Proposed Rules. Petition for rulemaking; Notice of receipt
20,319 words·~92 min read·
/register/2005/12/21/05-24235·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
BILLING CODE 6325-39-P NUCLEAR REGULATORY COMMISSION 10 CFR Part 35 [Docket No. PRM-35-18] Peter G. Crane; Receipt of Petition for Rulemaking AGENCY: Nuclear Regulatory Commission. ACTION: Petition for rulemaking; Notice of receipt. SUMMARY: The Nuclear Regulatory Commission
(NRC)has received and requests public comment on a petition for rulemaking filed by Peter G. Crane (petitioner). The petition has been docketed by the NRC and has been assigned Docket No. PRM-35-18. The petitioner is requesting that the NRC amend the regulation that governs medical use of byproduct material concerning release of individuals who have been treated with radio pharmaceuticals. The petitioner believes that this regulation is defective on legal and policy grounds. The petitioner requests that the patient release rule be partially revoked to not allow patients to be released from radioactive isolation with more than the equivalent of 30 millicuries of radioactive iodine I-131 in their bodies. DATES: Submit comments by March 6, 2006. Comments received after this date will be considered if it is practical to do so, but assurance of consideration cannot be given except as to comments received on or before this date. ADDRESSES: You may submit comments by any one of the following methods. Please include the following number (PRM-35-18) in the subject line of your comments. Comments on petitions submitted in writing or in electronic form will be made available for public inspection. Because your comments will not be edited to remove any identifying or contact information, the NRC cautions you against including personal information such as social security numbers and birth dates in your submission. Mail comments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555. Attention: Rulemaking and Adjudications staff. E-mail comments to: *SECY@nrc.gov.* If you do not receive a reply e-mail confirming that we have received your comments, contact us directly at
(301)415-1966. You may also submit comments via the NRC's rulemaking Web site at *http://ruleforum.llnl.gov.* Address comments about our rulemaking Web site to Carol Gallagher,
(301)415-5905; (e-mail *cag@nrc.gov* ). Comments can also be submitted via the Federal eRulemaking Portal *http:www.regulations.gov.* Hand deliver comments to 11555 Rockville Pike, Rockville, Maryland, between 7:30 a.m. and 4:15 p.m. on Federal workdays. Publicly available documents related to this petition may be viewed electronically on the public computers located at the NRC Public Document Room (PDR), O1 F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland. The PDR reproduction contractor will copy documents for a fee. Selected documents, including comments, may be viewed and downloaded electronically via the NRC rulemaking Web site at *http://ruleforum.llnl.gov.* Publically available documents created or received at the NRC after November 1, 1999 are also available electronically at the NRC's Electronic Reading Room at *http://www.nrc.gov/reading—rm/adams.html.* From this site, the public can gain entry into the NRC's Agencywide Documents Access and Management System (ADAMS), which provides text and image files of NRC's public documents. If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the NRC PDR Reference staff at 1-800-397-4209, 301-415-4737 or by e-mail to *pdr@nrc.gov.* For a copy of the petition, write to Michael T. Lesar, Chief, Rules and Directives Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. FOR FURTHER INFORMATION CONTACT: Michael T. Lesar, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555. Telephone: 301-415-7163 or Toll-Free: 1-800-368-5642 or E-mail: *MTL@NRC.Gov.* SUPPLEMENTARY INFORMATION: Background The NRC has received a petition for rulemaking dated September 2, 2005, submitted by Peter G. Crane (petitioner) entitled “Re: Petition for Partial Revocation of the Patient Release Criteria Rule.” The petitioner is an attorney who was formerly employed in the NRC's Office of the General Counsel from 1975 until his retirement from the NRC in 1999. The petitioner requests that the NRC amend 10 CFR part 35, “Medical Use of Byproduct Material.” Specifically, the petitioner requests that the 1997 amendment to 10 CFR 35.75, “Release of Individuals Containing Radiopharmaceuticals or Permanent Implants” (62 FR 4120; January 29, 1997 (Patient Release Criteria Rule), be partially revoked. The petitioner believes the Patient Release Criteria Rule is defective on both legal and policy grounds. The petitioner recommends that 10 CFR 35.75 be amended to prohibit the release of patients from radioactive isolation with more than the equivalent of 30 millicuries of radioactive iodine-131 (I-131) in their systems. The NRC has determined that the petition meets the threshold sufficiency requirements for a petition for rulemaking under 10 CFR 2.802. The petition has been docketed as PRM-35-18. The NRC is soliciting public comment on the petition for rulemaking. Discussion of the Petition The NRC amended its patient release criteria in 10 CFR Part 35 in 1997 to allow the release of patients from licensee control who had been administered unsealed by product material if the total dose equivalent to any other individual from exposure to the released individual is not likely to exceed 5 mSv. (0.5rem). Prior to that time, NRC regulations required the hospitalization of patients with the equivalent of 30 millicuries or more of radioactive iodine 131 (I-131) in their systems, a dose which the petitioner believes is consistent with the International Basic Safety Standards on radiation protection. The petitioner objects to the release of patients with more than the equivalent of 30 millicuries of I-131 in their systems. The petitioner clarifies that his objection to the patient release criteria rule is based on both legal and policy grounds. On legal grounds, the petitioner asserts that the 1997 rulemaking was “a sham” in that it was “legally tainted” by collusion between the NRC staff and a petitioner. Specifically, the petitioner asserts that a former member of NRC's Advisory Committee on the Medical Uses of Isotopes (ACMUI) who submitted a petition for rulemaking in 1991 requesting the patient release criteria rule, submitted the petition at the NRC staff's request with NRC staff assistance, in violation of NRC regulations. The petitioner also objects to the patient release criteria rule on policy grounds, stating that it creates unwarranted hazards with regard to the radioactive iodine treatment of thyroid patients. The petitioner's concern is that there is no “hard and fast limit on the amount of I-131” administered to an outpatient, and that a licensee must only perform a calculation showing that no one will receive a dose that exceeds a prescribed limit. However, the patient release criteria rule means that patients who are sick, stressed, hypothyroid, potentially nauseous, and highly radioactive are being “sent out the door,” where they may come into close contact with family members and members of the public, and although they are supposed to receive instructions on minimizing exposure, may have trouble comprehending and remembering the guidance they are given. The petitioner expresses particular concern regarding how children of released patients will be adequately protected from radiological exposure, stating that children are more radiation-sensitive than adults and deserve more protection. The petitioner also expresses concern that there is a likelihood of vomiting and that, unlike hospital staff who wear protective clothing to protect against radiological contamination encountered while cleaning up, family members caring for patients at home will be unlikely to take such precautions. The petitioner also claims that during the 1997 rulemaking, when the NRC gave notice of the receipt of the petition for rulemaking, it received numerous adverse comments from the ACMUI, Agreement States, and other commenters. However, according to the petitioner, the NRC proceeded to issue the proposed rule and largely ignored comments that ran counter to the NRC staff's preferred approach. In fact, the petitioner asserts that the notice of the final rule misrepresented critical comments on the release of patients with I-131 in their systems. The petitioner states that the NRC acknowledged in promulgating the 1997 final rule that family members of patients would receive higher doses of radiation, but justified this in part by arguing that members of the clergy who visit hospitals frequently would receive lower doses of radiation as a result of patients having been sent out of the hospital, and by referring to the emotional benefit of releasing these patients. Specifically, the petitioner asserts that the NRC claimed in the final rule (see, 62 FR 4129) that although individuals exposed to the patient could receive higher doses than if the patient had been hospitalized longer, “these higher doses are balanced by shorter hospital stays and thus lower health care costs. In addition, shorter hospital stays may provide emotional benefits to patients and their families. Allowing earlier reunion of families can improve the patient's state of mind, which in itself may improve the outcome of the treatment and lead to the delivery of more effective health care.” The petitioner argues, however, that the NRC's reasoning ignored his and other thyroid patients' comments that some “patients may experience greater ‘emotional benefit’ from knowing that by receiving their treatment as in-patients, they are protecting their families from unnecessary radiation exposure.” Moreover, the petitioner is skeptical of the NRC's rationale that releasing patients with treatment doses of radioactivity in their bodies will reduce exposure to clergy who regularly visit hospitals, or hospital orderlies. Finally, the petitioner takes issue with other aspects that he notes constituted part of the NRC staff's rationale for the patient release criteria rule. Specifically, he contests the NRC's assertion that I-131 treatment for thyroid cancer occurs “probably no more than once in a lifetime,” the NRC's implication that no harm is done by exposing family members to the exposure from just one treatment, and the implication that it is not “reasonably achievable” to keep radiation exposure to family members low by treating patients in radioactive isolation. The Petitioner's Conclusion The petitioner concludes that the patient release criteria rule is irredeemably flawed, as was the rulemaking that produced that rule. The petitioner therefore requests that the NRC institute rulemaking to rescind that portion of 10 CFR 35.75 that allows patients to be released from radiological isolation with I-131 in their systems in amounts greater than 30 millicuries. The petitioner requests that this rulemaking be undertaken expeditiously. Dated at Rockville, Maryland, this 15th day of December, 2005. For the Nuclear Regulatory Commission. Annette Vietti-Cook, Secretary of the Commission. [FR Doc. E5-7641 Filed 12-20-05; 8:45 am] BILLING CODE 7590-01-P NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Parts 701 and 741 Third-Party Servicing of Indirect Vehicle Loans AGENCY: National Credit Union Administration (NCUA). ACTION: Notice of proposed rulemaking (NPR). SUMMARY: The NCUA is issuing a proposed rule to regulate purchases by federally insured credit unions of indirect vehicle loans serviced by third-parties. NCUA proposes to limit the aggregate amount of these loans serviced by any single third-party to a percentage of the credit union's net worth. The effect of the proposed rule would be to ensure that federally insured credit unions do not undertake undue risk with these purchases. DATES: Comments must be received on or before February 21, 2006. ADDRESSES: You may submit comments by any of the following methods (Please send comments by one method only): • *NCUA Web Site: http://www.ncua.gov/news/proposed_regs/proposed_regs.html.* Follow the instructions for submitting comments. • *E-mail:* Address to *regcomments@ncua.gov.* Include “[Your name] Comments on Advance Notice of Proposed Rulemaking (Specialized Lending Activities)” in the e-mail subject line. • *Fax:*
(703)518-6319. Use the subject line described above for e-mail. • *Mail:* Address to Mary Rupp, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. • *Hand Delivery/Courier:* Same as mail address. FOR FURTHER INFORMATION CONTACT: Paul Peterson, Staff Attorney, Office of General Counsel, at the above address or telephone
(703)518-6540, Matt Biliouris, Program Officer, Office of Examination and Insurance, at the above address or telephone
(703)518-6360, or Steve Sherrod, Division of Capital Markets Director, Office of Capital Markets and Planning, at the above address or telephone
(703)518-6620. SUPPLEMENTARY INFORMATION: A. Background Indirect lending involves credit union financing for the purchase of goods at the point-of-sale. The merchant, typically an automobile dealer, brings a potential member-borrower to the credit union and also assists with underwriting. When done properly, indirect lending has certain advantages for credit unions, including possible growth in membership and lending volume. Still, because the dealer's primary interest is in facilitating a vehicle sale and not in careful underwriting, indirect lending poses particular risks to credit unions. Some vendors offer indirect lending programs in which the vendor manages the credit union's relationship with the automobile dealer and, through loan servicing conducted by the vendor or a related business entity, the credit union's relationship with the member. These vehicle lending programs, referred to in this preamble as “indirect, outsourced programs,” carry all the risks of indirect lending programs as well as additional risks. NCUA is concerned some credit unions may increase risk exposures in indirect, outsourced programs without first conducting adequate due diligence, implementing appropriate controls, and gaining experience with servicer performance. Some credit unions have realized weaker than expected earnings because of participation in these programs. Therefore, the Board has determined that regulatory concentration limits on indirect, outsourced programs are appropriate. The types of risk associated with these indirect, outsourced loan programs include:
(1)Credit risk,
(2)liquidity risk,
(3)transaction risk,
(4)compliance risk, and
(5)reputation risk. A credit union should exercise caution and gain experience before significantly growing a portfolio of loans underwritten and serviced by a third party. A credit union's due diligence should include an initial review of each of these risks, as well as ongoing reviews. *Credit risk.* Both underwriting and post-underwriting factors generate potential credit risk. Credit loss experience may be worse if the indirect, outsourced loan program uses more permissive underwriting criteria than the credit union uses for its direct lending. Post-underwriting, credit loss experience may be worse if the quality of a third-party's servicing is not as good as that of the credit union's own servicing. Credit unions should adopt appropriate metrics (e.g., performance standards) in their servicing agreements to ensure timely servicing and collection performance by the third-party servicer. *Liquidity risk.* A credit union's liquidity position may suffer if the credit union experiences a sudden increase in indirect, outsourced loans. Liquidity may also be impaired if an indirect, outsourced arrangement restricts the ability to transfer servicing by imposing a material cost for the transfer, including the loss of a material economic benefit, such as cancellation of an insurance policy. Additionally, loans contractually bound to a third-party servicer may have a more limited market than the market for loans sold with servicing released. *Transaction risk.* Transaction risk (also referred to as operating or fraud risk) may arise in indirect, outsourced programs because the credit union is relying to a significant extent on the third-party servicer's internal controls, information systems, employee integrity, and operating processes. A credit union's due diligence should include continuing review of each of these areas, as well as the financial condition of the servicer. *Compliance risk.* Compliance risk in lending programs may arise from violations of, or nonconformance with, consumer protection laws, such as the Truth-in-Lending Act and Fair Debt Collection Practices Act. To the extent a credit union has reduced control and supervision of a third-party servicer's collection activities, a credit union's compliance risk in an indirect, outsourced program may be greater than that of an in-house servicing program. *Reputation risk.* Reputation risk may result from a third-party servicer's compliance failures or transaction losses. Poor quality servicing, improper collection processes, and questionable or excessive fees assessed against the borrower by the servicer may also alienate members from the credit union and affect the ability of the credit union to maintain existing relationships or establish new ones. NCUA has discussed sound business practices related to this form of lending in a series of letters to credit unions going back several years. In November 2001, for example, NCUA published NCUA Letter to Credit Unions
(LTCU)No. 01-CU-20, *Due Diligence over Third Party Service Providers,* providing minimum due diligence practices over third-party service providers In September 2004, the Board expressed its concern with specialized lending activities and the associated risks in NCUA LTCU No. 04-CU-13, *Specialized Lending Activities.* That letter discussed three, higher risk lending activities: subprime lending, indirect lending, and outsourced lending relationships, and included three examiner questionnaires so credit unions could see how examiners evaluate the risks in these activities. These two letters are available on NCUA's Web site at *http://www.ncua.gov/letters/2001/01-CU-20.pdf* and *http://www.ncua.gov/letters/2004/04-CU-13.pdf,* respectively. Members of the public without access to the internet may request copies of letters to credit unions and other NCUA publications by calling NCUA's publication line at
(703)518-6340. Since the summer of 2004, NCUA has also observed a significant increase in specialized lending activities, including the use of third parties to service indirect vehicle loans. NCUA began collecting indirect loan data from all credit unions beginning with the June 30, 2004, Call Report. The portfolios of credit unions reporting indirect loans increased to $58 billion (at June 30, 2005) from $45 billion (at June 30, 2004), a 29 percent increase in one year. 1 Based on supervision and insurance information, the growth in indirect, outsourced vehicle loan programs was even more rapid, and NCUA also detected increasing concentration levels at particular credit unions in these loans. Currently, NCUA estimates there are approximately twenty or more credit unions with more than 100 percent of their net worth invested in indirect, outsourced vehicle loans. 1 Based on anecdotal information, NCUA believes that the vast majority of these indirect loans are vehicle loans. In June 2005, the NCUA Board issued Risk Alert 05-RISK-01 (the Risk Alert), Subject: Specialized Lending Activities—Third-Party Subprime Indirect Lending and Participations, available on NCUA's website at *http://www.ncua.gov/letters/RiskAlert/2005/05-RISK-01.pdf.* The Risk Alert discussed concerns related to subprime, indirect automobile loans underwritten or serviced by third parties. The Risk Alert further discussed due diligence practices and on-going control mechanisms appropriate for such programs. Despite these NCUA supervision and insurance initiatives, the Board remains concerned that some credit unions engaging in these programs still do not undertake the requisite due diligence to understand and protect themselves from the risks inherent in these programs. In fact, some credit unions with significant concentrations in indirect, outsourced loans have indicated to NCUA their desire to fund new loans even though they have not yet completed the due diligence described in NCUA issuances. B. Proposed Rule 1. General NCUA proposes a two-step, regulatory concentration limit for indirect, outsourced programs with a waiver provision for higher limits in appropriate cases. The Board believes the proposed rule is necessary to protect the National Credit Union Share Insurance Fund (NCUSIF) from the risks associated with this activity. For the first 30 months of a new relationship, § 701.21(h)(1) limits a credit union's interest in indirect vehicle loans serviced by any single third party to 50 percent of the credit union's net worth. This permits a credit union to enter and gain experience with a new indirect, outsourced vendor program. After 30 months of experience with that third party's program, the proposed rule permits a credit union to increase its interests in that program to 100 percent of the credit union's net worth. The Board believes that limits of 50 percent and 100 percent are appropriate, assuming credit unions maintain an adequate due diligence program. As explained below, however, a credit union that can demonstrate appropriate initial and ongoing due diligence may apply for a waiver to obtain higher limits. In determining these concentration limits, the Board noted that indirect, outsourced programs typically require a credit union to give a third party servicer significant control over the loan assets. For example, the third-party generally makes all contacts with the member-borrowers; determines when the loans are in default; determines the pace of and resource allocation to loan collection, vehicle repossession, and vehicle remarketing; and also controls all the cash flows. The indirect lending aspect of these programs creates additional loss of control for the credit union, as member-borrower information does not come directly to the credit union but instead is filtered through both the dealer and the vendor. In some of these programs, the third-party also controls the quality of the loan receivables because it dictates the underwriting criteria and processes the loan applications. In addition, some third-party vendors control the insurance coverage associated with these loans. The third-party may even assume some of the credit risk through reinsurance arrangements or stop-loss agreements. All these factors increase a credit union's reliance on the third-party to produce a positive return for the credit union. Some vendors have advertised these programs in the past by promoting them as “turn-key” and suggesting that credit unions need do very little in the way of due diligence. The control exercised by the third-party in indirect, outsourced programs is similar to the control exercised by an issuer of an asset backed security
(ABS)collateralized by loan receivables. The originator of a pool of loan receivables ( *e.g.* , auto loans) sells the receivables into a bankruptcy-remote grantor trust or owner trust ( *i.e.* , the ABS issuer). The ABS issuer contracts with a servicer, usually affiliated with the seller ( *e.g.* , seller/servicer), to service the receivables, and determines what sort of credit enhancements or insurance will be necessary to support issuance of ABS. The ABS issuer also controls the cash flows. The Board believes the risks to a credit union from indirect, outsourced programs are similar to those posed by the purchase of an ABS investment. Accordingly, in determining appropriate concentration limits for indirect, outsourced vendor loan programs the Board examined established concentration limits for investment in ABS. Natural person federal credit unions are not authorized to invest in ABS, even highly rated ABS. 2 12 U.S.C. 1757. National banks may invest in ABS, but the Office of the Comptroller of the Currency
(OCC)limits a bank's aggregate investments in ABS issued by any one issuer to 25 percent of capital and surplus. 3 12 CFR 1.3(f). For purposes of this limit, the OCC requires aggregation of ABS issued by obligors that are related directly or indirectly through common control. 12 CFR 1.4(d)(i). 2 NCUA's corporate credit union rule, however, does permit corporate credit unions to invest in ABS. 12 CFR 704.5(c)(5). The corporate rule generally limits the aggregate of all investments, including ABS, issued by any single obligor to 50 percent of the corporate credit union's capital or $5 million, whichever is greater. 12 CFR 704.6(c). 3 The capital and surplus of a national bank is roughly equivalent to the net worth of a natural person credit union. Compare 12 CFR 1.2(a) with 12 CFR 702.2(f) and the definition of the “net worth” in proposed § 701.21(h)(3)(iv). The OCC established this 25 percent limit in 1996. Originally, the OCC proposed an even more restrictive 15 percent limit, but ultimately chose a 25 percent limit with the following explanation: The OCC believes the 25 percent of capital limit is a prudential limit that provides sufficient protection against undue risk concentrations. This limit parallels the 25 percent credit concentration benchmark in the Comptroller's Handbook for National Bank Examiners. The Handbook identifies credit concentrations in excess of 25 percent of a bank's capital as raising potential safety and soundness concerns. For this purpose, the Handbook guidance aggregates direct and indirect obligations of an obligor or issuer and also specifically contemplates application of the 25 percent benchmark to concentrations that may result from an acquisition of a volume of loans from a single source, regardless of the diversity of the individual borrowers. 61 FR 63972, 63977 (Dec. 2, 1996)(emphasis in original). In comparing indirect, outsourced programs and ABS, the Board notes there are certain protections for the ABS investor that do not exist in the indirect, outsourced loan programs. The creation and sale of ABS securities are regulated by the Securities and Exchange Commission, while the various vendors that currently market indirect, outsourced loan programs to credit unions have no specific regulatory oversight. Further, the only ABS that corporate credit unions and national banks may invest in are reviewed and rated by nationally recognized statistical rating organizations (NRSROs) while the vendors currently offering indirect, outsourced programs to credit unions are often privately held companies with no NRSRO rating. The proposed rule, with limits of 50 and 100 percent, is less restrictive than the 25 percent that the OCC permits for national bank investment in ABS. While investing is a secondary activity for credit unions, lending is a primary purpose. Credit unions should have maximum flexibility to make loans to members within the bounds of safety and soundness. The Board is generally not inclined to allow a credit union to place over 100 percent of its net worth at risk. A credit union is not likely to experience a 100 percent devaluation of any particular indirect, outsourced vehicle loan portfolio but substantial devaluations are possible, particularly in portfolios of poor credit quality or in the event of fraud. In addition, inadequate oversight in one credit union program, such as a lending program, may indicate poor due diligence and potential losses in other programs at that credit union. Accordingly, the Board has determined that a credit union should be held to a maximum concentration of 100 percent of net worth unless it can demonstrate a high level of due diligence and controls. In determining when a credit union may move from the 50 percent limit to the 100 percent limit, the Board examined the average life of the loans that make up an indirect, outsourced program portfolio. Average vehicle loan life depends on various factors. For example, it can be as little as 20 to 24 months for subprime vehicle loans, and as much as 36 months or more for prime, new vehicle loans. After about 30 months of experience, then, a credit union that is properly monitoring loan performance on vehicle loans should have a sufficient understanding of the historical performance of that portfolio. At the 30-month point, the Board believes that an increase in concentration limits from 50 percent of net worth to 100 percent is appropriate. Regardless of whether a credit union is at or below its concentration limit, all credit unions should conduct due diligence, both before entering into indirect, outsourced lending programs and on an on-going basis. Even at lesser concentration levels, these programs entail significant risk that can negatively affect net worth. All credit unions involved in these programs must be familiar with relevant regulatory limitations and guidance, including those documents referenced earlier in this preamble. The proposed rule is limited in scope, in that it is limited to loans made to finance vehicle purchases and the concentration limits do not apply to servicers that are federally-insured depository institutions or wholly-owned subsidiaries of federally-insured depository institutions. The risks to credit unions associated with these servicers are mitigated because federal regulators have access to and oversight of these entities. Of course, credit unions must still conduct appropriate due diligence even when using these servicers. The proposed concentration limits are not, however, limited to loans of any particular credit quality, such as prime, nonprime, or subprime loans. Still, loan portfolios of lesser credit quality require greater due diligence, as described in the Risk Alert. 4 Also, the due diligence required for a waiver of the concentration limits may increase for portfolios of lesser credit quality. 4 The Board would like to clarify that, potentially, there could be vendor programs affected by this rulemaking that are not affected by the Risk Alert, and vice versa. For example, an indirect, outsourced program that only involves vehicle loans of prime credit quality would be affected by the limits in this proposed rule but not by the Risk Alert. On the other hand, any vendor program that requires the credit union adopt vendor-generated subprime underwriting criteria but does not involve any third-party servicing would be subject to portions of the Risk Alert but not subject to the limits imposed by this proposed rule. 2. Waiver Provision Section 701.21(h)(2) of the proposed rule establishes a waiver process to permit credit unions with high levels of due diligence and tight controls to have greater concentration limits. A credit union requesting a waiver of the concentration limits may apply to the regional director who will consider various criteria in determining whether to grant a waiver, including: • The credit union's understanding of the third party servicer's business model, organization, financial health, and the program risks; • The credit union's due diligence in monitoring and protecting against program risks; • The credit union's ability to control the servicer's actions and replace an inadequate servicer as provided by contract; • Other relevant factors related to safety and soundness considerations. If a regional director determines that a waiver is appropriate, the regional director will include appropriate limitations on the waiver such as a substitute concentration limit and a waiver expiration date. 3. Waiver Criteria Credit unions that desire greater concentration limits must have high levels of due diligence and tight controls. A discussion of the criteria a regional director will use when reviewing an application for waiver follows. a. The Credit Union's Understanding of the Third Party Servicer's Organization, Business Model, Financial Health, and Program Risks Often, an indirect, outsourced vendor is a privately held company that processes significant cash flows for the credit union and also controls important credit union records, such as the vehicle title documents and current member contact information. A credit union requesting a concentration limit waiver must demonstrate a comprehensive understanding of the third party's organization, business model, financial health, and the risks associated with the vendor's program. The credit union must also demonstrate that the servicer is adequately capitalized to meet its financial obligations. A credit union requesting a waiver should provide detailed information about the following in its waiver request to the regional director: • The vendor's organization, including identification of subsidiaries and affiliates involved in the program and the purpose of each; • The various sources of income to the vendor and the credit union in the program and any potential vendor conflicts with the interests of the credit union; • The experience, character, and fitness of the vendor's owners and key employees; • The vendor's ability to fulfill commitments, as evidenced by aggregate financial commitments, capital strength, liquidity, reputation, and operating results; 5 5 NRSRO ratings, multi-year audited and segmented financials, and explanations of related party transactions and changes to the net worth of the vendor, if any, are also relevant. • How loan-related cash flows, including borrower payments, borrower payoffs, and insurance payments, are tracked and identified in the program; • The vendor's internal controls to protect against fraud and abuse, as documented by, for example, a current SAS 70 type II report prepared by an independent and well-qualified accounting firm; • Insurance offered by the vendor, including interrelated insurance products, premiums, conditions for coverage beyond the control of the credit union (e.g., a prohibition on extension of the insured loans past maturity), and limitations such as aggregate loss limits; • The underwriting criteria provided by the vendor, including an analysis of the expected yield based on historical loan data, and a sensitivity analysis considering the potential effects of a deteriorating economic environment, failure of associated insurance, the possibility of fraud at the servicer, a decline in average portfolio credit quality, and, if applicable, movement in the program back toward industry-wide performance statistics; 6 6 If the program loans have historically outperformed industry averages, perhaps because of lower prepayment rates or lower default proportions, the credit union should calculate expected yield should the prepayment rates or default proportions move upwards toward the industry averages. • Vendor involvement in the underwriting and processing of loan applications, including use of proprietary scoring or screening models not included in the credit union approved underwriting criteria; and • The program risks, including
(1)credit risk,
(2)liquidity risk,
(3)transaction risk,
(4)compliance risk,
(5)strategic risk,
(6)interest rate risk, and
(7)reputation risk. Some indirect, outsourced programs have complex business models that include vendor management of the dealer relationship and also insurance provided by the vendor. These business models can produce situations where the vendor's financial interests are not aligned with the credit union's interests. The credit union needs to be aware of these situations and, if appropriate, take protective action. For example, the dealer's interest in an indirect lending situation is to obtain financing so that the dealer can sell a vehicle. The credit union's interest is to ensure that loan applications are properly underwritten, and that only members who are qualified for loans receive loans. With an indirect, outsourced program, the third-party vendor controls information on the quality of all of a particular dealer's originations. A vendor could present loans to a credit union from a changing list of dealers, making it difficult for the credit union to identify and screen out such substandard dealers. This creates a potential for the vendor to permit dealers with substandard underwriting performance to remain active in the program. Unlike typical indirect lending where the dealer receives an origination fee, in some vendor programs the vendor processes the loan application for the credit union and the vendor also receives significant income from dealer fees. The credit union needs to fully understand the relationship between the vendor and the dealers. Credit unions seeking a concentration limit waiver should review agreements between the vendor and associated dealers. Some vendors provide third-party default insurance to credit unions, and this presents a potential conflict. This insurance pays most of the loan deficiency balance to the credit union if a loan defaults and a vehicle is repossessed and sold at auction. In the event of high loan default rates, the interests of the credit union and insurance company may conflict. The credit union would like the vehicles repossessed and sold and the insurance paid, while the insurance company would rather not pay the claims if they can be legally avoided. Some vendors align their interests with the insurance company, not the credit union, through guaranty or reinsurance agreements. That is, if the vehicle is repossessed and sold, the insurance company passes some or all of its costs for paying the claim through to the vendor. This creates a potential conflict of interest and an incentive for the vendor, as servicer, not to repossess vehicles. For example, a delay in repossession increases the odds that a vehicle will disappear (i.e., go skip) or a borrower will declare and complete a bankruptcy under chapter 13, and in neither situation will the default insurance pay. In addition, a delay in repossession on a default near loan maturity may also cause the insurance coverage to lapse whether or not the vehicle is ultimately repossessed. Accordingly, a credit union needs to understand the relationship between the vendor and the insurance company and the associated risks to the credit union. To understand this relationship fully, a credit union desiring a concentration limit waiver should review all agreements between the vendor, affiliates of the vendor, and the associated insurance companies. Another potential conflict exists where the vendor controls the dealer relationship and can route a potential loan to multiple funding sources. For example, some vendors track statistics on loan performance by dealership. A credit union should be aware if a vendor then routes loan applications from the preferred dealerships to the preferred funding sources. A credit union desiring a waiver should understand the various funding sources available to the vendor and document how the vendor tracks vendor performance and makes funding decisions. b. The Credit Union's Due Diligence in Monitoring and Protecting Against Program Risks Credit unions must design a due diligence program that identifies and assesses all material risks. The nature and extent of the due diligence required for a waiver depends on the nature and extent of the identified risks. Higher concentration levels entail more risk to the net worth of the credit union, and so the requisite due diligence also depends on the substitute concentration limit that the credit union requests. c. Whether Contracts Between the Credit Union and the Third-Party Servicer Grant the Credit Union Sufficient Control Over the Servicer's Actions and Provide for Replacing an Inadequate Servicer After a loan is funded, the most important activity affecting loan performance is the quality of the servicing. As NCUA stated in LTCU No. 04-CU-13, and, again, in the Risk Alert, safety and soundness requires a credit union to limit the power of a third-party servicer to alter loan terms. Also, the servicing contract must contain a mechanism, or exit clause, to replace an unsatisfactory servicer. To qualify for a waiver of these regulatory concentration limits, the servicing agreement should include more than minimal protections for the credit union. Servicer performance standards should be objective and clear, and the waiver request should clearly articulate how the performance standards protect the interests of the credit union. The exit clause, including any cure period, should be exercisable in a reasonable period of time. The more intensive the requisite servicing, such as for nonprime or subprime loans, the shorter that period of time should be. A credit union's right to exit the servicing agreement should be exercisable at a reasonable cost to the credit union. If the credit union must pay a punitive fee to replace a poor servicer, or give up valuable insurance protection or legal rights without adequate compensation, the servicing agreement will not satisfy this waiver criterion. The regional director may also consider any legal reviews obtained by the credit union on these contracts. The regional director should consider the scope and depth of the review and the qualifications of the reviewer. d. Other Factors Related to Safety and Soundness Regional directors may consider other relevant factors when determining whether to grant a waiver of the concentration limits as well as the size of any substitute limit. Other factors include, but are not limited to, the demonstrated strength of the credit union's management and the credit union's previous history in exercising due diligence over similar programs. 4. Grandfathering Several credit unions that currently participate in indirect, outsourced programs have concentration levels that exceed the proposed concentration limits. For those credit unions that exceed the concentration limits on the effective date of any final rule, the rule will not require any divestiture. The rule will prohibit these credit unions from purchasing any additional loans, or interests in loans, from the affected vendor program until such time as the credit union either reduces its holdings below the appropriate concentration limit or the credit union obtains a waiver to permit a greater concentration limit. The Board is concerned that some credit unions may consider making large purchases of loans that would be subject to the rule before the effective date of a final rule. NCUA will review any large purchases closely and credit unions should be advised that NCUA may consider appropriate supervisory action, including divestiture, to ensure that the credit union's actions were safe and sound. Regulatory Procedures Regulatory Flexibility Act The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a proposed rule may have on a substantial number of small credit unions (those under $10 million in assets). This proposed rule establishes for federally-insured credit unions a concentration limit on indirect vehicle loans serviced by third parties. As of May 31, 2005, NCUA estimates no more than five small credit unions were involved in purchasing vehicle loans, or interests in loans, from an indirect, outsourced vendor program. The proposed rule, therefore, will not have a significant economic impact on a substantial number of small credit unions and a regulatory flexibility analysis is not required. Paperwork Reduction Act The waiver provision of section 701.21(h)(2) contains information collection requirements. As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), NCUA has submitted a copy of this proposed rule as part of an information collection package to the Office of Management and Budget
(OMB)for its review and approval of a new Collection of Information, Third-Party Servicing of Indirect Vehicle Loans. The proposed § 701.21(h)(2) requires that credit unions requesting a waiver provide sufficient information to NCUA to determine if a waiver is appropriate. NCUA is not certain how many credit unions may request a waiver. Currently, there are approximately twenty credit unions that have in excess of 100 percent of net worth invested in indirect, outsourced vehicle loan programs. NCUA believes that no more than ten of these credit unions will request a waiver during the first year. Also, during the first year, NCUA estimates that no more than five additional credit unions will approach their concentration limits and also request a waiver. It will take a credit union approximately fifty hours to prepare the waiver request, including preparing a description of current and planned due diligence efforts and making copies of all supporting documentation. Fifteen respondents times fifty hours each is a total annual burden of seven hundred and fifty hours. Organizations and individuals desiring to submit comments on the information collection requirements should direct them to the Office of Information and Regulatory Affairs, OMB, Attn: Mark Menchik, Room 10226, New Executive Office Building, Washington, DC 20503. The NCUA considers comments by the public on this proposed collection of information in— —Evaluating whether the proposed collection of information is necessary for the proper performance of the functions of the NCUA, including whether the information will have a practical use; —Evaluating the accuracy of the NCUA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; —Enhancing the quality, usefulness, and clarity of the information to be collected; and —Minimizing the burden of collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology; e.g., permitting electronic submission of responses. The Paperwork Reduction Act requires OMB to make a decision concerning the collection of information contained in these proposed regulations between 30 and 60 days after publication of this document in the **Federal Register** . Therefore, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication. This does not affect the deadline for the public to comment to the NCUA on the proposed regulations. Executive Order 13132 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. The proposed rule would not have substantial direct effects on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this proposed rule does not constitute a policy that has federalism implications for purposes of the executive order. The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families NCUA has determined that this proposed rule would not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998). List of Subjects 12 CFR part 701 Credit unions, Loans. 12 CFR part 741 Credit unions, Requirements for insurance. By the National Credit Union Administration Board on December 15, 2005. Mary Rupp, Secretary of the Board. For the reasons stated in the preamble, the National Credit Union Administration proposes to amend 12 CFR parts 701 and 741 as set forth below: PART 701—ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS 1. The authority citation for part 701 continues to read as follows: Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1787, and 1789. Section 701.6 is also authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 *et seq.* ; 42 U.S.C. 1981 and 3601-3619. Section 701.35 is also authorized by 42 U.S.C. 4311-4312. 2. In part 701, add a new paragraph
(h)to § 701.21 to read as follows: § 701.21 Loans to Members and Lines of Credit to Members.
(h)Third-Party Servicing of Indirect Vehicle Loans.
(1)A federally-insured credit union must not acquire any vehicle loan, or any interest in a vehicle loan, serviced by a third-party servicer if the aggregate amount of vehicle loans and interests in vehicle loans serviced by that third-party servicer and its affiliates would exceed:
(i)50 percent of the credit union's net worth during the initial thirty months of that third-party servicing relationship; or
(ii)100 percent of the credit union's net worth after the initial thirty months of that third-party servicing relationship.
(2)Regional directors may grant a waiver of the limits in paragraph (h)(1) of this section to permit greater limits upon written application by a credit union. In determining whether to grant or deny a waiver, a regional director will consider:
(i)The credit union's understanding of the third party servicer's organization, business model, financial health, and the related program risks;
(ii)The credit union's due diligence in monitoring and protecting against program risks;
(iii)Whether contracts between the credit union and the third-party servicer grant the credit union sufficient control over the servicer's actions and provide for replacing an inadequate servicer; and
(iv)Other factors relevant to safety and soundness.
(3)For purposes of paragraph
(h)of this section:
(i)The term “third-party servicer” means any entity, other than a federally-insured depository institution or a wholly-owned subsidiary of a federally-insured depository institution, that receives any scheduled periodic payments from a borrower pursuant to the terms of a loan and distributes the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan.
(ii)The term “its affiliates,” as it relates to the third-party servicer, means any entities that:
(A)Control, are controlled by, or are under common control with, that third-party servicer; or
(B)Are under contract with that third-party servicer or other entity described in paragraph (h)(3)(ii)(A) of this section.
(iii)The term “vehicle loan” means any installment vehicle sales contract or its equivalent that the credit union must report as an asset under generally accepted accounting principles. The term does not include loans made directly by the credit union to a member.
(iv)The term “net worth” means the retained earnings balance of the credit union at quarter end as determined under generally accepted accounting principles. For low income-designated credit unions, net worth also includes secondary capital accounts that are uninsured and subordinate to all other claims, including claims of creditors, shareholders, and the National Credit Union Share Insurance Fund. PART 741—REQUIREMENTS FOR INSURANCE 3. The authority citation for part 741 continues to read as follows: Authority: 12 U.S.C. 1757, 1766, 1781-1790, and 1790d. Section 741.4 is also authorized by 31 U.S.C. 3717. 4. Add a new paragraph
(c)to § 741.203 to read as follows: § 741.203 Minimum loan policy requirements.
(c)Adhere to the requirements stated in § 701.21(h) of this chapter concerning third-party servicing of indirect vehicle loans. Before a state-chartered credit union applies to a regional director for a waiver under § 701.21(h)(2) it must first notify its state supervisory authority. The regional director will not grant a waiver unless the appropriate state official concurs in the waiver. [FR Doc. E5-7584 Filed 12-20-05; 8:45 am] BILLING CODE 7535-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-144615-02] RIN 1545-BB26 Section 482: Methods To Determine Taxable Income in Connection With a Cost Sharing Arrangement; Correction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction to notice of proposed rulemaking. SUMMARY: This document corrects notice of proposed rulemaking (REG-144615-02) that was published in the **Federal Register** on Monday, August 29, 2005 (70 FR 51116). The document contains proposed regulations that provide guidance regarding methods under section 482 to determine taxable income in connection with a cost sharing arrangement. FOR FURTHER INFORMATION CONTACT: Jeffrey L. Parry or Christopher J. Bello,
(202)435-5265 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The notice of proposed rulemaking (REG-144615-02) that is the subject of this correction is under section 482 of the Internal Revenue Code. Need for Correction As published, REG-144615-02 contains errors that may prove to be misleading and are in need of clarification. Correction of Publication Accordingly, the notice of proposed rulemaking (REG-144615-02), that was the subject of FR Doc. 05-16626, is corrected as follows: 1. On page 51116, column 2, in the preamble, under the paragraph heading “Paperwork Reduction Act”, eighth paragraph, third line, the language “of information (see below);” is corrected to read “of information (see above);”. 2. On page 51116, column 3, in the preamble, under the paragraph heading “Background”, tenth line from the bottom of the last paragraph, the language “for this type of external contributions is” is corrected to read “for this type of external contribution is”. 3. On page 51117, column 1, in the preamble, under the paragraph heading “ *A. Overview* ”, fourth line from the bottom of the first paragraph, the language “the commensurate income standard” is corrected to read “the commensurate with income standard”. 4. On page 51117, column 2, in the preamble, under the paragraph heading “ *A. Overview* ”, the second line from the bottom of the column, the language “ *appropriate return would be provided to such* ” is corrected to read “ *appropriate return would be required to such* ”. 5. On page 51118, column 2, in the preamble, under the paragraph heading “1. General Rule—Proposed § 1.482-7(a)”, the last line of the second paragraph, the language “exploiting cost shared intangibles.” is corrected to read “exploiting the cost shared intangibles.”. 6. On page 51118, column 3, in the preamble, under the paragraph heading “1. General Rule Proposed § 1.482-7(a)”, the second line from the bottom of the first full paragraph of the column, the language “the rules of §§ 1.482-1 and 1.482-5” is corrected to read “the rules of §§ 1.482-1 and 1.482-4”. 7. On page 51118, column 3, in the preamble, under the paragraph heading “a. CSA Transactions in General”, the eighth line of the first paragraph, the language “circumstances. “(Emphasis added.)” is corrected to read “circumstances * * * “(Emphasis added.)”. 8. On page 51119, column 1, in the preamble, under the paragraph heading “a. CSA Transactions in General”, the fifteenth line of the first paragraph of the column, the language “expected in a cost sharing agreement” is corrected to read “expected in a cost sharing arrangement.”. 9. On page 51119, column 1, in the preamble, under the paragraph heading “a. CSA Transactions in General”, the second line from bottom of the second full paragraph, the language “be provided to such party to reflect its” is corrected to read “be required to such party to reflect its”. 10. On page 51124, column 3, in the preamble, under the paragraph heading “h. Valuation Consistent With the Investor Model—Proposed § 1.482-7(g)(2)(viii)”, the third line from the bottom of the column, the language “would be expected to yield a rate return” is corrected to read “would be expected to yield a rate of return”. 11. On page 51125, column 1, in the preamble, under the paragraph heading “h. Valuation Consistent With the Investor Model—Proposed § 1.482-7(g)(2)(viii)”, the sixth and seventh lines from the bottom of the column, the language “ins effectively diminish the value of the buy-in payments, such that the return to” is corrected to read “ins effectively diminishes the value of the buy-in payments, such that”. 12. On page 51125, column 2, in the preamble, under the paragraph heading “i. Coordination of Best Method Rule and Form of Payment—Proposed § 1.482-7(g)(2)(ix)”, the last line of the paragraph, the language “ method as to its method payment form.” is corrected to read “method.”. 13. On page 51127, column 1, in the preamble, under the paragraph heading “6. Market Capitalization Method—Proposed § 1.482-7(g)(6)”, the seventeenth and eighteenth lines of the first full paragraph, the language “separately accounted for under proposed § 1.482-7(d) and by the value” is corrected to read “(separately accounted for under proposed § 1.482-7(d)) and by the value”. 14. On page 51128, column 3, in the preamble, under the paragraph heading “2. Allocations When CSTs Are Consistently and Materially Disproportionate to RAB Shares—Proposed § 1.482-7(i)(5)”, the second full paragraph of the column, the first line, the language “Current § 1.482-7(g)(5) provides that” is corrected to read “Current § 1.482-7(g)(5) to the extent it provides that”. 15. On page 51129, column 2, in the preamble, under the paragraph heading “3. Periodic Adjustments—Proposed § 1.482-7(i)(6)”, the fourth line from the bottom of the first full paragraph of the column, the language “ *would be provided to such party to* ” is corrected to read “ *would be required to such party to* ”. 16. On page 51130, column 1, in the preamble, under the paragraph heading “3. Periodic Adjustments—Proposed § 1.482-7(i)(6)”, the seventh line from the top of the column, the language “profits, cost contributions, or PCT” is corrected to read “profits, cost contributions, and PCT”. 17. On page 51130, column 3, in the preamble, under the paragraph heading “6. Territorial Operating Profit or Loss-Proposed § 1.482-7(j)(1)(vi)”, the sixth line of the paragraph, the language “Activity, determined before an expense” is corrected to read “Activity, determined before any expense”. § 1.482-7 [Corrected] 18. On page 51133, column 2, § 1.482-7(b)(5)(iii), the language “Example.” is corrected to read “Examples.”. 19. On page 51133, column 2, § 1.482-7(e)(2)(ii), the language “Indirect bases for measuring benefits.” is corrected to read “Indirect bases for measuring anticipated benefits.”. 20. On page 51133, column 3, § 1.482-7(g)(2)(x), the language “Coordination of the valuations or prior and subsequent PCTs.” is corrected to read “Coordination of the valuations of prior and subsequent PCTs.”. 21. On page 51133, column 3, § 1.482-0 is corrected by adding two entries to the outline for § 1.482-7(g)(2)(x)(A) and (g)(2)(x)(B) to read as follows: § 1.482-0 Outline of regulations under section 482. § 1.482-7 Methods to determine taxable income in connection with a cost sharing arrangement.
(g)* * *
(2)* * *
(x)* * *
(A)In general.
(B)Coordination with regard to PFAs. 22. On page 51133, column 3, § 1.482-7(g)(7), the language “Residual profit split.” is corrected to read “Residual profit split method.”. 23. On page 51134, column 1, § 1.482-7(i)(6)(vi)(A), second line, the language “external contributions as in the PCT.” is corrected to read “external contribution as in the PCT.”. 24. On page 51134, column 1, § 1.482-7(i)(6)(viii), the language “Documentation.” is removed. § 1.482-5 [Corrected] 25. On page 51136, column 3, § 1.482-7(b)(3)(viii), *Example 4.* , second line from the bottom of the paragraph, the language “as Company's P acquisition of Company X,” is corrected to read “as Company P's acquisition of Company X,”. 26. On page 51140, column 3, § 1.482-7(e)(2)(ii)(C), sixth line, the language “amortization) on account of IDCS, may” is corrected to read “amortization) on account of IDCs, may”. 27. On page 51141, column 1, § 1.482-7(e)(2)(ii)(E), *Example 2.,* lines fourteen through seventeen, the language “relative to USS' units by a factor of 2. This reflects the fact that FP pays twice as much as USS as a percentage of its other production costs for electricity and,” is corrected to read “relative to USS's units by a factor of 2. This reflects the fact that FP pays twice as much as USS for electricity and,”. 28. On page 51142, column 1, § 1.482-7(e)(2)(iii)(B), paragraph
(ii)of *Example 1.,* fourth line, the language “order to reflect USS' one-year lag in” is corrected to read “order to reflect USS's one-year lag in”. 29. On page 51142, column 2, § 1.482-7(g), ninth line, the language “provisions of § 1.482-1, including best” is corrected to read “provisions of § 1.482-1, including the best”. 30. On page 51143, column 1, § 1.482-7(g)(2)(iv)(B), paragraph
(i)of *Example 1.,* first line of the column, the language “product and are therefore the RT Rights in” is corrected to read “product and therefore the RT Rights in”. 31. On page 51143, column 1, § 1.482-7(g)(2)(iv)(B), paragraph
(iii)of *Example 1.,* third line, the language “product outside of the Country X for a royalty” is corrected to read “product outside of Country X for a royalty”. 32. On page 51144, column 1, § 1.482-7(g)(2)(vi)(B), *Example 1.,* twenty second line, the language “USPharm in the form of the RT Rights in its” is corrected to read “USPharm consisting of the RT Rights in its”. 33. On page 51144, column 2, § 1.482-7(g)(2)(vi)(B), *Example 2.,* fourth line from the top of the column, the language “USPharm's cost of debt is 6%. Equity” is corrected to read “USPharm's after-tax cost of debt is 6%. Equity”. 34. On page 51144, column 2, § 1.482-7(g)(2)(vii)(B), paragraph
(ii)of *Example 1.,* sixth line, the language “technology and workforce of Company X” is corrected to read “technology and workforce of Company X are”. 35. On page 51144, column 3, § 1.482-7(g)(2)(vii)(B), paragraph
(ii)of *Example 1.,* second line from the bottom of the paragraph, the language “PCTs. See paragraph (g)(5)(iv(A) of this” is corrected to read “PCTs. See paragraph (g)(5)(iv)(A) of this”. 36. On page 51146, column 3, § 1.482-7(g)(4)(ii)(B), paragraph
(i)of *Example.,* twentieth line, the language “did not participate in the CSA, its next best” is corrected to read “did not participate in the CSA, its best”. 37. On page 51146, column 3, § 1.482-7(g)(4)(ii)(B), paragraph
(ii)of *Example.,* fourth line, the language “present value to USP of the next best realistic” is corrected to read “present value to USP of the best realistic”. 38. On page 51148, column 1, § 1.482-7(g)(4)(iv)(D), paragraph
(ii)of *Example.,* second line, the language “Payment under the income method is an” is corrected to read “Payment based on territorial sales under the income method is an”. 39. On page 51148, column 1, § 1.482-7(g)(4)(iv)(D), paragraph
(ii)of *Example.,* fifth line, the language “case the alternative rate is 80% (($80 million” is corrected to read “case the alternative rate is 80% ($80 million”. 40. On page 51148, column 1, § 1.482-7(g)(4)(iv)(D), paragraph
(ii)of *Example.,* fourteenth line, the language “payable by the FS to the USP over the period” is corrected to read “payable by FS to USP over the period”. 41. On page 51148, column 1, § 1.482-7(g)(4)(iv)(D), paragraph
(iii)of *Example.,* sixth line, the language “alternative rate is 100% (($80 million” and is corrected to read “alternative rate is 100% ($80 million”. 42. On page 51148, column 1, § 1.482-7(g)(4)(iv)(D), paragraph
(iii)of *Example.,* fifth line from the bottom of the paragraph, the language “PCT Payment, payable by the FS to the USP” is corrected to read “PCT Payment, payable by FS to USP”. 43. On page 51148, column 2, § 1.482-7(g)(4)(vi)(C), sixth line, the language “considerations stated in § 1.482-5(c)” is corrected to read “considerations stated in § 1.482-5(c) may”. 44. On page 51149, column 1, § 1.482-7(g)(5)(v), eighth line from the bottom of the paragraph, the language “acquisition price $100 million ($110 million” is corrected to read “acquisition price of $100 million ($110 million”. 45. On page 51149, column 3, § 1.482-7(g)(6)(vi), *Example 2.,* lines six through nine, the language “reasonably anticipated to contribute software development that is the subject of the CSA and are therefore not external contributions and accordingly not required to be covered “ is corrected to read “reasonably anticipated to contribute to the software development that is the subject of the CSA and, therefore, are not external contributions and, accordingly, are not required to be covered”. 46. On page 51150, column 3, § 1.482-7(g)(7)(iii)(C)(4), second line from the bottom of the paragraph, the language “controlled participant for its such” is corrected to read “controlled participant for such”. 47. On page 51151, column 1, § 1.482-7(g)(7)(iv)(D), third line, the language “3, 1.482-4, and 1.482-5, or with the” is corrected to read “3, 1.482-4, and 1.482-5, or the”. 48. On page 51151, column 3, § 1.482-7(g)(7)(v)(ix), sixth line, the language “amount of its territorial operating iprofit or” is corrected to read “amount of its territorial operating profit or”. 49. On page 51154, column 1, § 1.482-7(i)(2)(ii)(D), paragraph
(iii)of *Example 7.,* fourth line from the bottom of the paragraph, the language “Commissioner adjusts costs shares for each of” is corrected to read “Commissioner adjusts cost shares for each of”. 50. On page 51155, column 1, § 1.482-7(i)(6)(v)(A)( *1* ), fifth and sixth lines, the language “paragraphs (i)(6)(vi)(A)( *2* ) and (i)(6)(vi)(A)( *3* ) of this section.” is corrected to read “paragraphs (i)(6)(v)(A)( *2* ) and (i)(6)(v)(A)( *3* ) of this section.”. 51. On page 51155, column 2, § 1.482-7(i)(6)(v)(B)( *1* ), fifth and sixth lines, the language “specified in paragraphs (i)(6)(vi)(B)( *2* ) and (i)(6)(vi)(B)( *3* ) of this section.” is corrected to read “specified in paragraphs (i)(6)(v)(B)( *2* ) and (i)(6)(v)(B)( *3* ) of this section.”. 52. On page 51155, column 2, § 1.482-7(i)(6)(vi)(D)( *1* ), fifth line, the language “RT (as defined in paragraph (b)(3)(iii) of” is corrected to read “RT (as defined in paragraph (b)(3)(iv) of”. 53. On page 51155, column 3, § 1.482-7(i)(6)(vi)(D)( *2* ), second line, the language “(i)(6)(vii)(D) of this section, the” is corrected to read “(i)(6)(vi)(D) of this section, the”. 54. On page 51156, column 1, § 1.482-7(i)(6)(vi)(E), fourth line from the top of the column, the language “CSA is, then no periodic adjustment in” is corrected to read “CSA, then no periodic adjustment in”. 55. On page 51156, column 3, § 1.482-7(i)(6)(vi)(F)(vii), paragraph
(ii)of *Example 1.,* third line, the language “cash flows include the lump sum PCT of” is corrected to read “cash flows include the lump sum PCT Payment of”. 56. On page 51158, column 1, § 1.482-7(j)(1)(viii), *Example 1.,* second line from the bottom of the paragraph, the language “derive a benefit from the exploiting the” is corrected to read “derive a benefit from exploiting the”. 57. On page 51158, column 3, § 1.482-7(j)(3)(iii), *Example 1.,* twelfth line, the language “FS's share is 120X. The payment will be” is corrected to read “FS's share is 120X so that FS must make a payment to USP of 20X. The payment will be”. 58. On page 51160, column 1, § 1.482-7(k)(2)(ii)(J)( *2* ), last line, the language “use;” is corrected to read “used;”. 59. On page 51160, column 1, § 1.482-7(k)(2)(ii)(J)( *4* ), fourth line, the language “controlled participant method selected” is corrected to read “controlled participant's method selected”. 60. On page 51161, column 2, § 1.482-7(m)(3)(vii), fifth line, the language “paragraph (m)(3)(iv) of this section no” is corrected to read “paragraph (m)(3)(v) of this section no”. § 1.482-8 [Corrected] 61. On page 51161, column 3, § 1.482-8, paragraph
(i)of *Example 10.,* fourteenth line, the language “Y, a promising molecular compound derived” is corrected to read “X, a promising molecular compound derived”. 62. On page 51161, column 3, § 1.482-8, paragraph
(i)of *Example 11.,* sixth line, the language “are its workforce and the its sole patent,” is corrected to read “are its workforce and its sole patent,”. 63. On page 51161, column 3, § 1.482-8, paragraph
(i)of *Example 11.,* thirteenth line, the language “derived from Compound Y. Compound X is” is corrected to read “derived from Compound Y. Compound Y is”. 64. On page 51161, column 3, § 1.482-8, paragraph
(i)of *Example 11.,* eighteenth line, the language “the developing Oncol under the CSA. The RT” is corrected to read “developing Oncol under the CSA. The RT”. 65. On page 51162, column 2, § 1.482-8, paragraph
(ii)of *Example 14.,* sixth line, the language “evidence of the arm's length price of USP”' is corrected to read “evidence of the arm's length price of USP's”. Guy R. Traynor, Acting Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel. (Procedure and Administration) [FR Doc. E5-7582 Filed 12-20-05; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-104385-01] RIN 1545-AY75 Application of Normalization Accounting Rules to Balances of Excess Deferred Income Taxes and Accumulated Deferred Investment Tax Credits of Public Utilities Whose Assets Cease To Be Public Utility Property AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking, notice of public hearing, and withdrawal of previous proposed regulations. SUMMARY: This document contains proposed regulations that provide guidance on the normalization requirements applicable to public utilities that benefit (or have benefited) from accelerated depreciation methods or from the investment tax credit permitted under pre-1991 law. The proposed regulations permit a utility whose assets cease to be public utility property to return to its ratepayers the normalization reserve for excess deferred income taxes (EDFIT) with respect to those assets and, in certain circumstances, also permit the return of part or all of the reserve for accumulated deferred investment tax credits (ADITC) with respect to those assets. This document also provides notice of a public hearing on these proposed regulations and a withdrawal of proposed regulations [REG-104385-01] published March 4, 2003, at 68 FR 10190. DATES: Written or electronic comments must be received by March 21, 2006. Requests to speak and outlines of topics to be discussed at the public hearing scheduled for April 5, 2006, at 10 a.m. must be received by March 15, 2006. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-104385-01), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-104385-01), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically, via the IRS Internet site at *http://www.irs.gov/regs* or via the Federal eRulemaking Portal at *http://www.regulations.gov* (indicate IRS and REG-104385-01). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, David Selig, at
(202)622-3040; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Treena Garrett, at
(202)622-7190 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to the Income Tax Regulations (26 CFR Part 1) relating to the normalization requirements of sections 168(f)(2) and 168(i)(9) of the Internal Revenue Code (Code), section 203(e) of the Tax Reform Act of 1986, Public Law 99-514 (100 Stat. 2146), and former section 46(f) of the Code. Proposed regulations relating to the normalization requirements applicable to electric utilities that benefit (or have benefited) from accelerated depreciation methods or from the investment tax credit permitted under pre-1991 law [REG-104385-01] were published in the **Federal Register** on March 4, 2003 (the 2003 proposed regulations). The 2003 proposed regulations would have provided rules under which electric utilities whose electricity generation assets cease to be public utility property, whether by disposition, deregulation, or otherwise, could continue to flow through certain reserves associated with those assets without violating the normalization requirements. In response to public comments and after further analysis, the 2003 proposed regulations are withdrawn, and new regulations are proposed in this document. Normalization Method of Accounting Section 168 of the Code permits the use of accelerated depreciation methods. Section 168(f)(2) provides, however, that accelerated depreciation is permitted with respect to public utility property only if the taxpayer uses a normalization method of accounting for ratemaking purposes. Under a normalization method of accounting, a utility calculates its ratemaking tax expense using depreciation that is no more accelerated than its ratemaking depreciation (typically straight-line). In the early years of an asset's life, this results in ratemaking tax expense that is greater than actual tax expense. The difference between the ratemaking tax expense and the actual tax expense is added to a reserve (the accumulated deferred federal income tax reserve, or ADFIT). The difference between ratemaking tax expense and actual tax expense is not permanent and reverses in the later years of the asset's life when the ratemaking depreciation method provides larger depreciation deductions and lower tax expense than the accelerated method used in computing actual tax expense. This accounting treatment prevents the immediate flow-through to utility ratepayers of the reduction in current taxes resulting from the use of accelerated depreciation. Instead, the reduction is treated as a deferred tax expense that is collected from current ratepayers through utility rates, and thus is available to utilities as investment capital. When the accelerated method provides lower depreciation deductions in later years, only the ratemaking tax expense is collected from ratepayers and the difference between actual tax expense and ratemaking tax expense is charged to ADFIT. Excess Deferred Income Tax The Tax Reform Act of 1986 (the 1986 Act) reduced the highest corporate tax rate from 46 percent to 34 percent. The excess deferred federal income tax (EDFIT) reserve is the balance of the deferred tax reserve immediately before the rate reduction over the balance that would have been held in the reserve if the 34 percent rate had been in effect for prior periods. The EDFIT reserves were amounts that utilities had collected from ratepayers to pay future taxes that, as a result of the 1986 Act reduction in corporate tax rates, would not be imposed. Section 203(e) of the 1986 Act specifies the manner in which the EDFIT reserve must be flowed through to ratepayers under a normalization method of accounting. It provides that the EDFIT reserve may be reduced, with a corresponding reduction in the cost of service the utility collects from ratepayers, no more rapidly than the EDFIT reserve would be reduced under the average rate assumption method (ARAM). For taxpayers that did not have adequate data to apply the average rate assumption method, subsequent guidance permitted use of the reverse South Georgia method as an alternative. In general, both the average rate assumption method and the reverse South Georgia method spread the flow-through of the EDFIT reserve over the remaining lives of the property that gave rise to the excess. Accumulated Deferred Investment Tax Credits (ADITC) Former section 46 of the Code similarly addressed the flow-through to ratepayers of the investment tax credit determined under that section. Under former section 46(f)(1), the rate base (the amount on which the utility is permitted to collect a return from ratepayers) could be reduced by reason of the credit if the reduction in the rate base was restored not less rapidly than ratably. If the rate base is reduced, the credit may not also be used to reduce the utility's cost of service. Under former section 46(f)(2), an electing utility could flow through the investment credit not more rapidly than ratably (that is, could reduce the cost of service collected from ratepayers by no more than a ratable portion of the credit) over the investment's regulatory life. The balance of the credit remaining to be flowed through to ratepayers would be held in a reserve for accumulated deferred investment tax credits (ADITC). If the utility elected ratable flow-through of the credit, the rate base could not be reduced by reason of any portion of the credit. Private Letter Rulings The IRS has issued a number of private letter rulings holding that flow-through of the EDFIT and ADITC reserves associated with an asset is not permitted after the asset's deregulation, whether by disposition or otherwise. These rulings were based on the principle that flow-through is permitted only over the asset's regulatory life and when that life is terminated by deregulation no further flow-through is permitted. After further consideration, the IRS and Treasury have concluded that former section 46(f) does not, in all cases, prohibit flowthrough of ADITC reserves after deregulation and that section 203(e) of the Tax Reform Act does not preclude flowthrough of the EDFIT reserve with respect to deregulated property. Explanation of Provisions The 2003 proposed regulations provided that utilities whose generation assets cease to be public utility property, whether by disposition, deregulation, or otherwise (deregulated public utility property), may continue to flow through EDFIT reserves associated with those assets without violating the normalization requirements. The rate of flowthrough was limited to the rate that would have been permitted under a normalization method of accounting if the assets had remained public utility property. But for section 203(e) of the 1986 Act, the entire EDFIT reserve would have been flowed through to ratepayers when the reduction in rates became effective, whether the assets to which the EDFIT reserve was attributable remained public utility property for their entire useful life or were subsequently deregulated or sold. As noted in the preamble of the 2003 proposed regulations, the IRS and Treasury have concluded that section 203 of the 1986 Act provides a schedule for flowing through the EDFIT reserve but that nothing in that section suggests that something less than the entire reserve should ultimately be flowed through to ratepayers. Accordingly, these proposed regulations retain the rule of the 2003 proposed regulations, with the effective date changes described below, for generation assets and extend the application of the rule to all other public utility property. The 2003 proposed regulations also provided similar rules under which utilities could continue to flow through ADITC reserves associated with deregulated generation assets without violating the normalization requirements. The proposed regulations did not address the treatment of deregulated assets under former section 46(f)(1) (relating to the use of the investment credit to reduce the taxpayer's rate base). After further consideration, the IRS and Treasury have concluded that flowthrough of the ADITC reserve should not continue after deregulation except to the extent the utility is permitted to recover stranded costs after deregulation. If an asset qualifying for the investment tax credit is purchased by a utility, the allowance of the credit, without flowthrough, lowers the utility's actual tax expense but does not result in higher tax expense for ratepayers than would have been the case if the asset had not been purchased. Thus, in the absence of flowthrough, the investment tax credit is a subsidy from the Federal government for the purchase of the asset rather than a transfer from ratepayers to the utility. The underlying policy of former section 46(f) is to share this subsidy between ratepayers and utilities in proportion to their respective contributions to the purchase price. In general, former section 46(f) treats ratepayers as contributing to the purchase price when ratemaking depreciation expense with respect to the asset is included in the rates they pay, resulting in full flowthrough over the asset's regulatory life. In the case of a deregulated asset, the contribution of ratepayers can be appropriately measured by the ratemaking depreciation expense they are charged with respect to the asset and any additional stranded cost that the utility is permitted to recover with respect to the asset after its deregulation. Accordingly, the proposed regulations permit flowthrough of the ADITC reserve with respect to public utility property to continue after its deregulation only to the extent the reduction in cost of service does not exceed, as a percentage of the ADITC with respect to the property at the time of deregulation, the percentage of the total stranded cost that the taxpayer is permitted to recover with respect to the property. In addition, the credit may not be flowed through more rapidly than the rate at which the taxpayer is permitted to recover the stranded cost with respect to the property. As in the case of the EDFIT reserve, these proposed regulations extend the flowthrough rule for generation assets to all public utility property. In addition, these proposed regulations provide equivalent rules for property to which former section 46(f)(1) (relating to rate base restoration) applies. Proposed Effective Date The 2003 proposed regulations would have applied to public utility property deregulated after March 4, 2003. Utilities would have been permitted an election to apply the proposed rules to property that was deregulated on or before that date. Comments suggested that deregulation agreements between utilities and their regulators entered into before the March 4, 2003 proposed effective date were based on the only guidance then available ( *i.e.,* the private letter rulings issued by the IRS) and that the availability of a retroactive election could effectively change the terms of those agreements. Although private letter rulings are directed only to the taxpayers who requested them and may not be used or cited as precedent, the IRS and Treasury have concluded that the Secretary's authority under section 7805(b)(7) to provide for retroactive elections should not be exercised in a manner that impairs existing agreements between utilities and their regulators. Accordingly, these proposed regulations do not include a similar election to apply the regulations retroactively. As noted above, these proposed regulations are broader in scope than the 2003 proposed regulations. Accordingly, these regulations are proposed to apply to public utility property that becomes deregulated public utility property after [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ]. For public utility property that becomes deregulated public utility property on or before [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ], the IRS will follow the holdings set forth in the private letter rulings that prohibit flow-through of the EDFIT and ADITC reserves associated with an asset after the asset's disposition. Flowthrough will be permitted, however, if it is consistent with the 2003 proposed regulations, and occurs during the period March 5, 2003, through the earlier of the last date on which the utility's rates are determined under the rate order in effect on [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ], or [DATE 2 YEARS AFTER PUBLICATION OF FINAL RULE IN THE **Federal Register** ]. Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations and, because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted (in the manner described in the ADDRESSES caption) timely to the IRS. All comments will be available for public inspection and copying. Treasury and IRS specifically request comments on the clarity of the proposed regulations and how they may be made clearer and easier to understand. A public hearing has been scheduled for April 5, 2006, at 10 a.m. in room 7218 of the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Because of access restrictions, visitors will not be admitted beyond the Internal Revenue Building lobby more than 30 minutes before the hearing starts. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit comments and submit an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight
(8)copies) by March 15, 2006. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal author of these regulations is David Selig, Office of the Associate Chief Counsel (Passthroughs and Special Industries), IRS. However, other personnel from the IRS and Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Withdrawal of Proposed Regulations Under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG-104385-01) published in the **Federal Register** on March 4, 2003 (68 FR 10190) is withdrawn. Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 1.46-6 is amended by adding paragraph
(k)to read as follows: § 1.46-6 Limitation in case of certain regulated companies.
(k)Treatment of accumulated deferred investment tax credits upon the deregulation of public utility property—(1) *Scope.* This paragraph
(k)provides rules for the application of former sections 46(f)(1) and 46(f)(2) of the Internal Revenue Code with respect to public utility property that ceases, whether by disposition, deregulation, or otherwise, to be public utility property (deregulated public utility property).
(2)*Ratable amount* —(i) *Restoration of rate base reduction.* A reduction in the taxpayer's rate base on account of the credit with respect to public utility property that becomes deregulated public utility property is restored ratably during the period after the property becomes deregulated public utility property if the amount of the reduction remaining to be restored does not, at any time during the period, exceed the restoration percentage of the recoverable stranded cost of the property at such time. For this purpose—
(A)The stranded cost of the property is the cost of the property reduced by the amount of such cost that the taxpayer has recovered through regulated depreciation expense during the period before the property becomes deregulated;
(B)The recoverable stranded cost of the property at any time is the stranded cost of the property that the taxpayer will be permitted to recover through rates after such time; and
(C)The restoration percentage for the property is determined by dividing the reduction in rate base remaining to be restored with respect to the property immediately before the property becomes deregulated public utility property by the stranded cost of the property.
(ii)*Cost of service reduction.* Reductions in the taxpayer's cost of service on account of the credit with respect to public utility property that becomes deregulated public utility property are ratable during the period after the property becomes deregulated public utility property if the cumulative amount of the reduction during such period does not, at any time during the period, exceed the flow-through percentage of the cumulative stranded cost recovery for the property at such time. For this purpose—
(A)The stranded cost of the property is the cost of the property reduced by the amount of such cost that the taxpayer has recovered through regulated depreciation expense during the period before the property becomes deregulated;
(B)The cumulative stranded cost recovery for the property at any time is the stranded cost of the property that the taxpayer has been permitted to recover through rates on or before such time; and
(C)The flow-through percentage for the property is determined by dividing the amount of credit with respect to the property remaining to be used to reduce cost of service immediately before the property becomes deregulated public utility property by the stranded cost of the property.
(3)*Cross reference.* See § 1.168(i)-(3) for rules relating to the treatment of balances of excess deferred income taxes when public utility property becomes deregulated public utility property.
(4)*Effective dates* —(i) *In general.* This paragraph
(k)applies to public utility property that becomes deregulated public utility property after [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ].
(ii)*Application of regulation project REG-104385-01 to pre-effective date reductions in cost of service.* A reduction in the taxpayer's cost of service will be treated as ratable if it is consistent with the proposed rules in regulation project REG-104385-01 (2003-1 C.B. 634) and occurs during the period March 5, 2003, through the earlier of the last date on which the utility's rates are determined under the rate order in effect on [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ], or [DATE 2 YEARS AFTER PUBLICATION OF FINAL RULE IN THE **Federal Register** ]. **Par. 3.** Section 1.168(i)-3 is added to read as follows: § 1.168(i)-(3) Treatment of excess deferred income tax reserve upon disposition of deregulated public utility property.
(a)*Scope.* This section provides rules for the application of section 203(e) of the Tax Reform Act of 1986, Public Law 99-514 (100 Stat. 2146) with respect to public utility property (within the meaning of section 168(i)(10)) that ceases, whether by disposition, deregulation, or otherwise, to be public utility property (deregulated public utility property).
(b)*Amount of reduction.* If public utility property of a taxpayer becomes deregulated public utility property to which this section applies, the reduction in the taxpayer(s excess tax reserve permitted under section 203(e) of the Tax Reform Act of 1986 is equal to the amount by which the reserve could be reduced under that provision if all such property had remained public utility property of the taxpayer and the taxpayer had continued use of its normalization method of accounting with respect to such property.
(c)*Cross reference.* See § 1.46-6(k) for rules relating to the treatment of accumulated deferred investment tax credits when utilities dispose of regulated public utility property.
(d)*Effective dates* —(1) *In general.* This section applies to public utility property that becomes deregulated public utility property after [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ].
(2)*Application of regulation project REG-104385-01 to pre-effective date reductions of excess deferred income tax reserve.* A reduction in the taxpayer's excess deferred income tax reserve will be treated as ratable if it is consistent with the proposed rules in regulation project REG-104385-01 (2003-1 C.B. 634) and occurs during the period March 5, 2003, through the earlier of the last date on which the utility's rates are determined under the rate order in effect on [DATE OF PUBLICATION OF FINAL RULE IN THE **Federal Register** ], or [DATE 2 YEARS AFTER PUBLICATION OF FINAL RULE IN THE **Federal Register** ]. Mark E. Matthews, Deputy Commissioner for Services and Enforcement. [FR Doc. E5-7583 Filed 12-20-05; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD05-05-131] RIN 1625-AA09 Drawbridge Operation Regulations; New Jersey Intracoastal Waterway, Manasquan River, NJ AGENCY: Coast Guard, DHS. ACTION: Notice of proposed rulemaking. SUMMARY: The Coast Guard proposes to change the regulations that govern the operation of the Route 35 Bridge, at New Jersey Intracoastal Waterway (NJICW) mile 1.1, across the Manasquan River, at Brielle, New Jersey. The proposal will allow the drawbridge to provide vessel openings upon four hours advance notice from December 1 to March 31. This proposal will reduce draw tender services during the non-peak boating season while still providing for the reasonable needs of navigation. DATES: Comments and related material must reach the Coast Guard on or before February 6, 2006. ADDRESSES: You may mail comments and related material to Commander (obr), Fifth Coast Guard District, Federal Building, 1st Floor, 431 Crawford Street, Portsmouth, VA 23704-5004. The Fifth Coast Guard District maintains the public docket for this rulemaking. Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, will become part of this docket and will be available for inspection or copying at Commander (obr), Fifth Coast Guard District between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Bill. H. Brazier, Bridge Management Specialist, Fifth Coast Guard District, at
(757)398-6422. SUPPLEMENTARY INFORMATION: Request for Comments We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking (CGD05-05-131), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8” by 11 inches, suitable for copying. If you would like a return receipt, please enclose a stamped, self-addressed postcard or envelope. We will consider all submittals received during the comment period. We may change this proposed rule in view of them. Public Meeting We do not now plan to hold a public meeting. But you may submit a request for a meeting by writing to Commander (obr), Fifth Coast Guard District at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the **Federal Register.** Background and Purpose The New Jersey Department of Transportation (NJDOT) owns and operates the Route 35 Bridge, at NJICW mile 1.1., across the Manasquan River, at Brielle, New Jersey. The current operating regulations set out in 33 CFR 117.733(b) requires the drawbridge to open on signal except as follows: from May 15 through September 30, on Saturdays, Sundays and Federal holidays, from 8 a.m. to 10 p.m. the draw need only open 15 minutes before the hour and 15 minutes after the hour; on Mondays to Thursdays from 4 p.m. to 7 p.m., and on Fridays, except Federal holidays from 12 p.m. to 7 p.m. the draw need only open 15 minutes before the hour and 15 minutes after hour; and year-round from 11 p.m. to 8 a.m., the draw need only open if at least four hours notice is given. The Route 35 Bridge, a bascule-type drawbridge, has a vertical clearance in the closed position to vessels of 30 feet, at mean high water. The NJDOT has requested a change to the existing regulations for the Route 35 Bridge. This proposal would reduce draw tender services during the non-peak boating season by requiring openings of the bridge if at least four hours advance notice is given from December 1 to March 31. We reviewed the yearly drawbridge logs provided by NJDOT for the years 2000 to 2004, which revealed that the bridge opened for vessels 970, 835, 811, 716 and 685 times, respectively. NJDOT contends that the vessel traffic through the bridge is minimal during the winter months. During the period from December 1 to March 31, from 7 a.m. to 11 p.m., the bridge data for the years 2000 to 2004 shows that the bridge opened 51, 61, 49, 48 and 47 times, respectively. The data shows a significant decrease in the number of bridge openings during the non-peak boating season. Based on the data provided, the proposal will have minimal impact on vessel traffic. Discussion of Proposed Rule The Coast Guard proposes to amend the regulations governing the Route 35 Bridge over the Manasquan River, at NJICW mile 1.1, at Brielle, New Jersey, set out in 33 CFR 117.733(b) by revising paragraph(b)(2). As amended, paragraph (b)(2) would read “Year-round from 11 p.m. to 8 a.m., and at all times from December 1 to March 31, the draw need only open if at least four hours notice is given.” Regulatory Evaluation This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning, and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS). We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. We reached this conclusion based on the historical data, and due to the reduced number of vessels requiring transit through the bridge during the proposed period. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. The non-peak boating season operating rules proposed for the bridge are designed to minimize the number of small entities affected. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact Waverly W. Gregory, Jr., Bridge Administrator, Fifth Coast Guard District,
(757)398-6222. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Collection of Information This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This proposed rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. Indian Tribal Governments This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Energy Effects We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( *e.g.* , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this proposed rule under Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969
(NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this proposed rule is categorically excluded, under figure 2-1, paragraph (32)(e) of the Instruction, from further environmental documentation because it has been determined that the promulgation of operating regulations for drawbridges are categorically excluded. List of Subjects in 33 CFR Part 117 Bridges. Regulations For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows: PART 117—DRAWBRIDGE OPERATION REGULATIONS 1. The authority citation for part 117 continues to read as follows: Authority: 33 U.S.C. 499; Department of Homeland Security Delegation No. 0170.1; 33 CFR 1.05-1(g); section 117.255 also issued under the authority of Pub. L. 102-587, 106 Stat. 5039. 2. In § 117.733, paragraph (b)(2) is revised to read as follows: § 117.733 New Jersey Intracoastal Waterway. (b)(2) Year-round from 11 p.m. to 8 a.m., and at all times from December 1 to March 31, the draw need only open if at least four hours notice is given. Dated: December 5, 2005. Larry L. Hereth, Rear Admiral, U.S. Coast Guard, Commander, Fifth Coast Guard District. [FR Doc. E5-7632 Filed 12-20-05; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD07-05-158] RIN 1625-AA09 Drawbridge Operation Regulations; Stickney Point (SR 72) Bridge, Gulf Intracoastal Waterway Mile 68.6, Gulf Intracoastal Waterway, Sarasota County, FL AGENCY: Coast Guard, DHS. ACTION: Notice of proposed rulemaking. SUMMARY: The Coast Guard proposes to change the operating schedule of the Stickney Point (SR 72) bridge across the Gulf Intracoastal Waterway, mile 68.6 in Sarasota County, Florida. This proposed rule would require the drawbridge to open on a 30-minute schedule from 6 a.m. until 10 p.m., Monday through Friday except Federal holidays. This proposed action may improve the movement of vehicular traffic while not unreasonably interfering with the movement of vessel traffic. DATES: Comments and related material must reach the Coast Guard on or before February 21, 2006. ADDRESSES: You may mail comments and related material to Commander (dpb), Seventh Coast Guard District, 909 SE. 1st Avenue, Room 432, Miami, FL 33131, who maintains the public docket for this rulemaking. Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, will become part of this docket and are available for inspection or copying at the Seventh Coast Guard District Bridge Branch, between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Mr. Barry Dragon, Project Officer, Seventh Coast Guard District, Bridge Branch, at
(305)415-6743. SUPPLEMENTARY INFORMATION: Request for Comments We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking [CGD07-05-158], indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them. Public Meeting We do not now plan to hold a public meeting. But you may submit a request for a meeting by writing to the Bridge Branch at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the **Federal Register** . Background and Purpose The current regulations governing the Stickney Point (SR 72) bridge, mile 68.6, at Sarasota County in 33 CFR 117.5 requires the drawbridge to open on signal. On September 29, 2005, Sarasota County officials requested the Coast Guard review the operation of the Stickney Point bridge because they contended the regulation is not meeting the needs of vehicle traffic. Discussion of Proposed Rule This proposed rule would require the Stickney Point (SR 72) bridge, mile 68.6, at Sarasota County to open on the hour and half-hour, from 6 a.m. to 10 p.m., Monday through Friday, except Federal holidays. This proposed schedule will allow local vehicular traffic to plan for drawbridge openings while providing for the reasonable needs of navigation. In order to record this change in the Code of Federal Regulations, the current regulation governing the Siesta Drive bridge at 33 CFR 117.287(b-1) shall be moved to 33 CFR 117.287(c) so that the regulation governing the Stickney Point bridge can be recorded at 33 CFR 117.287(b-1). Regulatory Evaluation This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS). We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. This proposed rule would modify the existing bridge schedule to allow for improved vehicle traffic flow and provide scheduled openings for vessel traffic. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small business, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed rule would affect the following entities, some of which may be small entities: the owners or operators of vessels needing to transit the Intracoastal Waterway in the vicinity of Stickney Point bridge, persons intending to drive over the bridge and nearby business owners. Vehicle traffic and small business owners in the area might benefit from the increased traffic flow that regularly scheduled openings will offer this area. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this proposed rule would economically affect it. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed under FOR FURTHER INFORMATION CONTACT . The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Collection of Information This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This proposed rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. Indian Tribal Governments This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Energy Effects We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this proposed rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969
(NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this proposed rule is categorically excluded, under figure 2-1, paragraph (32)(e) of the Instruction, from further environmental documentation. Under figure 2-1, paragraph (32)(e) of the Instruction, an “Environmental Analysis Check List” and a “Categorical Exclusion Determination” are not required for this proposed rule. List of Subjects in 33 CFR Part 117 Bridges. Regulations For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows: PART 117—DRAWBRIDGE OPERATION REGULATIONS 1. The authority citation for Part 117 continues to read as follows: Authority: 33 U.S.C. 499; Department of Homeland Security Delegation No. 0170.1; 33 CFR 1.05-1(g); section 117.255 also issued under the authority of Pub. L. 102-587, 106 Stat. 5039. 2. In Sec. 117.287 revise para (b-1) and
(c)to read as follows: § 117.287 Gulf Intracoastal Waterway. (b-1) The draw of the Stickney Point (SR 72) bridge, mile 68.6 at Sarasota County shall open on the hour and half-hour, from 6 a.m. to 10 p.m., Monday through Friday, except Federal holidays.
(c)The draw of the Siesta Drive bridge, mile 71.6 at Sarasota, Florida shall open on signal, except that from 7 a.m. to 6 p.m., Monday through Friday, except Federal holidays, the draw need open only on the hour, 20 minutes past the hour, and 40 minutes past the hour. On weekends and Federal holidays, from 11 a.m. to 6 p.m., the draw need open only on the hour, 20 minutes past the hour and 40 minutes past the hour. Dated: December 13, 2005. D.B. Peterman, RADM, U.S. Coast Guard, Commander, Seventh Coast Guard District. [FR Doc. E5-7631 Filed 12-20-05; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF TRANSPORTATION Saint Lawrence Seaway Development Corporation 33 CFR Part 401 [Docket No. SLSDC 2005-23248] RIN 2135-AA22 Seaway Regulations and Rules: Periodic Update, Various Categories AGENCY: Saint Lawrence Seaway Development Corporation, DOT. ACTION: Notice of proposed rulemaking. SUMMARY: The Saint Lawrence Seaway Development Corporation (SLSDC) and the St. Lawrence Seaway Management Corporation (SLSMC) of Canada, under international agreement, jointly publish and presently administer the St. Lawrence Seaway Regulations and Rules (Practices and Procedures in Canada) in their respective jurisdictions. Under agreement with the SLSMC, the SLSDC is amending the joint regulations by updating the Seaway Regulations and Rules in various categories. The proposed changes will update the following sections of the Regulation and Rules: Condition of Vessels; Preclearance and Security for Tolls; Seaway Navigation; Toll Assessment and Payment; and Information and Reports. These proposed amendments are necessary to take account of updated procedures and/or technology and will enhance the safety of transits through the Seaway. Several of the proposed amendments are merely editorial or for clarification of existing requirements. DATES: Any party wishing to present views on the proposed amendment may file comments with the Corporation on or before January 20, 2006. ADDRESSES: You may submit comments [identified by DOT DMS Docket Number SLSDC 2005-23248] by any of the following methods: • *Web site: http://dms.dot.gov.* Follow the instructions for submitting comments on the DOT electronic docket site. • *Fax:* 1-202-493-2251. • *Mail:* Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-001. • *Hand Delivery:* Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal Holidays. • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov.* Follow the online instructions for submitting comments. *Instructions:* All submissions must include the agency name and docket number or Regulatory Identification Number
(RIN)for this rulemaking. Note that all comments received will be posted without change to *http://dms.dot.gov,* including any personal information provided. Please see the Privacy Act heading under Regulatory Notices. *Docket:* For access to the docket to read background documents or comments received, go to *http://dms.dot.gov* at any time or to Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal Holidays. FOR FURTHER INFORMATION CONTACT: Craig H. Middlebrook, Acting Chief Counsel, Saint Lawrence Seaway Development Corporation, 400 Seventh Street, SW., Washington, DC 20590,
(202)366-0091. SUPPLEMENTARY INFORMATION: The Saint Lawrence Seaway Development Corporation (SLSDC) and the St. Lawrence Seaway Management Corporation (SLSMC) of Canada, under international agreement, jointly publish and presently administer the St. Lawrence Seaway Regulations and Rules (Practices and Procedures in Canada) in their respective jurisdictions. Under agreement with the SLSMC, the SLSDC is proposing to amend the joint regulations by updating the Regulations and Rules in various categories. The proposed changes would update the following sections of the Regulations and Rules: Condition of Vessels; Preclearance and Security for Tolls; Seaway Navigation; Toll Assessment and Payment; and Information and Reports. These updates are necessary to take account of updated procedures and/or technology, which will enhance the safety of transits through the Seaway. Many of these proposed changes are to clarify existing requirements in the regulations. Where new requirements or regulations are being proposed, an explanation for such a change is provided below. Regulatory Notices *Privacy Act:* Anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit *http://dms.dot.gov.* The SLSDC is proposing two amendments to the joint regulations pertaining to the Condition of Vessels. Under sections 401.16, “Propeller Direction Alarms”, and 401.17, “Pitch Indicators and Alarms”, the SLSDC is proposing additional language that would require visible and audible alarms to have a time delay of not greater than 8 seconds. In confined waters of the Seaway or while entering a lock it is important for the master/pilot to know immediately when an incorrect command is received in order to take appropriate corrective action. Currently some vessels have alarms with a 30 second delay in which time, the vessel could be outside the shipping channel or have already hit the lock bumpers. The SLSDC is proposing to make two amendments to the joint regulations regarding the Preclearance and Security for Tolls. Under § 401.24, “Application for Preclearance”, the SLSDC is proposing to revise the location from which a vessel can obtain a preclearance form from Cornwall, Ontario to St. Lambert, Quebec. This proposed change reflects the fact that preclearance applications are now being processed at St. Lambert, Quebec instead of at Cornwall, Ontario. For § 401.26, “Security for Tolls”, the SLSDC is proposing to add language that would allow the SLSMC manager to include charges for additional items as tie-up fees in the security for tolls. The SLSDC is proposing to make one change to the joint regulations regarding Seaway Navigation. The proposed amendment to § 401.30, “Ballast Water and Trim”, would reflect a change to the SLSDC/SLSMC joint website making it easier for Seaway users to obtain ballast water management documents. Shippers have expressed frustration regarding their difficulties in locating these documents on the website. The Seaway Corporations have inserted a direct link on the Seaway website homepage to the relevant documents. The SLSDC is proposing to make two changes to the joint regulations regarding Toll Assessment and Payment. Under § 401.74, “Transit Declaration”, the SLSDC is proposing to clarify that Seaway Transit Declaration Forms can be obtained from the Seaway website or the SLSMC in St. Lambert, Quebec. This function was previously performed at Cornwall, Ontario. Additionally, the proposed amendment would remove references to specific form numbers that are no longer relevant. The SLSDC is proposing to make one amendment to the joint regulations regarding Information and Reports. Under § 401.81, the SLSDC is proposing to require the master of a vessel involved in an accident or dangerous occurrence to notify the nearest Seaway and Canadian or U.S. Coast Guard. This proposed amendment is intended to clarify that the U.S. Coast Guard is the U.S. federal entity responsible for responding to vessel incidents and needs to be notified immediately when there is an accident or dangerous occurrence. Regulatory Evaluation This proposed regulation involves a foreign affairs function of the United States and therefore Executive Order 12866 does not apply and evaluation under the Department of Transportation's Regulatory Policies and Procedures is not required. Regulatory Flexibility Act Determination I certify this proposed regulation will not have a significant economic impact on a substantial number of small entities. The St. Lawrence Seaway Regulations and Rules primarily relate to commercial users of the Seaway, the vast majority of whom are foreign vessel operators. Therefore, any resulting costs will be borne mostly by foreign vessels. Environmental Impact This proposed regulation does not require an environmental impact statement under the National Environmental Policy Act (49 U.S.C. 4321, et reg.) because it is not a major federal action significantly affecting the quality of the human environment. Federalism The Corporation has analyzed this proposed rule under the principles and criteria in Executive Order 13132, dated August 4, 1999, and has determined that this proposal does not have sufficient federalism implications to warrant a Federalism Assessment. Unfunded Mandates The Corporation has analyzed this proposed rule under Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48) and determined that it does not impose unfunded mandates on State, local, and tribal governments and the private sector requiring a written statement of economic and regulatory alternatives. Paperwork Reduction Act This proposed regulation has been analyzed under the Paperwork Reduction Act of 1995 and does not contain new or modified information collection requirements subject to the Office of Management and Budget review. List of Subjects in 33 CFR Part 401 Hazardous materials transportation, Navigation (water), Penalties, Radio, Reporting and recordkeeping requirements, Vessels, Waterways. Accordingly, the Saint Lawrence Seaway Development Corporation proposes to amend 33 CFR Part 401, Regulations and Rules, as follows: PART 401—SEAWAY REGULATIONS AND RULES Subpart A—Regulations 1. The authority citation for subpart A of part 401 continues to read as follows: Authority: 33 U.S.C. 983(a) and 984(a) (4), as amended; 49 CFR 1.52, unless otherwise noted. 2. In § 401.16 paragraph
(b)would be revised to read as follows: § 401.16 Propeller direction alarms.
(b)Visible and audible wrong-way propeller direction alarms, with a time delay of not greater than 8 seconds, located in the wheelhouse and the engineer room, unless the vessel is fitted with a device which renders it impossible to operate engines against orders from the bridge telegraph. 3. In § 401.17 paragraph
(b)would be revised to read as follows: § 401.17 Pitch indicators and alarms.
(b)Effective April 1, 1984, visible and audible pitch alarms, with a time delay of not greater than 8 seconds, in the wheelhouse and engine room to indicate wrong pitch. 4. Section 401.24 would be revised to read as follows: § 401.24 Application for preclearance. The representative of a vessel may, on a preclearance form (3 copies) obtained from the Manager, St. Lambert, Quebec, or downloaded from the St. Lawrence Seaway Web site at *http://www.greatlakes-seaway.com,* apply for preclearance, giving particulars of the ownership, liability insurance and physical characteristics of the vessel and guaranteeing payment of the fees that may be incurred by the vessel. 5. In § 401.26 paragraph
(b)would be revised to read as follows: § 401.26 Security for Tolls.
(b)The security for the tolls of a vessel shall be sufficient to cover the tolls established in the St. Lawrence Seaway Tariff of Tolls for the gross registered tonnage of the vessel, cargo carried, and lockage tolls as well as security for any other charges estimated by the Manager. 6. In § 401.30 paragraph
(2)would be revised to read as follows: § 401.30 Ballast water and trim.
(e)* * *
(2)Every other vessel entering the Seaway that operates within the Great Lakes and the Seaway must agree to comply with the “Voluntary Management Practices to Reduce the Transfer of Aquatic Nuisance Species Within the Great Lakes by U.S. and Canadian Domestic Shipping” of the Lake Carriers Association and Canadian Shipowners Association dated January 26, 2001, while operating anywhere within the Great Lakes and the Seaway. For copies of the “Code of Best Practices for Ballast Water Management” and of the “Voluntary Management Practices to Reduce the Transfer of Aquatic Nuisance Species Within the Great Lakes by U.S. and Canadian Domestic Shipping” refer to the St. Lawrence Seaway Web site at *http://www.greatlakes-seaway.com.* 7. In § 401.74 paragraphs
(a)and
(g)are revised to read as follows: § 401.74 Transit declaration.
(a)Seaway Transit Declaration Form (Cargo and Passenger) shall be forwarded to the Manager by the representative of a ship, for each ship that has an approved preclearance except non-cargo ships, within fourteen days after the vessel enters the Seaway on any upbound or downbound transit. The form may be obtained from the St. Lawrence Seaway Management Corporation, 151 Ecluse Street, St. Lambert, Quebec, J4R 2V6 or from the St. Lawrence Seaway Web site at *http://www.greatlakes-seaway.com.*
(g)Where government aid cargo is declared, appropriate Canadian or U.S. customs form or a stamped and signed certification letter from the U.S. or Canada Customs must accompany the transit declaration form. 8. In § 401.81 paragraph
(a)is revised to read as follows: § 401.81 Reporting an Accident.
(a)Where a vessel on the Seaway is involved in an accident or a dangerous occurrence, the master of the vessel shall report the accident or occurrence, pursuant to the requirements of the Transportation Safety Board Regulations, to the nearest Seaway and Canadian or U.S. Coast Guard radio or traffic stations, as soon as possible and prior to departing the Seaway system. Issued at Washington, DC, on December 13, 2005 Saint Lawrence Seaway Development Corporation. Albert S. Jacquez, Administrator. [FR Doc. 05-24235 Filed 12-20-05; 8:45 am]
Connectionstraces to 31
Traces to 31 documents
CFR
- Release of individuals containing unsealed byproduct material or implants containing byproduct material.§ 35.75
- Petition for rulemaking—requirements for filing.§ 2.802
- Limitations on dealing in, underwriting, and purchase and sale of securities.§ 1.3
- Calculation of limits.§ 1.4
- Investments.§ 704.5
- Credit risk management.§ 704.6
- Definitions.§ 1.2
- Definitions.§ 702.2
- Rules and regulations.§ 601.601
- New Jersey Intracoastal Waterway.§ 117.733
- Delegation of rulemaking authority.§ 1.05-1
- When the drawbridge must open.§ 117.5
- Gulf Intracoastal Waterway.§ 117.287
U.S. Code
- Powers§ 1757
- Public information collection activities; submission to Director; approval and delegation§ 3507
- Definitions§ 3502
- Definitions§ 1752
- Interest and penalty on claims§ 3717
- Congressional findings and declaration of purpose§ 1601
- Equal rights under the law§ 1981
- Rules and regulations§ 7805
- Avoidance of duplicative or unnecessary analyses§ 605
- Establishment, functions, and activities§ 272
- Regulations for drawbridges§ 499
- Functions of Corporation§ 983
register
public-private-law
21 references not yet in our index
- 10 CFR 35
- Pub. L. 105-277
- 12 CFR 701
- 12 CFR 741
- 42 USC 4311-4312
- 26 CFR 1
- Pub. L. 99-514
- 100 Stat. 2146
- 33 CFR 117
- 5 USC 601-612
- Pub. L. 104-121
- 44 USC 3501-3520
- 2 USC 1531-1538
- 42 USC 4321-4370f
- Pub. L. 102-587
- 106 Stat. 5039
- 33 CFR 401
- 49 USC 4321
- Pub. L. 104-4
- 109 Stat. 48
- 49 CFR 1.52
Citation graph
cites case law
Proposed Rules
Petition for rulemaking; Notice of receipt
Cite10 CFR 35
Pub. L.Pub. L. 105-277
Cite12 CFR 701
Cites 52 · showing 12Cited by 0 across 0 sources