue Certificates of Divestiture.

(b)*Purpose.* The purpose of section 1043 and this subpart is to minimize the burden that would result from paying capital gains tax on the sale of assets to comply with conflict of interest requirements. Minimizing this burden aids in attracting and retaining highly qualified personnel in the executive branch and ensures the confidence of the public in the integrity of Government officials and decision-making processes. § 2634.1002 Role of the Internal Revenue Service. The Internal Revenue Service

(IRS)has jurisdiction over the tax aspects of a divestiture made pursuant to a Certificate of Divestiture. Eligible persons seeking to defer capital gains:

(a)Must follow IRS requirements for reporting dispositions of property and electing under section 1043 not to recognize capital gains; and

(b)Should consult a personal tax advisor or the IRS for guidance on these matters. § 2634.1003 Definitions. For purposes of this subpart: *Eligible person* means:

(1)Any officer or employee of the executive branch of the Federal Government, except a person who is a special Government employee as defined in 18 U.S.C. 202;

(2)The spouse or any minor or dependent child of the individual referred to in paragraph

(1)of this definition; and

(3)Any trustee holding property in a trust in which an individual referred to in paragraph

(1)or

(2)of this definition has a beneficial interest in principal or income. *Permitted property* means:

(1)An obligation of the United States; or

(2)A diversified investment fund. A diversified investment fund is a diversified mutual fund or diversified unit investment trust, as defined in 5 CFR 2640.102(a),

(k)and (u);

(3)Provided, however, a permitted property cannot be any holding prohibited by statute, regulation, rule, or Executive order. As a result, requirements applicable to specific agencies and positions may limit an eligible person's choices of permitted property. An employee seeking a Certificate of Divestiture should consult the appropriate designated agency ethics official to determine whether a statute, regulation, rule, or Executive order may limit choices of permitted property. § 2634.1004 General rule.

(a)The Director of the Office of Government Ethics may issue a Certificate of Divestiture for specific property in accordance with the procedures of § 2634.1005 of this subpart if:

(1)The Director determines that divestiture of the property by an eligible person is reasonably necessary to comply with 18 U.S.C. 208, or any other Federal conflict of interest statute, regulation, rule, or Executive order; or

(2)A congressional committee requires divestiture as a condition of confirmation.

(b)The Director of the Office of Government Ethics cannot issue a Certificate of Divestiture for property that already has been sold. Example 1 to § 2634.1004: An employee is directed to divest shares of stock, a limited partnership interest, and foreign currencies. If the sale of these assets will result in capital gains under the Internal Revenue Code, the employee may request and receive a Certificate of Divestiture. Example 2 to § 2634.1004: An employee of the Department of Commerce is directed to divest his shares of XYZ stock acquired through the exercise of options held in an employee benefit plan. His gain from the sale of the stock will be treated as ordinary income. Because only capital gains realized under Federal tax law are eligible for deferral under section 1043, a Certificate of Divestiture cannot be issued for the sale of the XYZ stock. Example 3 to § 2634.1004: During her Senate confirmation hearing, a nominee to a Department of Defense

(DOD)position is directed to divest stock in a DOD contractor as a condition of her confirmation. Eager to comply with the order to divest, the nominee sells her stock immediately after the hearing and prior to being confirmed by the Senate. Once she is a DOD employee, she requests a Certificate of Divestiture for the stock. Because the Office of Government Ethics cannot issue a Certificate of Divestiture for property that has already been divested, the employee's request for a Certificate of Divestiture will be denied. Example 4 to § 2634.1004: After receiving a Certificate of Divestiture, the spouse of a Food and Drug Administration employee sold stock in a regulated company. Between the time of the request for the Certificate of Divestiture and the sale of the stock, the stock price dropped and the spouse sold the stock at a loss. Because the sale of the stock did not result in capital gains, the spouse has no need for the Certificate of Divestiture and cannot submit it to the Internal Revenue Service for deferral of gains. No further action need be taken by the employee or the employee's spouse in connection with the Certificate of Divestiture. § 2634.1005 How to obtain a Certificate of Divestiture.

(a)*Employee's request to the designated agency ethics official.* An employee seeking a Certificate of Divestiture must submit a written request to the designated agency ethics official at his or her agency. The request must contain:

(1)A full and specific description of the property that will be divested. For example, if the property is corporate stock, the request must include the number of shares for which the eligible person seeks a Certificate of Divestiture;

(2)A brief description of how the eligible person acquired the property;

(3)A statement that the eligible person holding the property has agreed to divest the property; and (4)(i) The date that the requirement to divest first applied; or

(ii)The date the employee first agreed that the eligible person would divest the property in order to comply with conflict of interest requirements.

(b)*Designated agency ethics official's submission to the Office of Government Ethics.* The designated agency ethics official must forward to the Director of the Office of Government Ethics the employee's written request described in paragraph

(a)of this section. In addition, the designated agency ethics official must submit:

(1)A copy of the employee's latest financial disclosure report. If the employee is not required to file a financial disclosure report, the designated agency ethics official must obtain from the employee, and submit to the Office of Government Ethics, a listing of the employee's interests that would be required to be disclosed on a confidential financial disclosure report excluding gifts and travel reimbursements. For purposes of this listing, the reporting period is the preceding twelve months from the date the requirement to divest first applied or the date the employee first agreed that the eligible person would divest the property;

(2)An opinion that describes why divestiture of the property is reasonably necessary to comply with 18 U.S.C. 208, or any other Federal conflict of interest statute, regulation, rule, or Executive order; and

(3)A brief description of the employee's position or a citation to a statute that sets forth the duties of the position.

(c)*Divestitures required by a congressional committee.* In the case of a divestiture required by a congressional committee as a condition of confirmation, the designated agency ethics official must submit appropriate evidence that the committee requires the divestiture. A transcript of congressional testimony or a written statement from the designated agency ethics official concerning the committee's custom regarding divestiture are examples of evidence of the committee's requirements.

(d)*Divestitures for property held in a trust.* In the case of divestiture of property held in a trust, the employee must submit a copy of the trust instrument, as well as a list of the trust's current holdings, unless the holdings are listed on the employee's most recent financial disclosure report. In certain cases involving divestiture of property held in a trust, the Director may not issue a Certificate of Divestiture unless the parties take actions which, in the opinion of the Director, are appropriate to exclude, to the extent practicable, parties other than eligible persons from benefitting from the deferral of capital gains. Such actions may include, as permitted by applicable State law, division of the trust into separate portfolios, special distributions, dissolution of the trust, or anything else deemed feasible by the Director, in his or her sole discretion. Example 1 to paragraph (d): An employee has a 90% beneficial interest in an irrevocable trust created by his grandfather. His four adult children have the remaining 10% beneficial interest in the trust. A number of the assets held in the trust must be sold to comply with conflicts of interest requirements. Due to State law, no action can be taken to separate the trust assets. Because the adult children have a small interest in the trust and the assets cannot be separated, the Director may consider issuing a Certificate of Divestiture to the trustee for the sale of all of the conflicting assets.

(e)*Time requirements.* A request for a Certificate of Divestiture does not extend the time in which an employee otherwise must divest property required to be divested pursuant to an ethics agreement, or prohibited by statute, regulation, rule, or Executive order. Therefore, an employee must submit his or her request for a Certificate of Divestiture as soon as possible once the requirement to divest becomes applicable. The Office of Government Ethics will consider requests submitted beyond the applicable time period for divestiture. If the designated agency ethics official submits a request to the Office of Government Ethics beyond the applicable time period for divestiture, he must explain the reason for the delay. ( *See* 5 CFR 2634.802 and 2635.403 for rules relating to the time requirements for divestiture.)

(f)*Response by the Office of Government Ethics.* After reviewing the materials submitted by the employee and the designated agency ethics official, and making a determination that all requirements have been met, the Director will issue a Certificate of Divestiture. The certificate will be sent to the designated agency ethics official who will then forward it to the employee. § 2634.1006 Rollover into permitted property.

(a)*Reinvestment of proceeds.* In order to qualify for deferral of capital gains, an eligible person must reinvest the proceeds from the sale of the property divested pursuant to a Certificate of Divestiture into permitted property during the 60-day period beginning on the date of the sale. The proceeds may be reinvested into one or more types of permitted property. Example 1 to paragraph (a): A recently hired employee of the Department of Transportation receives a Certificate of Divestiture for the sale of a large block of stock in an airline. He may split the proceeds of the sale and reinvest them in an S&P Index Fund, a diversified Growth Stock Fund, and U.S. Treasury bonds. Example 2 to paragraph (a): The Secretary of Treasury sells certain stock after receiving a Certificate of Divestiture and is considering reinvesting the proceeds from the sale into U.S. Treasury securities. However, because the Secretary of the Treasury is prohibited by 31 U.S.C. 329 from being involved in buying obligations of the United States Government, the Secretary cannot reinvest the proceeds in such securities. However, she may invest the proceeds in a diversified mutual fund. See the definition of *permitted property* at § 2634.1003.

(b)*Internal Revenue Service reporting requirements.* An eligible person who elects to defer the recognition of capital gains from the sale of property pursuant to a Certificate of Divestiture must follow Internal Revenue Service rules for reporting the sale of the property and the reinvestment transaction. § 2634.1007 Cases in which Certificates of Divestiture will not be issued. The Director of the Office of Government Ethics, in his or her sole discretion, may deny a request for a Certificate of Divestiture in cases where an unfair or unintended benefit would result. Examples of such cases include:

(a)*Employee benefit plans.* The Director will not issue a Certificate of Divestiture if the property is held in a pension, profit-sharing, stock bonus, or other employee benefit plan and can otherwise be rolled over into an eligible tax-deferred retirement plan within the 60-day reinvestment period.

(b)*Complete divestiture.* The Director will not issue a Certificate of Divestiture unless the employee agrees to divest all of the property that presents a conflict of interest, as well as other similar or related property that presents a conflict of interest under a Federal conflict of interest statute, regulation, rule, or Executive order. However, any property that qualifies for a regulatory exemption at 5 CFR part 2640 need not be divested for a Certificate of Divestiture to be issued. Example 1 to paragraph (b): A Department of Agriculture employee owns shares of stock in Better Workspace, Inc. valued at $25,000. As part of his official duties, the employee is assigned to evaluate bids for a contract to renovate office space at his agency. The Department's designated agency ethics official discovers that Better Workspace is one of the companies that has submitted a bid and directs the employee to sell his stock in the company. Because Better Workspace is a publicly traded security, the employee could retain up to $15,000 of the stock under the regulatory exemption for interests in securities at 5 CFR 2640.202(a). He would be able to request a Certificate of Divestiture for the $10,000 of Better Workspace stock that is not covered by the exemption. Alternatively, he could request a Certificate of Divestiture for the entire $25,000 worth of stock. If he chooses to sell his stock down to an amount permitted under the regulatory exemption, the Office of Government Ethics will not issue additional Certificates of Divestiture if the value of the stock goes above $15,000 again.

(c)*Property acquired under improper circumstances.* The Director will not issue a Certificate of Divestiture:

(1)If the eligible person acquired the property at a time when its acquisition was prohibited by statute, regulation, rule, or Executive order; or

(2)If circumstances would otherwise create the appearance of a conflict with the conscientious performance of Government responsibilities. § 2634.1008 Public access to a Certificate of Divestiture. A Certificate of Divestiture issued pursuant to the provisions of this subpart is available to the public in accordance with the rules of § 2634.603 of this part. [FR Doc. 04-17200 Filed 7-27-04; 8:45 am]

Connectionstraces to 8

Traces to 8 documents

U.S. Code