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Code · REGISTER · 2006-11-09 · PROPOSED RULES · Agricultural Agricultural Research Service NOTICES Committees; establishment, renewal, termination, etc.: Biotechnology and 21st Century Agriculture Advisory Committee; membership nominations, 65771 E · Unknown

Unknown. Final rule; correction

48,874 words·~222 min read·/register/2006/11/09/06-9136

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

--- schema: federal-register doc_type: fedreg source_file: FR-2006-11-09.xml --- 71 217 Thursday, November 9, 2006 Contents Agricultural Agricultural Research Service NOTICES Committees; establishment, renewal, termination, etc.: Biotechnology and 21st Century Agriculture Advisory Committee; membership nominations, 65771 E6-19029 Meetings: Biotechnology and 21st Century Agriculture Advisory Committee, 65771-65772 E6-19028 Agriculture Agriculture Department See Agricultural Research Service See Animal and Plant Health Inspection Service See Commodity Credit Corporation See Food and Nutrition Service See Forest Service Alcohol Alcohol, Tobacco, Firearms, and Explosives Bureau NOTICES Agency information collection activities; proposals, submissions, and approvals, 65837-65838 E6-18942 E6-18943 Animal Animal and Plant Health Inspection Service PROPOSED RULES Exportation and importation of animals and animal products:
Bovine spongiform encephalopathy; minimal-risk regions and importation of commodities, 65758-65759 E6-19042 NOTICES Agency information collection activities; proposals, submissions, and approvals, 65772-65773 E6-19017 Army Army Department See Engineers Corps NOTICES Patent licenses; non-exclusive, exclusive, or partially exclusive: Advanced Mechanical Technology, Inc., 65783 06-9145 Centers Centers for Medicare & Medicaid Services RULES Medicare: Home health prospective payment system; 2007 CY rates update, 65884-66006 06-9068 Civil Civil Rights Commission NOTICES Meetings;
Sunshine Act, 65774-65775 06-9186 Coast Guard Coast Guard NOTICES Meetings: Lower Mississippi River Waterway Safety Advisory Council, 65829 E6-18900 Commerce Commerce Department See Industry and Security Bureau See International Trade Administration See National Oceanic and Atmospheric Administration Commodity Commodity Credit Corporation RULES Loan and purchase programs: Dairy Disaster Assistance Payment Program Correction, 65711 E6-18800 Corporation Corporation for National and Community Service NOTICES Agency information collection activities; proposals, submissions, and approvals, 65779-65780 E6-18914 Defense Defense Acquisition Regulations System RULES Acquisition regulations:
Trade agreement thresholds and Morocco free trade agreement, 65752 E6-19032 PROPOSED RULES Acquisition regulations: Contracting methods and contract type, 65768-65769 E6-19034 Receiving reports for shipments, 65769-65770 E6-19035 Defense Defense Department See Army Department See Defense Acquisition Regulations System See Engineers Corps NOTICES Meetings: Defense Science Board, 65780 06-9137 06-9138 Privacy Act; systems of records, 65780-65783 06-9139 06-9140 Education Education Department NOTICES Agency information collection activities; proposals, submissions, and approvals; correction, 65785 E6-18979 Energy Energy Department See Energy Information Administration See Federal Energy Regulatory Commission NOTICES Environmental statements; notice of intent Yucca Mountain, NV; geologic repository;
Caliente rail line; alignment, construction, and operation, 65785-65786 E6-19030 Environmental statements; notice of intent: Yucca Mountain, NV; spent nuclear fuel and high-level radioactive waste disposal; geologic repository, 65786 E6-19023 Energy Energy Information Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 65786-65787 E6-19101 Engineers Engineers Corps NOTICES Environmental statements; availability, etc.: Brazoria County, TX;
Freeport Ship Channel, 65783-65785 06-9146 San Bernadino County, CA; Burlington Northern Santa Fe Cajon Third Main Track Summit to Keenbrook Project, 65785 E6-19049 EPA Environmental Protection Agency RULES Air quality implementation plans; approval and promulgation; various States: California, 65740-65743 E6-18874 PROPOSED RULES Air pollutants, hazardous; national emission standards: Gasoline distribution bulk terminals, pipeline facilities and gasoline dispensing facilities, 66064-66092 E6-18656 Air quality implementation plans; approval and promulgation; various States:
California, 65764-65765 E6-18875 Hazardous waste program authorizations: Idaho, 65765-65768 E6-18486 NOTICES Agency information collection activities; proposals, submissions, and approvals, 65809-65811 E6-19014 Environmental statements; availability, etc.: Agency comment availability, 65811-65812 E6-19022 Agency weekly receipts, 65812-65813 E6-19026 Superfund; response and remedial actions, proposed settlements, etc.: Flura Corp. Leaking AST Site, TN, 65813-65814 E6-19013 Export Export-Import Bank NOTICES Agency information collection activities; proposals, submissions, and approvals, 65814 06-9129 FAA Federal Aviation Administration RULES Airworthiness directives:
Air Tractor, Inc., 65719-65722 E6-18688 B-N Group Ltd., 65714-65716 E6-18723 Dowty Propellers, 65716-65719 E6-18840 PROPOSED RULES Airworthiness standards: Special conditions— Boeing 737 airplanes, 65759-65762 E6-18906 NOTICES Airport noise compatibility program: Columbia Metropolitan Airport, SC, 65872-65876 06-9122 Reports and guidance documents; availability, etc.: Advisory circulars; other policy documents, and proposed technical standard orders; availability on agency Web site, 65876-65877 06-9123 FBI Federal Bureau of Investigation NOTICES Meetings:
Criminal Justice Information Services Advisory Policy Board, 65838 06-9143 FCC Federal Communications Commission RULES Common carrier services: Telecommunications service providers; biennial regulatory review, 65743-65751 E6-18842 NOTICES Agency information collection activities; proposals, submissions, and approvals, 65814-65816 E6-19046 FDIC Federal Deposit Insurance Corporation RULES Practice and procedure: Failure to timely pay assessment; civil money penalties, 65711-65713 E6-18804 Federal Energy Federal Energy Regulatory Commission NOTICES Complaints filed:
Wisconsin Public Power Inc., et al., 65802 E6-18926 Environmental statements; availability, etc.: Mississippi Hub, L.L.C.; meeting, 65802-65804 E6-18988 Northern Natural Gas Co., LLC, 65804-65805 E6-18987 Rockies Express Pipeline, LLC, et al., 65805-65806 E6-18986 Environmental statements; notice of intent: PacifiCorp, 65807 E6-18927 Hydroelectric applications, 65807-65808 E6-18990 E6-18991 Off-the-record communications, 65808-65809 E6-18992 Reports and guidance documents; availability, etc.:
Electronic Reliability Organization certification; electric reliability standards; establishment, approval, and enforcement procedures, 65809 E6-18928 *Applications, hearings, determinations, etc.:* ANR Pipeline Co., 65787 E6-19010 Black Marlin Pipeline Co., 65788 E6-18932 Canyon Creek Compression Co., 65788 E6-18938 CenterPoint Energy Gas Transmission Co., 65788-65789 E6-19000 Chebuere Sabine Pass Pipeline, L.P., 65789 E6-18940 Cheyenne Plains Gas Pipeline Co., LLC, 65789 E6-18935 Dauphin Island Gathering Partners, 65789-65790 E6-18994 Discovery Gas Transmission LLC, 65790 E6-18998 Distrigas of Massachusetts LLC, 65790 E6-19002 Eastern Shore Natural Gas Co., 65790-65791 E6-18931 El Paso Natural Gas Co., 65791 E6-18933 Enbridge Pipelines (Midla) L.L.C., 65791-65792 E6-19004 Gas Transmission Northwest Corp., 65792 E6-18984 Hardy Storage Co., LLC, 65792 E6-19011 Iroquois Gas Transmission System, L.P, 65792-65793 E6-19008 Midwestern Gas Transmission Co., 65793 E6-18921 MIGC, Inc., 65793 E6-18922 National Fuel Gas Supply Corp., 65793-65794 E6-18929 E6-18939 North Baja Pipeline, LLC, 65794-65795 E6-19003 Northern Border Pipeline Co., 65795 E6-18993 Northern Natural Gas Co., 65795 E6-18937 Panhandle Eastern Pipe Line, 65795-65796 E6-18925 Panther Interstate Pipeline Energy, LLC, 65796 E6-19001 Pine Needle LNG Co., LLC, 65796 E6-18996 Questar Overthrust Pipeline Co., 65796-65797 E6-18930 Rockies Express Pipeline LLC, 65797 E6-18995 Sabine Pipe Line LLC, 65797 E6-18997 Southern LNG Inc., 65798 E6-18936 Sunbury Generation LP, 65798 E6-18989 TransColorado Gas Transmission Co., 65798-65799 E6-19007 Transcontinental Gas Pipe Line Corp., E6-18923 E6-19005 65799-65800 E6-19006 Trunkline Gas Co., LLC, 65800 E6-18985 E6-18999 Wyoming Interstate Co., Ltd, 65800-65802 E6-18924 E6-18934 Federal Highway Federal Highway Administration NOTICES Environmental statements; notice of intent:
Multnomah County, OR, 65877 06-9149 Federal Reserve Federal Reserve System NOTICES Banks and bank holding companies: Change in bank control, 65816 E6-18974 Formations, acquisitions, and mergers, 65816 E6-18973 Meetings; Sunshine Act, 65816-65817 06-9175 FTC Federal Trade Commission PROPOSED RULES Telemarketing sales rules: Prerecorded telemarketing calls, etc.; seller and telemarketer compliance, 65762 E6-19012 NOTICES Prohibited trade practices: Thermo Electron Corp., 65817-65819 E6-18917 Watson Pharmaceuticals, Inc., et al., 65819-65822 E6-18916 Zango, Inc., 65822-65824 E6-18912 Reports and guidance documents; availability, etc.:
Federal antidiscrimination, whistleblower protection, and retaliation laws; No FEAR Act notice, 65824-65825 E6-19066 Fish Fish and Wildlife Service RULES Endangered and threatened species: Critical habitat designations— Canada lynx; contiguous United States distinct population segment, 66008-66061 06-9090 NOTICES Endangered and threatened species: Survival enhancement permits— Lane County, OR; Oregon silverspot butterfly; safe harbor agreement, 65830-65832 E6-18970 Endangered and threatened species permit applications, 65830 E6-18967 Environmental statements; availability, etc.:
Lacassine National Wildlife Refuge, LA; comprehensive conservation plan, 65832-65833 06-9135 Meetings: Southeast Alaska Federal Subsistence Regional Advisory Council, 65774 06-9147 Food Food and Drug Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 65827-65829 E6-19044 E6-19045 Food Food and Nutrition Service PROPOSED RULES Child nutrition programs: National School Lunch Program— Fluid milk substitutions, 65753-65758 06-9136 Forest Forest Service NOTICES Meetings:
Roadless Area Conservation National Advisory Committee, 65773 E6-18983 Southeast Alaska Federal Subsistence Regional Advisory Council, 65774 06-9147 Recreation fee areas: North Carolina National Forests, NC— Flintlock Shooting Range use fee, 65773 06-9134 Uwharrie Horse Trail use fee, 65774 06-9162 Woodrun Mountain Bike Trail use fee, 65773-65774 06-9161 GSA General Services Administration NOTICES Committees; establishment, renewal, termination, etc.: Civilian Board of Contract Appeals et al., 65825-65826 E6-18982 Health Health and Human Services Department See Centers for Medicare & Medicaid Services See Food and Drug Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 65826 E6-18963 Homeland Homeland Security Department See Coast Guard Housing Housing and Urban Development Department NOTICES Agency information collection activities; proposals, submissions, and approvals, 65829-65830 E6-18888 Homeless assistance; excess and surplus Federal properties, 65830 06-9085 Industry Industry and Security Bureau NOTICES Export privileges, actions affecting:
Zhou, Daqing, 65775-65777 06-9121 Interior Interior Department See Fish and Wildlife Service See Land Management Bureau See National Park Service See Surface Mining Reclamation and Enforcement Office IRS Internal Revenue Service RULES Income taxes: Credit for increasing research activities, 65722-65732 E6-18909 International International Trade Administration NOTICES Antidumping: Cased pencils from— China, 65777-65778 E6-19040 International International Trade Commission NOTICES Meetings;
Sunshine Act, 65835 06-9164 Justice Justice Department See Alcohol, Tobacco, Firearms, and Explosives Bureau See Federal Bureau of Investigation NOTICES Pollution control; consent judgments: Detrex Corp. Inc., 65835-65836 06-9127 McKenna, John J., Jr., 65836 06-9128 Milner, 65836 06-9125 Tarrant, Padraig, et al., 65837 06-9126 Land Land Management Bureau NOTICES Meetings: Resource Advisory Councils— Southeast Oregon, 65834 E6-19019 Maritime Maritime Administration NOTICES Environmental statements; availability, etc.:
Beacon Port Liquefied Natural Gas Deepwater Port, TX; license application, 65877-65878 E6-19009 National Highway National Highway Traffic Safety Administration NOTICES Meetings: Brain Injury Symposium, 65878-65879 E6-18919 NOAA National Oceanic and Atmospheric Administration NOTICES Meetings: Caribbean Fishery Management Council, 65778-65779 E6-19037 National Park National Park Service NOTICES Concession contract negotiations: Great Smoky Mountains National Park, TN, 65834-65835 E6-18969 National Register of Historic Places; pending nominations, 65835 E6-18946 National Science National Science Foundation NOTICES Reports and guidance documents; availability, etc.:
Federal antidiscrimination, whistleblower protection, and retaliation laws; No FEAR Act notice, 65838-65839 E6-18981 Nuclear Nuclear Regulatory Commission NOTICES Petitions; Director's decisions: Union of Concerned Scientists et al., 65840 E6-18980 Reports and guidance documents; availability, etc.: Yucca Mountain Review Plan— Preclosure safety analysis; information and reliability estimation level, 65840 E6-18976 Postal Postal Service RULES Postage meters: Manufacture and distribution; authorization— Postage Evidencing Systems; revisions to requirements, 65732-65740 E6-18949 Railroad Railroad Retirement Board NOTICES Agency information collection activities; proposals, submissions, and approvals, 65840-65841 E6-18961 E6-18962 Railroad Unemployment Insurance Act:
Experience rating proclamations, monthly compensation base, and other determinations (CY 2007), 65841-65843 E6-18960 SEC Securities and Exchange Commission NOTICES Agency information collection activities; proposals, submissions, and approvals, 65843 E6-18950 Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC, 65844-65851 E6-18952 E6-18953 E6-18954 E6-18978 Chicago Board Options Exchange, Inc., 65851-65854 E6-18955 Depository Trust Co., 65854-65855 E6-18958 Fixed Income Clearing Corp., 65855-65857 E6-18948 International Securities Exchange, Inc., 65859-65860 E6-18975 International Securities Exchange, LLC, 65857-65859 E6-18956 National Association of Securities Dealers, Inc., 65860-65867 E6-18957 E6-18959 E6-18977 National Stock Exchange, Inc., 65867-65869 E6-18947 New York Stock Exchange LLC, 65869-65870 E6-18945 Philadelphia Stock Exchange, Inc., 65870-65871 E6-18944 SBA Small Business Administration RULES Organization, functions, and authority delegations:
Disaster Assistance Office; reorganization Correction, 65713-65714 E6-18712 Surface Surface Mining Reclamation and Enforcement Office NOTICES Agency information collection activities; proposals, submissions, and approvals, 65833-65834 06-9141 Surface Surface Transportation Board NOTICES Railroad operation, acquisition, construction, etc.: Genesee & Wyoming Inc., 65879 E6-19039 Portland Terminal Railroad Co., 65879-65880 E6-18883 Union Pacific Railroad Co., 65880 E6-18863 Railroad services abandonment:
Norfolk Southern Railway Co., 65880-65881 E6-19038 Transportation Transportation Department See Federal Aviation Administration See Federal Highway Administration See Maritime Administration See National Highway Traffic Safety Administration See Surface Transportation Board NOTICES Aviation proceedings: Agreements filed; weekly receipts, E6-19031 65871-65872 E6-19033 Treasury Treasury Department See Internal Revenue Service PROPOSED RULES Privacy Act; implementation, 65763-65764 E6-18853 NOTICES Agency information collection activities; proposals, submissions, and approvals, 65881 E6-19016 Separate Parts In This Issue Part II Health and Human Services Department, Centers for Medicare & Medicaid Services, 65884-66006 06-9068 Part III Interior Department, Fish and Wildlife Service, 66008-66061 06-9090 Part IV Environmental Protection Agency, 66064-66092 E6-18656 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 71 217 Thursday, November 9, 2006 Rules and Regulations DEPARTMENT OF AGRICULTURE Commodity Credit Corporation 7 CFR Part 1430 RIN 0560-AH56 2005 Dairy Disaster Assistance Payment Program AGENCY: Commodity Credit Corporation, USDA.
ACTION: Final rule; correction. SUMMARY: This document corrects a change made by a final rule published October 31, 2006 amending the regulations for the 2005 Dairy Disaster Assistance Payment Program (DDAP-II). A correction is needed because the final rule of October 31 incorrectly numbered the sections of the new subpart E that was added to 7 CFR part 1430. DATES: *Effective Date:* October 31, 2006. FOR FURTHER INFORMATION CONTACT: Tom Witzig, Regulatory Review Group, Economic and Policy Analysis Staff, Farm Service Agency (FSA), United States Department of Agriculture (USDA), Stop 0572, 1400 Independence Ave., SW., Washington, DC 20250-0572.
Telephone:
(202)205-5851; e-mail: *Tom.Witzig@wdc.usda.gov.* Persons with disabilities who require alternative means for communication (Braille, large print, audio tape, etc.) should contact the USDA Target Center at
(202)720-2600 (voice and TDD). SUPPLEMENTARY INFORMATION: Background This rule corrects the final rule published in the **Federal Register** on October 31, 2006 (71 FR 63668) that amended the regulations governing the 2005 Dairy Disaster Assistance Payment Program (DDAP-II) of the Commodity Credit Corporation (CCC). The final rule added a new subpart E, 2005 Dairy Disaster Assistance Program (DDAP-II). The sections of the new subpart were erroneously numbered as §§ 1430.300 through 1430.315. This document corrects the section numbers to be sections 1430.600 through 1430.615. List of Subjects in 7 CFR Part 1430 Dairy, Disaster assistance, Reporting and recordkeeping requirements. Accordingly, for this reason, 7 CFR part 1430 is amended as follows: PART 1430—DAIRY PRODUCTS 1. The authority citation for part 1430 continues to read as follows: Authority: 7 U.S.C. 7981 and 7982; 15 U.S.C. 714b and 714c; Sec. 3014 of Pub. L. 109-234, 16 U.S.C. 3801 note, 120 Stat. 474. 2. In subpart E, re-designate §§ 1430.300 through 1430.314 as §§ 1430.600 through 1430.614, respectively. § 1430.602 [Amended] 3. In newly designated § 1430.602, in the definition of *base month* , revise the reference for “§ 1430.304” to read “§ 1430.604”. § 1430.603 [Amended] 4. In newly designated § 1430.603(b), revise the reference for “§ 1430.302” to read “§ 1460.602”. § 1430.605 [Amended] 5. In newly designated § 1430.605(a), revise the reference for “§ 1430.306 to read “§ 1430.606”. § 1430.606 [Amended] 6. In newly designated § 1430.606: A. In paragraph (a), revise the references to “§ 1430.302”, “1430.304(g)” (two places), and “§ 1430.305” to read “§ 1430.602”, “§ 1430.604(g)”, and “§ 1430.605”, respectively; B. In paragraph (d), revise the reference to “§ 1430.305” to read “§ 1430.605”; C. In paragraph (e)(2), revise the reference to “§ 1430.305” to read “§ 1430.605”; and D. In paragraph (g), revise the reference to “§ 1420.305” to read “§ 1430.605”; § 1430.607 [Amended] 7. In newly designated § 1430.607: A. In paragraph
(a)introductory text, revise the reference to “§ 1430.306” to read “§ 1430.606”; and B. In paragraph (c), revise the reference to “§ 1430.306” to read “§ 1430.606”. § 1430.609 [Amended] 8. In newly designated § 1430.609, revise the references to “§ 1430.307” and “§ 1430.308” to read “§ 1430.607” and “§ 1430.608”, respectively. Signed in Washington, DC, on November 2, 2006. Teresa C. Lasseter, Executive Vice President, Commodity Credit Corporation. [FR Doc. E6-18800 Filed 11-8-06; 8:45 am] BILLING CODE 3410-05-P FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 308 RIN 3064-AD06 Penalty for Failure To Timely Pay Assessments AGENCY: Federal Deposit Insurance Corporation. ACTION: Final rule. SUMMARY: The Federal Deposit Insurance Corporation (“FDIC”) is adopting its final rule amending its regulations concerning penalties for failure to timely pay assessments. The final rule adopts changes made by the Federal Deposit Insurance Reform Act of 2005 (“Reform Act”), which amended provisions of the Federal Deposit Insurance Act (“FDI Act”). The statute generally provides that an insured depository institution which fails or refuses to pay any assessment shall be subject to a penalty of not more than 1 percent of the assessment due for each day the violation continues. The statute includes an exception if the failure to pay results from a dispute with the FDIC over the amount of the assessment and the institution deposits satisfactory security with the FDIC. The statute includes a provision covering assessment amounts of less than $10,000, which authorizes penalties up to $100 per day. Finally, the statute accords the FDIC discretion to compromise, modify or remit any penalty imposed on a finding that good cause prevented timely payment. The final rule amends the FDIC's former rule concerning late assessment penalties, in conformity with these provisions of the Reform Act. DATES: This final rule will become effective on January 1, 2007. FOR FURTHER INFORMATION CONTACT: Donna M. Saulnier, Senior Assessment Policy Specialist, DOF,
(703)562-6167; or William V. Farrell, Manager, Assessments Section, DOF,
(703)562-6168; or Christopher Bellotto, Counsel, Legal Division,
(202)898-3801; or Stephen T. Weisweaver, Attorney, Legal Division,
(202)898-6976. SUPPLEMENTARY INFORMATION: I. Background Section 2104
(c)of the Reform Act amends section 18(h) of the FDI Act, 12 U.S.C. 1828(h) (2000). 1 As described in its proposal, 71 FR 40938 (July 19, 2006), the FDIC added the present rule concerning late assessment penalties when it amended 12 CFR 308.132 pursuant to the Debt Collection Improvement Act of 1996 (“DCIA”). 2 *See* 61 FR 57987 (Nov. 12, 1996). 3 Accordingly, the FDIC increased the late assessment penalty amount from a maximum of $100, as originally established in section 18(h) of the FDI Act, to a maximum of $110 for each day the violation continues. *Id.* 4 This final rule amends the FDIC's late assessment penalty rule, 12 CFR 308.132(c)(3)(v), to reflect the changes made by section 2104(c) of the Reform Act. Section 2104(c) of the Reform Act changes the late assessment penalty from not more than $100 per day to not more than 1 percent of any assessment owed, per day that the violation continues, if the amount owed is $10,000 or more at the time the institution fails or refuses to pay the assessment. If the institution owes less than $10,000 at the time the institution fails or refuses to pay the assessment, then the amendment authorizes penalties up to $100 for each day that the violation continues. The Reform Act also provides for an exception if the failure to pay results from a dispute with the FDIC over the amount of the assessment and the institution deposits satisfactory security with the FDIC. 1 *See* Federal Deposit Insurance Reform Act of 2005, section 2104(c), Public Law 109-171, 120 Stat. 9, 13. 2 Public Law 104-134, 110 Stat. 1321-358, 373, amending section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990 (“Inflation Adjustment Act”), 28 U.S.C. 2461 (2000). 3 The DCIA required the head of each Federal Agency to enact rules adjusting each Civil Money Penalty (“CMP”), under the agency's jurisdiction, by a rate of inflation prescribed in the DCIA. 4 Section 2104(c) of the Reform Act effectively returns the late assessment penalty on assessments of less than $10,000 to the original amount of up to $100. The Inflation Adjustment Act, *supra* note 2, may require a readjustment of this amount in 2008. II. Comments Received On July 19, 2006, the FDIC published in the **Federal Register** a notice of proposed rulemaking and request for comment, which reflected the proposed amendments to the late assessment penalties rule, 12 CFR 308.132(c)(3)(v). *See* 71 FR 40938. The FDIC received one substantive comment, which was from a trade association. It acknowledged the former late assessment penalty provisions were outdated and supported the FDIC's proposal. Therefore, the FDIC is adopting the proposed amendments to 12 CFR 308.132(c)(3)(v) with no changes in its final rule. The trade association specifically supported the statutory provision that allows the FDIC to compromise, modify, or remit any penalty upon a determination that good cause prevented the timely payment of an assessment. It noted that natural disasters, such as Hurricane Katrina that struck the Gulf Coast in August of 2005, can affect numerous institutions' ability to pay assessments in a timely manner. The FDIC recognizes that situations may arise where a depository institution's failure to pay may be due to matters outside the control of the institution therefore establishing good cause for a failure to pay in a timely manner. After according an affected institution an opportunity to request a good cause determination, and when applicable because the FDIC and the institution are unable to resolve the matter, the FDIC will impose the penalty in the same manner as civil money penalties issued pursuant to section 8(i) of the FDI Act, 12 U.S.C. 1818(i) (2000). III. Description of the Final Rule Section 132(c)(3)(v) of part 308 is being amended by conforming it to the changes made by section 2104(c) of the Reform Act. The late assessment penalty is changed from a maximum of $110 per day (as previously adjusted under the Inflation Adjustment Act, *supra* note 2) to not more than 1 percent of the assessment owed, if the institution owes an assessment of $10,000 or more at the time the institution refuses or fails to pay any assessment. 5 Additionally, if the amount the institution fails or refuses to pay is less than $10,000, the rule authorizes penalties of up to $100 for each day that the violation continues. Finally, section 132(c)(3)(v) incorporates the statutory exception when the failure to pay results from a dispute with the FDIC over the amount of the assessment and the institution deposits satisfactory security with the FDIC. Section 132(c)(3)(v) also recognizes the FDIC's discretion to compromise, modify, or remit any penalty that the FDIC may assess upon a finding that good cause prevented the timely payment of an assessment. 5 The FDIC can also initiate a termination of insurance proceeding, pursuant to section 8(a) of the FDI ACT, 12 U.S.C. 1818(a) (2000), when an institution withholds portions of its insurance assessments. *Doolin Security Savings Bank* v. *FDIC* , 53 F.3d 1395, 1408 (4th Cir. 1995). IV. Regulatory Analysis and Procedure A. Solicitation of Comments on Use of Plain Language Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The proposed rule requested comments on how the rule might be changed to reflect the requirements of GLBA. No GLBA comments were received. B. Regulatory Flexibility Act The Regulatory Flexibility Act (“RFA”) requires that each Federal agency either certify that a proposed rule would not, if adopted in final form, have a significant economic impact on a substantial number of small entities or prepare an initial regulatory flexibility analysis of the proposal and publish the analysis for comment. *See* 5 U.S.C. 603, 604, 605 (2000). The proposed rule stated that the late assessment penalty rule adopts statutory language enacted by Congress in the Reform Act. Therefore the rule would not create any additional economic impact because the only economic impact would result from the language of the statute. No comments were received concerning the proposal's RFA certification. Additional factual bases exist for certifying that this final rule will not have a significant economic impact on a substantial number of small depository institutions, which are defined as having $165 million or less in assets. This final rule will not have an economic impact on a substantial number of small depository institutions because the assessments for a number of these institutions will remain below the $10,000 threshold limiting penalties to not more than $100 per day. Thus, the statutory changes adopted by this rule will not change the penalty amount that can be imposed on these institutions. In cases where a small depository institution's assessment exceeds $10,000, the economic impact of this final rule is limited to 1% of the assessment amount for each day of delinquency. For example, a bank with $165 million in assets subject to a 5 basis point assessment would incur a daily penalty of less than $200 for every day that its quarterly assessment payment was late. Additionally, over the last two years, less than 1% of the approximately 5,521 small depository institutions invoiced for deposit insurance premiums and FICO assessments each year failed to timely pay their assessment. Therefore, this final rule will not have a significant economic impact on a substantial number of small depository institutions. C. Paperwork Reduction Act No collections of information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 *et seq.* ) are contained in the final rule. D. The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Rules and Policies on Families The FDIC has determined that the final rule does not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681). E. Small Business Regulatory Enforcement Fairness Act The Office of Management and Budget has determined that the final rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement and Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 *et seq.* ). As required by SBREFA, the FDIC will file the appropriate reports with Congress and the General Accounting Office so that the final rule may be reviewed. List of Subjects in 12 CFR Part 308 Administrative practice and procedure, Bank deposit insurance, Banks, banking, Claims, Crime, Equal access to justice, Fraud, Investigations, Lawyers, Penalties. For the reasons set forth in the preamble, the FDIC hereby amends subpart H of 12 CFR 308 as follows: PART 308—RULES OF PRACTICE AND PROCEDURE 1. The authority citation continues to read as follows: Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4), 1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3 and 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31 U.S.C. 330, 5321; 42 U.S.C. 4012a; Sec. 3100(s), Pub. L. 104-134, 110 Stat. 1321-358. 2. Revise paragraph (c)(3)(v) of section 308.132 as follows: § 308.132 Assessment of penalties.
(c)* * *
(3)* * *
(v)*Civil money penalties assessed pursuant to section 18(h) of the FDI Act for failure to timely pay assessment.*
(A)*In General* .—Subject to paragraph (c)(3)(v)(C) of this section, any insured depository institution which fails or refuses to pay any assessment shall be subject to a penalty in an amount of not more than 1 percent of the amount of the assessment due for each day that such violation continues.
(B)*Exception In Case Of Dispute* .—Paragraph
(A)of this section shall not apply if— ( *1* ) The failure to pay an assessment is due to a dispute between the insured depository institution and the Corporation over the amount of such assessment; and ( *2* ) The insured depository institution deposits security satisfactory to the Corporation for payment upon final determination of the issue.
(C)*Special Rule For Small Assessment Amounts* .—If the amount of the assessment which an insured depository institution fails or refuses to pay is less than $10,000 at the time of such failure or refusal, the amount of any penalty to which such institution is subject under paragraph
(A)of this section shall not exceed $100 for each day that such violation continues.
(D)*Authority To Modify Or Remit Penalty* .—The Corporation, in the sole discretion of the Corporation, may compromise, modify or remit any penalty which the Corporation may assess or has already assessed under paragraph (c)(3)(v)(A) of this section upon a finding that good cause prevented the timely payment of an assessment. Dated at Washington, DC, this 2nd day of November 2006. By order of the Board of Directors. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. E6-18804 Filed 11-8-06; 8:45 am] BILLING CODE 6714-01-P SMALL BUSINESS ADMINISTRATION 13 CFR Parts 101 and 123 RIN 3245-AF42 Administration and Disaster Loan Program AGENCY: U.S. Small Business Administration (SBA). ACTION: Direct final rule; correction. SUMMARY: On October 31, 2006, SBA published in the **Federal Register** a direct final rule to amend SBA regulations to reflect the new structure of the Office of Disaster Assistance following an office reorganization (71 FR 63674). In the preamble to the regulation, SBA stated in the DATES section that this rule is effective November 30, 2006 without further action, unless adverse comment is received on or before the effective date. If adverse comment is received, SBA will publish a timely withdrawal of the rule in the **Federal Register** . SBA is correcting the DATES caption for this direct final rule to clarify the timeframe for public comment, and to allow sufficient time for SBA to withdraw the rule if any significant adverse comments are received. DATES: Effective November 9, 2006. FOR FURTHER INFORMATION CONTACT: James E. Rivera, Deputy Associate Administrator for Disaster Assistance, 409 3rd Street, SW., Washington, DC 20416;
(202)205-6734; fax
(202)205-7728; or e-mail *James.Rivera@sba.gov* . SUPPLEMENTARY INFORMATION: In FR Doc. E6-18246 appearing on page 63674 in the **Federal Register** on Tuesday, October 31, 2006, the following correction is made: On page 63674, in the third column the DATES heading is corrected to read as follows: DATES: This rule is effective December 15, 2006 without further action, unless significant adverse comment is received by November 30, 2006. If significant adverse comment is received, SBA will publish a timely withdrawal of the rule in the **Federal Register** . (Authority: 15 U.S.C. 634) Dated: November 1, 2006. Roger B. Garland, Acting Associate Administrator for Disaster Assistance. [FR Doc. E6-18712 Filed 11-8-06; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-25668; Directorate Identifier 2006-CE-44-AD; Amendment 39-14815; AD 2006-23-03] RIN 2120-AA64 Airworthiness Directives; B-N Group Ltd. BN-2, BN-2A, BN-2B, BN-2T, and BN-2T-4R Series (All Individual Models Included in Type Certificate Data Sheet
(TCDS)A17EU, Revision 16, Dated December 9, 2002) Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. SUMMARY: The FAA adopts a new airworthiness directive
(AD)for all B-N Group Ltd. BN-2, BN-2A, BN-2B, BN-2T, and BN-2T-4R series (all individual models included in Type Certificate Data Sheet
(TCDS)A17EU, Revision 16, dated December 9, 2002) airplanes. This AD requires you to inspect the horizontal stabilizer attachment bolts and anchor nuts for damage and wear and replace damaged and/or worn parts with new, modified parts. If no damaged or worn parts are found during the inspection, this AD requires you to replace the horizontal stabilizer attachment bolts and anchor nuts at a specified time with new, modified parts. This AD results from mandatory continuing airworthiness information
(MCAI)issued by the airworthiness authority for the United Kingdom. We are issuing this AD to detect and correct damaged and/or worn horizontal stabilizer attachment bolts and anchor nuts, which could result in failure of the horizontal stabilizer. This failure could result in loss of control. DATES: This AD becomes effective on December 14, 2006. As of December 14, 2006, the Director of the Federal Register approved the incorporation by reference of certain publications listed in the regulation. ADDRESSES: To get the service information identified in this AD, contact B-N Group Ltd., Bembridge Airport, Isle of Wight, PO35 5PR, United Kingdom; telephone: +44
(0)1983 872511; fax: +44
(0)1983 873246. To view the AD docket, go to the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-001 or on the Internet at *http://dms.dot.gov* . The docket number is FAA-2006-25668; Directorate Identifier 2006-CE-44-AD. FOR FURTHER INFORMATION CONTACT: Albert J. Mercado, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri, 64106; telephone:
(816)329-4119; fax:
(816)329-4090. SUPPLEMENTARY INFORMATION: Discussion On September 11, 2006, we issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to all B-N Group Ltd. BN-2, BN-2A, BN-2B, BN-2T, and BN-2T-4R series (all individual models included in Type Certificate Data Sheet
(TCDS)A17EU, Revision 16, dated December 9, 2002) airplanes. This proposal was published in the **Federal Register** as a notice of proposed rulemaking
(NPRM)on September 15, 2006 (71 FR 54438). The NPRM proposed to require you to inspect the horizontal stabilizer attachment bolts and anchor nuts for damage and wear and replace damaged and/or worn parts with new, modified parts. If no damaged or worn parts are found during the proposed inspection, the NPRM proposed to require you to replace the horizontal stabilizer attachment bolts and anchor nuts at a specified time with new, modified parts. Comments We provided the public the opportunity to participate in developing this AD. The following presents the comments received on the proposal and FAA's response to each comment: Comment Issue No. 1: Publish the Manufacturer Service Information Jack Buster with the Modification and Replacement Parts Association (MARPA) provides comments on the MCAI AD process pertaining to how the FAA addresses publishing manufacturer service information as part of a proposed AD action. The commenter states that the proposed rule attempts to require compliance with a public law by reference to a private writing (as referenced in paragraph
(e)of the proposed AD). The commenter would like the FAA to incorporate by reference
(IBR)the B-N Group Ltd. service information. We agree with Mr. Buster. However, we do not IBR any document in a proposed AD action, instead we IBR the document in the final rule. Since we are issuing the proposal as a final rule AD action, B-N Britten-Norman Aircraft Limited Service Bulletin number SB 302, Issue 2, dated April 12, 2005, and B-N Group Ltd. Modification Leaflet for Mod NB-M-1787, Issue 1, dated August 1, 2005, are incorporated by reference. Comment Issue No. 2: Availability of IBR Documents in the Docket Management System
(DMS)Mr. Buster requests IBR documents be made available to the public by publication in the **Federal Register** or in the DMS. We are currently reviewing issues surrounding the posting of service bulletins in the Department of Transportation's DMS as part of the AD docket. Once we have thoroughly examined all aspects of this issue and have made a final determination, we will consider whether our current practice needs to be revised. Comment Issue No. 3: Allow Replacement With FAA-approved Equivalent Parts Mr. Buster requests allowing the use of FAA-approved equivalent parts for replacing the horizontal stabilizer attachment bolts and anchor nuts with modified horizontal stabilizer attachment bolts. We agree with Mr. Buster. We will allow the use of FAA-approved equivalent parts when installing the modified horizontal stabilizer attachment bolts. We are adding the phrase “or FAA-approved equivalent part” in paragraphs (e)(2), (e)(3), and (e)(4) of this AD based on this comment. Conclusion We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections: • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and • Do not add any additional burden upon the public than was already proposed in the NPRM. Differences Between the Foreign Airworthiness Authority AD, the Service Bulletin, and This AD The MCAI British AD No. G-2004-0014 R1, Effective Date: July 29, 2005, and B-N Britten-Norman Aircraft Limited Service Bulletin number SB 302, Issue 2, dated April 12, 2005, allow 1,000-hour repetitive inspections of the horizontal stabilizer attachment bolts and anchor nuts with the option of installing the new, modified horizontal stabilizer attachment bolts as a terminating action for the repetitive inspections. This AD does not allow continued repetitive inspections. The actions required by this AD are consistent with the FAA's aging commuter aircraft policy, which briefly states that, when a modification exists that could eliminate or reduce the number of required critical inspections, the modification should be incorporated. This policy is based on the FAA's determination that reliance on critical repetitive inspections on airplanes utilized in commuter service carries an unnecessary safety risk when a design change exists that could eliminate or, in certain instances, reduce the number of those critical inspections. In determining what inspections are critical, the FAA considers
(1)The safety consequences of the airplane if the known problem is not detected by the inspection;
(2)the reliability of the inspection such as the probability of not detecting the known problem;
(3)whether the inspection area is difficult to access; and
(4)the possibility of damage to an adjacent structure as a result of the problem. Costs of Compliance We estimate that this AD will affect 91 airplanes in the U.S. registry. We estimate the following costs to do the inspection: Labor cost Parts cost Total cost per airplane Total cost on U.S. operators 1 work-hour × $80 per hour = $80 Not applicable $80 $80 × 91 = $7,280. We estimate the following costs to do the replacements: Labor cost Parts cost Total cost per airplane Total cost on U.S. operators 3 work-hours × $80 per hour = $240 $1,600 $240 + $1,600 = $1,840 $1,840 × 91 = $167,440. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this AD. Regulatory Findings We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a summary of the costs to comply with this AD (and other information as included in the Regulatory Evaluation) and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES . Include “Docket No. FAA-2006-25668; Directorate Identifier 2006-CE-44-AD” in your request. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. FAA amends § 39.13 by adding a new AD to read as follows: **2006-23-03 B-N Group Ltd:** Amendment 39-14815; Docket No. FAA-2006-25668; Directorate Identifier 2006-CE-44-AD. Effective Date
(a)This AD becomes effective on December 14, 2006. Affected ADs
(b)None. Applicability
(c)This AD applies to all BN-2, BN-2A, BN-2B, BN-2T, and BN-2T-4R series (all individual models included in Type Certificate Data Sheet
(TCDS)A17EU, Revision 16, dated December 9, 2002) airplanes; that are certificated in any category. Unsafe Condition
(d)This AD is the result of mandatory continuing airworthiness information
(MCAI)issued by the airworthiness authority for the United Kingdom. The actions specified in this AD are intended to detect and correct damaged and/or worn horizontal stabilizer attachment bolts and anchor nuts, which could result in failure of the horizontal stabilizer. This failure could result in loss of control. Compliance
(e)To address this problem, you must do the following, unless already done: Actions Compliance Procedures
(1)Inspect the horizontal stabilizer attachment bolts and anchor nuts for damage and wear Within the next 50 hours time-in-service
(TIS)or 2 months, whichever occurs first, after December 14, 2006 (the effective date of this AD) Follow B-N Britten-Norman Aircraft Limited Service Bulletin number SB 302, Issue 2, dated April 12, 2005.
(2)If you find any damaged or worn horizontal stabilizer attachment bolts and/or anchor nuts during the inspection required in paragraph (e)(1) of this AD, replace with new, modified horizontal stabilizer attachment bolts as specified in the service information (or FAA-approved equivalent part) Before further flight after the inspection required in paragraph (e)(1) of this AD Follow B-N Britten-Norman Aircraft Limited Service Bulletin number SB 302, Issue 2, dated April 12, 2005. Do any necessary replacements following B-N Group Ltd. Modification Leaflet for Mod NB-M-1787, Issue 1, dated August 1, 2005.
(3)If you do not find damaged or worn horizontal stabilizer attachment bolts and/or anchor nuts during the inspection required in paragraph (e)(1) of this AD, replace the horizontal stabilizer attachment bolts and anchor nuts with new, modified horizontal stabilizer attachment bolts as specified in the service information (or FAA-approved equivalent part) Upon accumulating 1,000 hours TIS after the inspection required in paragraph (e)(1) of this AD Follow B-N Group Ltd. Modification Leaflet for Mod NB-M-1787, Issue 1, dated August 1, 2005.
(4)You may replace the horizontal stabilizer attachment bolts and anchor nuts with the new, modified horizontal stabilizer attachment bolts as specified in the service information (or FAA-approved equivalent part) at any time, but no later than the applicable times specified in paragraphs (e)(2) and (e)(3) of this AD. After installing the new, modified horizontal stabilizer attachment bolts, no further action is required As of December 14, 2006 (the effective date of this AD) Follow B-N Group Ltd. Modification Leaflet for Mod NB-M-1787, Issue 1, dated August 1, 2005. Alternative Methods of Compliance (AMOCs)
(f)The Manager, Standards Staff, FAA, Small Airplane Directorate, ATTN: Albert J. Mercado, Aerospace Engineer, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:
(816)329-4119; fax:
(816)329-4090, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Related Information
(g)MCAI United Kingdom Civil Aviation Authority AD No. G-2004-0014 R1, Effective Date: July 29, 2005, also addresses the subject of this AD. Material Incorporated by Reference
(h)You must use B-N Britten-Norman Aircraft Limited Service Bulletin number SB 302, Issue 2, dated April 12, 2005, and B-N Group Ltd. Modification Leaflet for Mod NB-M-1787, Issue 1, dated August 1, 2005, to do the actions required by this AD, unless the AD specifies otherwise.
(1)The Director of the Federal Register approved the incorporation by reference of this service information under 5 U.S.C. 552(a) and 1 CFR part 51.
(2)For service information identified in this AD, contact B-N Group Ltd., Bembridge Airport, Isle of Wight, PO35 5PR, United Kingdom; telephone: +44
(0)1983 872511; fax: +44
(0)1983 873246.
(3)You may review copies at the FAA, Central Region, Office of the Regional Counsel, 901 Locust, Kansas City, Missouri 64106; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . Issued in Kansas City, Missouri, on October 30, 2006. Kim Smith, Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-18723 Filed 11-8-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26220; Directorate Identifier 2006-NE-40-AD; Amendment 39-14822; AD 2006-23-10] RIN 2120-AA64 Airworthiness Directives; Dowty Propellers R321/4-82-F/8; R324/4-82-F/9; R333/4-82-F/12; and R334/4-82-F/13 Propellers AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule; request for comments. SUMMARY: We are adopting a new airworthiness directive
(AD)for the products listed above. This AD results from mandatory continuing airworthiness information
(MCAI)issued by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as: One propeller blade has recently been identified after delivery from Dowty Propellers where the blade counterweight capscrew holes have not been correctly drilled. If the capscrew holes are not machined to their required depth, it may appear that the capscrew has been correctly assembled, but the counterweight will not be properly retained. This condition, if not corrected, could result in failure (due to fatigue) of one or more capscrews, release of the counterweight during propeller operation and consequent risk of injury to aircraft occupants and persons on the ground. Dowty has concluded that the problem is associated only with blades manufactured between April and July 2006, identified by serial number in the applicability section of this directive. This AD requires actions that are intended to address the unsafe condition described in the MCAI. DATES: This AD becomes effective November 24, 2006. The Director of the Federal Register approved the incorporation by reference of Dowty Propellers Alert Service Bulletin
(ASB)No. 61-A1133, dated October 17, 2006, and ASB No. 61-A1134, dated October 17, 2006, listed in the AD, as of November 24, 2006. We must receive comments on this AD by December 11, 2006. ADDRESSES: You may send comments by any of the following methods: • *DOT Docket Web Site:* Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • *Fax:*
(202)493-2251. • *Mail:* Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-0001. • *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: http://www.regulations.gov* . Follow the instructions for submitting comments. Examining the AD Docket You may examine the AD docket on the Internet at *http://dms.dot.gov* ; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone
(800)647-5227) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Frank Walsh, Aerospace Engineer, Boston Aircraft Certification Office, FAA, Engine & Propeller Directorate, 12 New England Executive Park, Burlington, MA 01803; telephone
(781)238-7158; fax
(781)238-7170. SUPPLEMENTARY INFORMATION: Streamlined Issuance of AD The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. This streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to follow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and **Federal Register** requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products. This AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The AD contains text copied from the MCAI and for this reason might not follow our plain language principles. Discussion The European Aviation Safety Agency (EASA), which is the aviation authority for the European community, has issued Emergency Airworthiness Directive No. 2006-0326-E, dated October 23, 2006 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states that: One propeller blade has recently been identified after delivery from Dowty Propellers where the blade counterweight capscrew holes have not been correctly drilled. If the capscrew holes are not machined to their required depth, it may appear that the capscrew has been correctly assembled, but the counterweight will not be properly retained. This condition, if not corrected, could result in failure (due to fatigue) of one or more capscrews, release of the counterweight during propeller operation and consequent risk of injury to aircraft occupants and persons on the ground. Dowty has concluded that the problem is associated only with blades manufactured between April and July 2006, identified by serial number in the applicability section of this directive. You may obtain further information by examining the MCAI in the AD docket. Relevant Service Information Dowty Propellers has issued ASB No. 61-A1133, dated October 17, 2006, and ASB No. 61-A1134, dated October 17, 2006. The actions described in those ASBs are intended to correct the unsafe condition identified in the MCAI. FAA's Determination and Requirements of This AD This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are issuing this AD because we evaluated all the information provided by the State of Design Authority and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design. Differences Between the AD and the MCAI or Service Information We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information. We might also have required different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are described in a separate paragraph of the AD. These requirements take precedence over the actions copied from the MCAI. FAA's Determination of the Effective Date An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because propeller blades have not been adequately machined to properly retain counterweights. This condition, if not corrected, could result in failure (due to fatigue) of one or more capscrews, release of the counterweight during propeller operation, consequent risk of injury to aircraft occupants and persons on the ground, and loss of control of aircraft in flight. We have concluded that due to the serious nature of this problem of the limited number of blades listed in the ASBs and in the applicability section of EASA Emergency AD No. 2006-0326-E, this AD must be a final rule; request for comments to require identification, inspection, and where necessary rework of the affected propeller blades. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days. Comments Invited This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2006-26220; Directorate Identifier 2006-NE-40-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this AD because of those comments. We will post all comments we receive, without change, to *http://dms.dot.gov* , including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this AD. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify this AD: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by adding the following new AD: **2006-23-10 Dowty Propellers (formerly Dowty Rotol Ltd):** Amendment 39-14822. Docket No. FAA-2006-26220; Directorate Identifier 2006-NE-40-AD. Effective Date
(a)This airworthiness directive
(AD)becomes effective November 24, 2006. Affected ADs
(b)None. Applicability
(c)This AD applies to Dowty Propellers R321/4-82-F/8; R324/4-82-F/9; R333/4-82-F/12; and R334/4-82-F/13 propellers, if blades are installed with serial numbers
(SNs)A156121 through A156132; A156137 through A156160; A156165 through A156168; A156177 through A156184; A156194; and A156196 through A156200. These propellers are known to be installed on, but not limited to CASA 212; M7 Aerospace (formerly Fairchild; Swearingen) SA227TT, SA227AT, and SA227AC; and BAE Systems (formerly British Aerospace) Jetstream 3100 and 3200 series airplanes. Reason
(d)One propeller blade has recently been identified after delivery from Dowty Propellers where the blade counterweight capscrew holes have not been correctly drilled. If the capscrew holes are not machined to their required depth, it may appear that the capscrew has been correctly assembled, but the counterweight will not be properly retained. This condition, if not corrected, could result in failure (due to fatigue) of one or more capscrews, release of the counterweight during propeller operation, and consequent risk of injury to aircraft occupants and persons on the ground. Dowty has concluded that the problem is associated only with blades manufactured between April and July 2006, identified by SN in the applicability section of this directive. Actions and Compliance
(e)Unless already done, do the following actions.
(1)Before next flight after the effective date of this directive, identify the propeller blades that have a SN listed in the applicability section of this directive and inspect the affected blades in accordance with the instructions contained in Dowty Propellers Alert Service Bulletin
(ASB)No. 61-A1133, dated October 17, 2006, and ASB No. 61-A1134, dated October 17, 2006, as applicable.
(2)When discrepancies are found, before further flight the counterweight attachment hole must be re-machined. Contact Dowty Propellers for advice on re-machining the holes.
(3)After the effective date of this directive, no person may install one of the listed SN propeller blades on an aircraft unless the blade has been inspected and, if necessary, reworked in accordance with the requirements of this directive. FAA AD Differences
(f)None. Other FAA AD Provisions
(g)The following provisions also apply to this AD:
(1)*Alternative Methods of Compliance (AMOCs):* The Manager, Boston Aircraft Certification Office, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19.
(2)*Airworthy Product:* For any requirement in this AD to obtain corrective actions from a manufacturer or other source, use these actions if they are FAA-approved. Corrective actions are considered FAA-approved if they are approved by the State of Design Authority (or their delegated agent). You are required to assure the product is airworthy before it is returned to service.
(3)*Reporting Requirements:* For any reporting requirement in this AD, under the provisions of the Paperwork Reduction Act, the Office of Management and Budget
(OMB)has approved the information collection requirements and has assigned OMB Control Number 2120-0056.
(h)*Special Flight Permits:* We are prohibiting special flight permits. Related Information
(i)Refer to Mandatory Continuing Airworthiness Information
(MCAI)EASA Emergency Airworthiness Directive 2006-0326-E, dated October 23, 2006. Material Incorporated by Reference
(j)You must use the Dowty Propellers service information specified in Table 1 of this AD to do the actions required by this AD, unless the AD specifies otherwise.
(1)The Director of the Federal Register approved the incorporation by reference of this service information under 5 U.S.C. 552(a) and 1 CFR part 51.
(2)For service information identified in this AD, contact Dowty Propellers, Anson Business Park, Cheltenham Road East, Gloucester GL 29QN, UK; telephone 44
(0)1452 716000; fax 44
(0)1452 716001.
(3)You may review copies at the FAA, New England Region, Office of the Regional Counsel, 12 New England Executive Park, Burlington, MA; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call
(202)741-6030, or go to: *http://www.archives.gov/federal-register/cfr/ibr-locations.html.* Table 1.—Material Incorporated by Reference Dowty Propellers Alert Service Bulletin No. Page Revision Date 61-A1133 All Original October 17, 2006. 61-A1134 All Original October 17, 2006. Issued in Burlington, Massachusetts, on November 1, 2006. Peter A. White, Acting Manager, Engine and Propeller Directorate, Aircraft Certification Service. [FR Doc. E6-18840 Filed 11-8-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2004-20007; Directorate Identifier 2004-CE-50-AD; Amendment 39-14798; AD 2006-23-01] RIN 2120-AA64 Airworthiness Directives; Air Tractor, Inc. Model AT-602 Airplanes AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. SUMMARY: The FAA adopts a new airworthiness directive
(AD)for all Air Tractor, Inc. (Air Tractor) Model AT-602 airplanes. This AD requires you to repetitively inspect (using the eddy current method) the wing center splice joint two outboard fastener holes on both of the wing main spar lower caps for fatigue cracking; repair or replace any wing main spar lower cap where fatigue cracking is found; and report any fatigue cracking found. This AD results from fatigue cracking at the wing center splice joint outboard fastener hole in one of the wing main spar lower caps. We are issuing this AD to detect and correct cracks in the wing main spar lower cap, which could result in failure of the spar cap and lead to wing separation and loss of control of the airplane. DATES: This AD becomes effective on December 14, 2006. As of December 14, 2006, the Director of the Federal Register approved the incorporation by reference of certain publications listed in the regulation. ADDRESSES: To get the service information identified in this AD, contact Air Tractor, Inc. at P.O. Box 485, Olney, Texas 76374; telephone:
(940)564-5616; or fax:
(940)564-5612. To view the AD docket, go to the Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-0001 or on the Internet at *http://dms.dot.gov* . The docket number is FAA-2004-20007; Directorate Identifier 2004-CE-50-AD. FOR FURTHER INFORMATION CONTACT: Andrew McAnaul, Aerospace Engineer, ASW-150 (c/o MIDO-43), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; telephone:
(210)308-3365; fax:
(210)308-3370. SUPPLEMENTARY INFORMATION: Discussion On August 3, 2006, we issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to all Air Tractor, Inc. (Air Tractor) Model AT-602 airplanes. This proposal was published in the **Federal Register** as a supplemental notice of proposed rulemaking
(NPRM)on August 9, 2006 (71 FR 45467). The supplemental NPRM proposed to require you to repetitively inspect (using the eddy current method) the wing center splice joint two outboard fastener holes on both of the wing main spar lower caps for fatigue cracking; repair or replace any wing main spar lower cap where fatigue cracking is found; and report any fatigue cracking found. The following table contains AD actions that address the wing spar safe life of the Air Tractor airplane fleet: Related Ad Actions AD No. Affected air tractor model airplanes Status 2000-14-51 AT-501, AT-502, and AT-502A Superseded by AD 2001-10-04. 2001-10-04 AT-400, AT-500, and AT-800 Series Revised by AD 2001-10-04 R1. 2001-10-04 R1 AT-400, AT-500, and AT-800 Series Superseded by AD 2002-11-05. 2002-11-05 AT-400, AT-401, AT-401B, AT-402, AT-402A, AT-402B, AT-501, AT-802, and AT-802A Revised by AD 2002-11-05 R1. 2002-13-02 AT-300, AT-301, AT-302, AT-400, and AT-400A Airplanes Superseded by AD 2003-06-01. 2002-11-03 AT-502, AT-502A, AT-502B, and AT-503A Superseded by AD 2002-26-05. 2002-26-05 AT-502, AT-502A, AT-502B, and AT-503A Current. 2003-06-01 AT-300, AT-301, AT-302, AT-400, and AT-400A Current. 2002-11-05 R1 AT-501 Current. 2006-08-08 AT-400, AT-401, AT-401B, AT-402, AT-402A, and AT-402B Current. 2006-08-09 AT-802 and AT-802A Current. You may view these ADs at the following Internet Web site addresses: *http://www.airweb.faa.gov/Regulatory_and_Guidance_Library/rgAD.nsf/MainFrame?OpenFrameSet* or *http://www.gpoaccess.gov/fr/index.html* . Comments We provided the public the opportunity to participate in developing this AD. The following presents the comments received on the proposal and FAA's response to each comment: Comment Issue No. 1: Publish the Manufacturer Service Information Jack Buster with the Modification and Replacement Parts Association (MARPA) provides comments on how the FAA addresses publishing manufacturer service information as part of a proposed AD action. The commenter states that the proposed rule attempts to require compliance with a public law by reference to a private writing (as referenced in paragraph
(e)of the proposed AD). The commenter would like the FAA to incorporate by reference
(IBR)the Snow Engineering Company service information. We agree with Mr. Buster. However, we do not IBR any document in a proposed AD action, instead we IBR the document in the final rule. Since we are issuing the proposal as a final rule AD action, the service information referenced in the NPRM is incorporated by reference. Comment Issue No. 2: Availability of IBR Documents in the Docket Management System
(DMS)Mr. Buster requests IBR documents be made available to the public by publication in the **Federal Register** or in the Docket Management System (DMS). We are currently reviewing issues surrounding the posting of service bulletins in the Department of Transportation's DMS as part of the AD docket. Once we have thoroughly examined all aspects of this issue and have made a final determination, we will consider whether our current practice needs to be revised. Conclusion We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections: • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and • Do not add any additional burden upon the public than was already proposed in the NPRM. Costs of Compliance We estimate that this AD affects 107 airplanes in the U.S. registry. We estimate the following costs to do the inspection: Labor cost Parts cost Eddy current inspection Total cost per airplane Total cost on U.S. operators Initial inspection and installation of access panels—24 work-hours × $80 = $1,920 $645 *$500 $3,065 $327,955 Repetitive Inspection
(each)60 *800 860 92,020 * Eddy current inspections are an estimated flat cost that includes labor and use of equipment. We estimate the following costs to do any necessary repairs that would be required based on the results of the proposed inspection. We have no way of determining the number of airplanes that may need this repair: Labor cost Parts cost Total cost per airplane Install web plate, 8-bolt splice blocks, and cold work fastener holes: Air Tractor estimated a labor cost of $12,100. When broken down into work-hours, we estimated 151 work-hours to complete the task. 151 work-hours × $80 = $12,080 $6,900 $18,980 Cold work fastener holes following Snow Engineering Co. Service Letter #244, dated April 25, 2005: 19 work-hours × $80 = $1,520 1,350 2,870 Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this AD. Regulatory Findings We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a summary of the costs to comply with this AD (and other information as included in the Regulatory Evaluation) and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES . Include “Docket No. FAA-2004-20007; Directorate Identifier 2004-CE-50-AD” in your request. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. FAA amends § 39.13 by adding a new AD to read as follows: **2006-23-01 Air Tractor, Inc.:** Amendment 39-14798; Docket No. FAA-2004-20007; Directorate Identifier 2004-CE-50-AD. Effective Date
(a)This AD becomes effective on December 14, 2006. Affected ADs
(b)None. Applicability
(c)This AD affects Model AT-602 airplanes, all serial numbers beginning with 602-0337, that are certificated in any category. Unsafe Condition
(d)This AD is the result of fatigue cracking of the wing main spar lower cap at the centerline splice joint outboard fastener hole. The actions specified in this AD are intended to detect and correct cracks in the wing main spar lower cap, which could result in failure of the spar cap and lead to wing separation and loss of control of the airplane. Compliance
(e)To address the problem, do the following:
(1)Before doing the initial eddy current inspection required in paragraph (e)(2) of this AD, gain access for the inspection by cutting inspection holes, modifying the vent tube, and installing cover plates; unless already done. Follow Snow Engineering Co. Service Letter #204, revised March 26, 2001, Drawing titled “602 Spar Inspection Holes and Vent Tube Mod.,” dated November 13, 2003.
(2)Eddy current inspect the wing center splice joint outboard two fastener holes in both the right and left wing main spar lower caps for cracks. Follow Snow Engineering Co. Process Specification #197, Revised June 4, 2002. For the following airplanes, use the wing spar lower cap hours time-in-service
(TIS)schedule below in Table 1 of this AD to do the initial and repetitive inspections: Table 1.—Compliance Times for Inspection Serial Nos. Condition Initially inspect Repetitively inspect thereafter at the following intervals
(i)602-0337 through 602-0584 As manufactured Upon accumulating 2,000 hours TIS or within 50 hours TIS after December 14, 2006 (the effective date of this AD), whichever occurs later, unless already done 1,000 hours TIS.
(ii)602-0337 through 602-0584 Modified with cold-worked fastener holes following Snow Engineering Co. Service Letter #244, dated April 25, 2005 If performing the cold-working procedure in Service Letter #244, it includes the eddy current inspection 2,000 hours TIS.
(3)Do an eddy current inspection as part of the cold working procedure in Service Letter #244, dated April 25, 2005, even if the wing spar was previously inspected.
(4)One of the following must do the inspection:
(i)A level 2 or 3 inspector certified in eddy current inspection using the guidelines established by the American Society for Nondestructive Testing or NAS 410; or
(ii)A person authorized to perform AD maintenance work and who has completed and passed the Air Tractor, Inc. training course on Eddy Current Inspection on wing lower spar caps.
(f)For the airplanes listed in paragraph (e)(2) of this AD, as terminating action for the inspection requirements, you may modify your wing by installing part number (P/N) 20996-2 steel web plate and P/N 20985-1/2 8-bolt splice blocks following Snow Engineering Co. Drawing 20998, Revision B, dated September 28, 2004, and cold work the lower spar cap two outboard fastener holes at the wing center section splice connection following Snow Engineering Co. Service Letter #240, dated September 30, 2004.
(g)For all affected airplanes listed in paragraph (e)(2) of this AD, repair or replace any cracked spar cap before further flight. For repair or replacement, do one of the following:
(1)For cracks that can be removed by performing the terminating action listed in paragraph
(f)of this AD above, perform the actions in paragraph
(f)of this AD.
(2)For cracks that can not be removed by performing the terminating action in paragraph
(f)of this AD, you must replace the lower spar caps and associated parts listed in paragraph
(h)of this AD before continued flight.
(h)For all Model AT-602 airplanes, upon accumulating 6,500 hours TIS on the wing spar lower caps or within the next 50 hours TIS after December 14, 2006 (the effective date of this AD), whichever occurs later, replace the wing lower spar caps, splice blocks and hardware, wing attach angles and hardware, and install the steel web plate, P/N 20996-2, if not already installed, following Snow Engineering Co. Drawing 20776, Sheet 2, Revision A, dated August 30, 2004. Compliance with this paragraph terminates the inspection requirements of paragraph (e)(2) of this AD.
(i)Report any cracks you find within 10 days after the cracks are found or within 10 days after December 14, 2006 (the effective date of this AD), whichever occurs later. Include in your report the airplane serial number, airplane TIS, wing spar cap TIS, crack location and size, corrective action taken, and a point of contact name and phone number. Send your report to Andrew McAnaul, Aerospace Engineer, ASW-150 (c/o MIDO-43), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; telephone:
(210)308-3365; facsimile:
(210)308-3370. The Office of Management and Budget
(OMB)approved the information collection requirements contained in this regulation under the provisions of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 and those following sections) and assigned OMB Control Number 2120-0056. Alternative Methods of Compliance (AMOCs)
(j)The Manager, Fort Worth Airplane Certification Office, FAA, ATTN: Andrew McAnaul, Aerospace Engineer, ASW-150 (c/o MIDO-43), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; telephone:
(210)308-3365; facsimile:
(210)308-3370, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Related Information
(k)None. Material Incorporated by Reference
(l)You must use the service information specified in Table 2 of this AD to do the actions required by this AD, unless the AD specifies otherwise.
(1)The Director of the Federal Register approved the incorporation by reference of this service information under 5 U.S.C. 552(a) and 1 CFR part 51.
(2)For service information identified in this AD, contact Air Tractor, Inc. at address P.O. Box 485, Olney, Texas 76374; telephone:
(940)564-5616; or facsimile:
(940)564-5612.
(3)You may review copies at the FAA, Central Region, Office of the Regional Counsel, 901 Locust, Kansas City, Missouri 64106; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . Table 2.—Material Incorporated by Reference Snow Engineering Co. service information Date Process Specification #197 Revised June 4, 2002. Drawing 20776, Sheet 2, Revision A August 30, 2004. Service Letter #204 Revised March 26, 2001. Service Letter #240 September 30, 2004. Drawing 20998, Revision B September 28, 2004. Service Letter #244 April 25, 2005. Issued in Kansas City, Missouri, on October 26, 2006. James E. Jackson, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-18688 Filed 11-8-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9296] RIN 1545-BD60 Credit for Increasing Research Activities AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations and removal of temporary regulations. SUMMARY: This document contains final regulations relating to the computation and allocation of the credit for increasing research activities for members of a controlled group of corporations or a group of trades or businesses under common control. These final regulations reflect changes made to section 41 by the Revenue Reconciliation Act of 1989, which introduced the current computational regime for the credit, and the Small Business Job Protection Act of 1996, which introduced the alternative incremental research credit. DATES: *Effective Date:* These regulations are effective November 9, 2006. *Applicability Dates:* For dates of applicability see §§ 1.41-6(j) and 1.41-8(b)(5). FOR FURTHER INFORMATION CONTACT: Nicole R. Cimino
(202)622-3120 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document amends 26 CFR part 1 to provide revised rules for the research credit under section 41, specifically section 41(f). On May 24, 2005, the Treasury Department and the IRS published in the **Federal Register** (70 FR 29662) proposed amendments to the regulations under section 41(f) by cross-reference to temporary regulations (REG-134030-04) and temporary regulations (70 FR 29596) (TD 9205) (collectively, the 2005 regulations) relating to the computation and allocation of the credit for increasing research activities (research credit) under section 41 for members of a controlled group of corporations or a group of trades or businesses under common control (controlled groups). The 2005 notice of proposed rulemaking withdrew the proposed regulations published in the **Federal Register** on July 29, 2003 (68 FR 44499) (REG-133791-02) (the 2003 proposed regulations). A public hearing was held on October 19, 2005. After considering the comments received and the statements made at the public hearing regarding the 2005 regulations, the 2005 regulations are adopted as revised by this Treasury decision. These final regulations generally retain the provisions of the 2005 regulations with the modifications discussed below. Summary of Comments and Explanation of Provisions Allocation of the Group Credit The 2005 regulations required that the group credit that did not exceed the sum of the stand-alone entity credits of all the members of the group be allocated among the members of a controlled group in proportion to the relative amounts of each individual member's stand-alone entity credit, computed for each member using the method that would have yielded the largest stand-alone entity credit for that member. Any excess of the group credit over the sum of the stand-alone entity credits of all the members of the group was allocated among all the members of the group based on the ratio of an individual member's qualified research expenditures
(QREs)to the sum of all the members' QREs. Although commentators generally agreed that the 2005 regulations fixed the anomalous results (for example, none of the group credit would be allocated to the members of the controlled group if no member had stand-alone entity credits) created by the method in the 2003 proposed regulations, some commentators continued to disagree with the stand-alone entity credit method. Commentators again suggested that the members of a controlled group should be permitted to use any reasonable method to allocate the group credit as long as the group's members collectively do not claim more than 100 percent of the group credit, or that if one method must be prescribed for all situations, a method that allocates the group credit based on the relative amounts of each member's total QREs (gross QREs method) is more appropriate than any other method. The Treasury Department and the IRS continue to believe that the allocation method under section 41(f) should be based on a group member's QREs in excess of a base amount, and that the stand-alone entity credit method reflects the incremental nature of the credit. The Treasury Department and the IRS believe that the stand-alone entity credit method of the 2005 regulations is consistent with the purpose of section 41(f) and its underlying legislative history. Further, a single, prescribed method is necessary to ensure the group's members collectively do not claim more than 100 percent of the group credit. For the reasons stated above and in the preamble to the 2005 regulations, the final regulations do not adopt the changes suggested by the commentators, and retain the allocation method contained in the 2005 regulations. Special Allocation Rule for Consolidated Groups The 2005 regulations provide that, for purposes of allocating the group credit among the members of a controlled group (first-tier allocation), a consolidated group (whose members are members of the controlled group) is treated as a single member of the controlled group, and a single stand-alone entity credit is computed for the consolidated group. If the consolidated group is the only member of the controlled group, the stand-alone entity credit computed for the consolidated group is equal to the group credit. The portion of the group credit allocated to a consolidated group must be allocated among the members of the consolidated group (second-tier allocation) in proportion to the stand-alone entity credits of the members of the consolidated group. Under the 2005 regulations, this rule applied only to taxable years ending on or after May 24, 2005. One commentator argued that the treatment of a consolidated group as a single member of a controlled group is contrary to the statutory language of sections 41(f)(5) and 1563. The Secretary is granted broad authority under section 1502 to provide rules regarding the determination of the tax liability of an affiliated group of corporations filing a consolidated return. The Treasury Department and the IRS believe that the treatment of a consolidated group as a single member of a controlled group of corporations for purposes of section 41(f) is within the broad authority of section 1502. Moreover, this treatment is consistent with the single entity treatment of a consolidated group under certain other provisions of the Code. One commentator argued that treating a consolidated group as a single member of the controlled group adds unnecessary complexity and is administratively burdensome because it requires additional rounds of allocations of each consolidated group's credit among its members and additional computations of each consolidated group member's stand-alone entity credit. One commentator urged that, if the consolidated group rule is retained, then the final regulations should not provide specific rules for how the second-tier allocation is to be made. The Treasury Department and the IRS continue to believe that computing a stand-alone entity credit for each member of a consolidated group does not impose a greater burden than computing a stand-alone entity credit for a corporation that is not a member of a consolidated group. The Treasury Department and the IRS also believe that specific allocation rules are necessary with respect to the second-tier allocation in order to prevent distortions and provide certainty concerning each consolidated group member's share of the credit, for example, if a member ceases to be a member of the consolidated group or if a member's share of credits becomes subject to section 383. Accordingly, the final regulations retain the rules contained in the 2005 regulations. The final regulations make clear, however, that the special allocation rule for consolidated groups applies prospectively only. Accordingly, the consolidated group rule contained in these final regulations applies only to taxable years ending on or after the date these final regulations are published in the **Federal Register** . For taxable years ending on or after May 24, 2005, and before the date these final regulations are published in the **Federal Register** , taxpayers must use the special allocation rule for consolidated groups contained in the 2005 regulations. However, taxpayers may choose to apply the rule retroactively to taxable years ending before May 24, 2005, provided that all the members of the controlled group treat the consolidated group as a single member of the controlled group. One commentator stated that the 2005 regulations are unclear whether, for purposes of the second-tier allocation, each consolidated group member's stand-alone entity credit is to be computed in the same manner as a controlled group member's stand-alone entity credit is computed for purposes of a first-tier allocation (that is, using the method that would have yielded the largest stand-alone entity credit for that consolidated group member). The Treasury Department and the IRS believe that the final regulations are clear that this is the rule, as they provide that “the principles of paragraph (c)” (which contains the rule) apply for purposes of the second-tier allocation. In addition, this rule is illustrated in *Example 3* of § 1.41-6(e). Start-Up Companies For purposes of computing the group credit, § 1.41-6T(b)(2) of the 2005 regulations treated a controlled group as a start-up company if the first taxable year in which at least one member of the group had gross receipts and at least one member of the group had QREs begins after December 31, 1983; or there were fewer than 3 taxable years beginning after December 31, 1983, and before January 1, 1989, in which at least one member of the group had gross receipts and at least one member of the group had QREs. One commentator suggested that the rule was not clear in a situation in which one member of the group has both gross receipts and QREs in a taxable year beginning before January 1, 1984. Although the Treasury Department and IRS believe that the temporary regulations are clear that the start-up rules do not apply if the group had QREs and gross receipts in a year beginning before January 1, 1984, no matter which member(s) of the group had the QREs and gross receipts, the final regulations clarify the start-up company rule of § 1.41-6(b)(2) to make it explicit. Alternative Incremental Research Credit Section 41(c)(4) provides an election to determine the research credit using the alternative incremental research credit
(AIRC)computation. Section 41(c)(4)(B) provides that the election to use the AIRC method applies to all succeeding taxable years unless revoked with the consent of the Secretary. The 2005 regulations generally provide that elections (or revocations) of the AIRC method are made by completing the portion of Form 6765, “Credit for Increasing Research Activities,” relating to the AIRC method (in the case of an election of the AIRC method) or to the regular method (in the case of a revocation of the AIRC method), and attaching the completed form to the taxpayer's timely filed original Federal income tax return for the year to which the election (or revocation) applies. Once an election (or revocation) is made for a taxable year, the taxpayer may not change the election (or revocation) on an amended return. The 2005 regulations provide that the provisions relating to AIRC elections and revocations apply to taxable years ending on or after May 24, 2005. The 2005 regulations provide special rules for making (or revoking) an election for controlled groups under section 41(f)(1) (in which one or more of the members do not join in filing a consolidated return). In such cases, the designated member must make (or revoke) the AIRC election on behalf of the group's members. The election (or revocation) by the designated member is binding on all the members of the group for the taxable year to which the election (or revocation) relates. The 2005 regulations provide that the designated member is that member of the group that is allocated the greatest amount of the group credit. In the event the members of a group compute the group credit using different methods (either the regular method or the AIRC method) and at least two members of the group qualify as the designated member, the designated member is the member that computes the group credit using the method that yields the greater group credit. If all the members of a controlled group are members of a single consolidated group, the AIRC election (or revocation) is made by the agent of the consolidated group, determined pursuant to the rules of § 1.1502-77. One commentator suggested that the language contained in § 1.41-8T(b)(4)(i) of the 2005 regulations be clarified to avoid any implication that additional requirements (other than completing the appropriate portion of Form 6765 and attaching the form to a timely filed original Federal income tax return) apply to a designated member seeking to elect (or revoke) the AIRC method. The final regulations clarify that a designated member must follow the same procedures for making (or revoking) an AIRC election that apply to other taxpayers. A commentator also noted that the regulations do not address whether and how changes to a member's research credit information after the original Federal income tax return is timely filed may affect its status as the designated member. The commentator suggested that the final regulations clarify what happens if the designated member at the time of filing subsequently is determined not to be the designated member. The Treasury Department and the IRS agree that clarification regarding this issue is needed. Accordingly, the final regulations are clarified to provide that the term *designated member* means the member of the group that is allocated the greatest amount of the group credit under paragraph
(c)of § 1.41-6 based on the amount of credit reported on the original timely filed Federal income tax return. A commentator questioned what happens if the designated member fails to timely file an original Federal income tax return. The Treasury Department and the IRS believe that the designated member must timely file a return in order for the group to elect (or revoke) the AIRC method. Accordingly, if the designated member fails to timely file for the current credit year (and thus, fails to elect (or revoke) the AIRC method for that year), then the method used by the group in the immediately preceding credit year remains the method in effect for the current credit year. The final regulations are amended to clarify this rule. The commentator also suggested that the final regulations allow the members of a controlled group to decide which member of the group will be the designated member. The Treasury Department and the IRS believe that it is necessary to have a bright-line test, applicable to all controlled groups, to provide certainty as to the identity of the designated member, and that to allow the members of a controlled group to decide which member's election (or revocation) will bind all the members of the group would not provide certainty in all situations. Accordingly, this comment has not been adopted. Another commentator urged the Treasury Department and the IRS to allow taxpayers to elect the AIRC method on an amended return. Alternatively, the commentator argued that if taxpayers cannot elect the AIRC method on an amended return, the final regulations should provide a special rule under which a taxpayer's research credit, computed by the taxpayer under the regular method, may not be adjusted on audit below the amount that would have been allowable under the AIRC method. The Treasury Department and the IRS believe that requiring an election to be made only on a timely filed original Federal income tax return is consistent with the statute and the doctrine of elections, and that the commentator's suggestion would inappropriately limit the authority of the IRS to conduct examinations. Thus, these final regulations retain the rules as contained in the 2005 regulations. Finally, a commentator suggested that, with respect to the AIRC provisions, the effective date for the 2005 regulations should not be limited to taxable years ending on or after May 24, 2005, but should apply as well to any taxable year ending before that date, provided that the original Federal income tax return for that year has not yet been filed. The Treasury Department and the IRS believe that making this option available retroactively to taxpayers that have not yet filed their returns would treat similarly situated taxpayers differently. For example, taxpayers that already had filed their returns would have been required to request permission for a revocation, while taxpayers that had not filed their returns would be eligible for the automatic revocation procedures set forth in the 2005 regulations. Thus, the Treasury Department and the IRS believe that it is appropriate to limit the application of this rule to prospective use only. The final regulations are effective for taxable years ending on or after the date these final regulations are published in the **Federal Register** . For taxable years ending on or after May 24, 2005, and before the date these final regulations are published in the **Federal Register** , taxpayers must use the rules contained in the 2005 regulations. Other Several commentators mentioned that the definition of trade or business in the 2005 regulations was changed from the prior regulations. The change in the 2005 regulations was inadvertent, and the definition has been returned to the language from the regulations existing prior to the issuance of the 2005 regulations. For taxable years prior to the effective date of these final regulations, taxpayers may rely upon the definition of trade or business in these final regulations. Another commentator requested that the regulations provide guidance as to whether the section 280C(c) election is made member by member or by the entire controlled group. This issue is beyond the scope of these final regulations, as guidance would have to be provided under the authority of section 280C rather than section 41. The Treasury Department and the IRS may consider addressing this issue in separate guidance. Effective Date The preamble to the 2005 regulations states that because the Treasury Department and the IRS decided to retain the general rules for the computation and allocation of the group credit contained in the 2003 proposed regulations, with certain modifications, the 2005 regulations were effective for taxable years ending on or after May 24, 2005. For taxable years prior to those covered by the 2005 regulations, a taxpayer generally may use any reasonable method of computing and allocating the group credit. As explained in the preamble to the 2005 regulations, paragraph
(b)of the 2005 regulations, relating to the computation of the group credit, and paragraph
(c)of the 2005 regulations, relating to the allocation of the group credit, apply to taxable years ending on or after December 29, 1999, if the members of a controlled group, as a whole, claimed more than 100 percent of the amount that would be allowable under paragraph (b). In the case of a controlled group whose members have different taxable years and whose members use inconsistent methods of allocation, the members of the controlled group are deemed to have, as a whole, claimed more than 100 percent of the amount that would be allowable under paragraph (b). One commentator argued that the 2005 regulations should not be effective until final regulations are published in the **Federal Register** . The Treasury Department and the IRS continue to believe that the general May 24, 2005, effective date is appropriate, because these final regulations are substantially similar to the 2003 proposed regulations. Another commentator objected to the use of the December 29, 1999, effective date for the portions of the 2005 regulations that are retroactive, because that is the date that the previous proposed regulations (2000 proposed regulations) were sent to the **Federal Register** , and not the date (January 4, 2000) on which they were published. The Treasury Department and the IRS continue to believe that the December 29, 1999, effective date is the appropriate date, because this is the date the 2000 proposed regulations were filed with the **Federal Register** and, thus, were made available to the public. Additionally, section 7805(b)(3) allows any regulation to take effect or apply retroactively to prevent abuse. Another commentator criticized the retroactive application of the rule requiring that a member's stand-alone entity credit be computed using whichever method results in the greater stand-alone entity credit for that member, without regard to the method used to compute the group credit. The commentator stated that the incentive effect sought can only be achieved prospectively, and that to allow use of the rule retroactively may cause abusive inconsistencies where some members of the group rely on the 2003 proposed regulations, while other members amend to follow the new rule. While the Treasury Department and the IRS do not want to encourage potentially abusive inconsistencies in years that taxpayers believe are settled, the Treasury Department and the IRS believe that one bright line is appropriate and do not want to treat similarly situated taxpayers differently. Another commentator suggested that the final regulations make clear that the special rule for consolidated groups is to be applied prospectively only. The 2005 regulations required paragraph
(b)of those regulations, relating to the computation of the group credit, and paragraph
(c)of those regulations, relating to the allocation of the group credit, to be applied retroactively in certain instances of abuse. The 2005 regulations did not require paragraph (d), relating to the special rule for consolidated groups, to be applied retroactively. Thus, the Treasury Department and IRS did not intend that taxpayers be required to apply retroactively the special rule for consolidated groups. Accordingly, the final regulations clarify that the special rule for consolidated groups applies only to taxable years ending on or after the date these final regulations are published in the **Federal Register** . The 2005 regulations apply for taxable years ending on or after May 24, 2005, and before the date these final regulations are published in the **Federal Register** . However, a controlled group may choose to apply the rule in paragraph
(d)retroactively if all the members of the group do so, so that the controlled group, as a whole, does not claim more than 100 percent of the group credit. Special Analyses It has been determined that this Treasury decision 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 these regulations do not impose on small entities a collection of information requirement, 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, the notice of proposed rulemaking preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. Drafting Information The principal author of these regulations is Nicole R. Cimino, Office of Associate Chief Counsel (Passthroughs and Special Industries). However, 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. Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 is amended by removing the entry for § 1.41-6T and adding an entry in numerical order to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * Section 1.41-6 also issued under 26 U.S.C. 1502. * * * **Par. 2.** In § 1.41-0, the table of contents is amended by removing the entries for § 1.41-6T and § 1.41-8T and adding entries for § 1.41-6 and § 1.41-8 to read as follows: § 1.41-0 Table of contents. § 1.41-6 Aggregation of expenditures.
(a)Controlled groups of corporations; trades or businesses under common control.
(1)In general.
(2)Consolidated groups.
(3)Definitions.
(b)Computation of the group credit.
(1)In general.
(2)Start-up companies.
(c)Allocation of the group credit.
(1)In general.
(2)Stand-alone entity credit.
(d)Special rules for consolidated groups.
(1)In general.
(2)Start-up company status.
(3)Special rule for allocation of group credit among consolidated group members.
(e)Examples.
(f)For taxable years beginning before January 1, 1990.
(g)Tax accounting periods used.
(1)In general.
(2)Special rule when timing of research is manipulated.
(h)Membership during taxable year in more than one group.
(i)Intra-group transactions.
(1)In general.
(2)In-house research expenses.
(3)Contract research expenses.
(4)Lease payments.
(5)Payment for supplies.
(j)Effective date. § 1.41-8 Special rules for taxable years ending on or after May 24, 2005.
(a)Alternative incremental credit.
(b)Election.
(1)In general.
(2)Time and manner of election.
(3)Revocation.
(4)Special rules for controlled groups.
(5)Effective date. **Par. 3.** Section 1.41-6 is added to read as follows. § 1.41-6 Aggregation of expenditures.
(a)*Controlled group of corporations; trades or businesses under common control* —(1) *In general.* To determine the amount of research credit (if any) allowable to a trade or business that at the end of its taxable year is a member of a controlled group, a taxpayer must—
(i)Compute the group credit in the manner described in paragraph
(b)of this section; and
(ii)Allocate the group credit among the members of the group in the manner described in paragraph
(c)of this section.
(2)*Consolidated groups.* For special rules relating to consolidated groups, see paragraph
(d)of this section.
(3)*Definitions.* For purposes of this section—
(i)*Consolidated group* has the meaning set forth in § 1.1502-1(h).
(ii)*Controlled group* and *group* mean a controlled group of corporations, as defined in section 41(f)(5), or a group of trades or businesses under common control. For rules for determining whether trades or businesses are under common control, see § 1.52-1
(b)through (g).
(iii)*Credit year* means the taxable year for which the member is computing the credit.
(iv)*Group credit* means the research credit (if any) allowable to a controlled group.
(v)*Trade or business* means a sole proprietorship, a partnership, a trust, an estate, or a corporation that is carrying on a trade or business (within the meaning of section 162). Any corporation that is a member of a commonly controlled group shall be deemed to be carrying on a trade or business if any other member of that group is carrying on any trade or business.
(b)*Computation of the group credit—*
(1)*In general.* All members of a controlled group are treated as a single taxpayer for purposes of computing the research credit. The group credit is computed by applying all of the section 41 computational rules on an aggregate basis. All members of a controlled group must use the same method of computation, either the method described in section 41(a) or the alternative incremental research credit
(AIRC)method described in section 41(c)(4), in computing the group credit for a credit year.
(2)*Start-up companies—*
(i)*In general.* For purposes of computing the group credit, a controlled group is treated as a start-up company for purposes of section 41(c)(3)(B)(i) if—
(A)There was no taxable year beginning before January 1, 1984, in which a member of the group had gross receipts and either the same member or another member also had qualified research expenditures (QREs); or
(B)There were fewer than three taxable years beginning after December 31, 1983, and before January 1, 1989, in which a member of the group had gross receipts and either the same member or another member also had QREs.
(ii)*Example.* The following example illustrates the principles of paragraph (b)(2)(i) of this section: Example. A, B, and C, all of which are calendar year taxpayers, are members of a controlled group. During the 1983 taxable year, A had QREs, but no gross receipts; B had gross receipts, but no QREs; and C had no QREs or gross receipts. The 1984 taxable year was the first taxable year for which each of A, B, and C had both QREs and gross receipts. A, B, and C had both QREs and gross receipts in 1985, 1986, 1987, and 1988. Because the first taxable year for which each of A, B, and C had both QREs and gross receipts began after December 31, 1983, each of A, B, and C is a start-up company under section 41(c)(3)(B)(i) and each is a start-up company for purposes of computing the stand-alone entity credit. During the 1983 taxable year, at least one member of the group, A, had QREs and at least one member of the group, B, had gross receipts, thus, the group had both QREs and gross receipts in 1983. Therefore, the controlled group is not a start-up company because the first taxable year for which the group had both QREs and gross receipts did not begin after December 31, 1983, and there were not fewer than three taxable years beginning after December 31, 1983, and before January 1, 1989, in which a member of the group had gross receipts and QREs.
(iii)*First taxable year after December 31, 1993, for which the controlled group had QREs.* In the case of a controlled group that is treated as a start-up company under section 41(c)(3)(B)(i) and paragraph (b)(2)(i) of this section, for purposes of determining the group's fixed-base percentage under section 41(c)(3)(B)(ii), the first taxable year after December 31, 1993, for which the group has QREs is the first taxable year in which at least one member of the group has QREs.
(iv)*Example.* The following example illustrates the principles of paragraph (b)(2)(iii) of this section: Example. D, E, and F, all of which are calendar year taxpayers, are members of a controlled group. The group is treated as a start-up company under section 41(c)(3)(B)(i) and paragraph (b)(2)(i) of this section. The first taxable year after December 31, 1993, for which D had QREs was 1994. The first taxable year after December 31, 1993, for which E had QREs was 1995. The first taxable year after December 31, 1993, for which F had QREs was 1996. Because the 1994 taxable year was the first taxable year after December 31, 1993, for which at least one member of the group, D, had QREs, for purposes of determining the group's fixed-based percentage under section 41(c)(3)(B)(ii), the 1994 taxable year was the first taxable year after December 31, 1993, for which the group had QREs.
(c)*Allocation of the group credit* —(1) *In general.*
(i)To the extent the group credit (if any) computed under paragraph
(b)of this section does not exceed the sum of the stand-alone entity credits of all of the members of a controlled group, computed under paragraph (c)(2) of this section, such group credit shall be allocated among the members of the controlled group in proportion to the stand-alone entity credits of the members of the controlled group, computed under paragraph (c)(2) of this section: ER09NO06.005
(ii)To the extent that the group credit (if any) computed under paragraph
(b)of this section exceeds the sum of the stand-alone entity credits of all of the members of the controlled group, computed under paragraph (c)(2) of this section, such excess shall be allocated among the members of a controlled group in proportion to the QREs of the members of the controlled group: ER09NO06.006
(2)*Stand-alone entity credit.* The term *stand-alone entity credit* means the research credit (if any) that would be allowable to a member of a controlled group if the credit were computed as if section 41(f)(1) did not apply, except that the member must apply the rules provided in paragraphs (d)(1) (relating to consolidated groups) and
(i)(relating to intra-group transactions) of this section. Each member's stand-alone entity credit for any credit year must be computed under whichever method (the method described in section 41(a) or the method described in section 41(c)(4)) results in the greater stand-alone entity credit for that member, without regard to the method used to compute the group credit.
(d)*Special rules for consolidated groups* —(1) *In general.* For purposes of applying paragraph
(c)of this section, a consolidated group whose members are members of a controlled group is treated as a single member of the controlled group and a single stand-alone entity credit is computed for the consolidated group.
(2)*Start-up company status.* A consolidated group's status as a start-up company and the first taxable year after December 31, 1993, for which a consolidated group has QREs are determined in accordance with the principles of paragraph (b)(2) of this section.
(3)*Special rule for allocation of group credit among consolidated group members.* The portion of the group credit that is allocated to a consolidated group is allocated to the members of the consolidated group in accordance with the principles of paragraph
(c)of this section. However, for this purpose, the stand-alone entity credit of a member of a consolidated group is computed without regard to section 41(f)(1), but with regard to paragraph
(i)of this section.
(e)*Examples.* The following examples illustrate the provisions of this section. Unless otherwise stated, no members of a controlled group are members of a consolidated group, no member of the group made any basic research payments or paid or incurred any amounts to an energy research consortium, and except as provided in *Example 6,* the group has not made an AIRC election: Example 1. *Group credit is less than sum of members' stand-alone entity credits* —(i) *Facts.* A, B, and C, all of which are calendar-year taxpayers, are members of a controlled group. For purposes of computing the group credit for the 2004 taxable year (the credit year), A, B, and C had the following: A B C Group aggregate Credit Year QREs $200x $20x $110x $330x 1984-1988 QREs 40x 10x 100x 150x 1984-1988 Gross Receipts 1,000x 350x 150x 1,500x Average Annual Gross Receipts for 4 Years Preceding the Credit Year 1,200x 200x 300x 1,700x
(ii)*Computation of the group credit* —(A) *In general.* The research credit allowable to the group is computed as if A, B, and C were one taxpayer. The group credit is equal to 20 percent of the excess of the group's aggregate credit year QREs ($330x) over the group's base amount ($170x). The group credit is 0.20 × ($330x−$170x), which equals $32x.
(B)*Group's base amount—(1) Computation.* The group's base amount equals the greater of: The group's fixed-base percentage (10 percent) multiplied by the group's aggregate average annual gross receipts for the 4 taxable years preceding the credit year ($1,700x), or the group's minimum base amount ($165x). The group's base amount, therefore, is $170x, which is the greater of: 0.10 × $1,700x, which equals $170x, or $165x. *(2) Group's minimum base amount.* The group's minimum base amount is 50 percent of the group's aggregate credit year QREs. The group's minimum base amount is 0.50 × $330x, which equals $165x. *(3) Group's fixed-base percentage.* The group's fixed-base percentage is the lesser of: The ratio that the group's aggregate QREs for the taxable years beginning after December 31, 1983, and before January 1, 1989, bear to the group's aggregate gross receipts for the same period, or 16 percent (the statutory maximum). The group's fixed-base percentage, therefore, is 10 percent, which is the lesser of: $150x/$1,500x, which equals 10 percent, or 16 percent.
(iii)*Allocation of the group credit.* Under paragraph (c)(2) of this section, each member's stand-alone entity credit must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credit for each of A, B, and C is greater using the method described in section 41(a). Therefore, the stand-alone entity credit for each of A, B, and C must be computed using the method described in section 41(a). A's stand-alone entity credit is $20x. B's stand-alone entity credit is $2x. C's stand-alone entity credit is $11x. The sum of the members' stand-alone entity credits is $33x. Because the group credit of $32x is less than the sum of the stand-alone entity credits of all the members of the group ($33x), the group credit is allocated among the members of the group based on the ratio that each member's stand-alone entity credit bears to the sum of the stand-alone entity credits of all the members of the group. The $32x group credit is allocated as follows: A B C Total Stand-Alone Entity Credit $20x $2x $11x $33x Allocation Ratio (Stand-Alone Entity Credit/Sum of Stand-Alone Entity Credits) 20/33 2/33 11/33 Multiplied by: Group Credit $32x $32x $32x Equals: Credit Allocated to Member $19.39x $1.94x $10.67x 32x Example 2. *Group credit exceeds sum of members' stand-alone entity credits* —(i) *Facts.* D, E, F, and G, all of which are calendar-year taxpayers, are members of a controlled group. For purposes of computing the group credit for the 2004 taxable year (the credit year), D, E, F, and G had the following: D E F G Group aggregate Credit Year QREs $580x $10x $70x $15x $675x 1984-1988 QREs 500x 25x 100x 25x 650x 1984-1988 Gross Receipts 4,000x 5,000x 2,000x 10,000x 21,000x Average Annual Gross Receipts for 4 Years Preceding the Credit Year 5,000x 5,000x 2,000x 5,000x 17,000x
(ii)*Computation of the group credit* —(A) *In general.* The research credit allowable to the group is computed as if D, E, F, and G were one taxpayer. The group credit is equal to 20 percent of the excess of the group's aggregate credit year QREs ($675x) over the group's base amount ($527x). The group credit is 0.20 × ($675x−$527x), which equals $29.76x.
(B)*Group's base amount—(1) Computation.* The group's base amount equals the greater of: The group's fixed-base percentage (3.10 percent) multiplied by the group's aggregate average annual gross receipts for the 4 taxable years preceding the credit year ($17,000x), or the group's minimum base amount ($337.50x). The group's base amount, therefore, is $527x, which is the greater of: 0.031 × $17,000x, which equals $527x, or $337.50x. *(2) Group's minimum base amount.* The group's minimum base amount is 50 percent of the group's aggregate credit year QREs. The group's minimum base amount is 0.50 × $675x, which equals $337.50x. *(3) Group's fixed-base percentage.* The group's fixed-base percentage is the lesser of: The ratio that the group's aggregate QREs for the taxable years beginning after December 31, 1983, and before January 1, 1989, bear to the group's aggregate gross receipts for the same period, or 16 percent (the statutory maximum). The group's fixed-base percentage, therefore, is 3.10 percent, which is the lesser of: $650x/$21,000x, which equals 3.10 percent, or 16 percent.
(iii)*Allocation of the group credit.* Under paragraph (c)(2) of this section, each member's stand-alone entity credit must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credits for D ($19.46x) and F ($1.71x) are greater using the AIRC method. Therefore, the stand-alone entity credits for D and F must be computed using the AIRC method. The stand-alone entity credit for G ($0.50x) is greater using the method described in section 41(a). Therefore, the stand-alone entity credit for G must be computed using the method described in section 41(a). E's stand-alone entity credit computed under either method is zero. The sum of the members' stand-alone entity credits is $21.67x. Because the group credit of $29.76x is greater than the sum of the stand-alone entity credits of all the members of the group ($21.67x), each member of the group is allocated an amount of the group credit equal to that member's stand-alone entity credit. The excess of the group credit over the sum of the members' stand alone entity credits ($8.09x) is allocated among the members of the group based on the ratio that each member's QREs bear to the sum of the QREs of all the members of the group. The $29.76x group credit is allocated as follows: D E F G Total Group Credit $29.76x Minus: Sum of Stand-Alone Entity Credits $19.46x $0.00x $1.71x $0.50x 21.67x Equals: Excess Group Credit 8.09x Excess Group Credit $8.09x $8.09x $8.09x $8.09x Multiplied By Allocation Ratio: QREs/Sum of QREs 580/675 10/675 70/675 15/675 Excess Group Credit Allocated $6.95x $0.12x $0.84x $0.18x Plus: Stand-Alone Entity Credit $19.46x $0.00x $1.71x $0.50x Equals: Credit Allocated to Member $26.41x $0.12x $2.55x $0.68x $29.76x Example 3. *Consolidated group within a controlled group* —(i) *Facts.* The facts are the same as in *Example 2* , except that D and E file a consolidated return.
(ii)*Allocation of the group credit* —(A) *In general.* For purposes of allocating the controlled group's research credit of $29.76x among the members of the controlled group, D and E are treated as a single member of the controlled group.
(B)*Computation of stand-alone entity credits.* The stand-alone entity credit for the consolidated group is computed by treating D and E as a single entity. Under paragraph (c)(2) of this section, the stand-alone entity credit for each member must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credit for each of the DE consolidated group ($17.55x) and F ($1.71x) is greater using the AIRC method. Therefore, the stand-alone entity credit for each of the DE consolidated group and F must be computed using the AIRC method. The stand-alone entity credit for G ($0.50x) is greater using the method described in section 41(a). Therefore, the stand-alone entity credit for G must be computed using the method described in section 41(a). The sum of the members' stand-alone entity credits is $19.76x.
(C)*Allocation of controlled group credit.* Because the group credit of $29.76x is greater than the sum of the stand-alone entity credits of all the members of the group ($19.76x), each member of the group is allocated an amount of the group credit equal to that member's stand-alone entity credit. The excess of the group credit over the sum of the members' stand-alone entity credits ($10.00x) is allocated among the members of the group based on the ratio that each member's QREs bear to the sum of the QREs of all the members of the group. The group credit of $29.76x is allocated as follows: DE F G Total Group Credit $29.76x Minus: Sum of Stand-Alone Entity Credits $17.55x $1.71x $0.50x 19.76x Equals: Excess Group Credit $10.00x Excess Group Credit $10.00x $10.00x $10.00x Multiplied By Allocation Ratio: QREs/Sum of QREs 590/675 70/675 15/675 Excess Group Credit Allocated $8.74x $1.04x $0.22x Plus: Stand-Alone Entity Credit $17.55x $1.71x $0.50x Equals: Credit Allocated to Member $26.29x $2.75x $0.72x 29.76x
(iii)*Allocation of the group credit allocated to consolidated group* —(A) *In general.* The group credit that is allocated to a consolidated group is allocated among the members of the consolidated group in accordance with the principles of paragraph
(c)of this section.
(B)*Computation of stand-alone entity credits.* Under paragraph (c)(2) of this section, the stand-alone entity credit for each member of the consolidated group must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credit for D ($19.46x) is greater using the AIRC method. Therefore, the stand-alone entity credit for D must be computed using the AIRC method. The stand-alone entity credit for E is zero under either method. The sum of the stand-alone entity credits of the members of the consolidated group is $19.46x.
(C)*Allocation among members of consolidated group.* Because the amount of the group credit allocated to the consolidated group ($26.29x) is greater than $19.46x, the sum of the stand-alone entity credits of all the members of the consolidated group, each member of the consolidated group is allocated an amount of the group credit allocated to the consolidated group equal to that member's stand-alone entity credit The excess of the group credit allocated to the consolidated group over the sum of the consolidated group members' stand alone entity credits ($6.83x) is allocated among the members of the consolidated group based on the ratio that each member's QREs bear to the sum of the QREs of all the members of the consolidated group. The group credit of $26.29x allocated to the DE consolidated group is allocated between D and E as follows: D E Total Group Credit $26.29x Minus: Sum of Stand-Alone Entity Credits $19.46x $0.00x 19.46x Excess Group Credit 6.83x Excess Group Credit $6.83x $6.83x Multiplied By Allocation Ratio: QREs/Sum of QREs 580/590 10/590 Excess Group Credit Allocated $6.71x $0.12x Plus: Stand-Alone Entity Credit $19.46x $0.00x Equals: Credit Allocated to Member $26.17x $0.12x 26.29x Example 4. *Member is a start-up company* —(i) *Facts.* H, I, and J, all of which are calendar-year taxpayers, are members of a controlled group. The first taxable year for which J has both QREs and gross receipts begins after December 31, 1983, therefore, J is a start-up company under section 41(c)(3)(B)(i). The first taxable year for which H and I had both QREs and gross receipts began before December 31, 1983, therefore, H and I are not start-up companies under section 41(c)(3)(B)(i). For purposes of computing the group credit for the 2004 taxable year (the credit year), H, I, and J had the following: H I J Group aggregate Credit Year QREs $200x $20x $50x $270x 1984-1988 QREs 55x 15x 0x 70x 1984-1988 Gross Receipts 1,000x 400x 0x 1,400x Average Annual Gross Receipts for 4 Years Preceding the Credit Year 1,200x 200x 0x 1,400x
(ii)*Computation of the group credit* —(A) *In general.* The research credit allowable to the group is computed as if H, I, and J were one taxpayer. The group credit is equal to 20 percent of the excess of the group's aggregate credit year QREs ($270x) over the group's base amount ($135x). The group credit is 0.20 × ($270x—$135x), which equals $27x.
(B)*Group's base amount* — *(1) Computation.* The group's base amount equals the greater of: the group's fixed-base percentage (5 percent) multiplied by the group's aggregate average annual gross receipts for the 4 taxable years preceding the credit year ($1,400x), or the group's minimum base amount ($135x). The group's base amount, therefore, is $135x, which is the greater of: 0.05 × $1,400x, which equals $70x, or $135x. *(2) Group's minimum base amount.* The group's minimum base amount is 50 percent of the group's aggregate credit year QREs. The group's minimum base amount is 0.50 × $270x, which equals $135x. *(3) Group's fixed-base percentage.* Because the first taxable year in which at least one member of the group has QREs and at least one member of the group has gross receipts does not begin after December 31, 1983, the group is not a start-up company. Therefore, the group's fixed-base percentage is the lesser of: the ratio that the group's aggregate QREs for the taxable years beginning after December 31, 1983, and before January 1, 1989, bear to the group's aggregate gross receipts for the same period, or 16 percent (the statutory maximum). The group's fixed-base percentage, therefore, is 5 percent, which is the lesser of: $70x/$1,400x, which equals 5 percent, or 16 percent.
(iii)*Allocation of the group credit.* Under paragraph (c)(2) of this section, the stand-alone entity credit for each member of the group must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credits for H ($20x), I ($2x), and J ($5x) are greater using the method described in section 41(a). Therefore, the stand-alone entity credits for each of H, I, and J must be computed using the method described in section 41(a). The sum of the stand-alone entity credits of the members of the group is $27x. Because the group credit of $27x is equal to the sum of the stand-alone entity credits of all the members of the group ($27x), the group credit is allocated among the members of the group based on the ratio that each member's stand-alone entity credit bears to the sum of the stand-alone entity credits of all the members of the group. The group credit of $27x is allocated as follows: H I J Total Stand-Alone Entity Credit $20x $2x $5x $27x Allocation Ratio (Stand-Alone Entity Credit/Sum of Stand-Alone Entity Credits) 20/27 2/27 5/27 Multiplied by: Group Credit $27x $27x $27x Equals: Credit Allocated to Member $20x $2x $5x 27x Example 5. Group is a start-up company—(i) Facts. K, L, and M, all of which are calendar-year taxpayers, are members of a controlled group. The taxable year ending on December 31, 1999, is the first taxable year in which a member of the group had QREs and either the same member or another member also had gross receipts. In that year, each of K, L, and M had both QREs and gross receipts. The 2004 taxable year is the fifth taxable year beginning after December 31, 1993, for which at least one member of the group had QREs For purposes of computing the group credit for the 2004 taxable year (the credit year), K, L, and M had the following: K L M Group aggregate Credit Year QREs $255x $25x $100x $380x 1984-1988 QREs 0x 0x 0x 0x 1984-1988 Gross Receipts 0x 0x 0x 0x Average Annual Gross Receipts for 4 Years Preceding the Credit Year 1,600x 340x 300x 2,240x
(ii)*Computation of the group credit* —(A) *In general.* The research credit allowable to the group is computed as if K, L, and M were one taxpayer. The group credit is equal to 20 percent of the excess of the group's aggregate credit year QREs ($380x) over the group's base amount ($190x). The group credit is 0.20 ($380x—$190x), which equals $38x.
(B)*Group's base amount* — *(1) Computation.* The group's base amount equals the greater of: the group's fixed-base percentage (3 percent) multiplied by the group's aggregate average annual gross receipts for the 4 taxable years preceding the credit year ($2,240x), or the group's minimum base amount ($190x). The group's base amount, therefore, is $190x, which is the greater of: 0.03 × $2,240x, which equals $67.20x, or $190x. *(2) Group's minimum base amount.* The group's minimum base amount is 50 percent of the group's aggregate credit year QREs. The group's minimum base amount is 0.50 × $380x, which equals $190x. *(3) Group's fixed-base percentage.* Because the first taxable year in which at least one member of the group has QREs and at least one member of the group has gross receipts begins after December 31, 1983, the group is treated as a start-up company under section 41(c)(3)(B)(i) and paragraph (b)(2)(i) of this section. Because the 2004 taxable year is the fifth taxable year beginning after December 31, 1993, for which at least one member of the group had QREs, under section 41(c)(3)(B)(ii)(I), the group's fixed-base percentage is 3 percent.
(iii)*Allocation of the group credit.* Under paragraph (c)(2) of this section, the stand-alone entity credit for each member of the group must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credit for each of K ($25.5x), L ($2.5x), and M ($10x) is greater using the method described in section 41(a). Therefore the stand-alone entity credits for each of K, L, and M must be computed using the method described in section 41(a). The sum of the stand-alone entity credits of all the members of the group is $38x. Because the group credit of $38x is equal to sum of the stand-alone entity credits of all the members of the group ($38x), the group credit is allocated among the members of the group based on the ratio that each member's stand-alone entity credit bears to the sum of the stand-alone entity credits of all the members of the group. The $38x group credit is allocated as follows: K L M Total Stand-Alone Entity Credit $25.5x $2.5x $10x $38x Allocation Ratio (Stand-Alone Entity Credit/Sum of Stand-Alone Entity Credits) 25.5/38 2.5/38 10/38 Multiplied by: Group Credit $38x $38x $38x Equals: Credit Allocated to Member $25.5x $2.5x $10x 38x Example 6. Group alternative incremental research credit—(i) Facts. N, O, and P, all of which are calendar-year taxpayers, are members of a controlled group. The research credit under section 41(a) is not allowable to the group for the 2004 taxable year because the group's aggregate QREs for the 2004 taxable year are less than the group's base amount. The group credit is computed using the AIRC rules of section 41(c)(4). For purposes of computing the group credit for the 2004 taxable year (the credit year), N, O, and P had the following: N O P Group aggregate Credit Year QREs $0x $20x $110x $130x Average Annual Gross Receipts for 4 Years Preceding the Credit Year 1,200x 200x 300x 1,700x
(ii)*Computation of the group credit.* The research credit allowable to the group is computed as if N, O, and P were one taxpayer. The group credit is equal to the sum of: 2.65 percent of so much of the group's aggregate QREs for the taxable year as exceeds 1 percent of the group's aggregate average annual gross receipts for the 4 taxable years preceding the credit year, but does not exceed 1.5 percent of such average; 3.2 percent of so much of the group's aggregate QREs as exceeds 1.5 percent of such average but does not exceed 2 percent of such average; and 3.75 percent of so much of such QREs as exceeds 2 percent of such average. The group credit is [0.0265 × [($1,700x × 0.015)—($1,700x × 0.01)]] + [0.032 × [($1,700x × 0.02)—($1,700x × 0.015)]] + [0.0375 × [$130x—($1,700x × 0.02)]], which equals $4.10x.
(iii)*Allocation of the group credit.* Under paragraph (c)(2) of this section, the stand-alone entity credit for each member of the group must be computed using the method that results in the greater stand-alone entity credit for that member. The stand-alone entity credit for N is zero under either method. The stand-alone entity credit for each of O ($0.66x) and P ($3.99x) is greater using the AIRC method. Therefore, the stand-alone entity credits for each of O and P must be computed using the AIRC method. The sum of the stand-alone entity credits of the members of the group is $4.65x. Because the group credit of $4.10x is less than the sum of the stand-alone entity credits of all the members of the group ($4.65x), the group credit is allocated among the members of the group based on the ratio that each member's stand-alone entity credit bears to the sum of the stand-alone entity credits of all the members of the group. The $4.10x group credit is allocated as follows: N O P Total Stand-Alone Entity Credit $0.00x $0.66x $3.99x $4.65x Allocation Ratio (Stand-Alone Entity Credit/Sum of Stand-Alone Entity Credits) 0/4.65 0.66/4.65 3.99/4.65 Multiplied by: Group Credit $4.10x $4.10x $4.10x Equals: Credit Allocated to Member $0.00x $0.58x $3.52x 4.10x
(f)*For taxable years beginning before January 1, 1990.* For taxable years beginning before January 1, 1990, see § 1.41-6 as contained in 26 CFR part 1, revised April 1, 2005.
(g)*Tax accounting periods used* —(1) *In general.* The credit allowable to a member of a controlled group is that member's share of the group credit computed as of the end of that member's taxable year. In computing the group credit for a group whose members have different taxable years, a member generally should treat the taxable year of another member that ends with or within the credit year of the computing member as the credit year of that other member. For example, Q, R, and S are members of a controlled group of corporations. Both Q and R are calendar year taxpayers. S files a return using a fiscal year ending June 30. For purposes of computing the group credit at the end of Q's and R's taxable year on December 31, S's fiscal year ending June 30, which ends within Q's and R's taxable year, is treated as S's credit year.
(2)*Special rule when timing of research is manipulated.* If the timing of research by members using different tax accounting periods is manipulated to generate a credit in excess of the amount that would be allowable if all members of the group used the same tax accounting period, then the appropriate Internal Revenue Service official in the operating division that has examination jurisdiction of the return may require each member of the group to calculate the credit in the current taxable year and all future years as if all members of the group had the same taxable year and base period as the computing member.
(h)*Membership during taxable year in more than one group.* A trade or business may be a member of only one group for a taxable year. If, without application of this paragraph, a business would be a member of more than one group at the end of its taxable year, the business shall be treated as a member of the group in which it was included for its preceding taxable year. If the business was not included for its preceding taxable year in any group in which it could be included as of the end of its taxable year, the business shall designate in its timely filed (including extensions) return the group in which it is being included. If the return for a taxable year is due before July 1, 1983, the business may designate its group membership through an amended return for that year filed on or before June 30, 1983. If the business does not so designate, then the appropriate Internal Revenue Service official in the operating division that has examination jurisdiction of the return will determine the group in which the business is to be included.
(i)*Intra-group transactions* —(1) *In general.* Because all members of a group under common control are treated as a single taxpayer for purposes of determining the research credit, transfers between members of the group are generally disregarded.
(2)*In-house research expenses.* If one member of a group performs qualified research on behalf of another member, the member performing the research shall include in its QREs any in-house research expenses for that work and shall not treat any amount received or accrued as funding the research. Conversely, the member for whom the research is performed shall not treat any part of any amount paid or incurred as a contract research expense. For purposes of determining whether the in-house research for that work is qualified research, the member performing the research shall be treated as carrying on any trade or business carried on by the member on whose behalf the research is performed.
(3)*Contract research expenses.* If a member of a group pays or incurs contract research expenses to a person outside the group in carrying on the member's trade or business, that member shall include those expenses as QREs. However, if the expenses are not paid or incurred in carrying on any trade or business of that member, those expenses may be taken into account as contract research expenses by another member of the group provided that the other member—
(i)Reimburses the member paying or incurring the expenses; and
(ii)Carries on a trade or business to which the research relates.
(4)*Lease Payments.* The amount paid or incurred to another member of the group for the lease of personal property owned by a member of the group is not taken into account for purposes of section 41. Amounts paid or incurred to another member of the group for the lease of personal property owned by a person outside the group shall be taken into account as in-house research expenses for purposes of section 41 only to the extent of the lesser of—
(i)The amount paid or incurred to the other member; or
(ii)The amount of the lease expenses paid to the person outside the group.
(5)*Payment for supplies.* Amounts paid or incurred to another member of the group for supplies shall be taken into account as in-house research expenses for purposes of section 41 only to the extent of the lesser of—
(i)The amount paid or incurred to the other member; or
(ii)The amount of the other member's basis in the supplies.
(j)*Effective date* —(1) *In general.* Except for paragraph
(d)of this section, these regulations are applicable for taxable years ending on or after May 24, 2005. Generally, a taxpayer may use any reasonable method of computing and allocating the credit (including use of the consolidated group rule contained in paragraph
(d)of this section) for taxable years ending before May 24, 2005. However, paragraph
(b)of this section, relating to the computation of the group credit, and paragraph
(c)of this section, relating to the allocation of the group credit, (applied without regard to paragraph
(d)of this section) will apply to taxable years ending on or after December 29, 1999, if the members of a controlled group, as a whole, claimed more than 100 percent of the amount that would be allowable under paragraph
(b)of this section. In the case of a controlled group whose members have different taxable years and whose members use inconsistent methods of allocation, the members of the controlled group shall be deemed to have, as a whole, claimed more than 100 percent of the amount that would be allowable under paragraph
(b)of this section.
(2)*Consolidated group rule.* Paragraph
(d)of this section is applicable for taxable years ending on or after November 9, 2006. For taxable years ending on or after May 24, 2005, and before November 9, 2006, see § 1.41-6(d) as contained in 26 CFR part 1, revised April 1, 2006. § 1.41-6T [Removed] **Par. 4.** Section 1.41-6T is removed. **Par. 5.** Section 1.41-8 is added to read as follows. § 1.41-8 Special rules for taxable years ending on or after November 9, 2006.
(a)*Alternative incremental credit.* At the election of the taxpayer, the credit determined under section 41(a)(1) equals the amount determined under section 41(c)(4).
(b)*Election* —(1) *In general.* A taxpayer may elect to apply the provisions of the alternative incremental research credit
(AIRC)in section 41(c)(4) for any taxable year of the taxpayer beginning after June 30, 1996. If a taxpayer makes an election under section 41(c)(4), the election applies to the taxable year for which made and all subsequent taxable years unless revoked in the manner prescribed in paragraph (b)(3) of this section.
(2)*Time and manner of election.* An election under section 41(c)(4) is made by completing the portion of Form 6765, “Credit for Increasing Research Activities,” relating to the election of the AIRC, and attaching the completed form to the taxpayer's timely filed (including extensions) original return for the taxable year to which the election applies. An election under section 41(c)(4) may not be made on an amended return.
(3)*Revocation.* An election under this section may not be revoked except with the consent of the Commissioner. A taxpayer is deemed to have requested, and to have been granted, the consent of the Commissioner to revoke an election under section 41(c)(4) if the taxpayer completes the portion of Form 6765 relating to the regular credit and attaches the completed form to the taxpayer's timely filed (including extensions) original return for the year to which the revocation applies. An election under section 41(c)(4) may not be revoked on an amended return.
(4)*Special rules for controlled groups* —(i) *In general.* In the case of a controlled group of corporations, all the members of which are not included on a single consolidated return, an election (or revocation) must be made by the designated member by satisfying the requirements of paragraph (b)(2) or (b)(3) of this section (whichever applies), and such election (or revocation) by the designated member shall be binding on all the members of the group for the credit year to which the election (or revocation) relates. If the designated member fails to timely make (or revoke) an election, each member of the group must compute the group credit using the method used to compute the group credit for the immediately preceding credit year.
(ii)*Designated member.* For purposes of this paragraph (b)(4) of this section, for any credit year, the term *designated member* means that member of the group that is allocated the greatest amount of the group credit under paragraph
(c)of this section based on the amount of credit reported on the original timely filed Federal income tax return (even if that member subsequently is determined not to be the designated member). If the members of a group compute the group credit using different methods (either the method described in section 41(a) or the AIRC method of section 41(c)(4)) and at least two members of the group qualify as the designated member, then the term *designated member* means that member that computes the group credit using the method that yields the greater group credit. For example, A, B, C, and D are members of a controlled group but are not members of a consolidated group. For the 2005 taxable year, the group credit using the method described in section 41(a) is $10x. Under this method, A would be allocated $5x of the group credit, which would be the largest share of the group credit under this method. For the 2005 taxable year, the group credit using the AIRC method is $15x. Under the AIRC method, C would be allocated $5x of the group credit, which is the largest share of the group credit computed using the AIRC method. Because the group credit is greater using the AIRC method and C is allocated the greatest amount of credit under that method, C is the designated member. Therefore, C's section 41(c)(4) election is binding on all the members of the group for the 2005 taxable year.
(5)*Effective date.* These regulations are applicable for taxable years ending on or after November 9, 2006. For taxable years ending on or after May 24, 2005, and before November 9, 2006, see § 1.41-6T(b)(5) as contained in 26 CFR part 1, revised April 1, 2006. § 1.41-8T [Removed] **Par. 6.** Section 1.41-8T is removed. Steven T. Miller, Acting Deputy Commissioner for Services and Enforcement. Approved: October 18, 2006. Eric Solomon, Acting Deputy Assistant Secretary of the Treasury. [FR Doc. E6-18909 Filed 11-8-06; 8:45 am] BILLING CODE 4830-01-P POSTAL SERVICE 39 CFR Part 501 Requirements for Authority To Manufacture and Distribute Postage Evidencing Systems AGENCY: Postal Service. ACTION: Final rule. SUMMARY: This final rule revises the requirements for authority to manufacture and distribute postage evidencing systems. This final rule includes updating the regulations, removing obsolete text, and incorporating pertinent portions of the rules for postage meters (Postage Evidencing Systems) formerly contained in section P030 of the *Mailing Standards of the United States Postal Service* , Domestic Mail Manual
(DMM)(Issue 58). This rule integrates the requirements that apply to the distribution and manufacture of PC Postage® products, a type of Postage Evidencing System. In addition, obsolete references to requirements for manually reset and mechanical meters are eliminated. DATES: This rule is effective December 11, 2006. FOR FURTHER INFORMATION CONTACT: Daniel J. Lord, Manager, Postage Technology Management, U.S. Postal Service, at 202-268-4281. SUPPLEMENTARY INFORMATION: Postage Evidencing Systems are devices or systems of components that a customer uses to print evidence that the prepaid postage required for mailing has been paid. They include, but are not limited to, postage meters and PC Postage® systems. The Postal Service TM regulates these systems and their use in order to protect postal revenue. Only Postal Service-authorized product service providers may design, produce, and distribute Postage Evidencing Systems. As a result of changes in technology, proposed revisions were published in the **Federal Register** on June 27, 2006 [Vol. 71, No. 123, Pages 36498-36506], with a request for submission of comments by July 27, 2006. We received three submissions from postage evidencing system providers in response to our solicitation for public comments. The Postal Service gave thorough consideration to the comments it received, modified the proposed rule as appropriate, determined that some comments were outside the scope of this rulemaking, and now announces the adoption of the final rule. List of Subjects in 39 CFR Part 501 Postal Service. For the reasons set out in the preamble, the Postal Service revises 39 CFR part 501 to read as set forth below: PART 501—AUTHORIZATION TO MANUFACTURE AND DISTRIBUTE POSTAGE EVIDENCING SYSTEMS Sec. 501.1 Definitions. 501.2 Postage Evidencing System provider authorization. 501.3 Postage Evidencing System provider qualification. 501.4 Changes in ownership or control, bankruptcy, or insolvency. 501.5 Burden of proof standard. 501.6 Suspension and revocation of authorization. 501.7 Postage Evidencing System requirements. 501.8 Postage Evidencing System test and approval. 501.9 Demonstration or test Postage Evidencing Systems. 501.10 Postage Evidencing System modifications. 501.11 Reporting Postage Evidencing System security weaknesses. 501.12 Administrative sanctions. 501.13 False representations of Postal Service actions. 501.14 Postage Evidencing System inventory control processes. 501.15 Computerized Meter Resetting System. 501.16 PC Postage payment methodology. 501.17 Decertified Postage Evidencing Systems. 501.18 Customer information and authorization. 501.19 Intellectual property. Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 410, 2601, 2605; Inspector General Act of 1978, as amended (Pub. L. 95-452, as amended); 5 U.S.C. App. 3. § 501.1 Definitions.
(a)*Postage Evidencing Systems* regulated by part 501 produce evidence of prepayment of postage by any method other than postage stamps and permit imprints. A Postage Evidencing System is a device or system of components that a customer uses to generate and print evidence that postage required for mailing has been paid. Postage Evidencing Systems print indicia, such as meter imprints or information-based indicia to indicate postage payment. They include but are not limited to postage meters and PC Postage systems.
(b)A *postage meter* is a Postal Service-approved Postage Evidencing System that uses a device to account for postage purchased and printed. The term *meter* as used in this part refers to a postage meter.
(c)*PC Postage products* are Postal Service-approved Postage Evidencing Systems that use a personal computer as an integral part of the system. PC Postage products may use the Internet to download postage to a mailer's computer from which the postage indicia may then be printed.
(d)A *provider* is a person or entity authorized under this section to manufacture and/or distribute Postage Evidencing Systems to customers.
(e)A *manufacturer* of postage meters produces postage meters.
(f)A *distributor* of postage meters may be a manufacturer who leases postage meters directly to end-user customers or may be an independent entity who leases postage meters to end-user customers on behalf of the manufacturer.
(g)A *customer* is a person or entity authorized by the Postal Service to use a Postage Evidencing System in accordance with *Mailing Standards of the United States Postal Service* , Domestic Mail Manual
(DMM)604 Postage Payment Methods, 4.0 Postage Meters and PC Postage Products (Postage Evidencing Systems). § 501.2 Postage Evidencing System provider authorization.
(a)The Postal Service considers Postage Evidencing Systems and their respective infrastructure to be essential to the exercise of its specific powers to prescribe postage and provide evidence of payment of postage under 39 U.S.C. 404(a)(2) and (4).
(b)Due to the potential for adverse impact upon Postal Service revenue, the following activities may not be engaged in by any person or entity without prior, written approval of the Postal Service:
(1)Producing or distributing any Postage Evidencing System that generates U.S. postage.
(2)Repairing, distributing, refurbishing, remanufacturing, modifying, or destroying any component of a Postage Evidencing System that accounts for or authorizes the printing of U.S. postage.
(3)Owning or operating an infrastructure that maintains operating data for the production of U.S. postage, or accounts for U.S. postage purchased for distribution through a Postage Evidencing System.
(4)Owning or operating an infrastructure that maintains operating data that is used to facilitate registration with the Postal Service of customers of a Postage Evidencing System.
(c)Any person or entity seeking authorization to perform any activity described in paragraph
(b)of this section, or to materially modify any activity previously approved by the Postal Service, must submit a request to the Postal Service in person or in writing. Decisions of the Postal Service upon such requests are effective only if in writing (including electronic mail).
(d)Approval shall be based upon satisfactory evidence of the applicant's integrity and financial responsibility, commitment to the security of the Postage Evidencing System, and a determination that disclosure to the applicant of Postal Service customer, financial, or other data of a commercial nature necessary to perform the function for which approval is sought would be appropriate and consistent with good business practices within the meaning of 39 U.S.C. 410(c)(2). The Postal Service may condition its approval upon the applicant's agreement to undertakings that would give the Postal Service appropriate assurance of the applicant's ability to meet its obligations under this section, including but not limited to the method and manner of performing certain financial, security, and servicing functions and the need to maintain sufficient financial reserves to guarantee uninterrupted performance of not less than 3 months of operation.
(e)Qualification and approval may be based upon additional conditions agreed to by the Postal Service and the applicant. The applicant is approved in writing to engage in the function(s) for which authorization was sought and approved.
(f)To the extent that any provider manufactures and/or distributes any PC Postage product through any authorized Postage Evidencing System, such provider must adhere to the requirements of these regulations.
(g)The Postal Service office responsible for administration of this Part 501 is the office of Postage Technology Management
(PTM)or successor organization. All submissions to the Postal Service required or invited by this Part 501 are to be made to this office in person or via mail to 475 L'Enfant Plaza SW, North Building Suite 4200, Washington, DC 20260-4200. Information updates may be found on the Postal Service Web site at *http://www.usps.com/postagesolutions/flash.htm* . § 501.3 Postage Evidencing System provider qualification. Any person or entity seeking authorization to manufacture and/or distribute Postage Evidencing Systems must:
(a)Satisfy the Postal Service of its integrity and financial responsibility.
(b)Obtain Postal Service approval under this part of at least one Postage Evidencing System satisfying the requirements of Postal Service regulations.
(c)As a condition of obtaining authorization under this section, the Postage Evidencing System provider's facilities used for the manufacture, distribution, storage, resetting, or destruction of postage meters and all facilities housing infrastructure supporting Postage Evidencing Systems will be subject to unannounced inspection by representatives of the Postal Service. If such facilities are outside the continental United States, the provider will be responsible for all reasonable and necessary travel-related costs incurred by the Postal Service to conduct the inspections. Travel-related costs are determined in accordance with Postal Service Handbook F-15, *Travel and Relocation* . At its discretion, the Postal Service may continue to fund routine inspections outside the continental United States as it has in the past, provided the costs are not associated with particular security issues related to a provider's Postage Evidencing System or supporting infrastructure, or with the start-up or implementation of a new plant or of a new or substantially changed manufacturing process.
(1)When conducting an inspection outside the continental United States, the Postal Service will make every effort to combine the inspection with other inspections in the same general geographic area in order to enable affected providers to share the costs. The Postal Service team conducting such inspections will be limited to the minimum number necessary to conduct the inspection. All air travel will be contracted for at the rates for official government business, when available, under such rules respecting class of travel as apply to those Postal Service representatives inspecting the facility at the time the travel occurs.
(2)If political or other impediments prevent the Postal Service from conducting security evaluations of Postage Evidencing System facilities in foreign countries, Postal Service approval of the activities conducted in such facilities may be suspended until such time as satisfactory inspections may be conducted.
(d)Have, or establish, and keep under its active supervision and control adequate facilities for the control, distribution, and maintenance of Postage Evidencing Systems and their replacement or secure disposal or destruction when necessary and appropriate. § 501.4 Changes in ownership or control, bankruptcy, or insolvency.
(a)Any person or entity authorized under § 501.2 must promptly notify the Postal Service when it has a reasonable expectation that there may be a change in its ownership or control including changes in the ownership of an affiliate which exercises control over its Postage Evidencing System operations in the United States. A change of ownership or control within the meaning of this section includes entry into a strategic alliance or other agreement whereby a third party either has access to data related to the security of the system or is a competitor to the Postal Service. Any person or entity seeking to acquire ownership or control of a person or entity authorized under § 501.2 must provide the Postal Service satisfactory evidence that upon completion of the contemplated transaction, it will satisfy the conditions for approval stated in § 501.2. Early notification of a proposed change in ownership or control will facilitate expeditious review of an application to acquire ownership or control under this section.
(b)Any person or entity authorized under § 501.2 must promptly notify the Postal Service when it has a reasonable expectation that there may be a change in the status of its financial condition either through bankruptcy, insolvency, assignment for the benefit of creditors, or other similar financial action. Any person or entity authorized under § 501.2 who experiences a change in the status of its financial condition may, at the discretion of the Postal Service, have its authorization under § 501.2 modified or terminated. § 501.5 Burden of proof standard. The burden of proof is on the Postal Service in administrative determinations of suspension and revocation under § 501.6 and administrative sanctions under § 501.12. Except as otherwise indicated in those sections, the standard of proof shall be the preponderance-of-evidence standard. § 501.6 Suspension and revocation of authorization.
(a)The Postal Service may suspend and/or revoke authorization to manufacture and/or distribute any or all of a provider's approved Postage Evidencing System(s) if the provider engages in any unlawful scheme or enterprise, fails to comply with any provision in this Part 501, fails to implement instructions issued in accordance with any final decision issued by the Postal Service within its authority over Postage Evidencing Systems or if the Postage Evidencing System or infrastructure of the provider is determined to constitute an unacceptable risk to Postal Service revenues.
(b)The decision to suspend or revoke pursuant to paragraph
(a)of this section shall be based upon the nature and circumstances of the violation ( *e.g.* whether the violation was willful, whether the provider voluntarily admitted to the violation, or cooperated with the Postal Service, whether the provider implemented successful remedial measures) and on the provider's performance history. Before determining that a provider's authorization to manufacture and/or distribute Postage Evidencing Systems should be suspended or revoked, the procedures in paragraph
(c)of this section shall be followed.
(c)Suspension or revocation procedures:
(1)Upon determination by the Postal Service that a provider is in violation of provisions of this Part 501, or that its Postal Evidencing System poses an unreasonable risk to postal revenue, PTM, acting on behalf of the Postal Service shall issue a written notice of proposed suspension citing the specific conditions or deficiencies for which suspension of authorization to manufacture and/or distribute a specific Postage Evidencing System or class of Postage Evidencing Systems may be imposed. Except in cases of willful violation, the provider shall be given an opportunity to correct deficiencies and achieve compliance with all requirements within a time limit corresponding to the potential revenue risk to postal revenue.
(2)In cases of willful violation, or if the Postal Service determines that the provider has failed to correct cited deficiencies within the specified time limit, PTM shall issue a written notice of suspension setting forth the facts and reasons for the decision to suspend and the effective date if a written defense is not presented as provided in paragraph
(d)of this section.
(3)The notice shall also advise the provider of its right to file a response under paragraph
(d)of this section. If a written response is not presented in a timely manner the suspension may go into effect. The suspension shall remain in effect for ninety
(90)calendar days unless revoked or modified by PTM.
(4)If, upon consideration of the defense as provided in paragraph
(d)of this section, the Postal Service deems that the suspension is warranted, the suspension shall remain in effect for up to 90 days unless withdrawn by the Postal Service, as provided in paragraph (c)(5)(iii) of this section.
(5)At the end of the ninety
(90)day suspension, the Postal Service may:
(i)Extend the suspension in order to allow more time for investigation or to allow the provider time to correct the problem.
(ii)Make a determination to revoke authorization to manufacture and/or distribute a Postage Evidencing System in part or in whole.
(iii)Withdraw the suspension based on identification and implementation of a satisfactory solution to the problem.
(d)The provider may present the Postal Service with a written defense to any suspension or revocation determination within thirty
(30)calendar days of receiving the written notice (unless a shorter period is deemed necessary). The defense must include all supporting evidence and state with specificity the reasons why the order should not be imposed.
(e)After receipt and consideration of the defense, PTM shall advise the provider of its decision and the facts and reasons for it. The decision shall be effective on receipt unless provided otherwise. The decision shall also advise the provider that it may be appealed within thirty
(30)calendar days of receipt (unless a shorter time frame is deemed necessary). If an appeal is not filed in a timely manner, the decision of PTM shall become a final decision of the Postal Service. The appeal may be filed with the Chief Marketing Officer of the Postal Service and must include all supporting evidence and state with specificity the reasons the provider believes that the decision is erroneous. The decision of the Chief Marketing Officer shall constitute a final decision of the Postal Service.
(f)An order or final decision under this section does not preclude any other criminal or civil statutory, common law, or administrative remedy that is available by law to the Postal Service, the United States, or any other person or entity. § 501.7 Postage Evidencing System requirements.
(a)A Postage Evidencing System submitted to the Postal Service for approval must meet the requirements of the Performance Criteria for Information-Based Indicia and Security Architecture for Open IBI Postage Evidencing Systems or Performance Criteria for Information-Based Indicia and Security Architecture for Closed IBI Postage Metering Systems published by PTM. The current versions of the Performance Criteria may be found on the Postal Service Web site at *http://www.usps.com/postagesolutions/programdoc.html* or requests for copies may be submitted via mail to the address in § 501.2(g).
(b)The provider must affix to all meters a cautionary message providing the meter user with basic reminders on leasing and meter movement.
(1)The cautionary message must be placed on all meters in a conspicuous and highly visible location. PROPERTY OF [NAME OF PROVIDER] as well as the provider's toll-free number must be emphasized by capitalized bold type and preferably printed in red. The minimum width of the message should be 3.25 inches, and the minimum height should be 1.75 inches. The message should read as follows: RENTED POSTAGE METER-NOT FOR SALE PROPERTY OF [NAME OF PROVIDER]
(800)###-#### Use of this meter is permissible only under U.S. Postal Service authorization. Call [Name of Provider] at
(800)###-#### to relocate/return this meter. WARNING! METER TAMPERING IS A FEDERAL OFFENSE. IF YOU SUSPECT METER TAMPERING, CALL POSTAL INSPECTORS AT
(800)372-8347 REWARD UP TO $50,000 for information leading to the conviction of any person who misuses postage meters resulting in the Postal Service not receiving correct postage payments.
(2)Exceptions to the formatting of the required message are determined on a case-by-case basis. Any deviation from standardized meter message requirements must be approved in writing by the Postal Service.
(c)The provider must ensure that any matter printed by a postage evidencing system, whether within the boundaries of the indicia or outside the clear zone as defined in DMM 604.4.0 and the Performance Criteria for Information-Based Indicia and Security Architecture for Open IBI Postage Evidencing Systems or Performance Criteria for Information-Based Indicia and Security Architecture for Closed IBI Postage Metering Systems, is:
(1)Consistent with the Postal Service's intent to maintain neutrality on religious, social, political, legal, moral, or other public issues;
(2)Is not obscene, deceptive, or defamatory of any person, entity, or group, and does not advocate unlawful action;
(3)Does not emulate any form of valid postage, government, or other official indicia, or payment of postage; and
(4)Does not harm the public image, reputation, or good will of the Postal Service and is not otherwise derogatory or detrimental to the interests of the Postal Service.
(d)Providers must also ensure that customers acknowledge, agree, and warrant in writing that:
(1)The customer bears full responsibility and liability for obtaining authorization to reproduce and otherwise use the matter as proposed (including, without limitation, any trademarks, slogans, likenesses or copyrighted material contained in the image);
(2)The customer in fact has the legal authority to reproduce and otherwise use the matter as proposed; and
(3)The customer understands that images or other matter is not provided, approved, or endorsed in any way by the Postal Service. § 501.8 Postage Evidencing System test and approval.
(a)To receive Postal Service approval, each Postage Evidencing System must be submitted by the provider and evaluated by the Postal Service in accordance with the Postage Evidencing Product Submission Procedures published by PTM. The current version of the Product Submission Procedures may be found on the Postal Service Web site at *http://www.usps.com/postagesolutions/programdoc.html* or requests for copies may be submitted via mail to the address in 501.2(g). These procedures apply to all proposed Postage Evidencing Systems regardless of whether the provider is currently authorized by the Postal Service to distribute Postage Evidencing Systems. All testing required by the Postal Service will be an expense of the provider.
(b)As provided in § 501.11, the provider has a duty to report security weaknesses to the Postal Service to ensure that each approved Postage Evidencing System protects the Postal Service against loss of revenue at all times. A grant of approval of a system does not constitute an irrevocable determination that the Postal Service is satisfied with the revenue-protection capabilities of the system. After approval is granted to manufacture and/or distribute a Postage Evidencing System, no change affecting its basic features or safeguards may be made except as authorized or ordered by the Postal Service in writing. § 501.9 Demonstration or test Postage Evidencing Systems.
(a)A demonstration or test postage evidencing system is any system that produces an image that replicates a postage indicium for which the Postal Service has not received payment for postage. The following procedures must be followed to implement controls over demonstration or test Postage Evidencing Systems:
(1)A demonstration or test Postage Evidencing System may print only specimen or test indicia. A specimen or test indicia must clearly indicate that the indicia does not represent valid postage.
(2)A demonstration or test Postage Evidencing System must be recorded as such on internal provider inventory records and must be tracked by model number, serial number, and physical location.
(3)A demonstration or test Postage Evidencing System must remain under the provider's direct control. A demonstration or test Postage Evidencing System may not be left in the possession of a customer under any circumstance.
(b)All indicia printed by a demonstration or test Postage Evidencing System must be collected and destroyed daily. § 501.10 Postage Evidencing System modifications.
(a)An authorized provider must receive prior written approval from the manager, PTM, of any and all changes made to a previously approved Postage Evidencing System. The notification must include a summary of all changes made and the provider's assessment as to the impact of those changes on the security of the Postage Evidencing System and postage funds. Upon receipt of the notification, PTM will review the summary of changes and make a decision regarding the need for the following:
(1)Additional documentation.
(2)Level of test and evaluation required.
(3)Necessity for evaluation by a laboratory accredited by the National Institutes of Standards and Technology
(NIST)under the National Voluntary Laboratory Accreditation Program (NVLAP).
(b)Upon receipt and review of additional documentation and/or test results, PTM will issue a written acknowledgement and/or approval of the change to the provider. § 501.11 Reporting Postage Evidencing System security weaknesses.
(a)For purposes of this section, provider refers to the Postage Evidencing System provider authorized under § 501.2 and its foreign affiliates, if any, subsidiaries, assigns, dealers, independent dealers, employees, and parent corporations.
(b)Each authorized provider of a Postage Evidencing System must notify the Postal Service within twenty-four
(24)hours, upon discovery of the following:
(1)All findings or results of any testing known to the provider concerning the security or revenue protection features, capabilities, or failings of any Postage Evidencing System sold, leased, or distributed by it that has been approved for sale, lease, or distribution by the Postal Service or any foreign postal administration; or has been submitted for approval by the provider to the Postal Service or other foreign postal administration(s).
(2)All potential security weaknesses or methods of tampering with the Postage Evidencing Systems that the provider distributes of which it knows or should know and the Postage Evidencing System model subject to each such method. Potential security weaknesses include but are not limited to suspected equipment defects, suspected abuse by a customer or provider employee, suspected security breaches of the Computerized Meter Resetting System
(CMRS)or databases housing confidential customer data relating to the use of Postage Evidencing Systems, occurrences outside normal performance, or any repeatable deviation from normal Postage Evidencing System performance.
(c)Within a time limit corresponding to the potential revenue risk to postal revenue as determined by the Postal Service, the provider must submit a written report to the Postal Service. The report must include the circumstances, proposed investigative procedure, and the anticipated completion date of the investigation. The provider must also provide periodic status reports to the Postal Service during subsequent investigation and, on completion, must submit a summary of the investigative findings.
(d)The provider must establish and adhere to timely and efficient procedures for internal reporting of potential security weaknesses and shall provide a copy of such internal reporting procedures and instructions to the Postal Service for review.
(e)Failure to comply with this section may result in suspension of approval under § 501.6 or the imposition of sanctions under § 501.12. § 501.12 Administrative sanctions.
(a)An authorized Postage Evidencing System provider may be responsible to the Postal Service for revenue losses caused by failure to comply with § 501.11.
(b)The Postal Service shall determine all costs and revenue losses measured from the date that the provider knew, or should have known, of a potential security weakness, including, but not limited to, administrative and investigative costs and documented revenue losses that result from any Postage Evidencing System for which the provider failed to comply with any provision in § 501.11. The Postal Service issues a written demand for reimbursement of any and all such costs and losses (net of any amount collected by the Postal Service from the customers) with interest. The demand shall set forth the facts and reasons on which it is based.
(c)The provider may present the Postal Service with a written defense to the proposed action within thirty
(30)calendar days of receipt. The defense must include all supporting evidence and state with specificity the reasons for which the sanction should not be imposed.
(d)After receipt and consideration of the defense, the Postal Service shall advise the provider of the decision and the facts and reasons for it; the decision shall be effective on receipt unless it provides otherwise. The decision shall also advise the provider that it may, within thirty
(30)calendar days of receiving written notice, appeal that determination to the Chief Marketing Officer of the Postal Service who shall issue a written decision upon the appeal which will constitute the final Postal Service decision.
(e)The imposition of an administrative sanction under this section does not preclude any other criminal or civil statutory, common law, or administrative remedy that is available by law to the Postal Service, the United States, or any other person or entity.
(f)An authorized Postage Evidencing System provider, who without just cause fails to follow any Postal Service approved procedures, perform adequately any of the Postal Service approved controls, or fails to obtain approval of a required process in § 501.14 in a timely fashion, is subject to an administrative sanction under this provision § 501.12. § 501.13 False representations of Postal Service actions. Providers, their agents, and employees must not intentionally misrepresent to customers of the Postal Service decisions, actions, or proposed actions of the Postal Service respecting its regulation of Postage Evidencing Systems. The Postal Service reserves the right to suspend and/or revoke the authorization to manufacture or distribute Postage Evidencing Systems throughout the United States or any part thereof pursuant to § 501.6 when it determines that the provider, its agents, or employees failed to comply with this section. § 501.14 Postage Evidencing System inventory control processes.
(a)Each authorized provider of Postage Evidencing Systems must permanently hold title to all Postage Evidencing Systems which it manufactures or distributes except those purchased by the Postal Service or distributed outside the United States.
(b)An authorized provider must maintain sufficient facilities for and records of the distribution, control, storage, maintenance, repair, replacement, and destruction or disposal of all Postage Evidencing Systems and their components to enable accurate accounting and location thereof throughout the entire life cycle of each Postage Evidencing System. A complete record shall entail a list by serial number of all Postage Evidencing Systems manufactured or distributed showing all movements of each system from the time that it is produced until it is scrapped, and the reading of the ascending register each time the system is checked into or out of service. These records must be available for inspection by Postal Service officials at any time during business hours.
(c)To ensure adequate control over Postage Evidencing Systems, plans for the following processes must be submitted for prior approval, in writing, to PTM:
(1)Check in to service procedures for all Postage Evidencing Systems—the procedures are to address the process to be used for new Postage Evidencing Systems as well as those previously leased to another customer.
(2)Transportation and storage of meters—procedures that provide reasonable precautions to prevent use by unauthorized individuals. Providers must ship all meters by Postal Service Registered Mail unless given written permission by the Postal Service to use another carrier. The provider must demonstrate that the alternative delivery carrier employs security procedures equivalent to those for Registered Mail.
(3)Postage meter examination/inspection procedures and schedule—The provider is required to perform postage meter examinations or inspections based on an approved schedule. Failure to complete the meter examination or inspections by the due date may result in the Postal Service requiring the provider to disable the meter's resetting capability. If necessary, the Postal Service shall notify the customer that the meter is to be removed from service and the authorization to use a meter revoked, following the procedures for revocation specified by regulation. The Postal Service shall notify the provider to remove the meter from the customer's location.
(4)Check out of service procedures for a non-faulty Postage Evidencing System when the system is to be removed from service for any reason.
(5)Postage meter repair process—any physical or electronic access to the internal components of a postage meter, as well as any access to software or security parameters, must be conducted within an approved facility under the provider's direct control and active supervision. To prevent unauthorized use, the provider or any third party acting on its behalf must keep secure any equipment or other component that can be used to open or access the internal, electronic, or secure components of a meter.
(6)Faulty meter handling procedures, including those that are inoperable, mis-registering, have unreadable registers, inaccurately reflect their current status, show any evidence of possible tampering or abuse, and those for which there is any indication that the meter has some mechanical or electrical malfunction of any critical security component, such as any component the improper operation of which could adversely affect Postal Service revenues, or of any memory component, or that affects the accuracy of the registers or the accuracy of the value printed.
(7)Lost or stolen meter procedures—the provider must promptly report to the Postal Service the loss or theft of any meter or the recovery of any lost or stolen meter. Such notification to the Postal Service will be made by completing and filing a standardized lost and stolen meter incident report within ten
(10)calendar days of the provider's determination of a meter loss, theft, or recovery.
(8)Postage meter destruction, when required-the postage meter must be rendered completely inoperable by the destruction process and associated postage—printing dies and components must be destroyed. Manufacturers/distributors of meters must submit the proposed destruction method; a schedule listing the postage meters to be destroyed, by serial number and model; and the proposed time and place of destruction to PTM for approval prior to any meter destruction. Providers must record and retain the serial numbers of the meters to be destroyed and provide a list of such serial numbers in electronic form in accordance with Postal Service requirements for meter accounting and tracking systems. Providers must give sufficient advance notice of the destruction to allow PTM to schedule observation by its designated representative who shall verify that the destruction is performed in accordance with a Postal Service—approved method or process. To the extent that the Postal Service elects not to observe a particular destruction, the provider must submit a certification of destruction, including the serial number(s) to the Postal Service within five
(5)calendar days of destruction. These requirements for meter destruction apply to all postage meters, Postage Evidencing Systems, and postal security devices included as a component of a Postage Evidencing System.
(d)If the provider uses a third party to perform functions that may affect Postage Evidencing System security, including, but not limited to repair, maintenance, and disposal of Postage Evidencing Systems, PTM must be advised in advance of all aspects of the relationship, as they relate to the custody and control of Postage Evidencing Systems, and must specifically authorize in writing the proposed arrangement between the parties.
(1)Postal Service authorization of a third party relationship to perform specific functions applies only to the functions stated in the written authorization but may be amended to embrace additional functions.
(2)No third-party relationship shall compromise the security of the Postage Evidencing System, or its components, including, but not limited to, the hardware, software, communications, and security components, or of any security-related system with which it interfaces, including, but not limited to, the resetting system, reporting systems, and Postal Service support systems. The functions of the third party with respect to a Postage Evidencing System, its components, and the systems with which it interfaces are subject to the same scrutiny as the equivalent functions of the provider.
(3)Any authorized third party must keep adequate facilities for and records of Postage Evidencing Systems and their components in accordance with paragraph
(b)of this section. All such facilities and records are subject to inspection by Postal Service representatives, insofar as they are used to distribute, control, store, maintain, repair, replace, destroy, or dispose of Postage Evidencing Systems.
(4)The provider must ensure that any party acting on its behalf in any of the functions described in paragraph
(b)of this section maintains adequate facilities, records, and procedures for the security of the Postage Evidencing Systems. Deficiencies in the operations of a third party relating to the custody and control of Postage Evidencing Systems, unless corrected in a timely manner, can place at risk a provider's approval to manufacture and/or distribute Postage Evidencing Systems.
(5)The Postal Service reserves the right to review all aspects of any third party relationship if it appears that the relationship poses a threat to Postage Evidencing System security and may require the provider to take appropriate corrective action. § 501.15 Computerized Meter Resetting System.
(a)*Description.* The Computerized Meter Resetting System
(CMRS)permits customers to reset their postage meters at their places of business. Authorized providers, who operate CMRS services, are known as resetting companies (RCs).
(b)A customer is required to have funds available on deposit with the Postal Service before resetting a Postage Evidencing System or the provider may opt to provide a funds advance in accordance with paragraph
(c)of this section.
(c)If the RC chooses to offer advancement of funds to customers, the RC is required to maintain a deposit with the Postal Service equal to at least one
(1)day's average funds advanced. The total amount of funds advanced to customers on any given day shall not exceed the amount the provider has on deposit with the Postal Service. The Postal Service shall not be liable for any payment made by the RC on behalf of a customer that is not reimbursed by the customer, since the RC is solely responsible for the collection of advances made by the RC.
(d)The CMRS customer is permitted to make deposits in one of three ways: check, electronic funds transfer (or wire transfer), or automated clearinghouse
(ACH)transfer. These deposits must be remitted to the Postal Service's designated bank account.
(e)The RC must require each CMRS customer that requests a meter resetting to provide the meter serial number, the CMRS account number, and the meter's ascending and descending register readings. The RC must verify that there are sufficient funds in the customer's CMRS account to cover the postage setting requested before proceeding with the setting transaction (unless the RC opts to provide the customer a funds advance).
(f)The Postal Service requires that the RC publicize to all CMRS customers the following payment options (listed in order of preference):
(1)Automated clearinghouse
(ACH)debits/credits.
(2)Electronic funds transfers (wire transfers).
(3)Checks.
(g)Returned checks and ACH debits are the responsibility of the Postal Service. Upon notice from the Postal Service's designated bank, the provider will be required to immediately lock the customer account to prevent a meter reset until the Postal Service receives payment for the returned check or the provider is provided with valid ACH credit or wire information.
(h)*Refunds.* The Postal Service will issue a refund in the amount remaining in a customer's Computerized Meter Resetting System account, after such time as the customer provides a written request to the provider, as long as the request meets the Postal Service approved minimum and time frame.
(i)*Security and Revenue Protection.* To receive Postal Service approval to continue to operate systems in the CMRS environment, the RC must submit to a periodic audit of its system, to be conducted by an independent systems auditor, the frequency and scope of which shall be determined by the Postal Service. The provider will be responsible for all reasonable costs to conduct these audits.
(j)*Inspection of records and facilities.* The RC must make its facilities that handle the operation of the computerized resetting system and all records about the operation of the system available for inspection by representatives of the Postal Service at all reasonable times. At its discretion, the Postal Service may continue to fund inspections as it has in the past, provided the costs are not associated with a particular security issue related to the provider's CMRS or supporting infrastructure.
(k)The RC is required to incorporate the following language into its meter rental agreements: Acknowledgment of Deposit Requirement—Meters By signing this meter rental agreement, you the customer represent that you have read the *Acknowledgment of Deposit Requirement—Meters* and are familiar with its terms. You agree that, upon execution of this agreement with the RC, you will also be bound by all terms and conditions of the Acknowledgment of Deposit Requirement—Meters, as it may be amended from time to time. § 501.16 PC Postage payment methodology.
(a)The PC Postage customer is permitted to make payments for postage in one of two ways: automated clearinghouse
(ACH)transfer or credit card.
(b)The provider must make payments on behalf of the customer to the Postal Service in accordance with contractual and/or regulatory responsibilities.
(c)The Postal Service requires that the provider publicize to all PC Postage customers the following payment options (listed in order of preference):
(1)Automated clearinghouse
(ACH)debits/credits.
(2)Credit cards.
(d)Returned ACH debits and credit card returns are the responsibility of the Postal Service. The RC must lock the customer account immediately so that the customer is unable to reset the account until the Postal Service receives payment in full.
(e)*Refunds.* The provider issues a refund to a customer for any unused postage in a Postage Evidencing System. After verification by the Postal Service, the provider will be reimbursed by the Postal Service for the individual refunds provided to customers by the provider, as long as the individual customer requests meet the Postal Service approved minimum and time frame.
(f)*Security and revenue protection.* To receive Postal Service approval to continue to operate PC Postage systems, the provider must submit to a periodic audit of its system, to be conducted by an independent systems auditor, the frequency and scope of which shall be determined by the Postal Service. The provider will be responsible for all reasonable costs to conduct these audits.
(g)*Inspection of records and facilities.* The provider must make its facilities, which handle the operation of the PC Postage system and all records about the operation of the system, available for inspection by representatives of the Postal Service at all reasonable times. At its discretion, the Postal Service may continue to fund inspections as it has in the past, provided the costs are not associated with a particular security issue related to the provider's CMRS or supporting infrastructure.
(h)To the extent that the customer maintains funds on deposit for the payment of postage, the provider is required to incorporate the following language into its agreements with PC Postage customers: Acknowledgment of Deposit Requirement—PC Postage By signing this agreement with the provider, you represent that you have read the *Acknowledgment of Deposit Requirement—PC Postage* and are familiar with its terms. You agree that, upon execution of this agreement with the provider, you will also be bound by all terms and conditions of the Acknowledgment of Deposit Requirement—PC Postage, as it may be amended from time to time. § 501.17 Decertified Postage Evidencing Systems.
(a)A Decertified Postage Evidencing System is a device for which the provider's authority to distribute has been withdrawn by the Postal Service as a result of any retirement plan for a given class of meters published by the Postal Service in the **Federal Register** ; a suspension or revocation under § 501.6; or a voluntary withdrawal undertaken by the provider.
(b)A Decertified Postage Evidencing System must be withdrawn from service by the date agreed to by the Postal Service and provider.
(c)To the extent postage meters are involved, the provider must utilize the approved procedures for lost and stolen meters under § 501.14(c)(7) to locate the meter and remove it from service by the agreed upon date.
(d)Decertified Postage Evidencing Systems that are not submitted to the Postal Service for refund within one hundred and eighty
(180)days of the agreed upon withdrawal from service date will not be eligible for refund of unused postage.
(e)Postage indicia printed by Decertified Postage Evidencing Systems may no longer be considered valid postage one hundred and eighty
(180)days from the agreed upon withdrawal from service date. § 501.18 Customer information and authorization.
(a)Authorized providers must electronically transmit the necessary customer information to the designated Postal Service central data processing facility, in Postal Service-specified format, in order for the Postal Service to authorize a customer to use a Postage Evidencing System. Postal Service receipt and acceptance of the customer information provides the customer with the authorization to possess or use a Postage Evidencing System in accordance with DMM 604 Postage Payment Methods, 4.0 Postage Meters and PC Postage Products (Postage Evidencing Systems).
(b)The Postal Service may refuse to issue a customer authorization to use a Postage Evidencing System for the following reasons:
(1)The customer submitted false or fictitious information.
(2)Within five years preceding submission of the information, the customer violated any standard for the care or use of the Postage Evidencing System that resulted in revocation of that customer's authorization.
(3)Or there is sufficient reason to believe that the Postage Evidencing System is to be used in violation of the applicable standards.
(c)The Postal Service will notify the provider of the revocation of a customer's authorization to use a Postage Evidencing System. Within ten
(10)days of receipt of the notice of revocation, the provider must cancel any lease or other agreement and remove the Postage Evidencing System from service. A customer's authorization to use a Postage Evidencing system is subject to revocation for any of the following reasons:
(1)A Postage Evidencing System is used for any illegal scheme or enterprise.
(2)The customer's Postage Evidencing System is not used for twelve
(12)consecutive months.
(3)Sufficient control of a Postage Evidencing System is not exercised or the standards for its care or use are not followed.
(4)The Postage Evidencing System is kept or used outside the customs territory of the United States or those U.S. territories and possessions where the Postal Service operates.
(5)The customer is in possession of a Decertified Postage Evidencing System.
(d)The provider must electronically transmit any updates to the necessary customer information to the designated Postal Service central data processing facility, in Postal Service-specified format.
(e)No one other than an authorized provider may possess a Postage Evidencing System without a valid rental or other agreement with the provider. Other parties in possession of a Postage Evidencing System must immediately surrender it to the provider or the Postal Service.
(f)The Postal Service may use customer information consistent with the Privacy Act and the Postal Service's privacy policies posted on *http://www.usps.com.* Examples include the following:
(1)Communication with customers who may no longer be visiting a traditional Postal Service retail outlet or communication with customers through any new retail channels.
(2)Issuance (including re-authorization, renewal, transfer, revocation or denial, as applicable) of authorization to use a Postage Evidencing System to a postal patron that uses a Postage Evidencing System, and communications with respect to the status of such authorization.
(3)Disclosure to a meter provider of the identity of any meter required to be removed from service by that meter provider, and any related customer data, as the result of revocation of an authorization to use a Postage Evidencing System, questioned accurate registration of that meter, or de-certification by the Postal Service of any particular class or model of postage meter.
(4)Tracking the movement of meters between a meter provider and its customers and communications to a meter provider (but not to any third party other than the customer) concerning such movement. The term meter provider includes a meter provider's dealers and agents.
(5)To transmit general information to all Postage Evidencing System customers concerning rate and rate category changes implemented or proposed for implementation by the Postal Service.
(6)To advertise Postal Service services relating to the acceptance, processing, and delivery of, or postage payment for, metered mail.
(7)To allow the Postal Service to communicate with Postal Service customers on products, services, and other information otherwise available to Postal Service customers through traditional retail outlets.
(8)Any internal use by Postal Service personnel, including identification and monitoring activities relating to Postage Evidencing Systems, provided that such use does not result in the disclosure of applicant information to any third party or will not enable any third party to use applicant information for its own purposes; except that the applicant information may be disclosed to other governmental agencies for law enforcement purposes as provided by law.
(9)Identification of authorized Postage Evidencing System providers or announcement of the de-authorization of an authorized provider, or provision of currently available public information, where an authorized provider is identified.
(10)To promote and encourage the use of Postage Evidencing Systems as a form of postage payment, provided that the same information is provided to all Postage Evidencing System customers and no particular Postage Evidencing System provider will be recommended by the Postal Service.
(11)To contact customers in cases of revenue fraud or revenue security.
(12)Disclosure to a Postage Evidencing System provider of applicant information pertaining to that provider's customers that the Postal Service views as necessary to enable the Postal Service to carry out its duties and purposes.
(13)To transmit to a Postage Evidencing System provider all applicant and system information pertaining to that provider's customers and systems that may be necessary to permit such provider to synchronize its computer databases with information contained in the computer files of the Postal Service.
(14)Subject to the conditions stated herein, to communicate in oral or written form with any or all applicants any information that the Postal Service views as necessary to enable the Postal Service to carry out its duties and purposes under part 501. § 501.19 Intellectual property. Providers submitting Postage Evidencing Systems to the Postal Service for approval are responsible for obtaining all intellectual property licenses that may be required to distribute their product in commerce and to allow the Postal Service to process mail bearing the indicia produced by the Postage Evidencing System. To the extent approval is granted and the Postage Evidencing System is capable of being used in commerce, the provider shall indemnify the Postal Service for use of such intellectual property in both the use of the Postage Evidencing System and the processing of mail bearing indicia produced by the Postage Evidencing System. Neva R. Watson, Attorney, Legislative. [FR Doc. E6-18949 Filed 11-8-06; 8:45 am] BILLING CODE 7710-12-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R09-OAR-2006-0829, FRL-8234-9] Revisions to the California State Implementation Plan, Lake County Air Quality Management District, Monterey Bay Unified Air Pollution Control District, San Joaquin Valley Unified Air Pollution Control District, and Ventura County Air Pollution Control District AGENCY: Environmental Protection Agency (EPA). ACTION: Direct final rule. SUMMARY: EPA is taking direct final action to approve revisions to the Lake County Air Quality Management District (LCAQMD), Monterey Bay Unified Air Pollution Control District (MBUAPCD), San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD), and Ventura County Air Pollution Control District (VCAPCD) portions of the California State Implementation Plan (SIP). Under authority of the Clean Air Act as amended in 1990 (CAA or the Act), we are approving local rules that address particulate matter (PM-10) emissions from open burning, general area sources, cotton gins, incinerators, and fuel burning equipment. DATES: This rule is effective on January 8, 2007, without further notice, unless EPA receives adverse comments by December 11, 2006. If we receive such comment, we will publish a timely withdrawal in the **Federal Register** to notify the public that this rule will not take effect. ADDRESSES: Submit comments, identified by docket number EPA-R09-OAR-2006-0829, by one of the following methods: 1. *Federal eRulemaking Portal: http://www.regulations.gov* . Follow the on-line instructions. 2. *E-mail: steckel.andrew@epa.gov.* 3. *Mail or deliver:* Andrew Steckel (Air-4), U.S. Environmental Protection Agency Region IX, 75 Hawthorne Street, San Francisco, CA 94105-3901. *Instructions:* All comments will be included in the public docket without change and may be made available online at *http://www.regulations.gov* , including any personal information provided, unless the comment includes Confidential Business Information
(CBI)or other information whose disclosure is restricted by statute. Information that you consider CBI or otherwise protected should be clearly identified as such and should not be submitted through *www.regulations.gov* or e-mail. *www.regulations.gov* is an “anonymous access” system, and EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send e-mail directly to EPA, your e-mail address will be automatically captured and included as part of the public comment. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. *Docket:* The index to the docket for this action is available electronically at *http://www.regulations.gov* and in hard copy at EPA Region IX, 75 Hawthorne Street, San Francisco, California. While all documents in the docket are listed in the index, some information may be publicly available only at the hard copy location (e.g., copyrighted material), and some may not be publicly available in either location (e.g., CBI). To inspect the hard copy materials, please schedule an appointment during normal business hours with the contact listed in the FOR FURTHER INFORMATION CONTACT section. FOR FURTHER INFORMATION CONTACT: Al Petersen, EPA Region IX,
(415)947-4118, *petersen.alfred@epa.gov.* SUPPLEMENTARY INFORMATION: Throughout this document, “we,” “us” and “our” refer to EPA. Table of Contents I. The State's Submittal A. What rules did the State submit? B. Are there other versions of these rules? C. What is the purpose of the submitted rules? II. EPA's Evaluation and Action A. How is EPA evaluating the rules? B. Do the rules meet the evaluation criteria? C. EPA Recommendation To Further Improve a Rule D. Public Comment and Final Action III. Statutory and Executive Order Reviews I. The State's Submittal A. What rules did the State submit? Table 1 lists the rules we are approving with the date that they were adopted by the local air agency and submitted by the California Air Resources Board (CARB). Table 1.—Submitted Rules for Full Approval Local agency Rule # Rule title Amended, tevised, or adopted Submitted LCAQMD Chapter VIII Section 1002 Agencies Authorized to Issue Burning Permits 08/09/05 Amended 03/10/06 LCAQMD Chapter VIII Table 8 Agencies Designated to Issue Burning Permits 08/09/05 Amended 03/10/06 MBUAPCD 403 Particulate Matter 02/16/05 Revised 07/15/05 SJVUAPCD 4204 Cotton Gins 02/17/05 Adopted 07/15/05 VCAPCD 57 Incinerators 01/11/05 Revised 07/15/05 VCAPCD 57.1 Particulate Matter Emissions form Fuel Burning Equipment 01/11/05 Adopted 07/15/05 On August 18, 2005, the submittal of March 10, 2006 was found to meet the completeness criteria in 40 CFR part 51, appendix V, which must be met before formal EPA review. On August 18, 2005, the submittal of July 15, 2005 was found to meet the completeness criteria. B. Are there other versions of these rules? We approved a version of LCAQMD Section 1002 and Table 8 into the SIP on May 18, 1999 (64 FR 26876). We approved a version of MBUAPCD Rule 403 into the SIP on July 11, 2001 (66 FR 36170) and approved a version of VCAPCD Rule 57 into the SIP on August 6, 2001 (66 FR 40898). C. What is the purpose of the submitted rules? Section 110(a) of the CAA requires states to submit regulations that control volatile organic compounds, oxides of nitrogen, particulate matter, and other air pollutants which harm human health and the environment. These rules were developed as part of the local agency's program to control these pollutants. The purposes of the LCAQMD Section 1002 and Table 8 revisions relative to the SIP are as follows: • Section 1002: The rule adds authority for agencies designated to issue burn permits in Table 8 to collect and retain burn permit fees. • Table 8 is revised to clarify which agencies are designated to issue burn permits. The purposes of new SJVUAPCD Rule 4204 are as follows: • 4204.4.1: The rule exempts cotton ginning facilities used for research purposes and for throughputs to 4,000 pounds of seed cotton per day. • 4204.5.0: The rule requires the control of all emission points in cotton ginning with 1D3D cyclones or rotary drum filters on compliance dates ranging between 07/01/06 and 07/01/08. • 4204.5.2: The rule requires air velocity entering 1D3D cyclones to be 2,800 to 3,600 feet per minute. • 4204.5.3: The rule requires new cyclones or replacement parts of existing cyclones 1D3D cyclones to have the dimensional characteristics of the enhanced 1D3D cyclone (figure 1) or the 1D3D cyclone with expansion chamber (figure 2). • 4204.5.6: The rule provides requirements for preventing fugitive dust emission during load-out into hoppers or trailers. • 4204.5.7: The rule provides requirements for preventing fugitive dust emission during load-out onto a pile. • 4204.6.0: The rule provides requirements for recordkeeping, source testing, and test methods. The purpose of new VCAPCD Rule 57.1 is as follows: • 57.1: This new rule acquires the section regulating fuel burning equipment being moved from Rule 57. The purposes of revisions of MBUAPCD Rule 403 relative to the SIP rule are as follows: • 403.1.3.4: The rule deletes the exemption for agricultural operations necessary for the growing of crops or raising of fowl or animals. • 403: The rule is reformatted. The purposes of revisions to VCAPCD Rule 57 relative to the SIP Rule 57, Combustion Contaminants-Specific, are as follows: • 57.A: This section on incinerators is retained in Rule 57, Incinerators, except that the requirements are changed from numerical standards limiting particulate matter emissions and requiring minimums of temperature of combustion and contact time in the SIP rule to a new non-numerical standard of requiring a multiple-combustion-chamber incinerator with at least three chambers and no numerical temperature of combustion or time of contact standard. • 57.B: This section on fuel burning equipment is removed from Rule 57 and put into new Rule 57.1, Particulate Matter Emissions from Fuel Burning Equipment, except that the requirement for limiting particulate matter emissions is changed from 0.1 grains/dry standard cubic foot (gr/dscf) at 12% carbon dioxide to a new standard of 0.12 pounds/million BTU at 12% carbon dioxide. The TSD has more information about these rules. II. EPA's Evaluation and Action A. How is EPA evaluating the rules? Generally, SIP rules must be enforceable (see section 110(a) of the CAA) and must not relax existing requirements (see sections 110(l) and 193). SIP rules must require for major sources reasonably available control measures (RACM), including RACT in moderate PM-10 nonattainment areas (see section 189(a)) or must require for major sources best available control measures (BACM), including best available control technology
(BACT)in serious PM-10 nonattainment areas (see section 189(b). LCAQMD, MBUAPCD and VCAPCD regulate PM-10 attainment areas, so need not fulfill the requirements of RACM/RACT or BACM/BACT. SJVUAPCD regulates a serious PM-10 nonattainment area (see 40 CFR part 81), so SJVUAPCD Rule 4204 must fulfill the requirements of BACM/BACT. Guidance and policy documents that we use to help evaluate the rules include the following: • *Requirements for Preparation, Adoption, and Submittal of Implementation Plans* , U.S. EPA, 40 CFR part 51. • *PM-10 Guideline Document* (EPA-452/R-93-008). B. Do the rules meet the evaluation criteria? We believe that LCAQMD Section 1002 and Table 8, MBUAPCD Rule 403, SJVUAPCD Rule 4204, and VCAPCD Rules 57 and 57.1 are consistent with the relevant policy and guidance regarding enforceability, SIP relaxations, and fulfilling the requirements of RACM/RACT or BACM/BACT. The TSD has more information on our evaluation. C. EPA Recommendation to Further Improve a Rule The TSD describes an additional revision to SJVUAPCD Rule 4204 that does not affect EPA's current action but is recommended for the next time the local agency modifies the rule. D. Public Comment and Final Action As authorized in section 110(k)(3) of the CAA, EPA is fully approving the submitted rules because we believe they fulfill all relevant requirements. We do not think anyone will object to this approval, so we are finalizing it without proposing it in advance. However, in the Proposed Rules section of this **Federal Register** , we are simultaneously proposing approval of the same submitted rules. If we receive adverse comments by December 11, 2006, we will publish a timely withdrawal in the **Federal Register** to notify the public that the direct final approval will not take effect and we will address the comments in a subsequent final action based on the proposal. If we do not receive timely adverse comments, the direct final approval will be effective without further notice on January 8, 2007. This will incorporate these rules into the federally enforceable SIP. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. III. Statutory and Executive Order Reviews Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). This rule also does not have tribal implications because it will 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, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). The Congressional Review Act, 5 U.S.C. 801 *et seq.* , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the **Federal Register** . A major rule cannot take effect until 60 days after it is published in the **Federal Register** . This action is not a “major rule” as defined by 5 U.S.C. 804(2). Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by January 8, 2007. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).) List of Subjects in 40 CFR Part 52 Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Particulate matter, Reporting and recordkeeping requirements. Dated: October 12, 2006. Alexis Strauss, Acting Regional Administrator, Region IX. Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows: PART 52—[AMENDED] 1. The authority citation for part 52 continues to read as follows: Authority: 42 U.S.C. 7401 *et seq.* Subpart F—California 2. Section 52.220 is amended by adding paragraphs (c)(337)(i)(A)( *3* ), (c)(337)(i)(B)( *2* ), (c)(337)(i)(D), and (c)(344)(i)(B) to read as follows: § 52.220 Identification of plan.
(c)* * *
(337)* * *
(i)* * *
(A)* * * ( *3* ) Rule 4204, adopted on February 17, 2005.
(B)* * * ( *2* ) Rule 57, adopted on July 2, 1968 and revised on January 11, 2005 and Rule 57.1, adopted on January 11, 2005.
(D)Monterey Bay Unified Air Pollution Control District. ( *1* ) Rule 403, adopted on September 1, 1974 and revised on February 16, 2005.
(344)* * *
(i)* * *
(B)Lake County Air Quality Management District. ( *1* ) Chapter VIII, Section 1002 and Table 8, adopted on March 19, 1996 and amended on August 9, 2005. [FR Doc. E6-18874 Filed 11-8-06; 8:45 am] BILLING CODE 6560-50-P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Parts 36, 51, 52, 53, 54, 63, 64 and 69 [WC Docket No. 02-313; FCC 06-86] Biennial Regulatory Review of Regulations Administered by the Wireline Competition Bureau AGENCY: Federal Communications Commission. ACTION: Final rule. SUMMARY: In this document, the Federal Communications Commission (Commission or FCC) reviews rules that apply to the operations and activities of providers of telecommunications services and repeals or modifies previous regulations no longer necessary in the public interest, obsolete, outdated, expired of their terms, or containing drafting or typographical errors. DATES: Effective December 11, 2006. FOR FURTHER INFORMATION CONTACT: Carrie-Lee Early, Wireline Competition Bureau,
(202)418-2776 or *carrielee.early@fcc.gov.* SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report and Order in WC Docket No. 02-313, adopted June 20, 2006 and released August 21, 2006. The complete text of this document is available for inspection and copying during normal business hours in the FCC Reference Information Center, Portals H, 445 12th Street, SW., Room CY-A257, Washington DC 20554. This document may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone
(800)378-3160 or
(202)863-2893, facsimile
(202)863-2989, or via e-mail at *FCC@BIWEB.com.* It is also available on the Commission's Web site at *http://www.fcc.gov.* The Notice of Proposed Rule Making which initiated the rule changes set forth in the Report and Order was published at 69 FR 12814, March 18, 2004. The rule changes do not cause any new information collection requirements subject to the PRA of 1995, Public Law 104-13. They also do not create any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, *see* 44 U.S.C. 3506(c)(4). Synopsis of the Report and Order 1. *Background.* Section 11 of the Communications Act of 1934, as amended (Act), requires the Commission to review biennially its regulations that apply to the operations and activities of providers of telecommunications service and to determine whether the regulations are “no longer necessary as the result of meaningful economic competition between providers of such service.” *See* 47 U.S.C. 161(a). 2. *Discussion.* In this Order, we impose no new rules; rather, we repeal or modify regulations that are no longer necessary in the public interest, obsolete, outdated, have expired of their terms, or contain drafting or typographical errors. The revisions reduce regulatory compliance burdens by eliminating the requirements and uncertainties described below. 3. *Part 36—Jurisdictional Separations Procedures:* With respect to the fundamental principles underlying jurisdictional separations procedures, the Commission clarifies in § 36.2(b)(3)(ii) that holding-time-minutes is the measurement unit for apportioning both local and toll switching plant. The Commission also clarifies, in § 36.2(b)(3)(iv), that subscriber plant is to be apportioned using the 25 percent Gross Allocator. 4. The Commission clarifies, in § 36.125(f), application of the weighting factor in apportioning to interstate jurisdiction certain Category 3 telecommunication property investments for study areas with fewer than 50,000 access lines. The Commission also repeals §§ 36.154(d) through
(f)because those sections are no longer in effect, and deletes references to those provisions. Because their termination dates have passed, the Commission also repeals §§ 36.631(a) and
(b)and 36.641. The Commission also clarifies the application of § 36.631(d) to apply only non-rural telephone companies serving study areas reporting more than 200,000 working loops. With respect to the universal service fund rules, the Commission clarifies that § 36.631(d) applies only to non-rural telephone companies serving study areas reporting more than 200,000 working loops. 5. In addition, because they reference payphone services that are no longer regulated, the Commission eliminates the last sentence of § 36.142(a) addressing coinless pay telephone equipment and the last sentence of § 36.377(a)(7) addressing expenses related to coin collection and administration. 6. The Commission also corrects three instances of transposed wording in § 36.377(a)(5): in subparagraphs
(i)and (v), “interstate” is corrected to “State,” and in subparagraph (vi), “State” is changed to “Interstate.” Similarly, the Commission eliminates, as obsolete, all references to Teletypwriter Exchange Service
(TWX)in part 36 because no carrier has reported data through the Automated Reporting Management System (ARMIS) system since it was established in 1988. 7. *Part 42—Preservation of Records of Communications Carriers:* The United States Telecom Association
(USTA)filed comments recommending the elimination of §§ 42.1 through 42.9 asserting that these regulations are outdated and unnecessary. USTA, however, did not offer any support for its assertions, nor did USTA make proposals regarding less costly and more efficient ways to collect, preserve and maintain carrier records and reports. Neither USTA's brief comment nor its incorporation of arguments from previous Biennial Review dockets, convince us that elimination or modification of part 42 is warranted at this time. Accordingly, we conclude that current part 42 record retention requirements assist the Commission to carry out its regulatory responsibilities and therefore continue to be necessary in the public interest at this time. 8. *Part 51—Interconnection:* The Commission eliminates §§ 51.211(a)-(f), 51.213(c)-(d), which imposed deadlines on Local Exchange Carriers
(LECs)and Bell Operating Companies to implement toll dialing parity or to notify the Commission of their failure to do so. The provisions no longer are relevant as the compliance deadlines have expired. Similarly, because their effective dates have expired, the Commission eliminates §§ 51.515(b) and
(c)which permitted incumbent LECs to assess certain interstate access charges and intrastate access charges on purchasers of unbundled elements until June 30, 1997. 9. The Commission also eliminates, as no longer necessary in the public interest, § 51.329(c)(3) which required incumbent LECs to send paper and diskette copies of network change public notices or certifications to the Chief of the Wireline Competition Bureau. 10. *Part 52—Numbering:* With respect to the scope and authority of the numbering rules, the Commission updates part 52 to reflect two developments: it revises the § 52.5 list of United States territories taking part in the North American Numbering Plan
(NANP)to reflect American Samoa's participation and changes a reference to the “Common Carrier Bureau” to the “Wireline Competition Bureau.” 11. In addition, regarding numbering administration, because the North American Numbering Council is no longer responsible for recommending to the Commission the entity to serve as the North American Numbering Plan Administrator, the Commission repeals § 52.11(d). 12. Further, because the North American Numbering Plan Administrator, rather than telecommunications carriers, now performs central office code administration, the Commission repeals § 52.15(c), portions of § 52.15(d), and § 52.15(e) in its entirety. 13. The Commission also modifies the introductory paragraph and subsection
(3)of § 52.13(b), which governs the duties of the North American Numbering Plan Administrator (NANPA) to reflect the existing role of the Commission in setting numbering policy. The Commission also modifies §§ 52.13(c)(4) and 52.15(b)(3) to reflect that the Numbering Resource Utilization Forecast has replaced the Central Office Code Utilization Survey (COCUS). 14. In the number portability context, the Commission eliminates §§ 52.27 and 52.29 which provided rules applicable to transitional number portability measures because long-term database methods have been developed. 15. Because the timeframe identified in the rule has expired, the Commission also eliminates § 52.31(c) which provided Local Number Portability
(LNP)deployment deadlines. 16. *Part 53—Special Provisions Concerning Bell Operating Companies:* The Commission eliminates § 53.101 because the expiration date of the prohibition against Bell Operating Company joint marketing of local and interLATA services has passed. 17. *Part 54—Universal Service:* With regard to the rules governing carriers eligible for universal service support, the Commission eliminates § 54.201(a)(2) because the waiver mechanism it provided to state commissions to request retroactive support and eligible telecommunications carrier
(ETC)status for certain carriers is no longer necessary in the public interest. 18. With respect to universal service support for high cost areas, the Commission eliminates § 54.313(d)(1) and
(2)as the Universal Service Program certification deadlines associated with long term support for non-rural carriers have expired. 19. In the context of universal service support for schools and libraries, the Commission removes obsolete parts of § 54.507(b) which addressed the length of the 1998-1999 funding year, the first year of the Universal Service Schools and Library Program. 20. With respect to universal service support for health care providers, the Commission eliminates expired sections § 54.604(a)(2) and
(d)which pertained to specified exemptions to the Universal Service Program competitive bid requirements applicable to eligible health care provider contracts with telecommunications service providers during 1998 and 1999. 21. The Commission eliminates §§ 54.623(c)(2) and
(3)as their provisions are redundant or unnecessary. The Commission modifies § 54.623(b) to eliminate an outdated reference to the already-passed initiation of the rural health care mechanism. The Commission also modifies § 54.623(c)(4) to clarify that all applications filed by rural health care providers within the filing window, as determined by the Administrator, will be treated as simultaneously received. 22. *Part 63—Extension of Lines, New Lines, and Discontinuance, Reduction, Outage and Impairment of Service by Common Carriers; and Grants of Recognized Private Operating Agency Status:* The Commission clarifies, in § 63.61, that non-dominant carriers which seek to discontinue, reduce, or impair service, must file for and receive authority from the Commission in order to take such action. This change was mistakenly omitted when § 63.71 was adopted. The Commission also modifies §§ 63.61 and 63.71 to clarify that the procedures, such as filing deadlines, for the discontinuance, reduction or impairment of international services are governed by § 63.19. 23. In §§ 63.71(a)(5)(i) and
(ii)the Commission clarifies descriptions of notice periods and procedures set forth in exemplar language which carriers use to advise affected customers of proposed discontinuances, reductions, or impairments of service, and of their rights to comment to the Commission. 24. *Part 64—Miscellaneous Rules Relating to Common Carriers:* The Commission repeals the expired September 20, 1998 deadline in § 64.1330(c) to eliminate confusion about the on-going nature of the requirements under section 276 and under §§ 64.1330(a) and
(c)regarding public interest payphones. 25. The Commission eliminates § 64.1903(c) which provided certain incumbent independent local exchange carriers a now expired deadline in which to comply with specified obligations to provide services through a separate affiliate. The Commission also deletes the cross reference to § 64.1903(c) set forth in § 64.1903(a). 26. *Part 69—Access Charges:* The Commission deletes rules with effective dates which have passed or which are no longer relevant to the carriers to which they had applied: § 69.116 which set forth a computation formula applicable to an access charge which was to fund the Universal Service Fund during the August 1, 1988 through December 31, 1997 time period; § 69.117 which set forth a computation formula applicable to an access charge which was to fund the Lifeline Assistance during the August 1, 1988 through December 31, 1997 time period; § 69.126 which provided a time frame for specified nonrecurring charges by incumbent local exchange carriers which is no longer relevant; § 69.127 which set forth a Transitional Equal Charge Rule which has been superceded by subsequent tariffs; and § 69.612 which defined the computation methods for the Long Term and Transitional Support payment obligations but has also expired. 27. *Paperwork Reduction Act Analysis:* According to the terms of the Paperwork Reduction Act of 1995, Pub. L. 104-13, the modifications engendered by the rules changes do not contain new or modified information collections subject to Office of Management and Budget review. 28. *Final Regulatory Flexibility Certification:* The Commission provides a Final Regulatory Flexibility Certification that the requirements of the Report and Order will not have a significant economic effect on a substantial number of small entities. 29. *Report to Congress:* The Commission will send a copy of the Order, including its Final Regulatory Flexibility Certification, in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Order including its Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of this present summarized Order and Final Regulatory Flexibility Certification is also hereby published in the **Federal Register** . Ordering Clauses 30. Accordingly, *it is ordered* that, pursuant to sections 1, 3, 4(i), 4(j), 201, 205, and 403, of the Communications Act of 1934, as amended, 47 U.S.C. 151, 153, 154, 201-205, and 403, the Report and Order is *adopted.* 31. *It is further ordered* , pursuant to sections 4(i), 4(j), 201, 205, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i)-(j), 201-205, 303(r), 403, and section 553 of Title 5, United States Code, that revisions to parts 36, 51, 52, 53, 54, 63, 64, and 69 of the Commission's rules *are adopted.* 32. *It is further ordered* , that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, *shall send* a copy of this Report and Order, including the Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration. 33. *It is further ordered* , that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, *shall send* a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). 34. *It is further ordered* , that the provisions of the Report and Order will be effective December 11, 2006. List of Subjects 47 CFR Part 36 Communications common carriers, Reporting and recordkeeping requirements, Telephone, Uniform system of Accounts. 47 CFR Part 51 Communications common carriers, Telecommunications. 47 CFR Part 52 Communications common carriers, Telecommunications, Telephone. 47 CFR Part 53 Communications common carriers, Telephone. 47 CFR Part 54 Communications common carriers, Health facilities, Infants and Children, Libraries, Reporting and recordkeeping requirements, Telecommunications, Telephone. 47 CFR Part 63 Communications common carriers, Reporting and recordkeeping requirements, Telephone, Telegraph. 47 CFR Part 64 Telecommunications, Telephone. 47 CFR Part 69 Communications common carriers, Reporting and recordkeeping requirements, Telephone. Federal Communications Commission. Marlene H. Dortch, Secretary. Rule Changes For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 36, 51, 52, 53, 54, 63, 64 and 69 as follows: PART 36—JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES 1. The authority citation for part 36 continues to read as follows: Authority: 47 U.S.C. 151, 154(i) and (j), 205, 221(c), 254, 403, and 410. 2. Amend § 36.2 by revising paragraphs (b)(3)(ii) and (b)(3)(iv) to read as follows: § 36.2 Fundamental principles underlying procedures.
(b)* * *
(3)* * *
(ii)Holding-time-minutes is the basis for measuring the use of local and toll switching plant.
(iv)Message telecommunications subscriber plant shall be apportioned on the basis of a Gross Allocator which assigns 25 percent to the interstate jurisdiction and 75 percent to the state jurisdiction. 3. Amend § 36.125 by revising paragraph
(f)to read as follows: § 36.125 Local switching equipment—Category 3.
(f)Beginning January 1, 1998, for study areas with fewer than 50,000 access lines, Category 3 investment is apportioned to the interstate jurisdiction by the application of an interstate allocation factor that is the lesser of either .85 or the sum of the interstate DEM factor specified in paragraph (a)(5) of this section, and the difference between the 1996 interstate DEM factor and the 1996 interstate DEM factor multiplied by a weighting factor as determined by the table below. The Category 3 investment that is not assigned to the interstate jurisdiction pursuant to this paragraph is assigned to the state jurisdiction. Number of access lines in service in study area Weighting factor 0-10,000 3.0 10,001-20,000 2.5 20,001-50,000 2.0 50,001-or above 1.0 4. Amend § 36.126 by revising paragraphs (e)(2), (e)(3) introductory text, (e)(3)(i) and (iii), and by removing and reserving paragraph (e)(3)(ii) to read as follows: § 36.126 Circuit equipment-Category 4.
(e)* * *
(2)Interexchange Circuit Equipment Used for Wideband Service—Category 4.22—This category includes the circuit equipment portion of interexchange channels used for wideband services. The cost of interexchange circuit equipment in this category is determined separately for each wideband channel and is segregated between message and private line services on the basis of the use of the channels provided. The respective costs are allocated to the appropriate operation in the same manner as the related interexchange cable and wire facilities described in § 36.156.
(3)All Other Interexchange Circuit Equipment—Category 4.23—This category includes the cost of all interexchange circuit equipment not assigned to Categories 4.21 and 4.22. The cost of interexchange basic circuit equipment used for the following classes of circuits is included in this category: Jointly used message circuits, *i.e.* , message switching plant circuits carrying messages from the state and interstate operations; circuits used for state private line service; and circuits used for state private line services.
(i)An average interexchange circuit equipment cost per equivalent interexchange telephone termination for all circuits is determined and applied to the equivalent interexchange telephone termination counts of each of the following classes of circuits: Private Line, State Private Line, Message. The cost of interstate private line circuits is assigned directly to the interstate operation. The cost of state private line circuits is assigned directly to the state operation. The cost of message circuits is apportioned between the state and interstate operations on the basis of the relative number of study area conversation-minutes applicable to such facilities.
(iii)The cost of special circuit equipment is segregated among telegraph grade private line services and other private line services based on an analysis of the use of the equipment and in accordance with § 36.126(b)(4). The special circuit equipment cost assigned to telegraph grade and other private line services is directly assigned to the appropriate operations. 5. Amend § 36.142 by revising paragraph
(a)to read as follows: § 36.142 Categories and apportionment procedures.
(a)*Other Information Origination/Termination Equipment—Category 1.* This category includes the cost of other information origination/termination equipment not assigned to Category 2. The costs of other information origination/termination equipment are allocated pursuant to the factor that is used to allocate subcategory 1.3 Exchange Line C&WF. 6. Amend § 36.152 by revising paragraphs (a)(1) and (a)(2) to read as follows: § 36.152 Categories of Cable and Wire Facilities (C&WF).
(a)* * *
(1)Exchange Line C&WF *Excluding Wideband* —Category 1—This category includes C&W facilities between local central offices and subscriber premises used for message telephone, private line, local channels, and for circuits between control terminals and radio stations providing very high frequency maritime service or urban or highway mobile service.
(2)*Wideband and* Exchange Trunk C&WF—Category 2—This category includes all wideband, including Exchange Line Wideband and C&WF between local central offices and Wideband facilities. It also includes C&WF between central offices or other switching points used by any common carrier for interlocal trunks wholly within an exchange or metropolitan service area, interlocal trunks with one or both terminals outside a metropolitan service area carrying some exchange traffic, toll connecting trunks, tandem trunks principally carrying exchange traffic, the exchange trunk portion of WATS access lines, the exchange trunk portion of private line local channels, and the exchange trunk portion of circuits between control terminals and radio stations providing very high frequency maritime service or urban or highway mobile service. 7. Amend § 36.154 by revising paragraph
(c)and by removing and reserving paragraphs (d),
(e)and
(f)to read as follows: § 36.154 Exchange Line Cable and Wire Facilities (C&WF)—Category 1—apportionment procedures.
(c)Effective January 1, 1986, 25 percent of the costs assigned to subcategory 1.3 shall be allocated to the interstate jurisdiction. 8. Amend § 36.156 by revising paragraph
(b)to read as follows: § 36.156 Interexchange Cable and Wire Facilities (C&WF)—Category 3—apportionment procedures.
(b)The cost of C&WF applicable to this category shall be directly assigned where feasible. If direct assignment is not feasible, cost shall be apportioned between the state and interstate jurisdiction on the basis of conversation-minute kilometers as applied to toll message circuits, etc. 9. Amend § 36.212 by revising paragraph
(c)to read as follows: § 36.212 Basic local services revenue—Account 5000.
(c)Wideband Message Service revenues from monthly and miscellaneous charges, service connections, move and change charges, are apportioned between state and interstate operations on the basis of the relative number of minutes-of-use in the study area. Effective July 1, 2001, through June 30, 2006, all study areas shall apportion Wideband Message Service revenues among the jurisdictions using the relative number of minutes of use for the twelve-month period ending December 31, 2000. 10. Amend § 36.214 by revising paragraph
(a)to read as follows: § 36.214 Long distance message revenue—Account 5100.
(a)Wideband message service revenues from monthly and miscellaneous charges, service connections, move and change charges, are apportioned between state and interstate operations on the basis of the relative number of minutes-of-use in the study area. Effective July 1, 2001 through June 30, 2006, all study areas shall apportion Wideband Message Service revenues among the jurisdictions using the relative number of minutes of use for the twelve-month period ending December 31, 2000. § 36.375 [Amended]. 11. Amend § 36.375 by removing paragraph (b)(2) and redesignating paragraphs (b)(3) through (b)(6) as (b)(2) through (b)(5). 12. Amend § 36.377 by removing and reserving paragraphs (a)(1)(viii), (a)(2)(vi), (a)(3)(v), and (a)(7) and by revising paragraphs (a)(1) introductory text, (a)(2) introductory text, (a)(2)(vii), (a)(3) introductory text , (a)(3)(vii), (a)(5)(i), (a)(5)(v), and (a)(5)(vi) to read as follows: § 36.377 Category 1—Local business office expense.
(a)* * *
(1)End-user service order processing includes expenses related to the receipt and processing of end users' orders for service and inquiries concerning service. This subcategory does not include any service order processing expenses for services provided to the interexchange carriers. End user service order processing expenses are first segregated into the following subcategories based on the relative number of actual contacts which are weighted, if appropriate, to reflect differences in the average work time per contact: Local service order processing; presubscription; directory advertising; State private line and special access; interstate private line and special access; other State message toll including WATS; other interstate message toll including WATS.
(2)End user payment and collection includes expenses incurred in relation to the payment and collection of amounts billed to end users. It also includes commissions paid to payment agencies (which receive payment on customer accounts) and collection agencies. This category does not include any payment or collection expenses for services provided to interexchange carriers. End user payment and collection expenses are first segregated into the following subcategories based on relative total state and interstate billed revenues (excluding revenues billed to interexchange carriers and/or revenues deposited in coin boxes) for services for which end user payment and collection is provided: State private line and special access; interstate private line and special access; State message toll including WATS; interstate message toll including WATS, and interstate subscriber line charge; local, including directory advertising.
(vii)Effective July 1, 2001, through June 30, 2006, study areas subject to price cap regulation, pursuant to § 61.41 of this chapter, shall assign the balance of Account 6620—Services to the subcategories, as specified in §§ 36.377(a)(2)(i) through 36.377(a)(2)(vi), based on the relative percentage assignment of the balance of Account 6620 to these categories/subcategories during the twelve month period ending December 31, 2000. All other subcategories of End User payment and collection expense, as specified in §§ 36.377(a)(2)(i) through 36.377(a)(2)(v), shall be directly assigned.
(3)End user billing inquiry includes expenses related to handling end users' inquiries concerning their bills. This category does not include expenses related to the inquiries of interexchange carriers concerning their bills. End user billing inquiry costs are first segregated into the following subcategories based on the relative number of actual contracts, weighted if appropriate, to reflect differences in the average work time per contact: State private line and special access; interstate private line and special access; State message toll including WATS, interstate message toll including WATS, interstate subscriber line charge; and other.
(vii)Effective July 1, 2001 through June 30, 2006 study areas subject to price cap regulation, pursuant to § 61.41 of this chapter, shall assign the balance of Account 6620—Services to the subcategories, as specified in §§ 36.377(a)(3)(i) through 36.377(a)(3)(vi), based on the relative percentage assignment of the balance of Account 6620 to these subcategories during the twelve month period ending December 31, 2000. All other subcategories of End user billing inquiry expense, as specified in §§ 36.377(a)(3)(i) through 36.377(a)(3)(vi), shall be directly assigned.
(5)* * *
(i)State special access and private line payment and collection expense is directly assigned to the State jurisdiction.
(v)State billing and collection payment and collection expense is directly assigned to the State jurisdiction.
(vi)Interstate billing and collection payment and collection expense is directly assigned to the interstate jurisdiction. 13. Amend § 36.631 by removing and reserving paragraphs
(a)and
(b)and by revising paragraph
(d)introductory text to read as follows: § 36.631 Expense adjustment.
(d)Beginning January 1, 1998, for study areas reporting more than 200,000 working loops pursuant to § 36.611(h), the expense adjustment (additional interstate expense allocation) is equal to the sum of paragraphs (d)(1) through
(4)of this section. After January 1, 2000, the expense adjustment (additional interstate expense allocation) for non-rural telephone companies serving study areas reporting more than 200,000 working loops pursuant to § 36.611(h) shall be calculated pursuant to § 54.309 of this chapter or § 54.311 of this chapter (which relies on this part), whichever is applicable. § 36.641 [Removed]. 14. Remove § 36.641. 15. Revise Appendix to Part 36—Glossary to read as follows: Appendix to Part 36—Glossary The descriptions of terms in this glossary are broad and have been prepared to assist in understanding the use of such terms in the separation procedures. Terms which are defined in the text of this part are not included in this glossary. Access Line A communications facility extending from a customer's premises to a serving central office comprising a subscriber line and, if necessary, a trunk facility, e.g., a WATS access line. Book Cost The cost of property as recorded on the books of a company. Cable Fill Factor The ratio of cable conductor or cable pair kilometers in use to total cable conductor or cable pair kilometers available in the plant, e.g., the ratio of revenue producing cable pair kilometers in use to total cable pair kilometers in plant. Category A grouping of items of property or expense to facilitate the apportionment of their costs among the operations and to which, ordinarily, a common measure of use is applicable. Central Office A switching unit, in a telephone system which provides service to the general public, having the necessary equipment and operations arrangements for terminating and interconnecting subscriber lines and trunks or trunks only. There may be more than one central office in a building. Channel An electrical path suitable for the transmission of communications between two or more points, ordinarily between two or more stations or between channel terminations in Telecommunication Company central offices. A channel may be furnished by wire, fiberoptics, radio or a combination thereof. Circuit A fully operative communications path established in the normal circuit layout and currently used for message, WATS access, or private line services. Circuit Kilometers The route kilometers or revenue producing circuits in service, determined by measuring the length in terms of kilometers, of the actual path followed by the transmission medium. Common Channel Network Signaling Channels between switching offices used to transmit signaling information independent of the subscribers' communication paths or transmission channels. Complement (of cable) A group of conductors of the same general type (e.g., quadded, paired) within a single cable sheath. Complex All groups of operator positions, wherever located, associated with the same call distribution and/or stored program control unit. Concentration Equipment Central office equipment whose function is to concentrate traffic from subscriber lines onto a lesser number of circuits between the remotely located concentration equipment and the serving central office concentration equipment. This concentration equipment is connected to the serving central office line equipment. Connection—Minute The product of
(a)the number of messages and,
(b)the average minutes of connection per message. Conversation—Minute The product of
(a)the number of messages and,
(b)the average minutes of conversation per message. Conversation—Minute—Kilometers The product of
(a)the number of messages,
(b)the average minutes of conversation per message and
(c)the average route kilometers of circuits involved. Cost The cost of property owned by the Telephone Company whose property is to be apportioned among the operations. This term applies either to property costs recorded on the books of the company or property costs determined by other evaluation methods. Current Billing The combined amount of charges billed, excluding arrears. Customer Dialed Charge Traffic Traffic which is both
(a)handled to completion through pulses generated by the customer and
(b)for which either a message unit change, bulk charge or message toll charge is except for that traffic recorded by means of message registers. Customer Premises Equipment Items of telecommunications terminal equipment in Accounts 2310 referred to as CPE in § 64.702 of the Federal Communication Commission's Rules adopted in the *Second Computer Inquiry* such as telephone instruments, data sets, dialers and other supplemental equipment, and PBX's which are provided by common carriers and located on customer premises and inventory included in these accounts to be used for such purposes. Excluded from this classification are similar items of equipment located on telephone company premises and used by the company in the normal course of business as well as over voltage protection equipment, customer premises wiring, coin operated public or pay telephones, multiplexing equipment to deliver multiple channels to the customer, mobile radio equipment and transmit earth stations. Customer Premises Wire The segment of wiring from the customer's side of the protector to the customer premises equipment. DSA Board A local dial office switchboard at which are handled assistance calls, intercepted calls and calls from miscellaneous lines and trunks. It may also be employed for handling certain toll calls. DSB Board A switchboard of a dial system for completing incoming calls received from manual offices. Data Processing Equipment Office equipment such as that using punched cards, punched tape, magnetic or other comparable storage media as an operating vehicle for recording and processing information. Includes machines for transcribing raw data into punched cards, etc., but does not include such items as key-operated, manually or electrically driven adding, calculating, bookkeeping or billing machines, typewriters or similar equipment. Dial Switching Equipment Switching equipment actuated by electrical impulses generated by a dial or key pulsing arrangement. Equal Access Costs Include only initial incremental presubscription costs and initial incremental expenditures for hardware and software related directly to the provision of equal access which would not be required to upgrade the switching capabilities of the office involved absent the provisions of equal access. Equivalent Gauge A standard cross section of cable conductors for use in equating the metallic content of cable conductors of all gauge to a common base. Equivalent Kilometers of 104 Wire The basic units employed in the allocation of pole lines costs for determining the relative use made of poles by aerial cables and by aerial wire conductors of various sizes. This unit reflects the relative loads of such cable and wire carried on poles. Equivalent Pair Kilometers The product of sheath Kilometers and the number of equivalent gauge pairs of conductors in a cable. Equivalent Sheath Kilometers The product of
(a)the length of a section of cable in kilometers (sheath kilometers) and
(b)the ratio of the metallic content applicable to a particular group of conductors in the cable (e.g., conductors assigned to a category) to the metallic content of all conductors in the cable. Exchange Transmission Plant This is a combination of
(a)exchange cable and wire facilities
(b)exchange central office circuit equipment, including associated land and buildings and
(c)information origination/termination equipment which forms a complete channel. Holding Time The time in which an item of telephone plant is in actual use either by a customer or an operator. For example, on a completed telephone call, holding time includes conversation time as well as other time in use. At local dial offices any measured minutes which result from other than customer attempts to place calls (as evidenced by the dialing of at least one digit) are not treated as holding time. Host Central Office An electronic analog or digital base switching unit containing the central call processing functions which service the host office and its remote locations. Information Origination/Termination Equipment Equipment used to input into or receive output from the telecommunications network. Interexchange Channel A circuit which is included in the interexchange transmission equipment. Interexchange Transmission Equipment The combination of
(a)interexchange cable and wire facilities,
(b)interexchange circuit equipment and,
(c)associated land and buildings. Interlocal Trunk A circuit between two local central office units, either manual or dial. Interlocal trunks may be used for either exchange or toll traffic or both. Intertoll Circuits Circuits between toll centers and circuits between a toll center and a tandem system in a different toll center area. Local Channel The portion of a private line circuit which is included in the exchange transmission plant. However, common usage of this term usually excludes information origination/termination equipment. Local Office A central office serving primarily as a place of termination for subscriber lines and for providing telephone service to the subscribers on these lines. Loop A pair of wires, or its equivalent, between a customer's station and the central office from which the station is served. Message A completed call, i.e., a communication in which a conversation or exchange of information took place between the calling and called parties. Message Service or Message Toll Service Switched service furnished to the general public (as distinguished from private line service). Except as otherwise provided, this includes exchange switched services and all switched services provided by interexchange carriers and completed by a local telephone company's access services, e.g., MTS, WATS, Execunet, open-end FX and CCSA/ONALs. Message Units Unit of measurement used for charging for measured message telephone exchange traffic within a specified area. Metropolitan Service Area The area around and including a relatively large city and in which substantially all of the message telephone traffic between the city and the suburban points within the area is classified as exchange in one or both directions. Minutes-of-Use A unit of measurement expressed as either holding time or conversation time. Minutes-of-Use-Kilometers The product of
(a)the number of minutes-of-use and
(b)the average route kilometers of circuits involved. Multi-Center Exchange An exchange area in which are located two or more local central office buildings or wire centers. Operations The term denoting the general classifications of services rendered to the public for which separate tariffs are filed, namely exchange, state toll and interstate toll. Operator Trunks A general term, ordinarily applied to trunks between manually operated switchboard positions and local dial central offices in the same wire center. Private Line Service A service for communications between specified locations for a continuous period or for regularly recurring periods at stated hours. Remote Access Line An access line (e.g., for WATS service) between a subscriber's premises in one toll rate center and a serving central office located in a different toll rate center. Remote Line Location A remotely located subscriber line access unit which is normally dependent upon the central processor of the host office for call processing functions. Remote Trunk Arrangement
(RTA)Arrangement that permits the extension of TSPS functions to remote locations. Reservation That amount or quantity of property kept or set apart for a specific use. Reserved Kept or set apart for a specific use. Separations The process by which telecommunication property costs, revenues, expenses, taxes and reserves are apportioned among the operations. Service Observing Unit A unit of work measurement which is used as the common denominator to express the relative time required for handling the various work functions at service observing boards. Sheath Kilometers The actual length of cable in route kilometers. Special Services All services other than message telephones, e.g., private line services. Station-to-Station Basis The term applied to the basis of toll rate making which contemplates that the message toll service charge (telephone) covers the use made of all facilities between the originating station and the terminating station, including the stations, and the services rendered in connection therewith. Study Area Study area boundaries shall be frozen as they are on November 15, 1984. Subscriber Line or Exchange Line A communication channel between a telephone station or PBX station and the central office which serves it. Subtributary Office A class of tributary office which does not have direct access to its toll center, but which is connected to its toll center office by means of circuits which are switched through to the toll center at another tributary office. Tandem Area The general areas served by the local offices having direct trunks to or from the tandem office. This area may consist of one or more communities or may include only a portion of a relatively large city. Tandem Circuit or Trunk A general classification of circuits or trunks between a tandem central office unit and any other central office or switchboard. Tandem Connection A call switched at a tandem office. Tandem Office A central office unit used primarily as an intermediate switching point for traffic between local central offices within the tandem area. Where qualified by a modifying expression, or other explanation, this term may be applied to an office employed for both the interconnection of local central offices within the tandem area and for the interconnection of these local offices with other central offices, e.g., long haul tandem office. Toll Center An office (or group of offices) within a city which generally handles the originating and incoming toll traffic for that city to or from other toll center areas and which handles through switched traffic. The toll center normally handles the inward toll traffic for its tributary exchanges and, in general, either handles the outward traffic originating at its tributaries or serves as the outlet to interexchange circuits for outward traffic ticketed and timed at its tributaries. Toll centers are listed as such in the Toll Rate and Route Guide. Toll Center Area The areas served by a toll center, including the toll center city and the communities served by tributaries of the toll center. Toll Center Toll Office A toll office (as contrasted to a local office) in a toll center city. Toll Circuit A general term applied to interexchange trunks used primarily for toll traffic. Toll Connecting Trunk A general classification of trunks carrying toll traffic and ordinarily extending between a local office and a toll office, except trunks classified as tributary circuits. Examples of toll connecting trunks include toll switching trunks, recording trunks and recording-completing trunks. Toll Office A central office used primarily for supervising and switching toll traffic. Traffic Over First Routes A term applied to the routing of traffic and denoting routing via principal route for traffic between any two points as distinguished from alternate routes for such traffic. Operator System A stored program electronic system associated with one or more toll switching systems which provides centralized traffic service position functions for several local offices at one location. Tributary Circuit A circuit between a tributary office and a toll switchboard or intertoll dialing equipment in a toll center city. Tributary Office A local office which is located outside the exchange in which a toll center is located, which has a different rate center from its toll center and which usually tickets and times only a part of its originating toll traffic, but which may ticket or time all or none, of such traffic. The toll center handles all outward traffic not ticketed and timed at the tributary and normally switches all inward toll traffic from outside the tributary's toll center to the tributary. Tributary offices are indicated as such in the Toll Rate and Route Guide. Trunks Circuit between switchboards or other switching equipment, as distinguished from circuits which extend between central office switching equipment and information origination/termination equipment. TSPS Complex All groups of operator positions, wherever located, associated with the same TSPS stored program control units. Weighted Standard Work Second A measurement of traffic operating work which is used to express the relative time required to handle the various kinds of calls or work functions, and which is weighted to reflect appropriate degrees of waiting to serve time. Wide Area Telephone Service WATS A toll service offering for customer dial type telecommunications between a given customer station and stations within specified geographic rate areas employing a single access line between the customer location and the serving central office. Each access line may be arranged for either outward (OUT-WATS) or inward (IN-WATS) service or both. Wideband Channel A communication channel of a bandwidth equivalent to twelve or more voice grade channels. Working Loop A revenue producing pair of wires, or its equivalent, between a customer's station and the central office from which the station is served. PART 51—INTERCONNECTION 16. The authority citation for part 51 continues to read as follows: Authority: Sections 1-5, 7, 201-05, 207-09, 218, 225-27, 251-54, 256, 271, 303(r), 332, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157, 201-05, 207-09, 218, 225-27, 251-54, 256, 271, 303(r), 332, 47 U.S.C. 157 *note* , unless otherwise noted. § 51.211 [Removed]. 17. Remove § 51.211. § 51.213 [Amended]. 18. Amend § 51.213 by removing paragraphs
(c)and (d). § 51.329 [Amended]. 19. Amend § 51.329 by removing paragraph (c)(3). § 51.515 [Amended]. 20. Amend § 51.515 by removing and reserving paragraphs
(a)and (b). PART 52—NUMBERING 21. The authority citation for part 52 continues to read as follows: Authority: Sec. 1, 2, 4, 5, 48 Stat. 1066, as amended; 47 U.S.C. 151, 152, 154, 155 unless otherwise noted. Interpret or apply secs. 3, 4, 201-05, 207-09, 218, 225-7, 251-2, 271 and 332, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 153, 154, 201-05, 207-09, 218, 225-7, 251-2, 271 and 332 unless otherwise noted. 22. Amend § 52.5 by revising paragraph
(c)to read as follows: § 52.5 Definitions.
(c)*North American Numbering Plan* (NANP). The “North American Numbering Plan” is the basic numbering scheme for the telecommunications networks located in American Samoa, Anguilla, Antigua, Bahamas, Barbados, Bermuda, British Virgin Islands, Canada, Cayman Islands, Dominica, Dominican Republic, Grenada, Jamaica, Montserrat, St. Kitts & Nevis, St. Lucia, St. Vincent, Turks & Caicos Islands, Trinidad & Tobago, and the United States (including Puerto Rico, the U.S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands). § 52.11 [Amended]. 23. Amend § 52.11 by removing and reserving paragraph (d). 24. Amend § 52.13 by revising paragraphs
(b)introductory text, (b)(3) and (c)(4) to read as follows: § 52.13 North American Numbering Plan Administrator.
(b)The NANPA shall administer the numbering resources identified in paragraph
(d)of this section. It shall assign and administer NANP resources in an efficient, effective, fair, unbiased, and non-discriminatory manner consistent with industry-developed guidelines and Commission regulations. It shall support the Commission's efforts to accommodate current and future numbering needs. It shall perform additional functions, including but not limited to:
(3)Complying with guidelines of the North American Industry Numbering Committee
(INC)or its successor, related industry documentation, Commission regulations and orders, and the guidelines of other appropriate policy-making authorities;
(c)* * *
(4)Manage projects such as Numbering Plan Area
(NPA)relief (area code relief) planning, Numbering Resource Utilization and Forecast
(NRUF)data collection, and NPA and NANP exhaust projection; 25. Amend § 52.15 by removing and reserving paragraphs
(c)and
(e)and by revising paragraphs (b)(3) and
(d)to read as follows: § 52.15 Central office code administration.
(b)* * *
(3)Conducting the Numbering Resource Utilization and Forecast
(NRUF)data collection;
(d)*Central Office
(CO)Code Administration functional requirements.* The NANPA shall manage the United States CO code numbering resource, including CO code request processing, NPA code relief and jeopardy planning, and industry notification functions. The NANPA shall perform its CO Code administration functions in accordance with the published industry numbering resource administration guidelines and Commission orders and regulations of 47 CFR chapter I. § 52.27 [Removed]. 26. Remove § 52.27. § 52.29 [Removed]. 27. Remove § 52.29. § 52.31 [Amended]. 28. Amend § 52.31 by removing and reserving paragraph (c). PART 53—SPECIAL PROVISIONS CONCERNING BELL OPERATING COMPANIES 29. The authority citation for part 53 continues to read as follows: Authority: Sections 1-5, 7, 201-05, 218, 251, 253, 271-75, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157, 201-05, 218, 251, 253, 271-75, unless otherwise noted. § 53.101 [Removed]. 30. Remove § 53.101. PART 54—UNIVERSAL SERVICE 31. The authority citation for part 54 continues to read as follows: Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless otherwise noted. § 54.201 [Amended]. 32. Amend § 54.201 by removing and reserving paragraph (a)(2). § 54.313 [Amended]. 33. Amend § 54.313 by removing and reserving paragraphs (d)(1) and (d)(2). 34. Amend § 54.507 by revising paragraph
(b)to read as follows: § 54.507 Cap.
(b)A funding year for purposes of the schools and libraries cap shall be the period July 1 through June 30. 35. Amend § 54.604 by revising paragraph (a)(1), removing and reserving (a)(2), and removing paragraph
(d)to read as follows: § 54.604 Existing contracts.
(a)* * *
(1)A contract signed on or before July 10, 1997 is exempt from the competitive bid requirement for the life of the contract. 36. Amend § 54.623 by removing and reserving paragraphs (c)(2) and (c)(3) and by revising paragraph (c)(4) to read as follows: § 54.623 Cap.
(c)* * *
(4)The Administrator shall implement a filing period that treats all rural health care providers filing within the period as if their applications were simultaneously received. PART 63—EXTENSION OF LINES, NEW LINES, AND DISCONTINUANCE, REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS 37. The authority citation for part 63 continues to read as follows: Authority: Sections 1, 4(i), 4(j), 10, 11, 201-205, 214, 218, 403 and 651 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 160, 201-205, 214, 218, 403, and 571, unless otherwise noted. 38. Revise § 63.61 to read as follows: § 63.61 Applicability. Any carrier subject to the provisions of section 214 of the Communications Act of 1934, as amended, proposing to discontinue, reduce or impair interstate or foreign telephone or telegraph service to a community, or a part of a community, shall request authority therefor by formal application or informal request as specified in the pertinent sections of this part:
(a)*Provided, however,* that where service is expanded on an experimental basis for a temporary period of not more than 6 months, no application shall be required to reduce service to its status prior to such expansion but a written notice shall be filed with the Commission within 10 days of the reduction showing:
(1)The date on which, places at which, and extent to which service was expanded; and,
(2)The date on which, places at which, and extent to which such expansion of service was discontinued.
(b)And provided further that a licensee of a radio station who has filed an application for authority to discontinue service provided by such station shall during the period that such application is pending before the Commission, continue to file appropriate applications as may be necessary for extension or renewal of station license in order to provide legal authorization for such station to continue in operation pending final action on the application for discontinuance of service. Procedures for discontinuance, reduction or impairment of service by dominant and non-dominant, domestic carriers are in § 63.71. Procedures for discontinuance, reduction or impairment of international services are in § 63.19. 39. Amend § 63.71 by revising paragraphs (a)(5)(i), (a)(5)(ii) and add new paragraph
(d)to read as follows: § 63.71 Procedures for discontinuance, reduction or impairment of service for domestic carriers.
(a)* * *
(5)* * *
(i)If the carrier is non-dominant with respect to the service being discontinued, reduced or impaired, the notice shall state: The FCC will normally authorize this proposed discontinuance of service (or reduction or impairment) unless it is shown that customers would be unable to receive service or a reasonable substitute from another carrier or that the public convenience and necessity is otherwise adversely affected. If you wish to object, you should file your comments as soon as possible, but no later than 15 days after the Commission releases public notice of the proposed discontinuance. Address them to the Federal Communications Commission, Wireline Competition Bureau, Competition Policy Division, Washington, DC 20054, and include in your comments a reference to the § 63.71 Application of (carrier's name). Comments should include specific information about the impact of this proposed discontinuance (or reduction or impairment) upon you or your company, including any inability to acquire reasonable substitute service.
(ii)If the carrier is dominant with respect to the service being discontinued, reduced or impaired, the notice shall state: The FCC will normally authorize this proposed discontinuance of service (or reduction or impairment) unless it is shown that customers would be unable to receive service or a reasonable substitute from another carrier or that the public convenience and necessity is otherwise adversely affected. If you wish to object, you should file your comments as soon as possible, but no later than 30 days after the Commission releases public notice of the proposed discontinuance. Address them to the Federal Communications Commission, Wireline Competition Bureau, Competition Policy Division, Washington, DC 20054, and include in your comments a reference to the § 63.71 Application of (carrier's name). Comments should include specific information about the impact of this proposed discontinuance (or reduction or impairment) upon you or your company, including any inability to acquire reasonable substitute service.
(d)Procedures for discontinuance, reduction or impairment of international services are in § 63.19. PART 64—MISCELLANEOUS RULES RELATING TO COMMON CARRIERS 40. The authority citation for part 64 continues to read as follows: Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B),(c), Pub. L. 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 218, 222, 225, 226, 228, and 254
(k)unless otherwise noted. 41. Amend § 64.1330 by revising paragraph
(c)to read as follows: § 64.1330 State review of payphone entry and exit regulations and public interest payphones.
(c)Each state must review its rules and policies to determine whether it has provided for public interest payphones consistent with applicable Commission guidelines, evaluate whether it needs to take measures to ensure that such payphones will continue to exist in light of the Commission's implementation of Section 276 of the Communications Act, and administer and fund such programs so that such payphones are supported fairly and equitably. 42. Amend § 64.1903 by revising paragraph
(a)introductory text and by removing paragraph
(c)to read as follows: § 64.1903 Obligations of all incumbent independent local exchange carriers.
(a)An incumbent independent LEC providing in-region, interstate, interexchange services or in-region international interexchange services shall provide such services through an affiliate that satisfies the following requirements: PART 69—ACCESS CHARGES 43. The authority citation for part 69 continues to read as follows: Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 403. §§ 69.116 and 69.117 [Removed]. 44. Remove §§ 69.116 and 69.117. §§ 69.126 and 69.127 [Removed]. 45. Remove §§ 69.126 and 69.127. § 69.612 [Removed]. 46. Remove § 69.612. [FR Doc. E6-18842 Filed 11-8-06; 8:45 am] BILLING CODE 6712-01-P DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 48 CFR Parts 225 and 252 RIN 0750-AF29 Defense Federal Acquisition Regulation Supplement; Trade Agreements Thresholds and Morocco Free Trade Agreement (DFARS Case 2005-D017) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. SUMMARY: DoD has adopted as final, with changes, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to update policy relating to trade agreements. The rule incorporates increased dollar thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, implements a new Free Trade Agreement with Morocco, and amends the list of end products subject to trade agreements. DATES: *Effective Date:* November 9, 2006. FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone
(703)602-0328; facsimile
(703)602-0350. Please cite DFARS Case 2005-D017. SUPPLEMENTARY INFORMATION: A. Background DoD published an interim rule at 71 FR 9269 on February 23, 2006, to reflect increased dollar thresholds for application of the trade agreements, as determined by the United States Trade Representative; to implement a new Free Trade Agreement with Morocco; and to update the list of end products subject to trade agreements. DoD received no comments on the interim rule and has adopted the interim rule as a final rule, with an additional change at 252.225-7021 to reflect that the definition of “designated country end products” includes Caribbean Basin and Free Trade Agreement country end products. This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. B. Regulatory Flexibility Act DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, *et seq.* , because the dollar threshold changes are designed to keep pace with inflation and thus maintain the status quo. Although the rule opens up DoD procurement to the products of Morocco, DoD does not believe there will be a significant economic impact on U.S. small businesses. DoD applies the trade agreements to only those non-defense items listed at DFARS 225.401-70, and procurements that are set aside for small businesses are exempt from application of the trade agreements. C. Paperwork Reduction Act This rule affects the certification and information collection requirements in the provisions at DFARS 252.225-7020 and 252.225-7035, currently approved under Office of Management and Budget Control Number 0704-0229 for use through May 31, 2007. However, there is no impact on the estimated burden hours. The dollar threshold changes are in line with inflation and maintain the status quo. Reporting of products from Morocco as Free Trade Agreement end products rather than other foreign end products has no impact on paperwork burden. List of Subjects in 48 CFR Parts 225 and 252 Government procurement. Michele P. Peterson, Editor, Defense Acquisition Regulations System. Accordingly, the interim rule amending 48 CFR parts 225 and 252, which was published at 71 FR 9269 on February 23, 2006, is adopted as a final rule with the following changes: 1. The authority citation for 48 CFR parts 225 and 252 continues to read as follows: Authority: 41 U.S.C. 421 and 48 CFR Chapter 1. PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 252.212-7001 [Amended] 2. Section 252.212-7001 is amended as follows: a. By revising the clause date to read “(NOV 2006)”; and b. In paragraph (b)(9), by removing “(OCT 2006)” and adding in its place “(NOV 2006)”. 3. Section 252.225-7021 is amended by revising the clause date and paragraph (c)(2)(i) to read as follows: 252.225-7021 Trade Agreements. Trade Agreements (Nov 2006)
(c)* * * (2)(i) Offers of U.S.-made, qualifying country, or designated country end products from responsive, responsible offerors are either not received or are insufficient to fill the Government's requirements; or [FR Doc. E6-19032 Filed 11-8-06; 8:45 am] BILLING CODE 5001-08-P 71 217 Thursday, November 9, 2006 Proposed Rules DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Parts 210 and 220 RIN 0584-AD58 Fluid Milk Substitutions in the School Nutrition Programs AGENCY: Food and Nutrition Service, USDA. ACTION: Proposed rule. SUMMARY: This proposed rule reflects amendments made by section 102 of the Child Nutrition and WIC Reauthorization Act of 2004 to the Richard B. Russell National School Lunch Act regarding substitutes for fluid milk in the National School Lunch Program. This rule would implement a legislative provision on milk substitutes that follows current regulations on menu exceptions for students with disabilities and would add new requirements for substitutions for fluid milk for children with medical or other special dietary needs. Specifically, this proposed rule would establish nutritional standards for nondairy beverage alternatives to fluid milk, as well as requirements for substitutions for fluid milk for non-disabled students with medical or special dietary needs. It would allow the parent or legal guardian of a child with medical or special dietary needs to request a fluid milk substitute. In addition, it would allow schools to select acceptable fluid milk substitutes that meet the nutritional standards established in this proposed rule, and would continue to make school food authorities responsible for substitution expenses that exceed the Federal reimbursement. This rule, as proposed, would ensure consistency among milk substitutes offered in the school lunch and breakfast programs, and would make certain that students who consume nondairy beverage alternates receive important nutrients found in fluid milk. DATES: To be assured of consideration, written comments must be postmarked on or before January 8, 2007. ADDRESSES: The Food and Nutrition Service invites interested persons to submit comments on this interim rule. Comments may be submitted by any of the following methods: • *E-Mail:* Send comments to *CNDPROPOSAL@FNS.USDA.GOV* . The subject line must include the words “Fluid Milk Substitutions”. • *Fax:* Submit comments by facsimile transmission to:
(703)305-2879, attention Robert Eadie. • *Mail:* Comments should be addressed to Mr. Robert Eadie, Chief, Policy and Program Development Branch, Child Nutrition Division, Food and Nutrition Service, Department of Agriculture, 3101 Park Center Drive, Room 634, Alexandria, Virginia 22302-1594. All written submissions will be available for public inspection at this location Monday through Friday, 8:30 a.m.-5 p.m. • *Hand Delivery or Courier:* Deliver comments to 3101 Park Center Drive, Room 634, Alexandria, Virginia 22302-1594, during normal business hours of 8:30 a.m.-5 p.m. • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov* . Follow the online instructions for submitting comments. FOR FURTHER INFORMATION CONTACT: William Wagoner or Marisol Benesch, Policy and Program Development Branch, Child Nutrition Division, Food and Nutrition Service at
(703)305-2590. SUPPLEMENTARY INFORMATION: I. Background National School Lunch Program
(NSLP)regulations under 7 CFR 210.10(g)(1) require schools to make food substitutions for children whose disabilities restrict their diet, and give schools discretion to make substitutions for students with medical or other special dietary needs. The need for substitutions must be supported by a statement signed by a physician in the case of a student with a disability, or by a recognized medical authority in the case of a student who is not disabled. The substitution rules in the NSLP also apply to the School Breakfast Program (SBP), pursuant to regulations at 7 CFR 220.8(g). Section 102 of the Child Nutrition and WIC Reauthorization Act of 2004 (Pub. L. 108-265; June 30, 2004) amended section 9(a)(2) of the Richard B. Russell National School Lunch Act (NSLA), 42 U.S.C. 1758(a)(2), to include the above regulatory provisions and added the following requirements for substitutions for milk: • Allows schools to make substitutions for students who have medical or dietary needs, other than a disability, and accept a statement from a parent or guardian in lieu of the statement from a recognized medical authority; • Adds the requirement, except in the case of a student with a disability, that nondairy beverages offered for substitution must be “nutritionally equivalent to fluid milk” and meet the nutritional standards set by the Secretary of Agriculture; • Grants schools discretion to select acceptable substitutes that meet the nutritional standards established by the Secretary; • Requires schools to inform the State agency if they choose to offer substitutes for fluid milk other than for students with a disability; and • Requires school food authorities
(SFAs)to pay for substitution expenses that exceed Federal reimbursements. The Food and Nutrition Service
(FNS)has issued separate guidance for accommodating children with special dietary needs in the school meal programs. The publication “Accommodating Children with Special Dietary Needs in the School Nutrition Programs” is available at the FNS Web site ( *http://www.fns.usda.gov/cnd/Guidance/special_dietary_needs.pdf* ). This proposed rule also makes a non-substantive change to the heading of 7 CFR 210.10 and 7 CFR 220.8 by converting each from a question to a statement. This change is intended to conform the headings to the same style as all other section headings in 7 CFR Parts 210 and 220. These non-substantive changes will not change the basic meaning of the headings, nor affect the meaning of any of the subsections. II. Fluid Milk Requirement Schools participating in the school meals programs are required to offer fluid milk as part of a reimbursable meal pursuant to section 9(a)(2) of the NSLA, 42 U.S.C. 1758(a)(2) and 7 CFR 210.10(m)(1)(ii) and 7 CFR 220.8(i)(1). This requirement is in place because research shows that milk consumption is especially important to bone health during childhood and adolescence. Section 102 of Public Law 108-265 expands section 9(a)(2) and continues the current milk requirement, and gives schools the option to offer an acceptable nondairy substitute to non-disabled children who cannot drink fluid milk for medical or other special dietary reasons. III. Substitutions for Disability Reasons Current regulations governing the NSLP and SBP require schools to make substitutions for children who cannot consume the regular lunch, afterschool snack or breakfast due to their disability, when that need is certified by a physician and the substitution needed for any food item (including fluid milk) is specified with a diet order or diet prescription. The regulations at 7 CFR 210.10(g)(1) already contain these requirements. This proposed rule retains the requirements as currently stated, but reorganizes them for clarity to distinguish between the requirements for substitutions for disabled and non-disabled students. IV. Substitutions for Non-Disability Reasons Over the years, Federal, State, and local program officials have received requests from parents and caregivers for alternatives to fluid milk for children who have milk intolerances or allergies that restrict their diet but do not meet the definition of disability. Under the current regulations, schools may offer non-disabled students substitutes for fluid milk when supported by a statement from a recognized medical authority. This proposed regulation would require that milk substitutions for non-disabled students meet the nutritional standards established in this rule and would allow schools the discretion to offer acceptable substitutes. This proposed rule would also permit schools to accept a written request from a parent or legal guardian in lieu of a statement from a medical authority. These and other statutory provisions are discussed in more detail in the following sections. Nutritional Standards for Milk Substitutes The NSLA now allows schools the option to offer a nondairy beverage that is nutritionally equivalent to fluid milk for non-disabled children with medical or special dietary needs. To ensure that children receive adequate substitutes, section 9(a)(2)(B) of the NSLA, 42 U.S.C. 1758(a)(2)(B), requires the Secretary to establish nutritional standards for nondairy beverages to assure that they are nutritionally equivalent to milk. That section also requires that milk substitutes be fortified with calcium, protein, vitamin A, and vitamin D to levels found in fluid milk. The NSLA also authorizes the Secretary to specify other nutrients in addition to the ones required by the statute. Existing research indicates that fluid milk is a major source of a number of other nutrients. According to the Food and Drug Administration (FDA), an “excellent source” (as found in 21 CFR 101.54(b)(1)) is a food item that contributes at least 20 percent of the daily need of a specified nutrient per serving. One serving (1 cup) of milk fulfills the FDA's nutrient content claim of “excellent source” for calcium, riboflavin and phosphorus. In addition, data from the Continuing Survey of Food Intakes by Individuals ( *see* table below) shows that milk is the primary food source for children for the following vitamins and minerals: Vitamin A, riboflavin, vitamin B-12, calcium, magnesium, phosphorus, and potassium. Given the special role of milk in providing these nutrients to children, the Department is proposing to extend the requirements for nondairy milk substitutes to also include minimum nutrient levels for riboflavin, vitamin B-12, magnesium, phosphorus, potassium. Summary of Milk Contributions to Total Nutrient Intakes Among U.S. Children, 2-18 Years of Age, 1994-96, 1998 Nutrient Rank Percent of total Energy 1 9.0 Carbohydrate 5 6.0 Protein 1 16.4 Total fat 1 10.4 Saturated fat 1 17.8 Polyunsaturated fat 10 2.2 Monosaturated fat 4 7.8 Cholesterol 3 13.5 Fiber <1 Vitamin C 7 3.5 Vitamin E 11 3.7 Vitamin A
(RE)1 20.2 Carotene 6 2.3 Folate 4 6.4 Thiamin 3 8.1 Riboflavin 1 27.2 Niacin <1 Vitamin B-6 2 8.5 Vitamin B-12 1 31.5 Calcium 1 45.7 Phosphorus 1 27.3 Sodium 4 5.4 Potassium 1 22.4 Iron <1 Zinc 3 12.4 Magnesium 1 18.9 Copper 12 3.1 Selenium 3 8.7 Caffeine <1 Theobromine <1 Derived from: 1994-96, 1998 Continuing Survey of Food Intakes by Individuals. Dietary Source Nutrient Database for USDA Survey Food Codes. In setting minimum nutritional standards for milk substitutes, we examined the nutrient levels found in various types of milk using USDA's *Nutrient Database for Dietary Studies 1.0.* 1 Among the varieties of fluid milk, whole milk typically provides the lowest levels of several important nutrients; therefore, we used whole milk (3.25% milkfat, the lowest fat level allowable for whole milk) as a benchmark for all nutrients except vitamins A and D. The chosen levels of vitamins A and D were based upon FDA's definition of “excellent source” and the milk fortification levels required by the FDA. 1 USDA Food and Nutrient Database for Dietary Studies 1.0. 2004. Beltsville, MD: Agricultural Research Service, Food Surveys Research Group. Based on the above, this rule proposes that allowable fluid milk substitutes provide, at a minimum, the nutrients listed on the following table. The following table also shows the Recommended Daily Intake
(RDI)for each of these nutrients and the percentage of the RDI provided by a cup of whole milk (values are RDI unless specified as Daily Reference Value (DRV)). Nutrient Per cup RDI Percentage Calcium 276 mg 1000 mg 27.6 Protein 8 g 50 g
(DRV)16.0 Vitamin A 500 IU 5000 IU 10.0 Vitamin D 100 IU 400 IU 25.0 Magnesium 24 mg 400 mg 6.00 Phosphorus 222 mg 1000 mg 22.2 Potassium 349 mg 3500 mg
(DRV)10.0 Riboflavin 0.44 mg 1.7 mg 25.9 Vitamin B 12 1.1 mcg 6.0 mcg 18.3 Sources: USDA National Nutrient Database for Standard Reference, Release 17 (2004). FDA Consumer Special Issue: Focus on Food Labeling, “Daily Values Encourage Healthy Diet”, May 1993. Fortification of nondairy milk substitutes used in the school nutrition programs must follow FDA guidelines, particularly those outlined in 21 CFR 101.9. In addition, Appendix O of the publication entitled “Grade ‘A’ Pasteurized Milk Ordinance”, issued by the FDA's Center for Food Safety and Applied Nutrition, provides guidance on upper bounds of vitamin A and vitamin D fortification. In light of the recommendations of the “2005 Dietary Guidelines for Americans” on fats and added sugars, and current trends in childhood overweight, the Department considered establishing maximum levels for nondairy milk substitutes for additional energy-bearing nutrients available on the Nutrition Facts Panel—either total calories (energy) or total fat, saturated fat, trans fat and total sugars—to limit their contribution toward the total calories. We refrained from doing so for the following reasons. First, we examined the levels of energy, total fats, saturated fats, and sugars generally available in regular and chocolate-flavored fluid whole milk. Chocolate-flavored whole milk typically has the highest levels of calories and total sugar among all fluid milk varieties. When we compared the nutrient levels in chocolate-flavored whole milk and in a typical chocolate-flavored soy-based beverage alternative ( *see* following table), we concluded that the commercial marketplace already provides a level of energy, total fat, saturated fat, and total sugars in milk substitutes that is below the levels contained in milks currently allowable in the NSLP and SBP, and further special regulatory restriction for milk substitutes does not seem warranted. Milk type (1 cup) Energy
(kcal)Total fat
(g)Saturated fat
(g)Sugars (total) Milk, chocolate, commercial, whole 208 kcals per cup 8.48 g per cup 5.260 g per cup 23.85 g per cup. Milk, soy, ready-to-drink, not-baby's, chocolate 118 kcals per cup 4.58 g per cup 0.514 g per cup 10.8 g per cup. Source: USDA Food and Nutrient Database for Dietary Studies, 2.0. 2006. Beltsville, MD: Agricultural Research Service, Food Surveys Research Group. Second, FNS believes that it is important to be consistent in our definition of allowable milk substitutes across our Federal nutrition programs. Currently, the Supplemental Program for Women Infants and Children
(WIC)has proposed a definition for allowable soy-based beverages (71 FR 44801) that reflects the minimum nutrient and energy levels proposed by this rule. Establishing maximum nutrition standards for energy or total fat, saturated fat, trans fat and sugar levels for milk substitutes in the school meals program would, therefore, generate inconsistency in our nutrition programs. Third, in regard to sugar levels and total diet quality, the “Report of the Dietary Guidelines Advisory Committee on the Dietary Guidelines for Americans, 2005,” notes that sugars can improve the palatability of foods and beverages that otherwise might not be consumed. Additionally, not all foods that contain added sugars are poor sources of nutrients. The Report also notes that, on average, the quality of children's and adolescents' total diet is positively affected by the consumption of sweetened dairy foods and beverages. The Department recognizes that the “2005 Dietary Guidelines for Americans” recommends choosing foods and beverages with little added sugars or caloric sweeteners, and is interested in encouraging reasonably low levels of added sugars in milk substitutes. However, we do not believe that it is necessary to establish a regulatory maximum level for sugars in milk substitutes when one is not established for fluid milk. Fourth, the Department also considered the potential impact of limiting total and saturated fats in milk substitutes. While fats are a significant contributor of calories, the Department recognizes that they are part of a healthful diet and facilitate the absorption of important nutrients found in fluid milk such as vitamins A and D. Current commercially available milk substitutes do not exceed the fat or saturated fat levels of flavored whole milk, as seen in the table above. For the reasons stated above, the Department decided not to propose maximum standards for calories or total fat, saturated fat, trans fat and sugars for milk substitutes. However, since the intent is to provide products that are reasonable substitutes for fluid milk, the Department will recommend that when made available, schools use the profile of unflavored milk with respect to calories, fats, and sugars as the guide for evaluating fluid nondairy milk substitutes. We further recommend that schools do not offer fluid nondairy milk substitutes that exceed maximum levels for these nutrients based on the nutrient profile of chocolate-flavored whole milk. Guidance and technical assistance from the Department would emphasize the importance of offering nondairy milk substitutes that meet the proposed minimum requirements but do not exceed the levels of calories, total fat, saturated fat, and sugars commonly found in the milks offered locally in school meals. Milk substitutes offered for non-medical reasons will be included in the nutrient analyses required under existing regulations. Selection of Nondairy Beverages by Schools While the NSLA requires the Secretary to identify the nutritional requirements for an equivalent beverage, a school wishing to offer fluid milk substitutes for non-disabled children would be responsible for choosing nondairy beverages that would meet the nutritional standards identified in this proposed rule. This would require that a school review documentation of the nutrients in nondairy beverages to determine if the beverages comply with the regulatory nutritional standards for milk substitutes. This proposed rule would allow a school to offer the nondairy beverage(s) that it has identified and selected as acceptable fluid milk substitute(s) based on the nutritional standards established by the Secretary. To the extent practicable, unless otherwise specified by a physician, the alternate nondairy beverages for disabled students should meet the same nutritional standards that apply to milk substitutes for non-disabled students. Written Statement From Student's Parent or Legal Guardian We intend to allow schools to fulfill the requests for fluid milk substitutes for children with medical and special dietary needs without creating additional paperwork or administrative burdens for parents or schools. Therefore, this proposed rule would allow a student's parent or legal guardian to submit a written request for a nondairy substitute by attaching it to the application form for free and reduced price meals or by submitting the request separately in writing at any time, provided that it identifies the student's medical or other special dietary needs. The request for substitutions would remain in effect until the student's parent or legal guardian revokes such request in writing, or until the school discontinues this option. State Agency Notification Section 9(a)(2)(B)(ii) of the NSLA requires that schools inform the State agency
(SA)if they choose to offer substitutes for fluid milk other than for children with a disability. Recognizing the State/local administrative structure, this rule would require each SFA to report to the State agency on behalf of its schools. According to this proposed rule, the SA would be able to specify how SFAs must notify it of this decision. FNS would expect the SA to have information on file regarding schools that offer this option for review upon request. Documentation for Substitutions Section 9(a)(2)(B)(ii) of the NSLA also requires that a request for milk substitution be in writing and identify the student's medical or special dietary need. This proposed rule would require schools to retain documentation such as the written statement from a medical authority or the student's parent or guardian, and product information certifying the nutritional content of the milk substitute. Expenses Related to Milk Substitutions In accordance with section 9(a)(2)(B)(iii) of the NSLA, schools would cover expenses incurred in providing allowable fluid milk substitutions that are in excess of expenses covered by program reimbursements. Because milk substitutions are granted on a case by case basis and a school selects the acceptable nondairy beverage(s), we anticipate that in most cases the substitution could be accommodated without undue financial hardship. These substitutions would be allowable costs and chargeable to the nonprofit school food service account. V. Procedural Matters Executive Order 12866 This proposed rule has been determined to be significant and was reviewed by the Office Management and Budget in conformance with Executive Order 12866. Regulatory Impact Analysis Need for Action This action is needed to implement the provisions of Public Law 108-265 regarding the substitution of fluid milk in the NSLP and SBP. In accordance with the NSLA, this proposed rule would establish nutritional standards for milk substitutes, set minimum requirements for the substitution of milk for students with medical or special dietary needs, allow schools to identify acceptable substitutes that meet the nutritional standards established by the Secretary, and make school food authorities responsible for substitution expenses that exceed Federal reimbursement. Cost-Benefit Assessment Previous analyses by FNS and the Congressional Budget Office of the provision being implemented in this rule estimated a cost of less than $500,000 annually. Little cost is anticipated because it is expected that few students will request a non-dairy alternative to fluid milk; schools are not required to provide a substitution; and the Federal government will not reimburse any additional cost for non-dairy alternatives. This rule is not expected to significantly increase administrative burdens at the national, state, or local level. The benefits of this rule include nutritional consistency among milk substitutes offered in the school meal programs and reduced barriers for students who cannot consume fluid milk. Regulatory Flexibility Act This proposed rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Nancy Montanez Johner, Under Secretary of Food, Nutrition, and Consumer Services has certified that this proposed rule will not have a significant economic impact on a substantial number of small entities participating in the NSLP and SBP. The requirement to provide substitutes for students with disabilities is not new, and the requirement concerning milk substitutes for non-disability reasons is only triggered if a school chooses to offer milk substitutes for non-disabled students with medical or special dietary needs. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under Section 202 of the UMRA, the Department generally must prepare a written statement, including a cost/benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule. This proposed rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) that impose costs on State, local, or tribal governments or to the private sector of $100 million or more in any one year. This proposed rule is, therefore, not subject to the requirements of sections 202 and 205 of the UMRA. Executive Order 12372 The NSLP is listed in the Catalog of Federal Domestic Assistance under No. 10.555 and the SBP is listed under No. 10.553. For the reasons set forth in the final rule in 7 CFR part 3015, Subpart V and related Notice (48 FR 29115, June 24, 1983), these Programs are included in the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials. Since the NSLP and SBP are State-administered, federally funded programs, our national headquarters staff and regional offices have formal and informal discussions with State and local officials on an ongoing basis regarding program implementation and policy issues. This arrangement allows State and local agencies to provide feedback that forms the basis for any discretionary decisions made in this and other rules. Federalism Summary Impact Statement Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement, for inclusion in the preamble to the regulations, describing the agency's considerations in terms of the three categories called for under section (6)(b)(2)(B) of Executive Order 13132. FNS has considered the impact of this rule on State and local governments and has determined that this rule does not have Federalism implications. This rule would not impose substantial or direct compliance costs on State and local governments. Therefore, under Section 6(b) of the Executive Order, a federalism summary impact statement is not required. Executive Order 12988 This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This proposed rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This proposed rule is not intended to have retroactive effect. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted. Civil Rights Impact Analysis FNS has reviewed this proposed rule in accordance with the Department Regulation 4300-4, “Civil Rights Impact Analysis,” to identify and address any major civil rights impacts the rule might have on children on the basis of age, race, color, national origin, sex or disability. After careful review of the rule's intent and provisions, FNS has determined that it would not have a deleterious effect on the participation of protected individuals in the NSLP and SBP. The rule's sole effect is to facilitate nutritionally adequate nondairy beverages for participants that have a disability or medical condition that precludes their consumption of fluid milk. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; *see* 5 CFR 1320) requires that the Office of Management and Budget
(OMB)approve all collections of information by a Federal agency before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number. The recordkeeping and reporting burden contained in this rule is approved under OMB No. 0584-0006. This proposed rule does not contain any new information collection requirements subject to approval by OMB under the Paperwork Reduction Act of 1995. E-Government Act Compliance The Food and Nutrition Service is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. List of Subjects 7 CFR Part 210 Grant programs—education, Grant programs—health, Infants and children, Nutrition, Penalties, Reporting and recordkeeping requirements, School breakfast and lunch programs, Surplus agricultural commodities. 7 CFR Part 220 Grant programs—education, Grant programs—health, Infants and children, Nutrition, Reporting and recordkeeping requirements, School breakfast and lunch programs. Accordingly, 7 CFR parts 210 and 220 are proposed to be amended as follows: PART 210—NATIONAL SCHOOL LUNCH PROGRAM 1. The authority citation for 7 CFR part 210 continues to read as follows: Authority: 42 U.S.C. 1751-1760, 1779. 2. In § 210.10: a. Revise the section heading; b. Revise paragraph (g)(1); c. Redesignate paragraphs (g)(2) and (g)(3) as paragraphs (g)(3) and (g)(4), respectively, and add a new paragraph (g)(2); and d. Redesignate paragraph (m)(3) as paragraph (m)(4) and add a new paragraph (m)(3). The revisions and additions read as follows: § 210.10 Nutrition standards and menu planning approaches for lunches and requirements for afterschool snacks.
(g)* * *
(1)*Exceptions for disability reasons.* Schools must make substitutions in lunches and afterschool snacks for students who are considered to have a disability under 7 CFR part 15b and whose disability restricts their diet. Substitutions must be made on a case by case basis only when supported by a written statement of the need for substitutions that includes the student's disability, an explanation of why the disability restricts the student's diet, the major life activity affected by the disability, the food(s) to be omitted from the student's diet, and the recommended alternative foods. Such statement must be signed by a licensed physician.
(2)*Exceptions for non-disability reasons.* Schools may make substitutions for students without disabilities who cannot consume the regular lunch or afterschool snack because of medical or other special dietary needs. Substitutions must be made on a case by case basis only when supported by a written statement of the need for substitutions that identifies the medical or special dietary need that restricts the student's diet, the foods to be omitted from the student's diet and, except for fluid milk, recommended alternative foods. Such statement must be signed by a recognized medical authority.
(i)*Milk substitutions for non-disability reasons.* Schools may make substitutions for fluid milk for non-disabled students who cannot consume fluid milk due to medical or special dietary needs. A school that selects this option may offer the nondairy beverage(s) of its choice, provided the beverage(s) meet the nutritional standards established under paragraph
(m)of this section. Expenses incurred in providing substitutions for fluid milk that exceed program reimbursements must be paid by the school food authority.
(ii)*Requisites for milk substitutions.*
(A)A school food authority must inform the State agency if any of its schools choose to offer fluid milk substitutes other than for students with disabilities; and
(B)A medical authority or the student's parent or legal guardian must submit a written request for a fluid milk substitute identifying the medical or other special dietary need that restricts the student's diet.
(iii)*Substitution approval.* The approval for fluid milk substitution shall remain in effect until the medical authority or the student's parent or legal guardian revokes such request in writing, or until such time as the school changes its substitution policy for non-disabled students.
(m)* * *
(3)*Milk substitutes.* If a school chooses to offer one or more substitutes for fluid milk for non-disabled students with medical or special dietary needs, all substitute beverages offered must be fortified to meet 276 milligrams calcium per cup, 8 grams protein per cup, 500 International Units vitamin A per cup, 100 International Units vitamin D per cup, 24 milligrams magnesium per cup, 222 milligrams phosphorus per cup, 349 milligrams potassium per cup, 0.44 milligrams riboflavin per cup, and 1.1 micrograms vitamin B12 per cup, in accordance with fortification guidelines issued by the Food and Drug Administration. A school need only offer the nondairy beverage(s) that it has identified as allowable milk substitutes according to this paragraph (m)(3). PART 220—SCHOOL BREAKFAST PROGRAM 1. The authority citation for 7 CFR part 220 continues to read as follows: Authority: 42 U.S.C. 1773, 1779, unless otherwise noted. 2. In § 220.8: a. Revise the section heading; b. Revise paragraph (d)(1); c. Redesignate paragraphs (d)(2) and (d)(3) as paragraphs (d)(3) and (d)(4), respectively, and add a new paragraph (d)(2); and d. Add a new paragraph (i)(3). The revisions and additions read as follows: § 220.8 Nutrition standards and menu planning approaches for breakfasts.
(d)* * *
(1)*Exceptions for disability reasons.* Schools must make substitutions in breakfasts for students who are considered to have a disability under 7 CFR part 15b of this title and whose disability restricts their diet. Substitutions must be made on a case by case basis only when supported by a written statement of the need for substitutions that includes the student's disability, an explanation of why the disability restricts the student's diet, the major life activity affected by the disability, the food(s) to be omitted from the student's diet, and the recommended alternative foods. Such statement must be signed by a licensed physician.
(2)*Exceptions for non-disability reasons.* Schools may make substitutions for students without disabilities who cannot consume the breakfast because of medical or other special dietary needs. Substitutions must be made on a case by case basis only when supported by a written statement of the need for substitutions that identifies the medical or special dietary need that restricts the student's diet, the foods to be omitted from the student's diet and, except for milk, recommended alternative foods. Such statement must be signed by a recognized medical authority.
(i)*Milk substitutions for non-disability reasons.* Schools may make substitutions for fluid milk for non-disabled students who cannot consume fluid milk due to medical or special dietary needs. A school that selects this option may offer the nondairy beverage(s) of its choice, provided the beverage(s) meet the nutritional standards established in Part 210 of this chapter. Expenses incurred in providing substitutions for fluid milk that exceed program reimbursements must be paid by the school food authority.
(ii)*Requisites for milk substitutions.*
(A)A school food authority must inform the State agency if any of its schools choose to offer fluid milk substitutes other than for students with disabilities; and
(B)A medical authority or the student's parent or legal guardian must submit a written request for a fluid milk substitute identifying the medical or other special dietary need that restricts the student's diet.
(iii)*Substitution approval.* The approval for fluid milk substitution shall remain in effect until the medical authority or the student's parent or legal guardian revokes such request in writing, or until such time as the school changes its substitution policy for non-disabled students.
(i)* * *
(3)*Milk substitutes.* If a school chooses to offer one or more substitutes for fluid milk for non-disabled students with medical or special dietary needs, all substitute beverages offered must be fortified to meet 276 milligrams calcium per cup, 8 grams protein per cup, 500 International Units vitamin A per cup, 100 International Units vitamin D per cup, 24 milligrams magnesium per cup, 222 milligrams phosphorus per cup, 349 milligrams potassium per cup, 0.44 milligrams riboflavin per cup, and 1.1 micrograms vitamin B12 per cup, in accordance with fortification guidelines issued by the Food and Drug Administration. A school need only offer the nondairy beverages that it has selected as allowable milk substitutes according to this paragraph (i)(3). Dated: November 1, 2006. Nancy Montanez Johner, Under Secretary, Food, Nutrition, and Consumer Services. [FR Doc. 06-9136 Filed 11-8-06; 8:45 am]
Connectionstraces to 50
Traces to 50 documents
U.S. Code
50 references not yet in our index
  • 7 CFR 1430
  • Pub. L. 109-234
  • 120 Stat. 474
  • 12 CFR 308
  • Pub. L. 109-171
  • 120 Stat. 9
  • Pub. L. 104-134
  • 53 F.3d 1395
  • Pub. L. 106-102
  • 113 Stat. 1338
  • Pub. L. 105-277
  • 15 USC 78(h)
  • 14 CFR 39
  • 1 CFR 51
  • 26 CFR 1
  • T.D. 9296
  • T.D. 9205
  • 39 CFR 501
  • Pub. L. 95-452
  • 40 CFR 52
  • 40 CFR 51
  • 40 CFR 81
  • Pub. L. 104-4
  • Pub. L. 104-13
  • Pub. L. 107-198
  • 47 CFR 36
  • 47 CFR 51
  • 47 CFR 52
  • 47 CFR 53
  • 47 CFR 54
  • 47 CFR 63
  • 47 CFR 64
  • 47 CFR 69
  • 47 USC 151-55
  • Pub. L. 104-104
  • 41 USC 421
  • 7 CFR 210.10(g)(1)
  • 7 CFR 220.8(g)
  • Pub. L. 108-265
  • 7 CFR 210.10
+ 10 more
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Unknown
Final rule; correction
U.S.C.§ 7981
U.S.C.§ 714b
U.S.C.§ 3801
U.S.C.§ 1828
C.F.R.§ 308.132
Stat.Public Law 104–133
U.S.C.§ 2461
U.S.C.§ 1818
U.S.C.§ 603
F. App'x53 F.3d 1395
Cite7 CFR 1430
Pub. L.Pub. L. 109-234
Cites 100 · showing 12Cited by 0 across 0 sources
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