Rules and Regulations. Direct final rule; withdrawal

43,812 words·~199 min read·/register/2006/12/27/06-9881

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BILLING CODE 3410-02-P NUCLEAR REGULATORY COMMISSION 10 CFR Part 72 RIN 3150-AH98 List of Approved Spent Fuel Storage Casks: HI-STORM 100 Revision 3; Withdrawal of Direct Final Rule AGENCY: U.S. Nuclear Regulatory Commission. ACTION: Direct final rule; withdrawal. SUMMARY: The U.S. Nuclear Regulatory Commission

(NRC)is withdrawing a direct final rule that would have revised the Holtec International HI-STORM 100 cask system listing within the “List of Approved Spent Fuel Storage Casks” to include Amendment No. 3 to the Certificate of Compliance. The NRC is taking this action because it has received significant adverse comments in response to the direct final rule. These significant adverse comments shall be considered as comments to the companion proposed rule that was published concurrently with the direct final rule. FOR FURTHER INFORMATION CONTACT: Jayne M. McCausland, Office of Federal and State Materials and Environmental Management Programs, U.S. Nuclear Regulatory Commission, Washington, DC 20555, telephone

(301)415-6219 (e-mail: *jmm2@nrc.gov* ). SUPPLEMENTARY INFORMATION: On October 16, 2006 (71 FR 60659), the NRC published in the **Federal Register** a direct final rule amending its regulations in 10 CFR 72.214 to revise the Holtec International HI-STORM 100 cask system listing within the “List of Approved Spent Fuel Storage Casks” to include Amendment No. 3 to the Certificate of Compliance Number 1014 (CoC No. 1014). Amendment No. 3 modifies the present cask system design by revising: Technical Specification

(TS)3.1.3 to eliminate cooling of the Multi-Purpose Canister

(MPC)cavity prior to reflood with water, as part of cask unloading operations; TS 3.3.1 to allow linear interpolation between minimal soluble boron concentrations, for certain fuel enrichments in the MPC-32/32F; Appendix B, Section 1, to make modifications to the definitions of fuel debris, damaged fuel assembly, and non-fuel hardware; and Appendix B, Section 2, to permit the storage of pressurized water reactor fuel assemblies with annular fuel pellets in the top and bottom 12 inches of the active fuel length. Amendment No. 3 also revises CoC No. 1014 to incorporate minor editorial corrections. The direct final rule was to become effective on January 2, 2007. The NRC also concurrently published a companion proposed rule on October 16, 2006 (71 FR 60672). In the direct final rule, NRC stated that if any significant adverse comments were received, a notice of timely withdrawal of the direct final rule would be published in the **Federal Register** and the direct final rule would not take effect. The NRC received significant adverse comments on the direct final rule; therefore, the NRC is withdrawing the direct final rule. These significant adverse comments shall be considered as comments to the companion proposed rule that was published concurrently with the direct final rule. The NRC will not initiate a second comment period on the companion proposed rule. Dated at Rockville, Maryland, this 14th day of December, 2006. For the Nuclear Regulatory Commission. Luis A. Reyes, Executive Director for Operations. [FR Doc. E6-22109 Filed 12-26-06; 8:45 am] BILLING CODE 7590-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26675; Directorate Identifier 2006-NM-203-AD; Amendment 39-14864; AD 2006-26-06] RIN 2120-AA64 Airworthiness Directives; Boeing Model 777-200 and -300 Series Airplanes Equipped with Rolls-Royce Engines AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule; request for comments. SUMMARY: The FAA is adopting a new airworthiness directive

(AD)for certain Boeing Model 777-200 and -300 series airplanes equipped with Rolls-Royce engines. This AD requires repetitive inspections to detect cracks of the outer V-blades of the thrust reverser, and corrective action if necessary. This AD also provides for optional terminating action for the repetitive inspections. This AD results from reports of cracked outer V-blades in the thrust reversers. We are issuing this AD to prevent separation of a thrust reverser from the airplane during normal reverse thrust or during a refused takeoff, which could result in impact damage to other airplane areas. If a thrust reverser separates from the airplane during a refused takeoff, the engine could produce forward thrust, resulting in unexpected thrust asymmetry and a possible runway excursion. DATES: This AD becomes effective January 11, 2007. The Director of the Federal Register approved the incorporation by reference of certain publications listed in the AD as of January 11, 2007. We must receive comments on this AD by February 26, 2007. ADDRESSES: Use one of the following addresses to submit comments on this AD. • *DOT Docket Web site:* Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • *Government-wide rulemaking Web site:* Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • *Mail:* Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street SW., Nassif Building, Room PL-401, Washington, DC 20590. • *Fax:*

(202)493-2251. • *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. Contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207, for service information identified in this AD. FOR FURTHER INFORMATION CONTACT: Gary Oltman, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)917-6443; fax

(425)917-6590. SUPPLEMENTARY INFORMATION: Discussion We have received reports of cracked outer V-blades in the Rolls-Royce engine thrust reversers on Boeing Model 777-200 and -300 series airplanes. The cracks were found in the top and bottom ends of the V-blade. The outer V-blade engages the aft end of the engine fan case to transmit fore and aft loads from the thrust reversers. Initial analysis of the V-blade did not include bending loads, and consequently the fatigue margins were not sufficient. A thrust reverser that separates from the airplane during normal reverse thrust or refused takeoff can damage other airplane areas. If a thrust reverser separates from the airplane during a refused takeoff, the engine could produce forward thrust, resulting in unexpected thrust asymmetry and a possible runway excursion. Relevant Service Information We have reviewed Boeing Special Attention Service Bulletin 777-78-0064, Revision 1, dated November 30, 2006. The service bulletin describes procedures for doing repetitive detailed inspections to detect cracks in the outer V-blade of the thrust reverser, replacing cracked V-blades with serviceable parts, and sending a report of the inspection results to Boeing. The compliance time for the initial inspection ranges from 250 to 6,000 flight cycles after the effective date of the AD, depending on the number of flight cycles on the V-blade, with repetitive intervals not to exceed 2,000 flight cycles from the last detailed inspection. We have also reviewed Boeing Special Attention Service Bulletin 777-78-0061, dated July 6, 2006, which describes procedures for doing a special detailed inspection to detect cracks in the outer V-blade of the thrust reverser in addition to a special detailed (eddy current or fluorescent penetrant) inspection to detect cracks in the fay surface area of the lower chord of the torque box where the outer V-blade attaches. If a crack is found in the outer V-blade, a new configuration V-blade is installed. If no crack is found, the V-blade is changed and installed with new support brackets at the top and bottom ends. The service bulletin also specifies contacting Boeing for repair instructions for cracks found in the torque box lower chord. Accomplishment of the actions specified in Special Attention Service Bulletin 777-78-0061 eliminates the need for the repetitive inspections of Special Attention Service Bulletin 777-78-0064. FAA's Determination and Requirements of This AD The unsafe condition described previously is likely to exist or develop on other airplanes of the same type design. For this reason, we are issuing this AD to prevent separation of a thrust reverser from the airplane during normal reverse thrust or during a refused takeoff, which could result in impact damage to other airplane areas. If a thrust reverser separates from the airplane during a refused takeoff, the engine could produce forward thrust, resulting in unexpected thrust asymmetry and a possible runway excursion. This AD requires accomplishing the actions specified in Boeing Special Attention Service Bulletin 777-78-0064 described previously. This AD also provides for an optional terminating action for the repetitive inspections. Difference Between the AD and Service Information Boeing Special Attention Service Bulletin 777-78-0061 specifies to contact the manufacturer for instructions on how to repair certain conditions, but this AD requires repairing those conditions, if accomplished, in one of the following ways: • Using a method that we approve; or • Using data that meet the certification basis of the airplane, and that have been approved by an Authorized Representative for the Boeing Commercial Airplanes Delegation Option Authorization Organization whom we have authorized to approve repair methods. Interim Action We consider this AD interim action. We are considering mandating the optional terminating action specified in Boeing Special Attention Service Bulletin 777-78-0061, which terminates the repetitive inspections required by this AD. However, the planned compliance time for this terminating action would allow enough time to provide notice and opportunity for prior public comment on the merits of the actions. FAA's Determination of the Effective Date Since an unsafe condition exists that requires the immediate adoption of this AD, we have found that notice and opportunity for public comment before issuing this AD are impracticable, and that good cause exists to make this AD effective in less than 30 days. Comments Invited This AD is a final rule that involves requirements that affect flight safety and was not preceded by notice and an opportunity for public comment; however, we invite you to submit any relevant written data, views, or arguments regarding this AD. Send your comments to an address listed in the ADDRESSES section. Include “Docket No. FAA-2006-26675; Directorate Identifier 2006-NM-203-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the AD that might suggest a need to modify it. 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 with FAA personnel concerning this AD. Using the search function of that Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78), or you may visit *http://dms.dot.gov.* Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov* , or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone

(800)647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them. 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 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 the regulation: 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. See the ADDRESSES section for a location to examine the regulatory evaluation. 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 Federal Aviation Administration

(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **2006-26-06 Boeing:** Amendment 39-14864. Docket No. FAA-2006-26675; Directorate Identifier 2006-NM-203-AD. Effective Date

(a)This AD becomes effective January 11, 2007. Affected ADs

(b)None. Applicability

(c)This AD applies to Boeing Model 777-200 and -300 series airplanes, certificated in any category, equipped with Rolls-Royce engines; as identified in Boeing Special Attention Service Bulletin 777-78-0064, Revision 1, dated November 30, 2006. Unsafe Condition

(d)This AD results from reports of cracked outer V-blades in the thrust reversers. We are issuing this AD to prevent separation of a thrust reverser from the airplane during normal reverse thrust or during a refused takeoff, which could result in impact damage to other airplane areas. If a thrust reverser separates from the airplane during a refused takeoff, the engine could produce forward thrust, resulting in unexpected thrust asymmetry and a possible runway excursion. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Repetitive Inspections

(f)Do the detailed inspections to detect cracks in the outer V-blade of the thrust reversers. Do the inspections in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-78-0064, Revision 1, dated November 30, 2006. Do the inspections at the applicable times specified in paragraph 1.E. of the service bulletin; except, where the service bulletin specifies an initial compliance time after the date on the service bulletin, this AD requires compliance within the specified time after the effective date of this AD. Do applicable corrective actions before further flight in accordance with the service bulletin or paragraph

(h)of this AD.

(g)Actions done before the effective date of this AD in accordance with Boeing Special Attention Service Bulletin 777-78-0064, dated August 7, 2006, are acceptable for compliance with the requirements of paragraph

(f)of this AD. Report

(h)At the applicable time specified in paragraph (h)(1) or (h)(2) of this AD, send a report of the findings (both positive and negative) of each inspection required by paragraph

(f)of this AD to the Manager, Seattle Aircraft Certification Office (ACO), FAA. The report must include the information specified in Appendix A of Boeing Special Attention Service Bulletin 777-78-0064, Revision 1, dated November 30, 2006. Under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 *et seq.* ), the Office of Management and Budget

(OMB)has approved the information collection requirements contained in this AD and has assigned OMB Control Number 2120-0056.

(1)For all inspections done after the effective date of this AD: Send the report within 10 days after the inspection.

(2)For any inspection done before the effective date of this AD: Send the report within 10 days after the effective date of this AD. Optional Terminating Action

(i)Accomplishment of the applicable inspections and related investigative/corrective actions, in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-78-0061, dated July 6, 2006, terminates the requirements of this AD; except, where the service bulletin specifies to contact the manufacturer for appropriate action, repair before further flight using a method approved in accordance with the procedures specified in paragraph

(j)of this AD. Alternative Methods of Compliance (AMOCs) (j)(1) The Manager, Seattle ACO, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(2)Before using any AMOC approved in accordance with § 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office.

(3)An AMOC that provides an acceptable level of safety may be used for any repair required by this AD, if it is approved by an Authorized Representative for the Boeing Commercial Airplanes Delegation Option Authorization Organization who has been authorized by the Manager, Seattle ACO, to make those findings. For a repair method to be approved, the repair must meet the certification basis of the airplane. Material Incorporated by Reference

(k)You must use Boeing Special Attention Service Bulletin 777-78-0064, Revision 1, dated November 30, 2006, to perform the actions that are required by this AD, unless the AD specifies otherwise. If the optional terminating action is accomplished, you must use Boeing Special Attention Service Bulletin 777-78-0061, dated July 6, 2006, to perform the optional terminating actions specified in this AD, unless the AD specifies otherwise. The Director of the Federal Register approved the incorporation by reference of these documents in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Contact Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-2207, for a copy of this service information. You may review copies at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street SW., Room PL-401, Nassif Building, Washington, DC; on the Internet at *http://dms.dot.gov* ; or at the National Archives and Records Administration (NARA). For information on the availability of this material at the NARA, call

(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . Issued in Renton, Washington, on December 14, 2006. Stephen P. Boyd, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-22040 Filed 12-26-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-23659; Directorate Identifier 2005-NM-236-AD; Amendment 39-14863; AD 2006-26-05] RIN 2120-AA64 Airworthiness Directives; Fokker Model F27 Mark 100, 200, 300, 400, 500, 600, and 700 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: The FAA is adopting a new airworthiness directive

(AD)for all Fokker Model F27 Mark 100, 200, 300, 400, 500, 600, and 700 airplanes. This AD requires revising the Limitations section of the airplane flight manual regarding the use of continuous ignition, fuel filter heating, and resetting circuit breakers during flight in certain conditions such as icing. This AD results from reports of power loss on one or both engines in icing conditions. We are issuing this AD to advise the flightcrew that continuous ignition will not reduce the probability of power loss, and what action they must take to avoid this hazard. Loss of power in one or more engines during flight, if not prevented, could result in loss of control of the airplane. DATES: This AD becomes effective January 31, 2007. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in the AD as of January 31, 2007. ADDRESSES: You may examine the AD docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC. Contact Fokker Services B.V., P.O. Box 231, 2150 AE Nieuw-Vennep, the Netherlands, for service information identified in this AD. FOR FURTHER INFORMATION CONTACT: Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)227-1137; fax

(425)227-1149. SUPPLEMENTARY INFORMATION: Examining the Docket You may examine the airworthiness directive

(AD)docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone

(800)647-5227) is located on the plaza level of the Nassif Building at the street address stated in the ADDRESSES section. Discussion The FAA issued a notice of proposed rulemaking

(NPRM)to amend 14 CFR part 39 to include an AD that would apply to all Fokker Model F27 Mark 100, 200, 300, 400, 500, 600, and 700 airplanes. That NPRM was published in the **Federal Register** on January 24, 2006 (71 FR 3792). That NPRM proposed to require revising the Limitations section of the airplane flight manual regarding the use of continuous ignition, fuel filter heating, and resetting circuit breakers during flight in certain conditions such as icing. Comments We provided the public the opportunity to participate in the development of this AD. We received no comments on the NPRM or on the determination of the cost to the public. Clarification of Note 1 Note 1 of the NPRM stated that the revision to the Limitations section of the Fokker F27 Airplane Flight Manual

(AFM)could be done by inserting a copy of Manual Change Notification—Operational Documentation

(MCNO)MCNO-F27-020, dated June 1, 2004, into the Normal Procedures, Abnormal Procedures, and Emergency Procedures sections of the Fokker F27 AFM. We have clarified Note 1 of this AD to state that the revision can be done by inserting a copy of that MCNO into the Limitations section, as specified in paragraph

(f)of this AD. Conclusion We have carefully reviewed the available data, and determined that air safety and the public interest require adopting the AD with the change described previously. We have determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD. Costs of Compliance This AD affects about 27 airplanes of U.S. registry. The revision takes about 1 work hour per airplane, at an average labor rate of $65 per work hour. Based on these figures, the estimated cost of the AD for U.S. operators is $1,755, or $65 per airplane. 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 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 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. See the ADDRESSES section for a location to examine the regulatory evaluation. 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 Federal Aviation Administration

(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **2006-26-05 Fokker Services B.V.:** Amendment 39-14863. Docket No. FAA-2006-23659; Directorate Identifier 2005-NM-236-AD. Effective Date

(a)This AD becomes effective January 31, 2007. Affected ADs

(b)None. Applicability

(c)This AD applies to all Fokker Model F27 Mark 100, 200, 300, 400, 500, 600, and 700 airplanes, certificated in any category. Unsafe Condition

(d)This AD results from reports of power loss on one or both engines in icing conditions. We are issuing this AD to advise the flightcrew that continuous ignition will not reduce the probability of power loss, and what action they must take to avoid this hazard. Loss of power in one or more engines during flight, if not prevented, could result in loss of control of the airplane. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Airplane Flight Manual

(AFM)Revision

(f)Within 30 days after the effective date of this AD, revise the Limitations section of the Fokker F27 AFM by incorporating the information specified in Fokker Manual Change Notification—Operational Documentation

(MCNO)MCNO-F27-020, dated June 1, 2004, into the Limitations section of the AFM. Note 1: The actions required by paragraph

(f)of this AD may be done by inserting a copy of MCNO MCNO-F27-020 into the Limitations section of the Fokker F27 AFM. When this MCNO, MCNO-F27-020, has been included in the general revisions of the AFM, the general revisions may be inserted in the AFM, provided the relevant information in the general revision is identical to that in MCNO MCNO-F27-020. Alternative Methods of Compliance (AMOCs) (g)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(2)Before using any AMOC approved in accordance with Sec. 39.19 on any airplane to which the AMOC applies, notify the appropriate principal inspector in the FAA Flight Standards Certificate Holding District Office. Related Information

(h)Dutch airworthiness directive 2004-122, dated October 28, 2004, also addresses the subject of this AD. Material Incorporated by Reference

(i)You must use Fokker Manual Change Notification—Operational Documentation MCNO-F27-020, dated June 1, 2004, to perform the actions that are required by this AD, unless the AD specifies otherwise. The Director of the Federal Register approved the incorporation by reference of this document in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Contact Fokker Services B.V., P.O. Box 231, 2150 AE Nieuw-Vennep, the Netherlands, for a copy of this service information. You may review copies at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Room PL-401, Nassif Building, Washington, DC; on the Internet at *http://dms.dot.gov;* or at the National Archives and Records Administration (NARA). For information on the availability of this material at the NARA, call

(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.* Issued in Renton, Washington, on December 14, 2006. Stephen P. Boyd, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-22042 Filed 12-26-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-24440; Directorate Identifier 2006-NM-058-AD; Amendment 39-14862; AD 2006-26-04] RIN 2120-AA64 Airworthiness Directives; Empresa Brasileira de Aeronautica S.A. (EMBRAER) Model EMB-145XR Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: The FAA is adopting a new airworthiness directive

(AD)for certain EMBRAER Model EMB-145XR airplanes. This AD requires replacement of certain segments of the passenger seat tracks with new, improved seat tracks. This AD results from instances where the shear plungers of the passenger seat legs were not adequately fastened. We are issuing this AD to prevent inadequate fastening of the seat leg shear plungers, which could result in failure of the passenger seat tracks during emergency landing conditions and consequent injury to passengers. DATES: This AD becomes effective January 31, 2007. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in the AD as of January 31, 2007. ADDRESSES: You may examine the AD docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh, Street, SW., Nassif Building, Room PL-401, Washington, DC. Contact Empresa Brasileira de Aeronautica S.A. (EMBRAER), P.O. Box 343-CEP 12.225, Sao Jose dos Campos—SP, Brazil, for service information identified in this AD. FOR FURTHER INFORMATION CONTACT: Todd Thompson, Aerospace Engineer, International Branch, ANM-116, FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton, Washington 98057-3356; telephone

(425)227-1175; fax

(425)227-1149. SUPPLEMENTARY INFORMATION: Examining the Docket You may examine the AD docket on the Internet at *http://dms.dot.gov* or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone

(800)647-5227) is located on the plaza level of the Nassif Building at the street address stated in the ADDRESSES section. Discussion The FAA issued a supplemental notice of proposed rulemaking

(NPRM)to amend 14 CFR part 39 to include an AD that would apply to certain EMBRAER Model EMB-145XR airplanes. That supplemental NPRM was published in the **Federal Register** on August 8, 2006 (71 FR 44935). That supplemental NPRM proposed to require replacement of certain segments of the passenger seat tracks with new, improved seat tracks. Comments We provided the public the opportunity to participate in the development of this AD. We have considered the comments received. Request To Publish Service Information The Modification and Replacement Parts Association (MARPA) states that, typically, ADs are based on service information originating with the type certificate holder or its suppliers. MARPA adds that manufacturer service documents are privately authored instruments generally having copyright protection against duplication and distribution. MARPA notes that when a service document is incorporated by reference into a public document, such as an AD, it loses its private, protected status and becomes a public document. MARPA adds that if a service document is used as a mandatory element of compliance, it should not simply be referenced, but should be incorporated into the regulatory document; by definition, public laws must be public, which means they cannot rely upon private writings. MARPA adds that incorporated by reference service documents should be made available to the public by publication in the Docket Management System (DMS), keyed to the action that incorporates them. MARPA notes that the stated purpose of the incorporation by reference method is brevity, to keep from expanding the **Federal Register** needlessly by publishing documents already in the hands of the affected individuals; traditionally, “affected individuals” means aircraft owners and operators, who are generally provided service information by the manufacturer. MARPA adds that a new class of affected individuals has emerged, since the majority of aircraft maintenance is now performed by specialty shops instead of aircraft owners and operators. MARPA notes that this new class includes maintenance and repair organizations, component servicing and repair shops, parts purveyors and distributors, and organizations manufacturing or servicing alternatively certified parts under section 21.303 (“Replacement and modification parts”) of the Federal Aviation Regulations (14 CFR 21.303). MARPA adds that the concept of brevity is now nearly archaic as documents exist more frequently in electronic format than on paper. Therefore, MARPA asks that the service documents deemed essential to the accomplishment of the supplemental NPRM be incorporated by reference into the regulatory instrument and published in DMS. We do not agree that documents should be incorporated by reference during the NPRM phase of rulemaking. The Office of the Federal Register

(OFR)requires that documents that are necessary to accomplish the requirements of the AD be incorporated by reference during the final rule phase of rulemaking. This final rule incorporates by reference the document necessary for the accomplishment of the requirements mandated by this AD. Further, we point out that while documents that are incorporated by reference do become public information, they do not lose their copyright protection. For that reason, we advise the public to contact the manufacturer to obtain copies of the referenced service information. In regard to the commenter's request to post service bulletins on the Department of Transportation's DMS, we are currently in the process of reviewing issues surrounding the posting of service bulletins on DMS as part of an 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. No change to the final rule is necessary in response to this comment. Request To Allow Use of Parts Manufacturer Approval

(PMA)Parts MARPA states that the practice of requiring the replacement of a defective part with a certain part conflicts with 14 CFR 21.303. MARPA asserts that requiring installation of a certain part prevents installation of other good parts and prohibits the development of new parts. MARPA also states that the practice of requiring an alternative method of compliance

(AMOC)to install a PMA part should be stopped. MARPA concludes that this practice presumes that all PMA parts are inherently defective and require an additional layer of approval. MARPA further states the NPRM does not comply with FAA Order 8040.2; that order states that replacement or installation of certain parts could have replacement parts approved under 14 CFR 21.303 based on a finding of identicality. That order also states that any parts approved under this regulation and installed should be subject to the actions of the AD and included in the applicability. MARPA states that if a PMA part is defective, then it must be addressed in an AD and not just simply implied by an AMOC requirement. MARPA suggests that we adopt language used in ADs issued by directorates other than the Transport Airplane Directorate, which specify installing an “FAA-approved equivalent part number” or “airworthy parts.” MARPA contends that the mandates contained in Section 1, paragraph (b)(1) of Executive Order 12866 are not being met because the directorates differ in their treatment of this issue. MARPA, therefore, requests that we revise the supplemental NPRM to allow use of PMA parts. We do not agree to revise this AD. The supplemental NPRM does not address PMA parts, as provided in draft FAA Order 8040.2, because the Order was only a draft that was out for comment at the time. After issuance of the supplemental NPRM, the Order was revised and issued as FAA Order 8040.5 with an effective date of September 29, 2006. FAA Order 8040.5 does not address PMA parts in ADs. We acknowledge the need to ensure that unsafe PMA parts are identified and addressed in ADs in a standardized way at the national level. We are currently examining all aspects of this issue, including input from industry. Once we have made a final determination, we will consider how our policy regarding PMA parts in ADs needs to be revised. However, the Transport Airplane Directorate considers that to delay this particular AD action would be inappropriate, since we have determined that an unsafe condition exists and that replacement of certain parts must be accomplished to ensure continued safety. Therefore, no change has been made to this AD in this regard. Conclusion We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD as proposed in the supplemental NPRM. Costs of Compliance This AD affects about 97 airplanes of U.S. registry. The required actions take about 10 work hours per airplane, at an average labor rate of $80 per work hour. Required parts cost about $82 per airplane. Based on these figures, the estimated cost of this AD on U.S. operators is $85,554, or $882 per airplane. 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 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 DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

(FAA)amends § 39.13 by adding the following new airworthiness directive (AD): **2006-26-04 Empresa Brasileira de Aeronautica S.A. (EMBRAER):** Amendment 39-14862. Docket No. FAA-2006-24440; Directorate Identifier 2006-NM-058-AD. Effective Date

(a)This AD becomes effective January 31, 2007. Affected ADs

(b)None. Applicability

(c)This AD applies to EMBRAER Model EMB-145XR airplanes, certificated in any category; as identified in EMBRAER Service Bulletin 145-53-0059, Revision 01, dated March 9, 2006. Unsafe Condition

(d)This AD results from instances where the shear plungers of the passenger seat legs were not adequately fastened. We are issuing this AD to prevent inadequate fastening of the seat leg shear plungers, which could result in failure of the passenger seat tracks during emergency landing conditions and consequent injury to passengers. Compliance

(e)You are responsible for having the actions required by this AD performed within the compliance times specified, unless the actions have already been done. Replacement of Passenger Seat Tracks

(f)Within 5,000 flight hours after the effective date of this AD, replace segments of the internal and external passenger seat tracks with new, improved seat tracks, by accomplishing all of the actions specified in the Accomplishment Instructions of EMBRAER Service Bulletin 145-53-0059, Revision 01, dated March 9, 2006. Alternative Methods of Compliance (AMOCs) (g)(1) The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested in accordance with the procedures found in 14 CFR 39.19.

(h)Brazilian airworthiness directive 2006-01-01R1, effective May 23, 2006, also addresses the subject of this AD. Material Incorporated by Reference

(i)You must use EMBRAER Service Bulletin 145-53-0059, Revision 01, dated March 9, 2006, to perform the actions that are required by this AD, unless the AD specifies otherwise. EMBRAER Service Bulletin 145-53-0059, Revision 01, dated March 9, 2006, contains the following effective pages: Page No. Revision level shown on page Date shown on page 1, 2, 16 01 March 9, 2006. 3-15, 17 Original July 1, 2005. The Director of the Federal Register approved the incorporation by reference of this document in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Contact Empresa Brasileira de Aeronautica S.A. (EMBRAER), P.O. Box 343—CEP 12.225, Sao Jose dos Campos—SP, Brazil, for a copy of this service information. You may review copies at the Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street, SW., Room PL-401, Nassif Building, Washington, DC; on the Internet at *http://dms.dot.gov;* or at the National Archives and Records Administration (NARA). For information on the availability of this material at the NARA, call

(202)741-6030, or go to *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.* Issued in Renton, Washington, on December 11, 2006. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. E6-22041 Filed 12-26-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 97 [Docket No. 30527 Amdt. No. 3198] Standard Instrument Approach Procedures, Weather Takeoff Minimums; Miscellaneous Amendments AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. SUMMARY: This amendment establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs) and/or Weather Takeoff Minimums for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, addition of new obstacles, or changes in air traffic requirements. These changes are designed to provide safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports. DATES: This rule is effective December 27, 2006. The compliance date for each SIAP and/or Weather Takeoff Minimums is specified in the amendatory provisions. The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of December 27, 2006. ADDRESSES: Availability of matters incorporated by reference in the amendment is as follows: *For Examination* — 1. FAA Rules Docket, FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; 2. The FAA Regional Office of the region in which the affected airport is located; 3. The National Flight Procedures Office, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or, 4. 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* . *For Purchase* —Individual SIAP and Weather Takeoff Minimums copies may be obtained from: 1. FAA Public Inquiry Center (APA-200), FAA Headquarters Building, 800 Independence Avenue, SW., Washington, DC 20591; or 2. The FAA Regional Office of the region in which the affected airport is located. *By Subscription* —Copies of all SIAPs and Weather Takeoff Minimums mailed once every 2 weeks, are for sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. FOR FURTHER INFORMATION CONTACT: Donald P. Pate, Flight Procedure Standards Branch (AFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd. Oklahoma City, OK. 73169 (Mail Address: P.O. Box 25082 Oklahoma City, OK. 73125) telephone:

(405)954-4164. SUPPLEMENTARY INFORMATION: This amendment to Title 14 of the Code of Federal Regulations, Part 97 (14 CFR part 97), establishes, amends, suspends, or revokes SIAPs and/or Weather Takeoff Minimums. The complete regulatory description of each SIAP and/or Weather Takeoff Minimums is contained in official FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA Forms are identified as FAA Forms 8260-3, 8260-4, 8260-5 and 8260-15A. Materials incorporated by reference are available for examination or purchase as stated above. The large number of SIAPs and/or Weather Takeoff Minimums, their complex nature, and the need for a special format make their verbatim publication in the **Federal Register** expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs and/or Weather Takeoff Minimums but refer to their depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP and/or Weather Takeoff Minimums contained in FAA form documents is unnecessary. The provisions of this amendment state the affected CFR sections, with the types and effective dates of the SIAPs and/or Weather Takeoff Minimums. This amendment also identifies the airport, its location, the procedure identification and the amendment number. The Rule This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP and/or Weather Takeoff Minimums as contained in the transmittal. Some SIAP and/or Weather Takeoff Minimums amendments may have been previously issued by the FAA in a Flight Data Center

(FDC)Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP, and/or Weather Takeoff Minimums amendments may require making them effective in less than 30 days. For the remaining SIAPs and/or Weather Takeoff Minimums, an effective date at least 30 days after publication is provided. Further, the SIAPs and/or Weather Takeoff Minimums contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs and/or Weather Takeoff Minimums, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs and/or Weather Takeoff Minimums and safety in air commerce, I find that notice and public procedure before adopting these SIAPs and/or Weather Takeoff Minimums are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs and/or Weather Takeoff Minimums effective in less than 30 days. Conclusion The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a “significant regulatory action” under Executive Order 12866;

(2)is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and

(3)does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. List of Subjects in 14 CFR Part 97 Air Traffic Control, Airports, Incorporation by reference, and Navigation (Air). Issued in Washington, DC, on December 15, 2006. James J. Ballough, Director, Flight Standards Service. Adoption of the Amendment Accordingly, pursuant to the authority delegated to me, under title 14, Code of Federal Regulations, part 97 (14 CFR part 97) is amended by establishing, amending, suspending, or revoking Standard Instrument Approach Procedures and Weather Takeoff Minimums effective at 0901 UTC on the dates specified, as follows: PART 97—STANDARD INSTRUMENT APPROACH PROCEDURES 1. The authority citation for part 97 continues to read as follows: Authority: 49 U.S.C. 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44701, 44719, 44721-44722. 2. Part 97 is amended to read as follows: Effective 18 January 2007 Eagle, CO, Eagle County Regional, LDA/DME RWY 25, Orig-B Wauchula, FL, Wauchula Muni, RNAV

(GPS)RWY 18, Orig Wauchula, FL, Wauchula Muni, RNAV

(GPS)RWY 36, Orig Wauchula, FL, Wauchula Muni, Takeoff Minimums and Textual DP, Amdt 1 Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 8L(Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 8R (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 9L (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 9R (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 10 (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 26L (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 26R (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 27L (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 27R (Simultaneous Close Parallel) Orig Atlanta, GA, Hartsfield-Jackson Atlanta Intl, ILS PRM RWY 28 (Simultaneous Close Parallel) Orig Indianapolis, IN, Indianapolis Intl, RNAV

(GPS)RWY 14, Amdt 1 Indianapolis, IN, Indianapolis Intl, RNAV

(GPS)RWY 32, Amdt 1 Indianapolis, IN, Indianapolis Intl, ILS OR LOC RWY 14, Amdt 5A Indianapolis, IN, Indianapolis Intl, ILS OR LOC RWY 32, Amdt 18 Indianapolis, IN, Indianapolis Intl, Takeoff Minimums & Textual DP's, Orig Leonardtown, MD, St. Mary's County Regional, Takeoff Minimums and Textual DP, Orig Monett, MO, Monett Muni, RNAV

(GPS)RWY 18, Orig Monett, MO, Monett Muni, RNAV

(GPS)RWY 36, Orig Monett, MO, Monett Muni, GPS RWY 18, Orig, CANCELLED Monett, MO, Monett Muni, GPS RWY 36, Amdt 1, CANCELLED Monett, MO, Monett Muni, Takeoff Minimums and Textual DP, Orig Ripley, MS, Ripley, VOR/DME-A, Amdt 2 Ripley, MS, Ripley, RNAV

(GPS)RWY 3, Amdt 1 Ripley, MS, Ripley, RNAV

(GPS)RWY 21, Amdt 1 Ripley, MS, Ripley, Takeoff Minimums and Textual DP, Orig Elizabeth City, NC, Elizabeth City CG Air Station/Regional, ILS OR LOC RWY 10, Orig Alliance, NE Alliance Muni, RNAV

(GPS)RWY 12, Orig Alliance, NE Alliance Muni, RNAV

(GPS)RWY 30, Orig Alliance, NE Alliance Muni, GPS RWY 30, Orig-A, CANCELLED Kimball, NE, Kimball Muni/Robert E. Arraj Field, RNAV

(GPS)RWY 10, Orig Kimball, NE, Kimball Muni/Robert E. Arraj Field, RNAV

(GPS)RWY 28, Orig Kimball, NE, Kimball Muni/Robert E. Arraj Field, NDB RWY 28, Amdt 2 Kimball, NE, Kimball Muni/Robert E. Arraj Field, GPS RWY 28, Orig-A, CANCELLED Kimball, NE, Kimball Muni/Robert E. Arraj Field, Takeoff Minimums and Textual DP, Orig Wellsville, NY, Wellsville Muni Arpt, Tarantine Fld, VOR-A, Amdt 6 Wellsville, NY, Wellsville Muni Arpt, Tarantine Fld, LOC/DME RWY 28, Amdt 4 Wellsville, NY, Wellsville Muni Arpt, Tarantine Fld, RNAV

(GPS)RWY 10, Orig Wellsville, NY, Wellsville Muni Arpt, Tarantine Fld, RNAV

(GPS)RWY 28, Orig Myerstown, PA, Deck, Takeoff Minimums and Textual DP, Orig Philadelphia, PA, Philadelphia Intl, ILS PRM RWY 26 (Simultaneous Close Parallel), Amdt 3 Philadelphia, PA, Philadelphia Intl, ILS PRM RWY 27L (Simultaneous Close Parallel), Amdt 3 The FAA published an Amendment in Docket No. 30525 Amdt No. 3196 to Part 97 of the Federal Aviation Regulations (Vol 71, FR No. 239, page 74764, dated December 13, 2006) Under Section 97.29 effective 18 January 2007, which is hereby rescinded: Homer, AK, Homer, RNAV

(GPS)Y RWY 21, Orig Homer, AK, Homer, RNAV

(GPS)Y RWY 3, Orig Homer, AK, Homer, GPS RWY 21, Orig-B, CANCELLED Homer, AK, Homer, GPS RWY 3, Orig-B, CANCELLED [FR Doc. E6-21956 Filed 12-26-06; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602 [TD 9305] RIN 1545-AW50 Source of Income From Certain Space and Ocean Activities; Source of Communications Income AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains final regulations under section 863(d) governing the source of income from certain space and ocean activities. It also contains final regulations under section 863(a), (d), and

(e)governing the source of income from certain communications activities. In addition, this document contains final regulations under section 863(a) and (b), amending the regulations in § 1.863-3 to conform those regulations to these final regulations. The final regulations primarily affect persons who derive income from activities conducted in space, or on or under water not within the jurisdiction of a foreign country, possession of the United States, or the United States (in international water). The final regulations also affect persons who derive income from transmission of communications. DATES: *Effective Date:* These regulations are effective December 27, 2006. *Applicability Date:* For dates of applicability, see § 1.863-8(h) and § 1.863-9(l). FOR FURTHER INFORMATION CONTACT: H. Michael Huynh,

(202)435-5161 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collections of information contained in these final regulations have been reviewed and approved by the Office of Management and Budget

(OMB)in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-1718. The collections of information in these final regulations are in §§ 1.863-8(g) and 1.863-9(k). This information is required by the IRS to monitor compliance with the Federal tax rules for determining the source of income from space or ocean activities, or from transmission of communications. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by the Office of Management and Budget. The estimated annual burden per respondent is 5 hours. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be sent to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224, and to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background Congress enacted section 863(d) and

(e)as part of the Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085. Section 863(d) governs the source of income derived from space or ocean activities. Section 863(e) governs the source of income derived from international communications activities. The Treasury Department and the IRS published a notice of proposed rulemaking (REG-106030-98) in the **Federal Register** on January 17, 2001 (66 FR 3903), which provided proposed regulations under section 863(a), (b), (d), and

(e)(the 2001 proposed regulations). The Treasury Department and the IRS received numerous written comments on the 2001 proposed regulations and held a public hearing on May 23, 2001. Since that time, the aerospace, telecommunications, and related industries have experienced substantial technological evolution and significant business change and consolidation. In addition, the American Jobs Creation Act of 2004 (AJCA), Pub. L. No. 108-357, 118 Stat. 1418, enacted a number of materially relevant statutory changes that affect the treatment of space and ocean income for purposes of the foreign tax credit and subpart F rules. In light of the extensive written comments, industry evolution, and AJCA changes, the Treasury Department and the IRS felt that it was appropriate to repropose these regulations to reflect these changes and to provide another opportunity for comment. Consequently, the Treasury Department and the IRS published another notice of proposed rulemaking in the **Federal Register** on September 19, 2005 (70 FR 54859), which withdrew the 2001 proposed regulations and provided new proposed regulations under section 863(a), (b), (d), and

(e)(the proposed regulations). The proposed regulations provided two sets of rules: one in § 1.863-8 for determining the source of income from space or ocean activities, the other in § 1.863-9 for determining the source of income from communications activities. A public hearing on the proposed regulations was scheduled for December 15, 2005, but was ultimately cancelled because no one requested to speak. A few written comments, however, were received. These comments uniformly praised the proposed regulations as an improvement over the 2001 proposed regulations and generally were supportive of much of the proposed regulations. However, commentators suggested a few additional changes. After consideration of these comments, the proposed regulations are adopted as final regulations, as amended by this Treasury decision. The revisions to regulations governing the source of income from space or ocean activities and the source of income from communications activities are discussed in section A and section B, respectively, of this preamble. Summary of Comments and Explanation of Revisions A. Space or Ocean Activity Under Section 863(d) Section 863(d) governs the source of income from certain space or ocean activities. In general, section 863(d)(1) provides that, except as provided in regulations, any income derived from a space or ocean activity (space and ocean income) is income from sources within the United States (U.S. source income) if derived by a United States person and is income from sources without the United States (foreign source income) if derived by a foreign person. Section 863(d)(2)(A)(i) defines space activity to include any activity conducted in space. Section 863(d)(2)(A)(ii) defines ocean activity to include any activity conducted on or under water not within the jurisdiction (as recognized by the United States) of a foreign country, possession of the United States, or the United States. Section 863(d)(2)(B) excludes three types of activities from the definition of space or ocean activity. Space or ocean activity does not include any activity giving rise to transportation income governed by section 863(c), international communications income governed by section 863(e), or income with respect to mines, oil and gas wells, or other natural deposits to the extent within the United States or any foreign country or possession of the United States (as defined in section 638). See Section 863(d)(2)(B). Section 1.863-8 of the proposed regulations generally provided rules for determining the source of income derived from space or ocean activity under section 863(d). Section 1.863-8(b)(1) of the proposed regulations reflected the general source rule under section 863(d)(1) that a United States person's space and ocean income is U.S. source income. Pursuant to the grant of regulatory authority under section 863(d)(1), however, the proposed regulations provided an exception to this general rule. Under that exception, a United States person's space and ocean income is foreign source income (and therefore not sourced on the basis of citizenship or residency) to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries. For a foreign person, proposed § 1.863-8(b)(2) reflected the general source rule under section 863(d)(1) that a foreign person's space and ocean income is foreign source income. Pursuant to regulatory authority under section 863(d)(1), however, the proposed regulations contained two exceptions to this general rule, one for controlled foreign corporations (CFCs), the other for foreign persons engaged in a U.S. trade or business. The proposed regulations generally sourced space and ocean income derived by a CFC, like that of a United States person, as U.S. source income. However, also like the rule for a United States person, a CFC's space and ocean income is foreign source income to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries. For a foreign person, other than a CFC, engaged in a trade or business within the United States, space and ocean income is U.S. source income to the extent it is attributable to functions performed, resources employed, or risks assumed within the United States. In addition to the general source rules for United States and foreign persons, the proposed regulations provided special rules, applicable to both United States and foreign persons, for income from services, certain sales of property, and communications activities (other than international communications activities). These special rules, as well as modifications to the proposed regulations, are discussed below. 1. Activities performed outside space and international water Section 1.863-8 of the proposed regulations provided source rules only for income from space or ocean activity. Thus, in some cases, income derived from a transaction must be allocated between space and ocean income and other income. For example, § 1.863-8(b)(3)(ii)(C) of the proposed regulations provided that when property is produced both in space or international water and outside space and international water, gross income allocable to production activity is allocated to production occurring in space or international water and production occurring outside space and international water based on where functions are performed, resources are employed, or risks are assumed. The proposed regulations also provided a similar analysis of functions performed, resources employed, or risks assumed to allocate income in the case of performance of services. See Prop. Treas. Reg. § 1.863-8(d)(2). Under the proposed regulations, only the amount allocated to production or performance of a service occurring in space or international water is treated as space and ocean income (character rule). The source of gross income allocated to production or performance of a service occurring in space or international water is then determined under the rules of proposed § 1.863-8(b)(1) or (2), as applicable (source rule). Section 1.863-8(b)(1) of the proposed regulations reflected the general source rule that a United States person's space and ocean income is U.S. source income. Proposed § 1.863-8(b)(2) reflected the general source rule that a foreign person's space and ocean income is foreign source income. Both proposed § 1.863-8(b)(1) and (2), however, provided exceptions to their respective general source rules. As discussed above, under the exceptions, a United States person's space and ocean income may be foreign source income and a foreign person's space and ocean income may be U.S. source income based on where functions are performed, resources are employed, or risks are assumed. One commentator noted that in some situations, the allocation of income derived from a transaction to determine space and ocean income based on functions performed, resources employed, or risks assumed presumably would remove the subsequent need to further analyze functions performed, resources employed, or risks assumed within a country to determine the source of the space and ocean income. In other words, the very act of determining the character of income seems to also determine the source of such income. The Treasury Department and the IRS agree with the commentator that use of the same standard to classify the transaction as space or ocean activity and to source the space and ocean income may be duplicative in some cases. However, there are other cases where a transaction with some land-based activity may be classified in its entirety as a space or ocean activity (for example, a lease of a satellite), but the income may be partially U.S. source and partially foreign source under the source rules of proposed § 1.863-8(b)(1) and

(2)based on functions performed, resources employed, or risks assumed within the United States or a foreign country. Consequently, the character and source rules are not always duplicative. Thus, the extent to which the character rules overlap with the source rules is particular to the type of transaction involved. The Treasury Department and the IRS recognize that the overlap in the character and source rules may produce equivalent results. But, the overlap is necessary to provide taxpayers and the IRS with workable rules. As a result, the final regulations do not follow this comment as a general matter. Nonetheless, a conforming amendment has been made to the lease transaction in Example 1 in § 1.863-8(f) of the final regulations to more clearly illustrate how the rules work. That example illustrates that the transaction involved is first classified in its entirety as a space or ocean activity, and then the resulting space and ocean income is subjected to the source rules. The space and ocean income is sourced as foreign source income to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries. 2. Activities performed by another person Section 1.863-8(a) of the proposed regulations provided that a taxpayer will not be considered to derive income from space or ocean activity if such activity is performed by another person. The approach under § 1.863-8(a) of the proposed regulations, providing that a taxpayer derives income from a space or ocean activity only if it conducts such activity directly, is consistent with the approach adopted in the § 1.863-3 regulations governing the source of income from certain sales of inventory. See, e.g., Treas. Reg. § 1.863-3(c) (“[T]he only production activities that are taken into account for purposes of §§ 1.863-1, 1.863-2, and this section are those conducted directly by the taxpayer.”). Accordingly, commentators believed that this provision assured that a content provider that retains a satellite operator to transmit programming abroad would not derive space and ocean income based on attribution of the satellite operator's activity. The Treasury Department and the IRS agree. One commentator noted, however, that *Examples 2* and *4* in § 1.863-8(f) of the proposed regulations seem to indicate that this is not what was intended. In *Example 2* , the taxpayer, an Internet service provider, transmits information requested by its customer, in part using satellite capacity leased from a third party. *Example 2* concludes that the service performed by the taxpayer is considered space activity to the extent the value of the service is attributable to functions performed, resources employed, and risks assumed in space. In *Example 4* , the taxpayer uses satellite capacity acquired from a third party to deliver programming services directly to its customers' televisions sets. *Example 4* concludes that the taxpayer's delivery of programming and other services is considered space activity to the extent the value of the delivery transaction is attributable to performance in space. In the commentator's view, the results reached in the examples conflict with the provision stating that activities performed by another person are not attributable to the taxpayer. The Treasury Department and the IRS do not believe that *Examples 2* and *4* of § 1.863-8(f) of the proposed regulations produce the result that the commentator raised. In *Examples 2* and *4* , the taxpayer performed the transmission or delivery activities using satellite capacity leased or acquired from a third party. Both *Examples 2* and *4* correctly conclude that the taxpayers derived space and ocean income from their own activities rather than from activities of another person. Thus, the examples do not, in fact, conflict with the text of the proposed regulations. Nevertheless, the Treasury Department and the IRS are concerned that *Examples 2* and *4* have been misinterpreted as suggesting that activities performed by another person may be attributable to the taxpayer in certain situations. This was not the intent of these examples. Consequently, *Examples 2* and *4* in § 1.863-8(f) of the final regulations have been modified to make clear that the taxpayers in the examples *directly* engage in a space activity by performing the uplink (transmitting to the satellite) and downlink functions. These examples differ from cases in which the taxpayer is a mere content provider that derives income either from the creation of content or from the creation and delivery of content, but in either case contracts with another person to deliver the content via satellite. Pursuant to § 1.863-8(a) of the final regulations, content providers of this type would not derive space and ocean income because the delivery of the content via satellite is performed by another person. This would be the result even though the value of the customer contract includes a payment to the content provider for space or ocean activity. To clarify the distinction between these situations and *Examples 2* and *4* , a new *Example 5* has been added to the final regulations. That example involves a content provider that does not derive space and ocean income because the taxpayer does not directly perform any space or ocean activity. 3. Income Characterization Rules for Income from Services and the De Minimis Exception Under § 1.863-8(b)(4) of the proposed regulations, to the extent a service is characterized as space or ocean activity, the source of gross income derived from such transaction is determined under proposed § 1.863-8(b)(1) or (2), as applicable. Section 1.863-8(d)(2)(ii)(B) of the proposed regulations provided, however, that if the taxpayer can demonstrate, based on all the facts and circumstances, that the value of the service attributable to performance in space or international water is de minimis, such service will not be treated as space or ocean activity. The de minimis rule was adopted to address taxpayers' concerns about potential confusion in qualifying for the “facilitation exception” under the 2001 proposed regulations. One commentator stated that the de minimis rule simply replaced one vague standard with another, as neither *Example 3* in § 1.863-8(f) of the proposed regulations nor the text of the proposed regulations provides any guidance as to when activities performed in space or international water would be de minimis under a facts and circumstances approach. The Treasury Department and the IRS recognize that issues of interpretation may arise in any facts and circumstances approach. Nevertheless, the Treasury Department and the IRS generally have refrained from adopting the alternative approach, to wit, adopting precise definitions and quantitative measures for a de minimis standard. Moreover, the inclusion of a precise definition and quantitative measures for determining de minimis value could raise equal, if not greater, concerns in terms of the quantitative threshold and other issues. Thus, the final regulations retain the de minimis standard for determining whether a taxpayer has space and ocean income. If the value of the service attributable to space or ocean activity is de minimis based on the facts and circumstances, the taxpayer will not derive space and ocean income. Nevertheless, the Treasury Department and the IRS agree that more guidance could be provided as to the application of the retained de minimis rule. Accordingly, *Examples 3* and *8* in § 1.863-8(f) of the final regulations ( *Example 7* in the proposed regulations) provide clearer illustrations of when activities performed in space or international water would be considered de minimis for this purpose and when those types of activities would not be considered de minimis. 4. Source Rules for Income From Certain Sales of Property The proposed regulations provided special rules for income from certain sales of property, either when any production occurs in space or international water, or when the sale occurs in space or international water. In either case, section 863(d) and the proposed regulations applied to determine the source of income from the sales of property, and the rules of sections 861(a)(6), 862(a)(6), 863(a), 863(b), and 865 apply only to the extent provided in the proposed regulations. a. Sales of Property Produced in the United States and Sold in Space or International Water Section 1.863-8(b)(3)(ii) of the proposed regulations provided that when the taxpayer both produces property and sells such property, one-half of the taxpayer's gross income will be considered income allocable to production activity and one-half of such gross income will be considered income allocable to sales activity. Taxpayers generally must then apply the rules of section 863(d) and the proposed regulations to determine the source of income allocable to production activity and sales activity. For production activity, the source of gross income allocable to production occurring in space or international water is generally based on the citizenship or residence of the taxpayer, applying the rules of proposed § 1.863-8(b)(1) or (2), as applicable. The source of gross income allocable to production occurring outside space and international water is determined under section 863(b) rather than section 863(d). See Prop. Treas. Reg. § 1.863-8(b)(3)(ii)(B) (referencing Treas. Reg. § 1.863-3(c)(1)). As for sales activity, when property is sold in space or international water, the source of gross income allocable to sales activity is generally based on the citizenship or residence of the taxpayer, applying the rules of proposed § 1.863-8(b)(1) or (2), as applicable. An exception to this general rule applied in cases when the property sold is inventory, within the meaning of section 1221(a)(1), and is sold in space or international water for use, consumption, or disposition outside space, international water, and the United States. In that case, the source of gross income allocable to sales activity is determined under Treas. Reg. § 1.861-7(c) and § 1.863-3(c)(2). Treas. Reg. § 1.861-7(c) and § 1.863-3(c)(2) generally provide for foreign source income where the seller's rights, title, and interest in the property are transferred to the buyer (the title passage rule) outside the United States and the property is not sold for use, consumption, or disposition in the United States. Treas. Reg. § 1.861-7(c) and § 1.863-3(c)(2) also applied to property sold outside space and international water. See Prop. Treas. Reg. § 1.863-8(b)(3)(ii)(D). One commentator believed that because certain U.S. manufacturers, such as U.S. satellite manufacturers, produce property that is sold in space or international water for use, consumption, or disposition in space or international water, they are at a disadvantage relative to U.S. manufacturers of other export property because the former may have U.S. source income with respect to income allocable to sales activity, while the latter may have foreign source income from sales activity. In response to comments on the 2001 proposed regulations, proposed § 1.863- 8(b)(1) was revised to provide that space and ocean income will be foreign source income to the extent the space and ocean income is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries. The Treasury Department and the IRS believe that this change may in many cases mitigate concerns about U.S. manufacturers potentially deriving 100 percent U.S. source income in these cases. Moreover, the Treasury Department and the IRS believe that the rules under the proposed regulations for determining the source of income allocable to sales activity are consistent with legislative intent to assert primary tax jurisdiction over income earned by United States persons that is not subject to foreign tax. See S. REP. NO. 99-313, 1986-3 C.B. 357-358 (“[T]he committee believes the United States should assert primary tax jurisdiction over income earned by its residents that is not within any foreign country's taxing jurisdiction* * *. Moreover, when a U.S. taxpayer conducts activities in space or international waters, foreign countries generally do not tax the income. Thus, the foreign tax credit limitation is inflated by income that is not within any foreign country's tax jurisdiction.”). Based on the legislative history, the Treasury Department and the IRS believe that sales of property in space or international water—with the exception of sales of inventory property in space or international water for use, consumption, or disposition outside space, international water, and the United States—should be considered space or ocean activity and that the source of income from such sales activity should be determined under section 863(d). As a result, no changes were made in response to this comment. b. Purchased Versus Produced Property Sold for Use, Consumption, or Disposition in the United States One commentator questioned the appropriateness of differences in determining the source of sales income depending on whether the taxpayer produced or purchased the property sold. Under the proposed regulations, when property produced by the taxpayer is sold in space or international water, the source of gross income allocable to sales activity is generally based on the citizenship or residence of the taxpayer, applying the rules of proposed § 1.863-8(b)(1) or (2), as applicable (and not the title passage rule)—subject to the foregoing inventory exception for property that will be used, consumed, or disposed of outside space, international water, and the United States. A slightly different rule applied to sales of property that had been purchased by the taxpayer. While the proposed regulations also provided that, for purchased property, the source of gross income allocable to sales activity is generally based on the citizenship or residence of the taxpayer, the inventory exception for purchased property only required that the property be used, consumed, or disposed of outside space and international water. The inventory exceptions for produced and purchased property were intended to produce different results when inventory property is used, consumed, or disposed of in the United States. In such case, the source of produced inventory property sales income is generally based on the citizenship or residence of the taxpayer, applying the rules of proposed § 1.863-8(b)(1) or (2), because the inventory exception did not extend to produced property sold for use, consumption, or disposition in the United States. In contrast, the source of purchased inventory property sales income is generally based on title passage under Treas. Reg. § 1.861-7(c) because the inventory exception did extend to purchased property even if it was sold for use, consumption, or disposition in the United States. The Treasury Department and the IRS believe that this difference between the produced and purchased property rules in the space and ocean context is consistent with the difference in the rules for sales of produced and purchased property outside the space and ocean context. In particular, under section 863(a) and

(b)and the regulations thereunder, if property is produced in the United States and sold for use, consumption, or disposition in the United States, the place of sale will be presumed to be the United States, and income attributable to the sales activity will be U.S. source income. See § 1.863-3(c)(2). There is, however, no comparable rule for purchased property under section 862(a)(6) or the regulations thereunder. Thus, the final regulations simply continue in the space and ocean context the varying treatment elsewhere for sales of purchased property and sales of produced property. In response to comments, however, the produced and purchased property rules have been modified to be similar in structure and style, to better reflect and highlight the differences between these two rules. 5. Allocations Taxpayers must allocate gross income under paragraphs (b)(1) and (b)(2) of proposed § 1.863-8 among U.S., foreign, and space or ocean activities. Under proposed § 1.863-8(b)(3)(ii)(C), allocations are also made between production activity occurring in space or international water and that occurring outside space and international water. Finally, allocations are also made under proposed § 1.863-8(b)(4) between services performed in space or international water and services performed outside space and international water. In performing these allocations, the proposed regulations generally provided that taxpayers should consider the relative value of functions performed, resources employed, or risks assumed in different locations. Moreover, the preamble to the proposed regulations provided that allocations should be based generally on section 482 principles. Commentators noted that little guidance is given as to the mechanics of allocation other than the statement that the principles of section 482 should be used. Commentators stated that allocation of gross income based on section 482 principles will result in added expense, uncertainty, and extra burden on multinational taxpayers who are already required to undertake and update functional analyses and satisfy substantial documentation requirements. While the final regulations were not changed in response to these comments, the Treasury Department and the IRS believe that some clarification is warranted. In suggesting the use of section 482 principles as a guide, the Treasury Department and the IRS intend for taxpayers to adopt a reasonable approach to the allocations required in this area. Taxpayers know their businesses and will generally be in the best position to fashion a reasonable method that most reliably reflects the relative value of functions performed, resources employed, and risks assumed in different locations. In the preamble to the proposed regulations, the Treasury Department and the IRS solicited comments on alternative methods of allocation for particular industries and criteria that could be used to evaluate the reasonableness of such methods. No such comments were received. One commentator noted, however, that the proposed regulations perhaps reflected what taxpayers in these industries have already been doing in order to determine the character and source of their space and ocean income. Consequently, the Treasury Department and the IRS believe that allocations of gross income based on functions performed, resources employed, and risks assumed are appropriate in these circumstances. 6. Separation of a Single Transaction and Aggregation of Multiple Transactions Paragraphs (d)(1)(i) and (d)(1)(ii) of § 1.863-8 of the proposed regulations provided that for purposes of determining space or ocean activity, the Commissioner may separate parts of a single transaction or combine separate transactions into a single transaction. One commentator stated that this is a “one-way” street, as only the Commissioner has the authority to separate or combine transactions for purposes of the proposed regulations. The final regulations do not change this rule. The Treasury Department and the IRS believe taxpayers are not inappropriately disadvantaged by this rule because taxpayers generally have the ability to structure their transactions in line with the economic prospects of their businesses. In addition, the Commissioner's ability to separate or combine transactions is not unfettered. Rather, the Commissioner may only separate or combine transactions to better reflect the value of functions performed, resources employed, or risks assumed. A taxpayer can always protect itself against recharacterization by adopting an arrangement that appropriately reflects the economic realities of a transaction or series of transactions. The taxpayer is clearly in the best position at the outset to structure its arrangements in this manner. In addition, taxpayers traditionally are not permitted to restructure retroactively the form of their completed transactions. Thus, the Treasury Department and the IRS believe that the limited “one-way” rule is appropriate in this case. 7. Income Derived From the Leasing of Shipping Cargo Containers One commentator requested that the Treasury Department and the IRS make clear that the final regulations under section 863(d) do not apply to income derived from the leasing of shipping cargo containers and that such income should be treated as rental income, sourced under sections 861 and 862. This commentator noted that valid arguments also exist for treating income derived from the leasing of shipping cargo containers as transportation income; however, in the commentator's view, the most appropriate treatment is rental income treatment, sourced under sections 861 and 862. The treatment of income derived from the leasing of shipping cargo containers is not covered by these final regulations. Instead, the Treasury Department and the IRS intend to address the treatment of such income explicitly in separate guidance. That guidance may apply section 863(c), section 863(d), or other provisions to source income derived from the leasing of shipping cargo containers. Any such guidance will be prospective in nature. Until such time, the treatment of such income will be determined under existing law. B. Communications Activity Under Section 863(a), (d), and

(e)Section 863(e) governs the source of income from international communications activities (international communications income). International communications income is defined in section 863(e)(2) as income derived from the transmission of communications or data between the United States and a foreign country (or possession of the United States). Section 863(e)(1)(A) provides that any international communications income of a United States person is sourced 50 percent in the United States and 50 percent outside the United States (50/50 source rule). Section 863(e)(1)(A) does not provide for any statutory or regulatory exceptions to this 50/50 source rule. In contrast, section 863(e)(1)(B)(i) provides that any international communications income of a foreign person is sourced outside the United States, except as provided in regulations or in section 863(e)(1)(B)(ii). The exception under section 863(e)(1)(B)(ii) provides that if a foreign person maintains an office or other fixed place of business in the United States, any international communications income attributable to such office or other fixed place of business is U.S. source income. Section 1.863-9 of the proposed regulations generally provided rules for determining the source of international communications income under section 863(e) and other communications income under section 863(a) and (d). Proposed § 1.863-9(b)(1) reflected the rule under section 863(e)(1)(A) that a United States person's international communications income is 50 percent U.S. source income and 50 percent foreign source income. Proposed § 1.863-9(b)(2) reflected the general rule under section 863(e)(1)(B) that a foreign person's international communications income is foreign source income. Consistent with the statutory exception under section 863(e)(1)(B)(ii), proposed § 1.863-9(b)(2)(iii) provided that any international communications income derived by a foreign person, other than a CFC, that is attributable to an office or other fixed place of business of the foreign person in the United States is U.S. source income. International communications income is attributable to an office or other fixed place of business to the extent of functions performed, resources employed, or risks assumed by the office or other fixed place of business. In addition to the statutory exception under section 863(e)(1)(B)(ii), section 863(e)(1)(B) provides general regulatory authority to depart from the general 100 percent foreign source rule for foreign persons. Thus, pursuant to this regulatory authority, the proposed regulations contained additional exceptions to the general rule applicable to foreign persons. In particular, the proposed regulations provided that international communications income derived by a CFC is 50 percent U.S. source income and 50 percent foreign source income (the same as for United States persons). The proposed regulations also provided that international communications income derived by a foreign person, other than a CFC, engaged in a trade or business within the United States is income from sources within the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed within the United States. In addition to the general source rules for international communications income of United States and foreign persons, the proposed regulations also provided rules, applicable to both United States and foreign persons, for income from U.S. communications, foreign communications, space/ocean communications, and communications where endpoints are indeterminate. These rules, as well as modifications to the proposed regulations, are discussed below. 1. Income Characterization Rules for Communications Income Section 1.863-9(h)(3) of the proposed regulations provided that the type of communications activity (and thus the applicable source rule) is determined by identifying the two points between which the taxpayer is paid to transmit the communication. For United States and foreign persons, U.S. communications income is entirely U.S. source income. A taxpayer derives U.S. communications income when the taxpayer is paid to transmit between two points in the United States or between the United States and a point in space or international water. In contrast, foreign communications income is entirely foreign source income for United States and foreign persons. A taxpayer derives foreign communications income when the taxpayer is paid to transmit between two points in a foreign country or countries (or a possession or possessions of the United States), between a foreign country and a possession of the United States, or between a foreign country (or a possession of the United States) and a point in space or international water. Finally, the proposed regulations provided different source rules for international communications income of United States and foreign persons. See section B.3 of this preamble for further discussion. A taxpayer derives international communications income when the taxpayer is paid to transmit between a point in the United States and a point in a foreign country (or a possession of the United States). When a taxpayer cannot establish the two points between which the taxpayer is paid to transmit the communication, § 1.863-9(f) of the proposed regulation provided a default source rule under which all the income derived by the taxpayer from such communications activity is U.S. source income. Commentators stated that the treatment of communications income as U.S. source income when the endpoints are indeterminate is overbroad and harsh, particularly as it relates to foreign taxpayers. Commentators also stated that taxpayers would have to commit significant resources to develop the technology necessary to identify the endpoints of communications. One commentator stated that it is unclear that a reliable system can be created at any expense to establish the endpoints of the transmission under all circumstances. Commentators suggested instead the use of any reasonable method to establish the endpoints between which a taxpayer is paid to transmit the communications. One commentator suggested that the Treasury Department and the IRS consider employing the Industry Issue Resolution Program or Prefiling Agreement Program as aids in the administration of a reasonable method rule. The Treasury Department and the IRS solicited comments on the challenges to identifying the endpoints of communications in specific industries or situations, as well as suggestions for rules that are responsive to these particular challenges. The Treasury Department and the IRS also solicited comments on methods to establish the endpoints of a communication that may be reasonable for particular industries, as well as criteria that may be appropriate to evaluate the reasonableness of such methods. In response, one commentator submitted examples of reasonable methods to establish the endpoints between which a taxpayer is paid to transmit the communications. The examples relied on statistical reports of data such as minutes used, areas of transmission, port locations, and transport charges. This commentator noted that current federal regulations already require telecommunications companies to submit some of these reports to certain governmental agencies, for example, the Federal Communications Commission. In light of the potential complexity in identifying the type of communications activity and in response to comments, the final regulations provide that a taxpayer may satisfy the requirement that the taxpayer establish the two points between which the taxpayer is paid to transmit, and bears the risk of transmitting, the communication by using any consistently applied reasonable method to establish one or both endpoints. In doing so, the taxpayer carries the burden of proof and must establish that the method used is reasonable (taking into account all of the facts and circumstances) and is consistently applied. In satisfying its burden of proof, a taxpayer will need to maintain reasonable records of communications activities. Depending on the facts and circumstances, methods based on, for example, records of port or transport charges, customer billing records, a satellite footprint, or records of termination fees made pursuant to an international settlement agreement may be reasonable. In addition, practices used by taxpayers to classify or categorize certain communications activity in connection with preparation of statements and analyses for the use of management, creditors, minority shareholders, joint ventures, or other parties or governmental agencies in interest may be reliable indicators of the reasonableness of the method chosen, but need not be accorded conclusive weight by the Commissioner. Furthermore, in evaluating the reasonableness of the method chosen, consideration will be given to all the facts and circumstances, including whether the endpoints would otherwise be identifiable absent this reasonable method provision. Along with resultant changes made to the text of the final regulations, several examples have been added to § 1.863-9(j) of the final regulations that illustrate instances where the taxpayer may be able to use reasonable methods to determine the endpoints between which the taxpayer is paid to transmit the communications. 2. The Paid-to-do Rule With Respect to Foreign-Originating Communications Under the proposed regulations, a taxpayer derives income from a certain type of communications activity (for example, foreign communications or international communications) only if the taxpayer is paid to transmit, and bears the risk of transmitting (the paid-to-do rule), the communications of such type. See Prop. Treas. Reg. § 1.863-9(h)(2) and (3). This is the case even if the taxpayer contracts out the transmission function. Commentators stated that application of the paid-to-do rule in all instances would give rise to results that are inconsistent with Congressional intent and may result in excessive amounts of U.S. source income. One commentator noted that in some cases, while it is clear that a communication originated in a foreign country and that a U.S. telecommunications company is paid to terminate the foreign-originating traffic in the United States, it is unclear exactly where the U.S. telecommunications company picked up the communication. This lack of clarity often may be due to legal restrictions in certain foreign countries on ownership of capacity and carriage of transmissions by non-nationals. It can also be due to the fact that the international settlement agreements under which major international telecommunications carriers operate often do not specify where the traffic is picked up or handed off, and in some cases the hand-off point is specified by reference to a mid-point convention, even though the transmission signal, from a technical standpoint, travels from end-to-end with no real points in-between. The commentator further stated that at the time section 863(e) was enacted, U.S. carriers were generally not allowed to own and operate facilities in foreign countries; specifically, no U.S. carrier could carry a foreign-to-U.S. or U.S.-to-foreign transmission end-to-end. Thus, concluded the commentator, Congress focused on the endpoints of the communications rather than where the activities constituting the transmission of communications take place. The commentator suggested a rule that would provide that when a taxpayer is paid to transmit foreign-originating communications from a point outside the United States to a point in the United States, the taxpayer should be deemed to have been paid to transmit the communications from a point in the foreign country in which the communication originated. Upon further consideration, the Treasury Department and the IRS believe that the paid-to-do rule may be over-inclusive in certain cases. Accordingly, the final regulations provide that international communications income also includes income derived from communications activity when the taxpayer is paid to transmit foreign-originating communications (communications with a beginning point in a foreign country or a possession of the United States) from a point in space or international water to a point in the United States. Also, a new example has been added to § 1.863-9(j) of the final regulations to illustrate the changes made in the final regulations with respect to foreign-originating communications. The changes made in the final regulations only affect communications that originate in a foreign country (or a possession of the United States) and does not affect communications that originate in space, international water, or the United States. The Treasury Department and the IRS continue to believe that communications activity is most appropriately characterized based on the two points between which the taxpayer is paid to transmit, and bears the risk of transmitting, the communication. 3. Determining the Source of Communications Income Based on Functions Performed, Resources Employed, or Risks Assumed in a Foreign Country or Countries As discussed above, the proposed regulations provided that the source of communications income is largely dependant on the type of communications activity and the citizenship or residence of the taxpayer. However, the proposed regulations provided for two instances where (in addition to the type of communications activity and the citizenship or residence of the taxpayer) the source of communications income may depend on functions performed, resources employed, or risks assumed. First, the proposed regulations provided that international communications income derived by a foreign person, other than a CFC, that is attributable to an office or other fixed place of business of the foreign person in the United States is U.S. source income. The proposed regulations provided that international communications income is attributable to an office or other fixed place of business to the extent of functions performed, resources employed, or risks assumed by the office or other fixed place of business. Second, the proposed regulations provided that international communications income derived by a foreign person, other than a CFC, engaged in a trade or business within the United States is income from sources within the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed within the United States. Commentators suggested that the final regulations also provide for similar rules that would source communications income as foreign source income based on functions performed, resources employed, or risks assumed in a foreign country or countries. For example, one commentator suggested that the source of international and U.S. communications income derived by any United States or foreign person (including branches, partnerships, and disregarded entities) engaged in a trade or business in a foreign country or countries is income from sources without the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in such foreign country or countries. While the Treasury Department and the IRS recognize that commentators' suggestion to provide for a source rule based on functions performed, resources employed, or risks assumed in a foreign country or countries is reasonable, as explained below, the Treasury Department and the IRS believe that the statute and legislative history preclude such an option. a. International Communications Income Consistent with section 863(e)(1)(A), proposed § 1.863-9(b)(1) provided that international communications income of a United States person is 50 percent U.S. source income and 50 percent foreign source income. One commentator suggested that it may be appropriate, in certain situations, to depart from the 50/50 source rule to provide special rules for foreign activities. According to the commentator, as a result of local regulatory requirements, U.S.-based international telecommunications providers often need to conduct portions of their international business through locally formed entities, and such entities are fully subject to foreign tax on their income. The commentator therefore concluded that a source rule for international communications income based on functions performed, resources employed, or risks assumed in a foreign country or countries is not only equitable but also consistent with treatment accorded to foreign persons having a U.S. fixed placed of business or engaged in a U.S. trade or business. The Treasury Department and the IRS recognize that a source rule based on functions performed, resources employed, or risks assumed may be a reasonable alternative to the 50/50 source rule. Nonetheless, they continue to believe that the 50/50 source rule is the method that must be used to determine the source of a United States person's international communications income. This is because section 863(e)(1)(A) provides for an explicit 50/50 source rule for those persons without exception. In contrast, section 863(e)(1)(B) provides that a foreign person's international communications income is generally sourced outside the United States, except as provided in regulations. The Treasury Department and the IRS believe that the express grant of regulatory authority in the case of foreign persons and the omission of any such authority in the case of United States persons indicate that Congress intended the 50/50 sourcing rule be applied to United States persons without regulatory modification. There is nothing in the statute or legislative history that clearly demonstrates a different intention. In contrast, section 863(e)(1)(B)(ii) provides for a special source rule with respect to foreign persons with an office or other fixed place of business in the United States. A similar rule is not provided with respect to a United States person's foreign activities. Thus, Congress chose a rule that sourced international communications income of foreign persons in certain instances based on the place of their activities, but expressly chose the 50/50 method to source international communications income of United States persons, regardless of the place of their activities. The Treasury Department and the IRS recognize that the statute does not require strict application of the 50/50 source rule for CFCs. Section 863(e)(1)(B) only provides that the international communications income of a foreign person is foreign source income, except as provided in regulations. Consistent with and in light of this regulatory authority, however, the Treasury Department and the IRS believe that the 50/50 source rule is the most appropriate method to determine the source of a CFC's international communications income. This approach addresses the concern of the Treasury Department and the IRS that United States persons may use CFCs to obtain benefits that are inconsistent with the purposes of section 863(e). Consequently, the rules for determining the source of international communications income derived by a CFC should be the same as the rules for determining the source of such income if it is derived by a United States person. In addition, the Treasury Department and the IRS believe that the 50/50 source rule for CFCs, as opposed to the 100 percent U.S. source rule that was originally proposed as part of the 2001 proposed regulations, should limit the potential for multiple levels of taxation that commentators raised with respect to those prior proposed regulations. b. U.S. Communications Income Section 1.863-9(c) of the proposed regulations provided that income derived by a United States or foreign person from U.S. communications activity is entirely from sources within the United States. One commentator noted that a foreign person deriving income from the transmission of communications between a point in the United States and another point in the United States or between a point in the United States and a point in space or international water has 100 percent U.S. source income, even if much or all of the activity involved is outside the United States. In contrast, under the space and ocean rules, a foreign person has U.S. source income only to the extent the income is attributable to functions performed, resources employed, or risks assumed within the United States. Commentators therefore suggested modification of the 100 percent U.S. source rule for U.S. communications income derived by United States and foreign persons to take into account foreign activities. The Treasury Department and the IRS recognize that a source rule based on functions performed, resources employed, or risks assumed may be a reasonable alternative to the 100 percent U.S. source rule for U.S. communications. Nonetheless, the Treasury Department and the IRS believe that Congress did not intend such an option. The legislative history indicates that if a communication is between two points within the United States, the “income attributable thereto is to be sourced *entirely* as U.S. source income.” S. Rep. No. 99-313, 1986-3 C.B. 359 (emphasis added). Congress intended such a result “even if the communication is routed through a satellite located in space, regardless of the satellite's location.” Id. Thus, the legislative history clearly provides that Congress intended that U.S. communications income be sourced entirely as U.S. source income. 4. International Communications Income Derived by a Foreign Person (Other Than a CFC) Proposed § 1.863-9(b)(2) reflected the general rule under section 863(e)(1)(B) that a foreign person's international communications income is foreign source income. Consistent with the statutory exception under section 863(e)(1)(B)(ii), proposed § 1.863-9(b)(2)(iii) provided that any international communications income derived by a foreign person, other than a CFC, that is attributable to an office or other fixed place of business of the foreign person in the United States is U.S. source income. International communications income is attributable to an office or other fixed place of business to the extent of functions performed, resources employed, or risks assumed by the office or other fixed place of business. Pursuant to the grant of regulatory authority under section 863(e)(1)(B), the proposed regulations provided other exceptions to the general rule for foreign persons. The first exception is the 50/50 source rule for CFCs under § 1.863-9(b)(2)(ii) of the proposed regulations, as discussed above. The second exception was provided in § 1.863-9(b)(2)(iv) of the proposed regulations and applied to foreign persons other than CFCs. Section 1.863-9(b)(2)(iv) of the proposed regulations provided that international communications income derived by a foreign person, other than a CFC, engaged in a trade or business within the United States, that is attributable to functions performed, resources employed, or risks assumed within the United States is U.S. source income. One commentator noted that it is unclear why a separate rule is needed for a fixed place of business in the United States and a U.S. trade or business because international communications income attributable to a fixed place of business in the United States should also be attributable to functions performed, resources employed and risks assumed within the United States. As indicated, the office or other fixed place of business rule under § 1.863-9(b)(2)(iii) of the proposed regulations was derived from the statutory language of section 863(e), while the trade or business rule under § 1.863-9(b)(2)(iv) of the proposed regulations was derived from the express grant of regulatory authority to source international communications income of foreign persons as other than foreign source. The Treasury Department and the IRS recognize that in most situations, the latter trade or business rule would indeed subsume the former fixed place of business rule, but still believe that the later rule serves an important function. The trade or business rule addresses the concern of the Treasury Department and the IRS that a foreign person could avoid a U.S. fixed place of business under section 863(e)(1)(B)(ii), yet engage in significant communications activity in the United States. The Treasury Department and the IRS believe that Congress intended that a foreign person engaged in substantial business in the United States be subject to U.S. tax on that communications activity. 5. Allocations Section 1.863-9(h)(1)(ii) of the proposed regulations provided that to the extent that a taxpayer's transaction consists in part of non-de minimis communications activity and in part of non-de minimis non-communications activity, each part of the transaction must be treated as a separate transaction. Gross income is then allocated to each communications activity transaction and each non-communications activity transaction to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in each such activity. Moreover, the Treasury Department and the IRS suggested in the preamble to the proposed regulations that allocations of gross income should be based generally on section 482 principles. One commentator stated that the complexities inherent in allocating income, based on section 482 principles, between the separated transactions are significant. While the final regulations were not changed in response to this comment, as in the case of allocations for space and ocean income, the Treasury Department and the IRS believe that some clarification is warranted. In suggesting the use of section 482 principles as a guide, the Treasury Department and the IRS intend for taxpayers to adopt a reasonable approach to the allocations required in this area. Taxpayers know their businesses and will generally be in the best position to fashion a reasonable method that most reliably reflects the relative value of functions performed, resources employed, and risks assumed in different locations. In the preamble to the proposed regulations, the Treasury Department and the IRS solicited comments on alternative methods of allocation for particular industries and criteria that could be used to evaluate the reasonableness of such methods. No such comments were received. One commentator noted, however, that the proposed regulations perhaps reflected what taxpayers in these industries have already been doing in order to determine the character and source of their communications income. Consequently, as in the case of space and ocean income, the Treasury Department and the IRS believe that allocations of gross income based on functions performed, resources employed, and risks assumed are appropriate in these circumstances. 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 pursuant to that Order is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the rules provided in these regulations principally affect large multinational corporations that pay foreign taxes on income derived from substantial foreign operations and that use these and any other applicable source rules in determining their foreign tax credit. Accordingly, a Regulatory Flexibility Act assessment is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the NPRM preceding these 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 H. Michael Huynh of the Office of the Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development. List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 602 Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1 and 602 are amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 is amended by adding entries in numerical order to read, in part, as follows: Authority: 26 U.S.C. 7805 * * *. Section 1.863-8 also issued under 26 U.S.C. 863(a),

(b)and (d). * * * Section 1.863-9 also issued under 26 U.S.C. 863(a),

(d)and (e). * * * **Par. 2.** Section 1.863-3 is amended by: 1. Adding a sentence after the first sentence in paragraph (a)(1). 2. Adding a sentence at the end of paragraph (c)(1)(i)(A). 3. Adding a sentence after the first sentence in paragraph (c)(2). The additions read as follows: § 1.863-3 Allocation and apportionment of income from certain sales of inventory.

(a)* * *

(1)* * * To determine the source of income from sales of property produced by the taxpayer, when the property is either produced in whole or in part in space or on or under water not within the jurisdiction (as recognized by the United States) of a foreign country, possession of the United States, or the United States (in international water), or is sold in space or international water, the rules of § 1.863-8 apply, and the rules of this section do not apply except to the extent provided in § 1.863-8. * * *

(c)* * *

(1)* * *

(i)* * *

(A)* * * For rules regarding the source of income when production takes place, in whole or in part, in space or international water, the rules of § 1.863-8 apply, and the rules of this section do not apply except to the extent provided in § 1.863-8.

(2)* * * Notwithstanding any other provision, for rules regarding the source of income when a sale takes place in space or international water, the rules of § 1.863-8 apply, and the rules of this section do not apply except to the extent provided in § 1.863-8. * * * **Par. 3.** Sections 1.863-8 and 1.863-9 are added to read as follows: § 1.863-8 Source of income derived from space and ocean activity under section 863(d).

(a)*In general.* Income of a United States or a foreign person derived from space and ocean activity (space and ocean income) is sourced under the rules of this section, notwithstanding any other provision, including sections 861, 862, 863, and 865. A taxpayer will not be considered to derive income from space or ocean activity, as defined in paragraph

(d)of this section, if such activity is performed by another person, subject to the rules for the treatment of consolidated groups in § 1.1502-13.

(b)*Source of gross income from space and ocean activity* —(1) *Space and ocean income derived by a United States person* . Space and ocean income derived by a United States person is income from sources within the United States. However, space and ocean income derived by a United States person is income from sources without the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries.

(2)*Space and ocean income derived by a foreign person* —(i) *In general* . Space and ocean income derived by a person other than a United States person is income from sources without the United States, except as otherwise provided in this paragraph (b)(2).

(ii)*Space and ocean income derived by a controlled foreign corporation.* Space and ocean income derived by a controlled foreign corporation within the meaning of section 957

(CFC)is income from sources within the United States. However, space and ocean income derived by a CFC is income from sources without the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries.

(iii)*Space and ocean income derived by foreign persons engaged in a trade or business within the United States.* Space and ocean income derived by a foreign person (other than a CFC) engaged in a trade or business within the United States is income from sources within the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed within the United States.

(3)*Source rules for income from certain sales of property* —(i) *Sales of purchased property.* When a taxpayer sells purchased property in space or international water, the source of gross income from the sale generally will be determined under paragraph (b)(1) or

(2)of this section, as applicable. However, if such property is inventory property within the meaning of section 1221(a)(1) (inventory property) and is sold for use, consumption, or disposition outside space and international water, the source of income from the sale will be determined under § 1.861-7(c).

(ii)*Sales of property produced by the taxpayer* —(A) *General.* If the taxpayer both produces property and sells such property, the taxpayer must allocate gross income from such sales between production activity and sales activity under the 50/50 method. Under the 50/50 method, one-half of the taxpayer's gross income will be considered income allocable to production activity, and the source of that income will be determined under paragraph (b)(3)(ii)(B) or

(C)of this section. The remaining one-half of such gross income will be considered income allocable to sales activity, and the source of that income will be determined under paragraph (b)(3)(ii)(D) of this section.

(B)*Production only in space or international water, or only outside space and international water.* When production occurs only in space or international water, income allocable to production activity is sourced under paragraph (b)(1) or

(2)of this section, as applicable. When production occurs only outside space and international water, income allocable to production activity is sourced under § 1.863-3(c)(1).

(C)*Production both in space or international water and outside space and international water.* When property is produced both in space or international water and outside space and international water, gross income allocable to production activity must be allocated to production occurring in space or international water and production occurring outside space and international water. Such gross income is allocated to production activity occurring in space or international water to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in space or international water. The balance of such gross income is allocated to production activity occurring outside space and international water. The source of gross income allocable to production activity in space or international water is determined under paragraph (b)(1) or

(2)of this section, as applicable. The source of gross income allocated to production activity occurring outside space and international water is determined under § 1.863-3(c)(1).

(D)*Source of income allocable to sales activity.* When property produced by the taxpayer is sold outside space and international water, the source of gross income allocable to sales activity will be determined under §§ 1.861-7(c) and 1.863-3(c)(2). When property produced by the taxpayer is sold in space or international water, the source of gross income allocable to sales activity generally will be determined under paragraph (b)(1) or

(2)of this section, as applicable. However, if such property is inventory property within the meaning of section 1221(a)(1) and is sold in space or international water for use, consumption, or disposition outside space, international water, and the United States, the source of gross income allocable to sales activity will be determined under §§ 1.861-7(c) and 1.863-3(c)(2).

(4)*Special rule for determining the source of gross income from services.* To the extent a transaction characterized as the performance of a service constitutes a space or ocean activity, as determined under paragraph (d)(2)(ii) of this section, the source of gross income derived from such transaction is determined under paragraph (b)(1) or

(2)of this section.

(5)*Special rule for determining source of income from communications activity (other than income from international communications activity).* Space and ocean activity, as defined in paragraph

(d)of this section, includes activity that occurs in space or international water that is characterized as a communications activity as defined in § 1.863-9(h)(1) (other than international communications activity). The source of space and ocean income that is also communications income as defined in § 1.863-9(h)(2) (but not space/ocean communications income as defined in § 1.863-9(h)(3)(v)) is determined under the rules of § 1.863-9(c), (d), and (f), as applicable, rather than under paragraph

(b)of this section. The source of space and ocean income that is also space/ocean communications income as defined in § 1.863-9(h)(3)(v) is determined under the rules of paragraph

(b)of this section. See § 1.863-9(e).

(c)*Taxable income.* When a taxpayer allocates gross income under paragraph (b)(1), (b)(2), (b)(3)(ii)(C), or (b)(4) of this section, the taxpayer must allocate expenses, losses, and other deductions as prescribed in §§ 1.861-8 through 1.861-14T to the class or classes of gross income that include the income so allocated in each case. A taxpayer must then apply the rules of §§ 1.861-8 through 1.861-14T to apportion properly amounts of expenses, losses, and other deductions so allocated to such gross income between gross income from sources within the United States and gross income from sources without the United States.

(d)*Space and ocean activity* —(1) *Definition* —(i) *Space activity.* In general, space activity is any activity conducted in space. For purposes of this section, space means any area not within the jurisdiction (as recognized by the United States) of a foreign country, possession of the United States, or the United States, and not in international water. For purposes of determining space activity, the Commissioner may separate parts of a single transaction into separate transactions or combine separate transactions as part of a single transaction. Paragraph (d)(3) of this section lists specific exceptions to the general definition of space activity. Activities that constitute space activity include but are not limited to—

(A)Performance and provision of services in space, as defined in paragraph (d)(2)(ii) of this section;

(B)Leasing of equipment located in space, including spacecraft (for example, satellites) or transponders located in space;

(C)Licensing of technology or other intangibles for use in space;

(D)Production, processing, or creation of property in space, as defined in paragraph (d)(2)(i) of this section;

(E)Activity occurring in space that is characterized as communications activity (other than international communications activity) under § 1.863-9(h)(1);

(F)Underwriting income from the insurance of risks on activities that produce space income; and

(G)Sales of property in space (see § 1.861-7(c)).

(ii)*Ocean activity.* In general, ocean activity is any activity conducted on or under water not within the jurisdiction (as recognized by the United States) of a foreign country, possession of the United States, or the United States (collectively, in international water). For purposes of determining ocean activity, the Commissioner may separate parts of a single transaction into separate transactions or combine separate transactions as part of a single transaction. Paragraph (d)(3) of this section lists specific exceptions to the general definition of ocean activity. Activities that constitute ocean activity include but are not limited to—

(A)Performance and provision of services in international water, as defined in paragraph (d)(2)(ii) of this section;

(B)Leasing of equipment located in international water, including underwater cables;

(C)Licensing of technology or other intangibles for use in international water;

(D)Production, processing, or creation of property in international water, as defined in paragraph (d)(2)(i) of this section;

(E)Activity occurring in international water that is characterized as communications activity (other than international communications activity) under § 1.863-9(h)(1);

(F)Underwriting income from the insurance of risks on activities that produce ocean income;

(G)Sales of property in international water (see § 1.861-7(c));

(H)Any activity performed in Antarctica;

(I)The leasing of a vessel that does not transport cargo or persons for hire between ports-of-call (for example, the leasing of a vessel to engage in research activities in international water); and

(J)The leasing of drilling rigs, extraction of minerals, and performance and provision of services related thereto, except as provided in paragraph (d)(3)(ii) of this section.

(2)*Determining a space or ocean activity* —(i) *Production of property in space or international water.* For purposes of this section, production activity means an activity that creates, fabricates, manufactures, extracts, processes, cures, or ages property within the meaning of section 864(a) and § 1.864-1.

(ii)*Special rule for performance of services* —(A) *General.* Except as provided in paragraph (d)(2)(ii)(B) of this section, if a transaction is characterized as the performance of a service, then such service will be treated as a space or ocean activity in its entirety when any part of the service is performed in space or international water. Services are performed in space or international water if functions are performed, resources are employed, or risks are assumed in space or international water, regardless of whether performed by personnel, equipment, or otherwise.

(B)*Exception to the general rule.* If the taxpayer can demonstrate the value of the service attributable to performance occurring in space or international water, and the value of the service attributable to performance occurring outside space and international water, then such service will be treated as space or ocean activity only to the extent of the activity performed in space or international water. The value of the service is attributable to performance occurring in space or international water to the extent the performance of the service, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in space or international water. In addition, if the taxpayer can demonstrate, based on all the facts and circumstances, that the value of the service attributable to performance in space and international water is de minimis, such service will not be treated as space or ocean activity.

(3)*Exceptions to space or ocean activity.* Space or ocean activity does not include the following types of activities:

(i)Any activity giving rise to transportation income as defined in section 863(c).

(ii)Any activity with respect to mines, oil and gas wells, or other natural deposits, to the extent the mines, wells, or natural deposits are located within the jurisdiction (as recognized by the United States) of any country, including the United States and its possessions.

(iii)Any activity giving rise to international communications income as defined in § 1.863-9(h)(3)(ii).

(e)*Treatment of partnerships.* This section is applied at the partner level.

(f)*Examples.* The following examples illustrate the rules of this section: Example 1. *Space activity—activity occurring on land and in space—(i) Facts.* S, a United States person, owns satellites in orbit. S leases one of its satellites to A. S, as lessor, will not operate the satellite. Part of S's performance as lessor in this transaction occurs on land. Assume that the combination of S's activities is characterized as the lease of equipment.

(ii)*Analysis.* Because the leased equipment is located in space, the transaction is defined in its entirety as space activity under paragraph (d)(1)(i) of this section. Income derived from the lease will be sourced under paragraph (b)(1) of this section. Under paragraph (b)(1) of this section, S's space income is sourced outside the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries. Example 2. *Space activity* —(i) *Facts.* X is an Internet service provider. X offers a service that permits a customer

(C)to connect to the Internet via a telephone call, initiated by the modem of C's personal computer, to a control center. X transmits information requested by C to C's personal computer, in part using satellite capacity leased by X from S. X performs the uplink and downlink functions. X charges its customers a flat monthly fee. Assume that neither X nor S derive international communications income within the meaning of § 1.863-9(h)(3)(ii). In addition, assume that X is able to demonstrate, pursuant to paragraph (d)(2)(ii)(B) of this section, the extent to which the value of the service is attributable to functions performed, resources employed, and risks assumed in space.

(ii)*Analysis.* Under paragraph (d)(2)(ii) of this section, the service performed by X constitutes space activity to the extent the value of the service is attributable to functions performed, resources employed, and risks assumed in space. To the extent the service performed by X constitutes space activity, the source of X's income from the service transaction is determined under paragraph

(b)of this section. To the extent the service performed by X does not constitute space or ocean activity, the source of X's income from the service is determined under sections 861, 862, and 863, as applicable. To the extent that X derives space and ocean income that is also communications income within the meaning of § 1.863-9(h)(2), the source of X's income is determined under paragraph

(b)of this section and § 1.863-9(c), (d), and (f), as applicable, as provided in paragraph (b)(5) of this section. S derives space and ocean income that is also communications income within the meaning of § 1.863-9(h)(2), and the source of S's income is therefore determined under paragraph

(b)of this section and § 1.863-9(c), (d), and (f), as applicable, as provided in paragraph (b)(5) of this section. Example 3. *Services as space activity—de minimis value attributable to performance occurring in space* —(i) *Facts.* R owns a retail outlet in the United States. R engages S to provide a security system for R's premises. S operates its security system by transmitting images from R's premises directly to a satellite, and from the satellite to a group of S employees located in Country B, who monitor the premises by viewing the transmitted images. The satellite is used as a medium of delivery and not as a method of surveillance. O provides S with transponder capacity on O's satellite, which S uses to transmit those images. Assume that S's transaction with R is characterized as the performance of a service. Assume that O's provision of transponder capacity is also viewed as the provision of a service. Assume also that S is able to demonstrate, pursuant to § 1.863-9(h)(1), that the value of the transaction with R attributable to communications activities is de minimis.

(ii)*Analysis.* S derives income from providing monitoring services. S can demonstrate, pursuant to paragraph (d)(2)(ii) of this section, that based on all the facts and circumstances, the value of S's service transaction attributable to performance in space is de minimis. Thus, S is not treated as engaged in a space activity, and none of S's income from the service transaction is space income. In addition, because S demonstrates that the value of the transaction with R attributable to communications activities is de minimis, S is not required under § 1.863-9(h)(1)(ii) to treat the transaction as separate communications and non-communications transactions, and none of S's gross income from the transaction is treated as communications income within the meaning of § 1.863-9(h)(2). O's provision of transponder capacity is viewed as the provision of a service. Based on all the facts and circumstances, the value of O's service transaction attributable to performance in space is not de minimis. Thus, O's activity will be considered space activity, pursuant to paragraph (d)(2)(ii) of this section, to the extent the value of the services transaction is attributable to performance in space (unless O's activity in space is international communications activity). To the extent that O derives communications income, the source of such income is determined under paragraph

(b)of this section and § 1.863-9(b), (c), (d), and (f), as applicable, as provided in paragraph (b)(5) of this section. R does not derive any income from space activity. Example 4. *Space activity* —(i) *Facts.* L, a domestic corporation, offers programming and certain other services to customers located both in the United States and in foreign countries. Assume that L's provision of programming and other services in this *Example* 4 is characterized as the provision of a service, and that no part of the service transaction occurs in space or international water. Assume that the delivery of the programming constitutes a separate transaction also characterized as the performance of a service. L uses satellite capacity acquired from S to deliver the programming service directly to customers' television sets. L performs the uplink and downlink functions, so that part of the value of the delivery transaction derives from functions performed and resources employed in space. Assume that these contributions to the value of the delivery transaction occurring in space are not considered de minimis under paragraph (d)(2)(ii)(B) of this section. Customer C pays L to provide and deliver programming to C's residence in the United States. Assume S's provision of satellite capacity in this *Example 4* is viewed as the provision of a service, and also that S does not derive international communications income within the meaning of § 1.863-9(h)(3)(ii).

(ii)*Analysis.* S's activity will be considered space activity. To the extent that S derives space and ocean income that is also communications income under § 1.863-9(h)(2), the source of S's income is determined under paragraph

(b)of this section and § 1.863-9(c), (d), and (f), as applicable, as provided in paragraph (b)(5) of this section. On these facts, L's activities are treated as two separate service transactions: the provision of programming (and other services), and the delivery of programming. L's income derived from provision of programming and other services is not income derived from space activity. L's delivery of programming and other services is considered space activity, pursuant to paragraph (d)(2)(ii) of this section, to the extent the value of the delivery transaction is attributable to performance in space. To the extent that the delivery of programming is treated as a space activity, the source of L's income derived from the delivery transaction is determined under paragraph (b)(1) of this section, as provided in paragraph (b)(4) of this section. To the extent that L derives space and ocean income that is also communications income within the meaning of § 1.863-9(h)(2), the source of such income is determined under paragraph

(b)of this section and § 1.863-9(b), (c), (d), (e), and (f), as applicable, as provided in paragraph (b)(5) of this section. Example 5. *Space activity* —(i) *Facts.* The facts are the same as in Example 4, except that L does not deliver the programming service directly but instead engages R, a domestic corporation specializing in content delivery, to deliver by transmission its programming. For all portions of a transmission which require satellite capacity, R, in turn, contracts out such functions to S. S performs the uplink and downlink functions, so that part of the value of the delivery transaction derives from functions performed and resources employed in space.

(ii)*Analysis.* L's activity will not be considered space activity because none of L's activity occurs in space. Thus, L does not derive any space and ocean income. L does, however, derive communications income within the meaning of § 1.863-9(h)(2). This is the case even though L does not perform the transmission function because L is paid by Customer C to transmit, and bears the risk of transmitting, the communications or data. To the extent that L's activity consists in part of non-de minimis communications and non-de minimis non-communications activity, each part of the transaction must be treated as a separate transaction and gross income is allocated accordingly under § 1.863-9(h)(1)(ii). In addition, L must also allocate expenses, losses, and other deductions, for example, payments to R, to the class or classes of gross income that include the income so allocated. R's activity will not be considered space activity. Since R contracts out all of the functions involving satellite capacity to S, no part of R's activity occurs in space. Thus, R does not derive any space and ocean income. R does, however, derive communications income within the meaning of § 1.863-9(h)(2). This is the case even though R does not perform the transmission function because R is paid by L to transmit, and bears the risk of transmitting, the communications or data. S's activity will be considered space activity. To the extent that S derives space and ocean income that is also communications income within the meaning of § 1.863-9(h)(2), the source of such income is determined under paragraph

(b)of this section and § 1.863-9(b), (c), (d), (e), and (f), as applicable, as provided in paragraph (b)(5) of this section. Example 6. *Space activity—treatment of land activity—*

(i)*Facts.* S, a United States person, offers remote imaging products and services to its customers. In year 1, S uses its satellite's remote sensors to gather data on certain geographical terrain. In year 3, C, a construction development company, contracts with S to obtain a satellite image of an area for site development work. S pulls data from its archives and transfers to C the images gathered in year 1, in a transaction that is characterized as a sale of the data. S's rights, title, and interest in the data pass to C in the United States. Before transferring the images to C, S uses computer software in its land-based office to enhance the images so that the images can be used.

(ii)*Analysis.* The collection of data and creation of images in space is characterized as the creation of property in space. Because S both produces and sells the data, S must allocate gross income from the sale of the data between production activity and sales activity under the 50/50 method of paragraph (b)(3)(ii)(A). The source of S's income allocable to production activity is determined under paragraph (b)(3)(ii)(C) of this section because production activities occur both in space and on land. The source of S's income attributable to sales activity is determined under paragraph (b)(3)(ii)(D) of this section (by reference to § 1.863-3(c)(2)) as U.S. source income because S's rights, title, and interest in the data pass to C in the United States. Example 7. *Use of intangible property in space* —(i) *Facts.* X acquires a license to use a particular satellite slot or orbit, which X sublicenses to C. C pays X a royalty.

(ii)*Analysis.* Because the royalty is paid for the right to use intangible property in space, the source of the royalty paid by C to X is determined under paragraph

(b)of this section. Example 8. *Performance of services* —(i) *Facts.* E, a domestic corporation, operates satellites with sensing equipment that can determine how much heat and light particular plants emit and reflect. Based on the data, E will provide F, a U.S. farmer, a report analyzing the data, which F will use in growing crops. E analyzes the data from offices located in the United States. Assume that E's combined activities are characterized as the performance of services.

(ii)*Analysis.* Based on all the facts and circumstances, the value of E's service transaction attributable to performance in space is not de minimis. Thus, E's activities will be considered space activities, pursuant to paragraph (d)(2)(ii) of this section, to the extent the value of E's service transaction is attributable to performance in space. To the extent E's service transaction constitutes a space activity, the source of E's income derived from the service transaction will be determined under paragraph (b)(4) of this section, by reference to paragraph (b)(1) of this section. To the extent that E's service transaction does not constitute a space or ocean activity, the source of E's income derived from the service transaction is determined under sections 861, 862, and 863, as applicable. Example 9. *Separate transactions* —(i) Facts. The same facts as Example 8, except that E provides the raw data to F in a transaction characterized as a sale of a copyrighted article. In addition, E provides an analysis in the form of a report to F. The price F pays E for the raw data is separately stated.

(ii)*Analysis.* To the extent that the provision of raw data and the analysis of the data are each treated as separate transactions, the source of income from the production and sale of data is determined under paragraph (b)(3)(ii) of this section. The provision of services would be analyzed in the same manner as in *Example 8.* Example 10. *Sale of property in international water* —(i) *Facts.* T purchased and owns transatlantic cable that lies in international water. T sells the cable to B, with T's rights, title, and interest in the cable passing to B in international water. Assume that the transatlantic cable is not inventory property within the meaning of section 1221(a)(1).

(ii)*Analysis.* Because T's rights, title, and interest in the property pass to B in international water, the sale takes place in international water under § 1.861-7(c), and the sale transaction is ocean activity under paragraph (d)(1)(ii) of this section. The source of T's sales income is determined under paragraph (b)(3)(i) of this section, by reference to paragraph (b)(1) or

(2)of this section. Example 11. *Sale of property in space* —(i) *Facts.* S, a United States person, manufactures a satellite in the United States and sells it to a customer who is not a United States person. S's rights, title, and interest in the satellite pass to the customer in space.

(ii)*Analysis.* Because S's rights, title, and interest in the satellite pass to the customer in space, the sale takes place in space under § 1.861-7(c), and the sale transaction is space activity under paragraph (d)(1)(i) of this section. The source of income derived from the sale of the satellite in space is determined under paragraph (b)(3)(ii) of this section, with the source of income allocable to production activity determined under paragraphs (b)(3)(ii)(A) and

(B)of this section, and the source of income allocable to sales activity determined under paragraphs (b)(3)(ii)(A) and

(D)of this section. Under paragraph (b)(1) of this section, S's space income is sourced outside the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in a foreign country or countries. Example 12. *Sale of property in space* —(i) *Facts.* S has a right to operate from a particular position (satellite slot or orbit) in space. S sells the right to operate from that position to P. Assume that the sale of the satellite slot is characterized as a sale of property and that S's rights, title, and interest in the satellite slot pass to P in space.

(ii)*Analysis.* The sale of the satellite slot takes place in space under § 1.861-7(c) because S's rights, title, and interest in the satellite slot pass to P in space. The sale of the satellite slot is space activity under paragraph (d)(1)(i) of this section, and income or gain from the sale is sourced under paragraph (b)(3)(i) of this section, by reference to paragraph (b)(1) or

(2)of this section. Example 13. *Source of income of a foreign person* —(i) *Facts.* FP, a foreign corporation that is not a CFC, derives income from the operation of satellites. FP operates ground stations in the United States and in foreign Country FC. Assume that FP is considered engaged in a trade or business within the United States based on FP's operation of the ground station in the United States.

(ii)*Analysis.* Under paragraph (b)(2)(iii) of this section, FP's space income is sourced in the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed within the United States. Example 14. *Source of income of a foreign person* —(i) *Facts.* FP, a foreign corporation that is not a CFC, operates remote sensing satellites in space to collect data and images for its customers. FP uses an independent agent, A, in the United States who provides marketing, order-taking, and other customer service functions. Assume that FP is considered engaged in a trade or business within the United States based on A's activities on FP's behalf in the United States.

(g)*Reporting and documentation requirements* —(1) *In general.* A taxpayer making an allocation of gross income under paragraph (b)(1), (b)(2), (b)(3)(ii)(C), or (b)(4) of this section must satisfy the requirements in paragraphs (g)(2), (3), and

(4)of this section.

(2)*Required documentation.* In all cases, a taxpayer must prepare and maintain documentation in existence when its return is filed regarding the allocation of gross income and allocation and apportionment of expenses, losses, and other deductions, the methodologies used, and the circumstances justifying use of those methodologies. The taxpayer must make available such documentation within 30 days upon request.

(3)*Access to software.* If the taxpayer or any third party used any computer software, within the meaning of section 7612(d), to allocate gross income, or to allocate or apportion expenses, losses, and other deductions, the taxpayer must make available upon request—

(i)Any computer software executable code, within the meaning of section 7612(d), used for such purposes, including an executable copy of the version of the software used in the preparation of the taxpayer's return (including any plug-ins, supplements, etc.) and a copy of all related electronic data files. Thus, if software subsequently is upgraded or supplemented, a separate executable copy of the version used in preparing the taxpayer's return must be retained;

(ii)Any related computer software source code, within the meaning of section 7612(d), acquired or developed by the taxpayer or a related person, or primarily for internal use by the taxpayer or such person rather than for commercial distribution; and

(iii)In the case of any spreadsheet software or similar software, any formulae or links to supporting worksheets.

(4)*Use of allocation methodology.* In general, when a taxpayer allocates gross income under paragraph (b)(1), (b)(2), (b)(3)(ii)(C), or (b)(4) of this section, it does so by making the allocation on a timely filed original return (including extensions). However, a taxpayer will be permitted to make changes to such allocations made on its original return with respect to any taxable year for which the statute of limitations has not closed as follows:

(i)In the case of a taxpayer that has made a change to such allocations prior to the opening conference for the audit of the taxable year to which the allocation relates or who makes such a change within 90 days of such opening conference, if the IRS issues a written information document request asking the taxpayer to provide the documents and such other information described in paragraphs (g)(2) and

(3)of this section with respect to the changed allocations and the taxpayer complies with such request within 30 days of the request, then the IRS will complete its examination, if any, with respect to the allocations for that year as part of the current examination cycle. If the taxpayer does not provide the documents and information described in paragraphs (g)(2) and

(3)of this section within 30 days of the request, then the procedures described in paragraph (g)(4)(ii) of this section shall apply.

(ii)If the taxpayer changes such allocations more than 90 days after the opening conference for the audit of the taxable year to which the allocations relate or the taxpayer does not provide the documents and information with respect to the changed allocations as requested in accordance with paragraphs (g)(2) and

(3)of this section, then the IRS will, in a separate cycle, determine whether an examination of the taxpayer's allocations is warranted and complete any such examination. The separate cycle will be worked as resources are available and may not have the same estimated completion date as the other issues under examination for the taxable year. The IRS may ask the taxpayer to extend the statute of limitations on assessment and collection for the taxable year to permit examination of the taxpayer's method of allocation, including an extension limited, where appropriate, to the taxpayer's method of allocation.

(h)*Effective date.* This section applies to taxable years beginning on or after December 27, 2006. § 1.863-9 Source of income derived from communications activity under section 863(a), (d), and (e).

(a)*In general.* Income of a United States or a foreign person derived from each type of communications activity, as defined in paragraph (h)(3) of this section, is sourced under the rules of this section, notwithstanding any other provision including sections 861, 862, 863, and 865. Notwithstanding that a communications activity would qualify as space or ocean activity under section 863(d) and the regulations thereunder, the source of income derived from such communications activity is determined under this section, and not under section 863(d) and the regulations thereunder, except to the extent provided in § 1.863-8(b)(5).

(b)*Source of international communications income—(1) International communications income derived by a United States person.* Income derived from international communications activity (international communications income) by a United States person is one-half from sources within the United States and one-half from sources without the United States.

(2)*International communications income derived by foreign persons* —(i) *In general.* International communications income derived by a person other than a United States person is, except as otherwise provided in this paragraph (b)(2), wholly from sources without the United States.

(ii)*International communications income derived by a controlled foreign corporation.* International communications income derived by a controlled foreign corporation within the meaning of section 957

(CFC)is one-half from sources within the United States and one-half from sources without the United States.

(iii)*International communications income derived by foreign persons with a fixed place of business in the United States.* International communications income derived by a foreign person, other than a CFC, that is attributable to an office or other fixed place of business of the foreign person in the United States is from sources within the United States. The principles of section 864(c)(5) apply in determining whether a foreign person has an office or fixed place of business in the United States. See § 1.864-7. International communications income is attributable to an office or other fixed place of business to the extent of functions performed, resources employed, or risks assumed by the office or other fixed place of business.

(iv)*International communications income derived by foreign persons engaged in a trade or business within the United States.* International communications income derived by a foreign person (other than a CFC) engaged in a trade or business within the United States is income from sources within the United States to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed within the United States.

(c)*Source of U.S. communications income.* Income derived by a United States or foreign person from U.S. communications activity is from sources within the United States.

(d)*Source of foreign communications income.* Income derived by a United States or foreign person from foreign communications activity is from sources without the United States.

(e)*Source of space/ocean communications income.* The source of income derived by a United States or foreign person from space/ocean communications activity is determined under section 863(d) and the regulations thereunder.

(f)*Source of communications income when taxpayer cannot establish the two points between which the taxpayer is paid to transmit the communication.* Income derived by a United States or foreign person from communications activity, when the taxpayer cannot establish the two points between which the taxpayer is paid to transmit the communication as required in paragraph (h)(3)(i) of this section, is from sources within the United States.

(g)*Taxable income.* When a taxpayer allocates gross income under paragraph (b)(2)(iii), (b)(2)(iv), or (h)(1)(ii) of this section, the taxpayer must allocate expenses, losses, and other deductions as prescribed in §§ 1.861-8 through 1.861-14T to the class or classes of gross income that include the income so allocated in each case. A taxpayer must then apply the rules of §§ 1.861-8 through 1.861-14T properly to apportion amounts of expenses, losses, and other deductions so allocated to such gross income between gross income from sources within the United States and gross income from sources without the United States. For amounts of expenses, losses, and other deductions allocated to gross income derived from international communications activity, when the source of income is determined under the 50/50 method of paragraph (b)(1) or (b)(2)(ii) of this section, taxpayers generally must apportion expenses, losses, and other deductions between sources within the United States and sources without the United States pro rata based on the relative amounts of gross income from sources within the United States and gross income from sources without the United States. However, the preceding sentence shall not apply to research and experimental expenditures qualifying under § 1.861-17, which are to be allocated and apportioned under the rules of that section.

(h)*Communications activity and income derived from communications activity* —(1) *Communications activity* —(i) *General rule.* For purposes of this part, *communications activity* consists solely of the delivery by transmission of communications or data (communications). Delivery of communications other than by transmission (for example, by delivery of physical packages and letters) is not communications activity within the meaning of this section. Communications activity also includes the provision of capacity to transmit communications. Provision of content or any other additional service provided along with, or in connection with, a non-de minimis communications activity must be treated as a separate non-communications activity unless de minimis. Communications activity or non-communications activity will be treated as de minimis to the extent, based on the facts and circumstances, the value attributable to such activity is *de minimis* .

(ii)*Separate transaction.* To the extent that a taxpayer's transaction consists in part of non-de minimis communications activity and in part of non-de minimis non-communications activity, each such part of the transaction must be treated as a separate transaction. Gross income is allocated to each such communications activity transaction and non-communications activity transaction to the extent the income, based on all the facts and circumstances, is attributable to functions performed, resources employed, or risks assumed in each such activity.

(2)*Income derived from communications activity. Income derived from communications activity* (communications income) is income derived from the delivery by transmission of communications, including income derived from the provision of capacity to transmit communications. Income may be considered derived from a communications activity even if the taxpayer itself does not perform the transmission function, but in all cases, the taxpayer derives communications income only if the taxpayer is paid to transmit, and bears the risk of transmitting, the communications.

(3)*Determining the type of communications activity* —(i) *In general.* Whether income is derived from international communications activity, U.S. communications activity, foreign communications activity, or space/ ocean communications activity is determined by identifying the two points between which the taxpayer is paid to transmit the communication. The taxpayer must establish the two points between which the taxpayer is paid to transmit, and bears the risk of transmitting, the communication. Whether the taxpayer contracts out part or all of the transmission function is not relevant. A taxpayer may satisfy the requirement that the taxpayer establish the two points between which the taxpayer is paid to transmit, and bears the risk of transmitting, the communication by using any consistently applied reasonable method to establish one or both endpoints. In evaluating the reasonableness of such method, consideration will be given to all the facts and circumstances, including whether the endpoints would otherwise be identifiable absent this reasonable method provision and the reliability of the data. Depending on the facts and circumstances, methods based on, for example, records of port or transport charges, customer billing records, a satellite footprint, or records of termination fees made pursuant to an international settlement agreement may be reasonable. In addition, practices used by taxpayers to classify or categorize certain communications activity in connection with preparation of statements and analyses for the use of management, creditors, minority shareholders, joint ventures, or other parties or governmental agencies in interest may be reliable indicators of the reasonableness of the method chosen, but need not be accorded conclusive weight by the Commissioner. In all cases, the method chosen to establish the two points between which the taxpayer is paid to transmit, and bears the risk of transmitting, the communication must be supported by sufficient documentation to permit verification by the Commissioner.

(ii)*Income derived from international communications activity. Income derived by a taxpayer from international communications activity* (international communications income) is income derived from communications activity, as defined in paragraph (h)(2) of this section, when the taxpayer is paid to transmit—

(A)Between a point in the United States and a point in a foreign country (or a possession of the United States); or

(B)Foreign-originating communications (communications with a beginning point in a foreign country or a possession of the United States) from a point in space or international water to a point in the United States.

(iii)*Income derived from U.S. communications activity.* Income derived by a taxpayer from U.S. communications activity (U.S. communications income) is income derived from communications activity, as defined in paragraph (h)(2) of this section, when the taxpayer is paid to transmit—

(A)Between two points in the United States; or

(B)Between the United States and a point in space or international water, except as provided in paragraph (h)(3)(ii)(B) of this section.

(iv)*Income derived from foreign communications activity. Income derived by a taxpayer from foreign communications activity* (foreign communications income) is income derived from communications activity, as defined in paragraph (h)(2) of this section, when the taxpayer is paid to transmit—

(A)Between two points in a foreign country or countries (or a possession or possessions of the United States);

(B)Between a foreign country and a possession of the United States; or

(C)Between a foreign country (or a possession of the United States) and a point in space or international water.

(v)*Income derived from space/ocean communications activity. Income derived by a taxpayer from space/ocean communications activity* (space/ocean communications income) is income derived from communications activity, as defined in paragraph (h)(2) of this section, when the taxpayer is paid to transmit between a point in space or international water and another point in space or international water.

(i)*Treatment of partnerships.* This section is applied at the partner level.

(j)*Examples.* The following examples illustrate the rules of this section: Example 1. *Income derived from non-communications activity—remote data base access* —(i) *Facts.* D provides its customers in various foreign countries with access to its data base, which contains information on certain individuals' health care insurance coverage. Customer C obtains access to D's data base by placing a call to D's telephone number. Assume that C's telephone service, used to access D's data base, is provided by a third party, and that D assumes no responsibility for the transmission of the information via telephone.

(ii)*Analysis.* D is not paid to transmit communications and does not derive income from communications activity within the meaning of paragraph (h)(2) of this section. Rather, D derives income from provision of content or provision of services to its customers. Therefore, the rules of this section do not apply to determine the source of D's income. Example 2. *Income derived from U.S. communications activity—U.S. portion of international communication* —(i) *Facts.* TC, a local telephone company, receives an access fee from an international carrier for picking up a call from a local telephone customer and delivering the call to a U.S. point of presence

(POP)of the international carrier. The international carrier picks up the call from its U.S. POP and delivers the call to a foreign country.

(ii)*Analysis.* TC is not paid to carry the transmission between the United States and a foreign country. TC is paid to transmit a communication between two points in the United States. TC derives U.S. communications income as defined in paragraph (h)(3)(iii) of this section, which is sourced under paragraph

(c)of this section as U.S. source income. Example 3. *Income derived from international communications activity—underwater cable* —(i) *Facts.* TC, a domestic corporation, owns an underwater fiber optic cable. Pursuant to contracts, TC makes available to its customers capacity to transmit communications via the cable. TC's customers then solicit telephone customers and arrange to transmit the telephone customers' calls. The cable runs in part through U.S. waters, in part through international waters, and in part through foreign country waters.

(ii)Analysis. TC derives international communications income as defined in paragraph (h)(3)(ii) of this section because TC is paid to make available capacity to transmit communications between the United States and a foreign country. Because TC is a United States person, TC's international communications income is sourced under paragraph (b)(1) of this section as one-half from sources within the United States and one-half from sources without the United States. Example 4. *Income derived from international communications activity—satellite* —(i) *Facts.* S, a United States person, owns satellites in orbit and uplink facilities in Country X, a foreign country. B, a resident of Country X, pays S to deliver B's programming from S's uplink facility, located in Country X, to a downlink facility in the United States owned by C, a customer of B.

(ii)*Analysis.* S derives international communications income under paragraph (h)(3)(ii) of this section because S is paid to transmit the communications between a beginning point in a foreign country and an endpoint in the United States. Because S is a United States person, the source of S's international communications income is determined under paragraph (b)(1) of this section as one-half from sources within the United States and one-half from sources without the United States. Example 5. *The paid-to-do rule—foreign communications via domestic route* —(i) *Facts.* TC is paid to transmit communications from Toronto, Canada, to Paris, France. TC transmits the communications from Toronto to New York. TC pays another communications company, IC, to transmit the communications from New York to Paris.

(ii)*Analysis.* Under the *paid-to-do* rule of paragraph (h)(3)(i) of this section, TC derives foreign communications income under paragraph (h)(3)(iv) of this section because TC is paid to transmit communications between two points in foreign countries, Toronto and Paris. Under paragraph (h)(3)(i) of this section, the character of TC's communications activity is determined without regard to the fact that TC pays IC to transmit the communications for some portion of the delivery path. IC has international communications income under paragraph (h)(3)(ii) of this section because IC is paid to transmit the communications between a point in the United States and a point in a foreign country. Example 6. *The paid-to-do rule—domestic communication via foreign route* —(i) *Facts.* TC is paid to transmit a call between two points in the United States, but routes the call through Canada.

(ii)*Analysis.* Under paragraph (h)(3)(i) of this section, the character of income derived from communications activity is determined by the two points between which the taxpayer is paid to transmit, and bears the risk of transmitting, the communications, without regard to the path of the transmission between those two points. Thus, under paragraph (h)(3)(iii) of this section, TC derives income from U.S. communications activity because it is paid to transmit the communications between two U.S. points. Example 7. *The paid-to-do rule—foreign-originating communications* —(i) *Facts.* Under an international settlement agreement, G, a Country X international carrier, pays T to receive all calls originating in Country X that are bound for the United States and to terminate such calls in the United States. Due to Country X legal restrictions, the international settlement agreement specifies that G carries the transmission to a point outside the territory of Country X and that T carries the foreign-originating transmission from such point to the destined point in the United States. T, in turn, contracts out with another communications company, S, to transmit the U.S. portion of the communications. Tracing and identifying the endpoints of each transmission is not possible or practical. T does, however, keep records of termination fees received from G for terminating the foreign-originating calls.

(ii)*Analysis.* T derives communications income as defined in paragraph (h)(2) of this section. Based on all the facts and circumstances, T can establish that T is paid to transmit, and bears the risk of transmitting, foreign-originating calls from a point in space or international water to a point in the United States using a reasonable method to establish the endpoints, assuming that this method is consistently applied. In this case, T can reasonably establish that T is paid to receive foreign-originating calls and terminate such calls in the United States based on the records of termination fees pursuant to an international settlement agreement. Under paragraph (h)(3)(ii)(B) of this section, a taxpayer derives income from international communications activity when the taxpayer is paid to transmit foreign-originating communications from space or international water to the United States. Thus, under paragraph (h)(3)(ii)(B) of this section, T derives income from international communications. If, based on all the facts and circumstances, T could reasonably trace and identify the endpoints, then T would have to directly establish that each call originated in a foreign country. Assuming T is able to do so, the rest of the analysis in this Example 7 remains the same. Under paragraph (h)(3)(iii) of this section, S derives income from U.S. communications activity because S is paid to transmit the communications between two U.S. points. Example 8. *Indeterminate endpoints—prepaid telephone calling cards* —(i) *Facts.* S purchases capacity from TC to transmit telephone calls. S sells prepaid telephone calling cards that give customers access to TC's telephone lines for a certain number of minutes. Assume that S cannot establish the endpoints of its customers' telephone calls, even under the reasonable method rule of paragraph (h)(3) of this section.

(ii)*Analysis.* S derives communications income as defined in paragraph (h)(2) of this section because S makes capacity to transmit communications available to its customers. In this case, S cannot establish the two points between which the communications are transmitted. Therefore, S's communications income is U.S. source income, as provided by paragraph

(f)of this section. Example 9. *Reasonable methods—minutes of use data on long distance calling plans—*

(i)*Facts* . B provides both domestic and international long distance services in a calling plan for a limited number of minutes for a set amount each month. Tracing and identifying the endpoints of each transmission is not possible or practical. B is, however, able to establish that the calling plan generated $10,000 of revenue for 25,000 minutes based on reports derived from customer billing records. Based on minutes of use data in these reports, B is able to establish that of the total 25,000 minutes, 60 percent or 15,000 minutes were for U.S. long distance calls and 40 percent or 10,000 minutes were for international calls.

(ii)*Analysis* . B derives communications income as defined in paragraph (h)(2) of this section. Based on all the facts and circumstances, B can establish the two points between which B is paid to transmit, and bears the risk of transmitting, the communications using a reasonable method to establish the endpoints, assuming that this method is consistently applied. In this case, B can reasonably establish that 60 percent of the income derived from the long distance calling plan is U.S. communications income and 40 percent is international communications income based on the minutes of use data derived from customer billing records to establish the endpoints of the communications. If, based on all the facts and circumstances, B could reasonably trace and identify the endpoints, then B would have to directly identify the endpoints between which B is paid to transmit the communications. Example 10. *Reasonable methods—system design* —(i) *Facts* . D operates satellites which are designed to transmit signals through two separate ranges of signal frequencies (bands). Due to technological limitations, requirements, and practicalities, one band is designed to only transmit signals within the United States. The other band is designed to transmit signals between foreign countries and the United States. D cannot trace and identify the endpoints of each individual transmission. D does, however, track the total transmission through each band and the total income derived from transmitting signals through each band.

(ii)*Analysis* . D derives communications income as defined in paragraph (h)(2) of this section. Based on all the facts and circumstances, D can establish the two points between which D is paid to transmit, and bears the risk of transmitting, the communications using a reasonable method to establish endpoints, assuming that this method is consistently applied. In this case, D can reasonably establish that income derived from transmissions through the first band is U.S. communications income and income derived from transmissions through the second band is international communications income based on the design of the bands to establish the endpoints of the communications. Example 11. *Reasonable methods—port locations* —(i) *Facts* . X provides its customer, C, with a virtual private network

(VPN)so that C's U.S. headquarter office canconnect and communicate with offices in the United States, Country X, Country Y, and Country Z. Assume that the VPN is only for communications with the U.S. headquarter office. X cannot trace and identify the endpoints of each transmission. C pays X a set amount each month for the entire service, regardless of the magnitude of the usage or the geographic points between which C uses the service.

(ii)*Analysis* . X derives communications income as defined in paragraph (h)(2) of this section. Based on the facts and circumstances, X can establish the two points between which X is paid to transmit, and bears the risk of transmitting, the communications using a reasonable method to establish endpoints, assuming that this method is consistently applied. In this case, X can reasonably establish that one-fourth of the income derived from the VPN service is U.S. communications income and three-fourths is international communications income based on the location of the VPN ports to establish the endpoints of the communications. Example 12. *Indeterminate endpoints—Internet access* —(i) *Facts* . B, a domestic corporation, is an Internet service provider. B charges its customer, C, a monthly lump sum for Internet access. C accesses the Internet via a telephone call, initiated by the modem of C's personal computer, to one of B's control centers, which serves as C's portal to the Internet. B transmits data sent by C from B's control center in France to a recipient in England, over the Internet. B does not maintain records as to the beginning and endpoints of the transmission.

(ii)*Analysis* . B derives communications income as defined in paragraph (h)(2) of this section. The source of B's communications income is determined under paragraph

(f)of this section as income from sources within the United States because B cannot establish the two points between which it is paid to transmit the communications. Example 13. *De minimis non-communications activity* —(i) *Facts* . The same facts as in Example 12. Assume in addition that B replicates frequently requested sites on B's own servers, solely to speed up response time. Assume that B's replication of frequently requested sites would be considered a de minimis non-communications activity under this section.

(ii)*Analysis* . On these facts, because B's replication of frequently requested sites would be considered a *de minimis* non-communications activity, B is not required to treat the replication activity as a separate non-communications activity transaction under paragraph (h)(1) of this section. B derives communications income under paragraph (h)(2) of this section. The character and source of B's communications income are determined by demonstrating the points between which B is paid to transmit the communications, under paragraph (h)(3)(i) of this section. Example 14. *Income derived from communications and non-communications activity—bundled services* —(i) *Facts* . A, a domestic corporation, offers customers local and long distance phone service, video, and Internet services. Customers pay a flat monthly fee plus 10 cents a minute for all long-distance calls, including international calls.

(ii)*Analysis* . Under paragraph (h)(1)(ii) of this section, to the extent that A's transaction with its customer consists in part of non- *de minimis* communications activity and in part of non- *de minimis* non-communications activity, each such part of the transaction must be treated as a separate transaction. A's gross income from the transaction is allocated to each such communications activity transaction and non-communications activity transaction in accordance with paragraph (h)(1)(ii) of this section. To the extent A can establish that it derives international communications income as defined in paragraph (h)(3)(ii) of this section, A would determine the source of such income under paragraph (b)(1) of this section. If A cannot establish the points between which it is paid to transmit communications, as required by paragraph (h)(3)(i) of this section, A's communications income is from sources within the United States, as provided by paragraph

(f)of this section. Example 15. *Income derived from communications and non-communications activity* — *(i) Facts.* B, a domestic corporation, is paid by D, a cable system operator in Foreign Country, to provide television programs and to transmit the television programs to Foreign Country. Using its own satellite transponder, B transmits the television programs from the United States to downlink facilities owned by D in Foreign Country. D receives the transmission, unscrambles the signals, and distributes the broadcast to D's customers in Foreign Country. Assume that B's provision of television programs is a non-de minimis non-communications activity, and that B's transmission of television programs is a non-de minimis communications activity.

(ii)*Analysis* . Under paragraph (h)(1)(ii) of this section, B must treat its communications and non-communications activities as separate transactions. B's gross income is allocated to each such separate communications and non-communications activity transaction in accordance with paragraph (h)(1)(ii) of this section. Income derived by B from the transmission of television programs to D's Foreign Country downlink facility is international communications income as defined in paragraph (h)(3)(ii) of this section because B is paid to transmit communications from the United States to a foreign country. Example 16. *Income derived from foreign communications activity* —(i) *Facts.* STS provides satellite capacity to B, a broadcaster located in Australia. B beams programming from Australia to the satellite. S's satellite picks the communications up in space and beams the programming over a footprint covering Southeast Asia.

(ii)*Analysis* . S derives communications income as defined in paragraph (h)(2) of this section. S's income is characterized as foreign communications income under paragraph (h)(3)(iv) of this section because S picks up the communication in space, and beams it to a footprint entirely covering a foreign area. Under paragraph

(d)of this section, S's foreign communications income is from sources without the United States. If S were beaming the programming over a satellite footprint that covered area both in the United States and outside the United States, S would be required to allocate the income derived from the different types of communications activity.

(k)*Reporting and documentation requirements* —(1) *In general* . A taxpayer making an allocation of gross income under paragraph (b)(2)(iii), (b)(2)(iv), or (h)(1)(ii) of this section must satisfy the requirements in paragraphs (k)(2), (3), and

(4)of this section.

(2)*Required documentation* . In all cases, a taxpayer must prepare and maintain documentation in existence when its return is filed regarding the allocation of gross income, and allocation and apportionment of expenses, losses, and other deductions, the methodologies used, and the circumstances justifying use of those methodologies. The taxpayer must make available such documentation within 30 days upon request.

(3)*Access to software* . If the taxpayer or any third party used any computer software, within the meaning of section 7612(d), to allocate gross income, or to allocate or apportion expenses, losses, and other deductions, the taxpayer must make available upon request—

(iii)In the case of any spreadsheet software or similar software, any formulae or links to supporting worksheets.

(4)*Use of allocation methodology* . In general, when a taxpayer allocates gross income under paragraph (b)(2)(iii), (b)(2)(iv), or (h)(1)(ii) of this section, it does so by making the allocation on a timely filed original return (including extensions). However, a taxpayer will be permitted to make changes to such allocations made on its original return with respect to any taxable year for which the statute of limitations has not closed as follows:

(3)of this section within 30 days of the request, then the procedures described in paragraph (k)(4)(ii) of this section shall apply.

(l)*Effective date* . This section applies to taxable years beginning on or after December 27, 2006. PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT **Par. 4.** The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805. **Par. 5.** In § 602.101 paragraph

(b)is amended by adding an entry to the table in numerical order, §§ 1.863-8 and 1.863-9, to read as follows: § 602.101 OMB Control numbers.

(b)* * * CFR part or section where identified and described Current OMB control No. 1.863-8 1545-1718. 1.863-9 1545-1718. Kevin M. Brown, Acting Deputy Commissioner for Services and Enforcement. Approved: December 21, 2006. Eric Solomon, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. E6-22174 Filed 12-26-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 31 [TD 9276] RIN 1545-BD96 Flat Rate Supplemental Wage Withholding; Correction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. SUMMARY: This document contains corrections to final regulations (TD 9276) that were published in the **Federal Register** on Tuesday, July 25, 2006 (71 FR 42049), amending the regulations that provide for determining the amount of income tax withholding on supplemental wages. These regulations apply to all employers and others making supplemental wage payments to employees. DATES: The correction will be effective January 1, 2007. FOR FURTHER INFORMATION CONTACT: A.G. Kelley,

(202)622-6040 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The final regulations that are the subject of these corrections are under sections 3401 and 3402 of the Internal Revenue Code. Need for Corrections As published, final regulations (TD 9276) contain errors that may prove to be misleading and are in need of clarification. List of Subjects in 26 CFR Part 31 Employment taxes, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social security, Unemployment compensation. Correction of Publication Accordingly, 26 CFR part 31 is corrected by making the following correcting amendments: PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE **Paragraph 1.** The authority citation for part 31 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 31.3402(g)-1(a)(8) is amended by revising the fifth sentence of *Example 1* paragraph (iii), the fifth sentence of *Example 3* paragraph (i), the last sentence of *Example 3* paragraph

(iv)and the third sentence of *Example 3* paragraph (vi). The revisions read as follows: § 31.3402(g)-1 Supplemental wage payments.

(a)* * *

(8)* * * Example 1. * * *

(iii)* * * If Y elected to withhold income tax using paragraph (a)(7) of this section, Y would withhold on the $400,000 component at 25 percent (pursuant to paragraph (a)(7)(iii)(F) of this section), which would result in $100,000 tax withheld. * * * Example 3.

(i)* * * Unrelated company U pays D sick pay as an agent of the employer R and such sick pay is supplemental wages pursuant to § 31.3401(a)-1(b)(8)(i)( *b* )( *2* ). * * *

(iv)* * * If R elects to use optional flat rate withholding provided under paragraph (a)(7)(iii)(f) of this section, withholding would be calculated at 25 percent of the $1,000,000 portion of the payment and would be $250,000.

(vi)* * * If U elects to withhold income tax at the flat rate provided under paragraph (a)(7)(iii)(F) of this section, withholding on the $50,000 of sick pay would be calculated at 25 percent of the $50,000 payment and would be $12,500. * * * LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E6-22022 Filed 12-26-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD05-06-119] RIN 1625-AA-09 Drawbridge Operation Regulations; Potomac River, Alexandria, VA and Oxon Hill, MD AGENCY: Coast Guard, DHS. ACTION: Notice of temporary deviation from regulations. SUMMARY: The Commander, Fifth Coast Guard District, has issued a temporary deviation from the regulation governing the operation of the new Woodrow Wilson Memorial (I-95) Bridge, mile 103.8, across Potomac River between Alexandria, Virginia and Oxon Hill, Maryland. This deviation allows the new drawbridge to remain closed to navigation each day from 10 a.m. to 2 p.m. beginning on December 25, 2006 until and including February 22, 2007, to facilitate completion of the Outer Loop portion for the new Woodrow Wilson Bridge construction project. DATES: This deviation is effective from 10 a.m. on December 25, 2006, until 2 p.m. on February 22, 2007. ADDRESSES: Materials referred to in this document are available for inspection or copying at Commander (dpb), Fifth Coast Guard District, Federal Building, 1st Floor, 431 Crawford Street, Portsmouth, VA 23704-5004 between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. The telephone number is

(757)398-6222. Commander (dpb), Fifth Coast Guard District maintains the public docket for this temporary deviation. FOR FURTHER INFORMATION CONTACT: Waverly W. Gregory, Jr., Bridge Administrator, Fifth Coast Guard District, at

(757)398-6222. SUPPLEMENTARY INFORMATION: In June 2006, the southernmost portion of the bascule spans for the new Woodrow Wilson Memorial Bridge, at mile 103.8, across Potomac River between Alexandria, Virginia and Oxon Hill, Maryland was publicly placed into service, switching I-95 Northbound traffic onto the new Outer Loop portion of the bridge. The newly-constructed portion of bridge will be required to open for vessels in accordance with the current drawbridge operating regulations set out in 33 CFR 117.255(c). While the drawbridge is operational, coordinators for the construction of the new Woodrow Wilson Bridge Project indicated that the bascule span is not yet fully commissioned and the work continues through the rigorous testing phase. Opening the new bascule span for a vessel at this time would take approximately 45 minutes in a best case scenario. This has the potential to have a significant impact upon I-95 traffic, especially during the 10 a.m. to 2 p.m. bridge-opening time frame currently available for commercial vessels, in accordance with 33 CFR 117.255(c). Coordinators requested a temporary deviation from the current operating regulation for the new Woodrow Wilson Memorial (I-95) Bridge set out in 33 CFR 117.255(c). Though good progress has been made regarding commissioning of the north and south drawbridges (both now carrying I-95 vehicle traffic), the coordinators are requesting an additional two months of the 10 a.m. to 2 p.m. restriction of bridge operation to proceed with commissioning activities through February 22, 2007. From a river-user standpoint, the coordinators have received no requests from boaters or mariners to open during the 10 a.m. to 2 p.m. timeframe since the restriction was issued in late June 2006. In fact, the coordinators have received no complaints on the 10 a.m. to 2 p.m. restriction. The coordinators requested that the new Outer Loop portion of the new drawbridge not be available for openings for vessels each day between the hours of 10 a.m. to 2 p.m. from Monday, December 25, 2006 through February 22, 2007 or until the bridge is properly commissioned, whichever comes first. The temporary deviation will only affect vessels with mast heights of 75 feet or greater since demolition of the existing drawbridge continues in addition to the lift spans removed. Management of the Federal and auxiliary channels will continue to be closely coordinated between the coordinators for the construction of the new Woodrow Wilson Bridge Project, the Coast Guard and vessels requesting transit through the construction zone. Furthermore, all affected vessels with mast heights greater than 75 feet will be able to receive an opening of the new drawbridge in the “off-peak” vehicle traffic hours (evening and overnight) in accordance with 33 CFR 117.255(c). Maintaining the new drawbridge in the closed-to-navigation position each day from 10 a.m. to 2 p.m. on December 25, 2006 through February 22, 2007 will help reduce the impact to vehicular traffic during this phase of new bridge construction. The Coast Guard has informed the known users of the waterway of the closure period for the bridge so that these vessels can arrange their transits to minimize any impact caused by the temporary deviation. In accordance with 33 CFR 117.35(c), this work will be performed with all due speed in order to return the bridge to normal operation as soon as possible. This deviation from the operating regulations is authorized under 33 CFR 117.35. Dated: December 11, 2006. Waverly W. Gregory, Jr., Chief, Bridge Administration Branch, Fifth Coast Guard District. [FR Doc. E6-22148 Filed 12-26-06; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD05-06-118] RIN 1625-AA-09 Drawbridge Operation Regulations; Atlantic Intracoastal Waterway (AICW), Scotts Hill, NC AGENCY: Coast Guard, DHS. ACTION: Notice of temporary deviation from regulations. SUMMARY: The Commander, Fifth Coast Guard District, has issued a temporary deviation from the regulation governing the operation of the Figure Eight Swing Bridge across the AICW mile 278.1, at Scotts Hill, North Carolina to perform needed mechanical and structural repairs. DATES: This deviation is effective from 7 a.m. on January 3, 2007, to 7 a.m. on January 5, 2007. FOR FURTHER INFORMATION CONTACT: Gary S. Heyer, Bridge Management Specialist, Fifth Coast Guard District, at

(757)398-6629. SUPPLEMENTARY INFORMATION: The contractor, on behalf of the bridge owner, the Figure Eight Beach Homeowners Association, Inc., has requested a temporary deviation from the current operating regulation set out in 33 CFR 117.821(a)(4) which requires the drawbridge to open on signal for commercial vessels at all times and on signal for pleasure vessels on the hour and half hour. The contractor has requested the temporary deviation to close the Figure Eight Swing Bridge to navigation to perform needed repairs to the center-bearing mechanism of the swing span. The concrete beneath 50% of the balance wheel track at the Figure Eight Swing Bridge has deteriorated and is in need of replacement. In order to replace the concrete, the balance wheels and track will be removed and the bad concrete hand-chipped out. Once the hand-chipping is complete, the rail will be reset and grouted. To facilitate this work, the Figure Eight Swing Bridge will be locked in the closed-to-navigation position from 7 a.m. on January 3, 2007 until and including 7 a.m. on January 5, 2007. The Coast Guard has informed the known users of the waterway of the closure periods for the bridge so that these vessels can arrange their transits to minimize any impact caused by the temporary deviation. In accordance with 33 CFR 117.35(c), this work will be performed with all due speed in order to return the bridge to normal operation as soon as possible. This deviation from the operating regulations is authorized under 33 CFR 117.35. Dated: December 11, 2006. Waverly W. Gregory, Jr., Chief, Bridge Administration Branch, Fifth Coast Guard District. [FR Doc. E6-22152 Filed 12-26-06; 8:45 am] BILLING CODE 4910-15-P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 117 [CGD05-06-086] RIN 1625-AA09 Drawbridge Operation Regulations; Darby Creek, Essington, PA AGENCY: Coast Guard, DHS. ACTION: Final rule. SUMMARY: The Coast Guard is changing the drawbridge operation regulation that governs the Consolidated Rail Corporation (CONRAIL) Railroad Bridge, at mile 0.3, across Darby Creek in Essington, Pennsylvania. This change will allow the bridge to be left in the open-to-navigation position from April 1 through October 31 of every year. The bridge will only close for the passage of trains and to perform periodic maintenance. From November 1 to March 31, the bridge will open on signal, if at least 24 hours notice is given by calling

(856)231-7088 or

(856)662-8201. DATES: This rule is effective January 26, 2007. ADDRESSES: Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, are part of docket CGD05-06-086 and are available for inspection or copying at Commander (dpb), Fifth Coast Guard District between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. The Fifth Coast Guard District maintains the public docket for this rulemaking. FOR FURTHER INFORMATION CONTACT: Waverly W. Gregory, Jr., Bridge Administrator, Fifth Coast Guard District, at

(757)398-6222. SUPPLEMENTARY INFORMATION: Regulatory Information On September 11, 2006, we published a notice of proposed rule

(NPRM)entitled “Drawbridge Operation Regulations; Darby Creek, PA” in the **Federal Register** (71 FR 53352). We received no comments on the proposed rule. No public meeting was requested, and none was held. Background and Purpose CONRAIL owns and remotely operates the railroad drawbridge across Darby Creek, at mile 0.3, located in Essington, Pennsylvania. The current operating regulation set out in 33 CFR 117.903 requires that from May 15 through October 15, the draw be left in the open position at all times and be lowered only for the passage of trains and to perform periodic maintenance authorized in accordance with subpart A of this part. From October 16 through May 14, the draw shall open on signal if at least 24 hours notice is given by telephone at

(856)231-7088 or

(856)662-8201. Operational information will be provided 24 hours a day at the same telephone numbers. The CONRAIL Railroad Bridge, a bascule-type drawbridge, has a vertical clearance in the closed position to vessels of approximately three feet above mean high water; and unlimited vertical clearance in the open-to-navigation position. The Ridley Township Municipal Marina Authority requested a change to the operating regulations for the Railroad Bridge, due to increased marine traffic under the bridge from April 1 to October 31. CONRAIL agreed to modify the operating regulations of the drawbridge to accommodate additional vessel traffic. Discussion of Comments and Changes The Coast Guard did not receive any comments on the NPRM. Therefore, no changes were made to the final rule. Discussion of Rule The Coast Guard is revising 33 CFR 117.903(a), which governs the CONRAIL railroad drawbridge across Darby Creek, at mile 0.3 in Essington, Pennsylvania, by amending paragraphs (a)(3) and (a)(13). From April 1 through October 31, the bridge will be left in the open position and will only close for the passage of trains and to perform periodic maintenance authorized in accordance with subpart A of this part. From November 1 to March 31, the draw of the CONRAIL Railroad Bridge need only open on signal if at least 24 hours notice is given by calling

(856)231-7088 or

(856)662-8201. Operational information will be provided 24 hours a day by telephone at

(856)231-7088 or

(856)662-8201, respectively. Regulatory Evaluation This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS). This conclusion is based on the fact CONRAIL, the only known land user of the bridge, has agreed to the change in the operating regulations. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities. This conclusion is based on the fact the rule would not have a significant economic impact on a substantial number of small entities because CONRAIL, the only known land user of the bridge, has agreed to the change in the operating regulations. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking process. No assistance was requested from any small entity. Collection of Information This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. Taking of Private Property This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. Protection of Children We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. Indian Tribal Governments This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Energy Effects We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( *e.g.* , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. Environment We have analyzed this rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph

(e)of the Instruction, from further environmental documentation because it has been determined that the promulgation of operating regulations for drawbridges are categorically excluded. List of Subjects in 33 CFR Part 117 Bridges. For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows: PART 117—DRAWBRIDGE OPERATION REGULATIONS 1. The authority citation for part 117 continues to read as follows: Authority: 33 U.S.C. 499; 33 CFR 1.05-1(g); Department of Homeland Security Delegation No. 0170.1; section 117.255 also issued under the authority of Pub. L. 102-587, 106 Stat. 5039. 2. Section 117.903 is amended by revising paragraphs (a)(3) and (a)(13) to read as follows: §117.903 Darby Creek.

(a)* * *

(3)From April 1 through October 31, the draw shall be left in the open position at all times and will only be lowered for the passage of trains and to perform periodic maintenance authorized in accordance with subpart A of this part.

(13)From November 1 through March 31, the draw shall open on signal if at least 24 hours notice is given by telephone at

(856)231-7088 or

(856)662-8201. Operational information will be provided 24 hours a day by telephone at

(856)231-7088 or

(856)662-8201. Dated: December 14, 2006. L.L. Hereth, Rear Admiral, United States Coast Guard, Commander, Fifth Coast Guard District. [FR Doc. E6-22149 Filed 12-26-06; 8:45 am] BILLING CODE 4910-15-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 80 [EPA-HQ-OAR-2006-0841; FRL-8261-9] Regulation of Fuels and Fuel Additives: Extension of the Reformulated Gasoline Program to the East St. Louis, Illinois Ozone Nonattainment Area AGENCY: Environmental Protection Agency (EPA). ACTION: Direct final rule. SUMMARY: Under section 211(k)(6) of the Clean Air Act, the Administrator of EPA shall require the sale of reformulated gasoline

(RFG)in an ozone nonattainment area classified as marginal, moderate, serious or severe upon the application of the Governor of the state in which the nonattainment area is located. In this direct final action, EPA is today extending the Act's prohibition against the sale of conventional gasoline (i.e., gasoline that is not RFG) to the Illinois portion of the St. Louis, Missouri-Illinois 8-hour ozone nonattainment area hereafter referred to as the East St. Louis nonattainment area. The RFG requirements will apply to refiners and all other persons in the fuel distribution system other than retailers and wholesale purchaser-consumers on May 1, 2007. For retailers and wholesale purchaser-consumers, the requirements of today's rule will apply on June 1, 2007. As of the June 1, 2007 implementation date, this area will be treated as a covered area for all purposes of the federal RFG program. DATES: This final rule is effective on May 1, 2007 without further notice, unless EPA receives adverse comments by January 26, 2007. If adverse comments are received, EPA will publish a timely withdrawal of the direct final rule in the **Federal Register** and inform the public that the rule will not take effect. ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ- OAR-2006-0841, by one of the following methods: • *http://www.regulations.gov:* Follow the on-line instructions for submitting comments. • *Mail:* Air Docket, Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-2006-0841. Comments may also be e-mailed to *a-and-r-docket@epamail.epa.gov.* In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St. NW., Washington, DC 20503. *Instructions:* Direct your comments to Docket ID No. EPA-HQ-OAR-2006-0841. EPA's policy is that all comments received 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 information claimed to be Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through *http://www.regulations.gov* or e-mail. The *http://www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *http://www.regulations.gov* your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. 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. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. *Docket:* All documents in the docket are listed in the *http://www.regulations.gov* index. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in *http://www.regulations.gov* or in hard copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is

(202)566-1744, and the telephone number for the Air Docket is

(202)566-1742. Note: The EPA Docket Center suffered damage due to flooding during the last week of June 2006. The Docket Center is continuing to operate. However, during the cleanup, there will be temporary changes to Docket Center telephone numbers, addresses, and hours of operation for people who wish to make hand deliveries or visit the Public Reading Room to view documents. Consult EPA's **Federal Register** notice at 71 FR 38147 (July 5, 2006) or the EPA Web site at *http://www.epa.gov/epahome/dockets.htm* for current information on docket operations, locations and telephone numbers. The Docket Center's mailing address for U.S. mail and the procedure for submitting comments to *http://www.regulations.gov* are not affected by the flooding and will remain the same. FOR FURTHER INFORMATION CONTACT: Kurt Gustafson, Transportation and Regional Programs Division (Mail Code 6406J), Environmental Protection Agency, 1200 Pennsylvania Ave, NW., Washington, DC 20460; *telephone number* : 202-343-9219; *fax number* : 202-343-2800; e-mail address: *gustafson.kurt@epa.gov* . SUPPLEMENTARY INFORMATION: General Information Does This Action Apply to Me? This action may affect you if you produce, distribute, or sell gasoline for use in the East St. Louis ozone nonattainment area. The table below gives some examples of entities that may have to comply with the regulations. However, since these are only examples, you should carefully examine these and other existing regulations in 40 CFR part 80. If you have any questions, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above. *Regulated entities* : Entities potentially regulated by this action are those which produce, supply or distribute motor gasoline. Regulated categories and entities include: Category NAICS codes a SIC codes b Examples of potentially regulated entities Industry 324110 2911 Petroleum Refiners. Industry 422710 5171 Gasoline Marketers and Distributors. 422720 5172 Industry 484220 4212 Gasoline Carriers. 484230 4213 a North American Industry Classification System (NAICS). b Standard Industrial Classification

(SIC)system code. This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your business is regulated by this action, you should carefully examine the list of areas covered by the reformulated gasoline program in Section 80.70 of title 40 of the Code of Federal Regulations. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section. Additional Information Under section 211(k)(6) of the Clean Air Act, as amended (the Act), the Administrator of EPA shall require the sale of reformulated gasoline in an ozone nonattainment area classified as marginal, moderate, serious, or severe upon the application of the Governor of the state in which the nonattainment area is located. This final action extends the prohibition set forth in section 211(k)(5) against the sale of conventional (i.e., non-reformulated) gasoline to the East St. Louis, Illinois moderate ozone nonattainment area (Jersey, Madison, Monroe, and St. Clair Counties). The Agency is adopting May 1, 2007, as the implementation date of the prohibition described herein for all persons other than retailers and wholesale purchaser-consumers (i.e., refiners, importers, and distributors). For retailers and wholesale purchaser-consumers, EPA is adopting June 1, 2007 as the implementation of the prohibition described. As of the implementation date for retailers and wholesale purchaser-consumers, the East St. Louis ozone nonattainment area will be a covered area for all purposes in the federal RFG program. Outline of This Preamble I. Background Opt-in Provision/Process II. The Governor's Request III. Final Action IV. Environmental Impact V. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments G. Executive Order 13045: Protection of Children From Environmental Health & Safety Risks H. Executive Order 13211: Actions That Significantly Effect Energy Supply I. National Technology Transfer Advancement Act J. Statutory Authority K. Congressional Review Act I. Background Opt-in Provision/Process As part of the Clean Air Act Amendments of 1990, Congress added a new subsection

(k)to section 211 of the Act. Subsection

(k)prohibits the sale of conventional gasoline (i.e., gasoline that EPA has not certified as reformulated) in certain ozone nonattainment areas beginning January 1, 1995. Section 211(k)(10)(D) defines the areas covered by the reformulated gasoline

(RFG)program as the nine ozone nonattainment areas having a 1980 population in excess of 250,000 and having the highest ozone design values during the period 1987 through 1989. 1 In addition, under section 211(k)(10)(D), any area reclassified as a severe ozone nonattainment area under section 181(b) is also included in the RFG program. EPA first published final regulations for the RFG program on February 16, 1994. See 59 FR 7716. 1 Applying these criteria, EPA has determined the nine covered areas to be the metropolitan areas including Los Angeles, Houston, New York City, Baltimore, Chicago, San Diego, Philadelphia, Hartford and Milwaukee. Certain other ozone nonattainment areas may be included in the program at the request of the Governor of the state in which the area is located. Section 211(k)(6)(A) provides that upon the application of a Governor, EPA shall apply the prohibition against selling conventional gasoline in “any area in the State classified under subpart 2 of Part D of Title I as a marginal, moderate, serious or severe” ozone nonattainment area. Subparagraph 211(k)(6)(A) further provides that EPA is to apply the prohibition as of the date the Administrator “deems appropriate, not later than January 1, 1995, or 1 year after such application is received, whichever is later.” In some cases the effective date may be extended for such an area as provided in section 211(k)(6)(B) based on a determination by EPA that there is “insufficient domestic capacity to produce” RFG. EPA is to publish a Governor's application in the **Federal Register** . II. The Governor's Request EPA received an application July 10, 2006 from the Honorable Rod R. Blagojevich, Governor of the State of Illinois, for the East St. Louis ozone nonattainment area to be included in the reformulated gasoline program. The Governor's letter is set out in full below. July 10, 2006. Mr. Stephen L. Johnson, U.S. Environmental Protection Agency, 401 M Street, SW., Washington, DC 20460. Dear Administrator Johnson: Pursuant to Section 211(k)(6) of the Clean Air Act (CAA), I hereby formally request the U.S. Environmental Protection Agency

(EPA)to extend the requirement for the sale of Reformulated Gasoline

(RFG)to the Illinois portion of the St. Louis ozone non-attainment area. The pertinent Illinois counties include Jersey, Madison, Monroe, and St. Clair. I request that the RFG program be implemented beginning January 1, 2007. Implementation of the RFG program in the Metro-East St. Louis RFG area will provide additional volatile organic compound emission reductions, which will assist the region in attaining the 8-hour ozone standard by 2010. The required use of RFG, which is currently in use in St. Louis Missouri, will also replace the summertime low volatility gasoline requirement in the Metro-East area, removing the need for a “boutique” fuel and simplifying gasoline supply in the region. Thank you for your attention to this matter. I look forward to the successful implementation of the RFG program in the Metro-East area and to the attainment of the national air quality standards in the St. Louis region. If you have any questions regarding this request, please contact Mr. Douglas P. Scott, Director of the Illinois Environmental Protection Agency at 217 782-3397. Sincerely, Rod R. Blagojevich, *Governor.* cc: USEPA, Region V. III. Final Action The RFG program includes seasonal requirements. Summertime RFG must meet certain VOC control requirements to reduce emissions of volatile organic compounds (VOCs), an ozone precursor. Under the RFG program, there are two compliance dates for VOC-controlled RFG. At the refinery level, and all other points in the distribution system other than the retail level, compliance with RFG VOC-control requirements is required from May 1 to September 15. At the retail level (service stations and wholesale purchaser-consumers), compliance is required from June 1 to September 15. See 40 CFR 80.78 (a)(1)(v). Pipeline requirements and demands for RFG from the supply industry drive refineries to establish their own internal compliance date earlier than May so that they can then assure that terminals are capable of meeting the RFG VOC-control requirements by May 1. Based on our evaluation of the appropriate lead time and start date(s) and pursuant to the Governor's letter and the provisions of section 211(k)(6), EPA is today adopting regulations that apply the prohibitions of subsection 211(k)(5) to the East St. Louis, Illinois ozone nonattainment area as of May 1, 2007, for all persons other than retailers and wholesale purchaser-consumers. This date applies to the refinery level and all other points in the distribution system other than the retail level. For retailers and wholesale purchaser-consumers, EPA is adopting regulations that apply the prohibitions of subsection 211(k)(5) to the East St. Louis, Illinois ozone nonattainment area on June 1, 2007. As of the June 1, 2007 implementation date, this area will be treated as a covered area for all purposes of the federal RFG program. The application of the prohibition of section 211(k)(5) to the East St. Louis ozone nonattainment area could take effect no later than July 10, 2007, under section 211(k)(6)(A), which stipulates that the effective program date must be no “later than January 1, 1995 or 1 year after [the Governor's] application is received, whichever is later.” The Governor of Illinois asked that EPA establish January 1, 2007, as the RFG implementation date. EPA believes the implementation dates adopted today achieve a reasonable balance between requiring the earliest possible start dates to achieve air quality benefits in East St. Louis and providing adequate lead time for industry to prepare for program implementation. These dates are consistent with the State's request that EPA require RFG to be sold in the East St. Louis area in advance of the beginning of the high ozone season, which begins June 1. These dates will provide environmental benefits by allowing East St. Louis to achieve VOC reduction benefits for the 2007 VOC control season. EPA has concluded, based on its analysis of available information, that the refining and distribution industry's capacity to supply federal RFG to East St. Louis this summer exceeds the estimated demand. EPA has also concluded that the implementation dates adopted today provide adequate lead time to industry to set up storage and sales agreements to ensure supply of RFG to the East St. Louis ozone nonattainment area. If adverse comment is received and this direct final rule is withdrawn, EPA will finalize the companion proposal also published in today's **Federal Register** . That proposal also includes a May 1, 2007, implementation date for parties other than retailers and wholesale purchaser-consumers, and a June 1, 2007 implementation date for retailers and wholesale purchaser-consumers. Although section 211(k)(6) provides EPA some discretion to establish the effective date for the application of RFG requirements in marginal, moderate, serious or severe ozone nonattainment areas subject to a Governor's petition, and allows EPA to consider whether there is sufficient domestic capacity to produce RFG in establishing the effective date for such requirements, EPA does not have discretion to deny a Governor's request. Therefore, the scope of this action is limited to setting an effective date for East St. Louis' opt-in to the RFG program, and not to decide whether St. Louis should in fact opt in. EPA considers that July 10, 2007 would be the latest possible effective date, since EPA expects there to be sufficient domestic capacity to produce RFG and therefore has no current reason to extend the effective date beyond one year after July 10, 2006 under section 211(k)(6)(B). Selection of the May 1/June 1 effective date coincides with the start of the summer RFG VOC control period and is the only practical date available for consideration. EPA does not have the authority to extend the date beyond July 10, 2007 absent supply issues and there is no justifiable reason to select a date between June 1 and July 10, 2007. For this reason we view this as a noncontroversial amendment, anticipate no adverse comment, and are publishing this action as a direct final rule without prior proposal. However, in the “Proposed Rules” section of this **Federal Register** publication, we are publishing a separate document that will serve as the proposal for a rule amendment should adverse comments be filed. That proposal also includes effective dates of May 1, 2007 and June 1, 2007. This direct final rule will be effective May 1, 2007 without further notice unless the Agency receives adverse comments by January 26, 2007. If EPA receives adverse comments, we will publish in the **Federal Register** a timely withdrawal of the direct final rule informing the public that the rule will not take effect. We will address all public comments in a subsequent final rule based on the proposed rule. EPA will not institute a second comment period on this rule. Any parties interested in commenting on this rule should do so at this time. IV. Environmental Impact The federal RFG program typically results in reductions in ozone-forming emissions and air toxics. Reductions in ozone precursors are environmentally significant because they lead to reductions in ozone formation, with the associated improvements in human health and welfare. Exposure to ground-level ozone (or smog) can cause respiratory problems, chest pain, and coughing and may worsen bronchitis, emphysema, and asthma. Animal studies suggest that long-term exposure (months to years) to ozone can damage lung tissue and may lead to chronic respiratory illness. Reductions in emissions of toxic air pollutants are environmentally important because they carry significant benefits for human health and welfare primarily by reducing the number of cancer cases each year. Illinois EPA analyzed the emissions benefits which could be achieved by switching from 7.2 RVP fuel to RFG. Using the U.S. EPA's MOBILE6a model, Illinois projected that year 2010 motor vehicle VOC emissions could be reduced by 5.4 percent and carbon monoxide by 2.2 percent. The use of RFG in the Metro-East area would also decrease benzene emissions by 75 tons per year, which equates to a 44 percent reduction from motor vehicles. On a total toxic emissions basis, the use of RFG would reduce emissions of the five primary motor vehicle related air toxics by 63 tons per year in 2010, a total percentage reduction of 23.5 percent. V. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review This action is not a “significant regulatory action” under the terms of Executive Order (EO)12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under the EO. EPA notes that the economic impacts of the RFG program were assessed in EPA's Regulatory Impact Analysis for the 1994 RFG rules. See 59 FR 7810-7811 (February 16, 1994). In that analysis the production cost of RFG was estimated to be 4 to 8 cents more per gallon than conventional gasoline. Since conventional gas regulations have evolved since that time to be more like RFG and since the State has a low RVP requirement that also more closely resembles RFG, EPA expects the costs of RFG in the East St. Louis area to be at the low end or lower than this range. Nonetheless, using the 4 to 8 cent per gallon estimate, the cost of the program in East St. Louis would be significantly lower than the trigger for a significant regulatory action. B. Paperwork Reduction Act This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 *et seq.* The Office of Management and Budget

(OMB)has approved the information collection requirements that apply to the RFG/anti-dumping program (see 59 FR 7716, February 16, 1994), and has assigned OMB control number 2060-0277 (EPA ICR No. 1951.08). Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR Part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act

(RFA)generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's rule on small entities, small entity is defined as:

(1)A small business that has not more than 1,500 employees (13 CFR 121.201);

(2)a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and

(3)a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. In promulgating the RFG and the related anti-dumping regulations for conventional gasoline, the Agency analyzed the impact of the regulations on small businesses. The Agency concluded that the regulations may possibly have some economic effect on a substantial number of small refiners, but that the regulations may not significantly affect other small entities, such as gasoline blenders, terminal operators, service stations and ethanol blenders. See 59 FR 7810-7811 (February 16, 1994). As stated in the preamble to the final RFG/anti-dumping rule, exempting small refiners from the RFG regulations would result in the failure of meeting CAA standards. 59 FR 7810. However, since most small refiners are located in the mountain states or in California, which has its own RFG program, the vast majority of small refiners are unaffected by the federal RFG requirements (although all refiners of conventional gasoline are subject to the anti-dumping requirements). Moreover, all businesses, large and small, maintain the option to produce conventional gasoline to be sold in areas not obligated by the Act to receive RFG or those areas which have not chosen to opt into the RFG program. A complete analysis of the effect of the RFG/anti-dumping regulations on small businesses is contained in the Regulatory Flexibility Analysis which was prepared for the RFG and anti-dumping rulemaking, and can be found in the docket for that rulemaking. The docket number is: EPA Air Docket A-92-12. Today's action will affect only those refiners, importers or blenders of gasoline that choose to produce or import RFG for sale in the East St. Louis ozone nonattainment area, and gasoline distributors and retail stations in those areas. As discussed above, EPA determined that, because of their location, the vast majority of small refiners would be unaffected by the RFG requirements. For the same reason, most small refiners will be unaffected by today's action. Other small entities, such as gasoline distributors and retail stations located in East St. Louis, which will become a covered area as a result of today's action, will be subject to the same requirements as those small entities which are located in current RFG covered areas. The Agency did not find the RFG regulations to significantly affect these entities. Based on this, EPA certifies that this direct final rule would not have a significant adverse impact on a substantial number of small entities. D. 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, EPA 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, and tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements. EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. Thus, today's rule is not subject to the requirements of sections 202 and 205 of the UMRA. Although EPA does not believe that UMRA imposes requirements for this rulemaking, EPA notes that the environmental and economic impacts of the RFG program were assessed in EPA's Regulatory Impact Analysis for the 1994 RFG rules. E. Executive Order 13132: Federalism Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that 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.” This rule does not have federalism implications. It will 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. The rule would only impose requirements on certain refiners and other entities in the gasoline distribution system, and not on States. The requirements of the rule will be enforced by the federal government at the national level. Thus, Executive Order 13132 does not apply to this rule. F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This direct final rule does not have tribal implications, as specified in Executive Order 13175. Today's direct final rule will affect only those refiners, importers or blenders of gasoline that choose to produce or import RFG for sale in the East St. Louis ozone nonattainment area, and gasoline distributors and retail stations in those areas. Thus, Executive Order 13175 does not apply to this rule. G. Executive Order 13045: Protection of Children From Environmental Health & Safety Risks Executive Order 13045, entitled Protection of Children from Environmental Health and Safety Risks, (62 FR 19885, April 23, 1997) applies to any rule that:

(1)As determined to be “economically significant” as defined under Executive Order 12866, and

(2)concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. EPA interprets Executive Order 13045 as applying only to those regulatory actions that are based on health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This rule is not subject to Executive Order 13045 because it is not economically significant. H. *Executive Order 13211:* Actions That Significantly Affect Energy Supply This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” [66 FR 28355 (May 22, 2001)] because it is not a significant regulatory action under Executive Order 12866. I. National Technology Transfer Advancement Act Section 12(d) of Public Law 104-113, the National Technology Transfer and Advancement Act of 1995 (NTTAA), directs us to use voluntary consensus standards in our regulatory activities unless it would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( *e.g.* , materials specifications, test methods, sampling procedures, and business practices) developed or adopted by voluntary consensus standards bodies. The NTTAA directs us to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards. This direct final rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards. J. Statutory Authority The Statutory authority for the action finalized today is granted to EPA by sections 211(c) and

(k)and 301 of the Clean Air Act, as amended; 42 U.S.C. 7545(c) and

(k)and 7601. K. Congressional Review Act 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). This rule will be effective May 1, 2007. List of Subjects in 40 CFR Part 80 Environmental protection, Air pollution control, Fuel additives, Gasoline, Motor vehicle pollution. Dated: December 20, 2006. Stephen L. Johnson, Administrator. 40 CFR part 80 is amended as follows: PART 80—[AMENDED] 1. The authority citation for part 80 continues to read as follows: Authority: 42 U.S.C. 7414, 7545, 7542, and 7601(a). 2. Section 80.70 is amended by adding paragraph (k)(2) to read as follows: § 80.70 Covered areas.

(k)* * *

(2)The Illinois portion of the St. Louis, MO-IL 8-hour ozone nonattainment area is a covered area beginning June 1, 2007. The prohibitions of section 211(k)(5) of the Clean Air Act apply to all persons other than retailers and wholesale purchaser-consumers in the Illinois portion of the St. Louis, MO-IL 8-hour ozone nonattainment area beginning May 1, 2007. The prohibitions of section 211(k)(5) of the Clean Air Act apply to retailers and wholesale purchaser-consumers in the Illinois portion of the St. Louis, MO-IL 8-hour ozone nonattainment area beginning June 1, 2007. [FR Doc. E6-22162 Filed 12-26-06; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2006-0788; FRL-8108-8] Fluthiacet-methyl; Pesticide Tolerance AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: This regulation establishes a tolerance for combined residues of fluthiacet-methyl in or on cotton, gin byproducts and cotton, undelinted seed. K-I Chemical U.S.A. Inc. requested this tolerance under the Federal Food, Drug, and Cosmetic Act (FFDCA), as amended by the Food Quality Protection Act of 1996 (FQPA). DATES: This regulation is effective December 27, 2006. Objections and requests for hearings must be received on or before February 26, 2007, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION ). ADDRESSES: EPA has established a docket for this action under docket identification

(ID)number EPA-HQ-OPP-2006-0788. All documents in the docket are listed in the index for the docket. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available in the electronic docket at *http://www.regulations.gov* , or, if only available in hard copy, at the OPP Regulatory Public Docket in Rm. S-4400, One Potomac Yard (South Building), 2777 S. Crystal Drive, Arlington, VA. The Docket Facility is open from 8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays. The Docket telephone number is

(703)305-5805. FOR FURTHER INFORMATION CONTACT: Joanne I. Miller, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone number:

(703)305-6224; e-mail address: *miller.joanne@epa.gov* . SUPPLEMENTARY INFORMATION: I. General Information A. Does this Action Apply to Me? You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to: • Crop production (NAICS 111), e.g., agricultural workers; greenhouse, nursery, and floriculture workers; farmers. • Animal production (NAICS 112), e.g., cattle ranchers and farmers, dairy cattle farmers, livestock farmers. • Food manufacturing (NAICS 311), e.g., agricultural workers; farmers; greenhouse, nursery, and floriculture workers; ranchers; pesticide applicators. • Pesticide manufacturing (NAICS 32532), e.g., agricultural workers; commercial applicators; farmers; greenhouse, nursery, and floriculture workers; residential users. This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT . B. How Can I Access Electronic Copies of this Document? In addition to accessing an electronic copy of this **Federal Register** document through the electronic docket at *http://www.regulations.gov* , you may access this **Federal Register** document electronically through the EPA Internet under the “ **Federal Register** ” listings at *http://www.epa.gov/fedrgstr* . You may also access a frequently updated electronic version of 40 CFR part 180 through the Government Printing Office's pilot e-CFR site at *http://www.gpoaccess.gov/ecfr* . C. Can I File an Objection or Hearing Request? Under section 408(g) of the FFDCA, as amended by the FQPA, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. The EPA procedural regulations which govern the submission of objections and requests for hearings appear in 40 CFR part 178. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2006-0788 in the subject line on the first page of your submission. All requests must be in writing, and must be mailed or delivered to the Hearing Clerk on or before February 26, 2007. In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket that is described in ADDRESSES . Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit your copies, identified by docket ID number EPA-HQ-OPP-2006-0788, by one of the following methods: • Federal e Rule making Portal: *http://www.regulations.gov* . Follow the on-line instructions for submitting comments. • *Mail* : Office of Pesticide Programs

(OPP)Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001. • *Delivery* : OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Building), 2777 S. Crystal Drive, Arlington, VA. Deliveries are only accepted during the Docket's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket telephone number is

(703)305-5805. II. Background and Statutory Findings In the **Federal Register** of September 20, 2006 (71 FR 54987) (FRL-8094-7), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 7F4821) by K-I Chemical U.S.A. Inc., 11 Martine Avenue, Suite 970, White Plains, NY 10606. The petition requested that 40 CFR 180.551 be amended by establishing a tolerance for combined residues of the herbicide, fluthiacet-methyl, acetic acid, [[2-chloro-4-fluoro-5-[(tetrahydro-3-oxo-1H,3H-[1,3,4]thiadiazolo[3,4-α]pyridazin-1-ylidene)amino]phenyl]thio]-methyl ester, and its acid metabolite, acetic acid, [[2-chloro-4-fluoro-5-[(tetrahydro-3-oxo-1H,3H-[1,3,4]thiadiazolo[3,4-α]pyridazin-1-ylidene)amino]phenyl]thio]-, in or on the food/feed commodities: Cotton, gin byproducts at 0.20 part per million

(ppm)and cotton, undelinted seed at 0.020 ppm. That notice included a summary of the petition prepared by K-I Chemical U.S.A. Inc., the registrant. There were no comments received in response to the notice of filing. Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .” EPA performs a number of analyses to determine the risks from aggregate exposure to pesticide residues. For further discussion of the regulatory requirements of section 408 of the FFDCA and a complete description of the risk assessment process, see *http://www.epa.gov/fedrgstr/EPA-PEST/1997/November/Day-26/p30948.htm* . III. Aggregate Risk Assessment and Determination of Safety Consistent with section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure, consistent with section 408(b)(2) of FFDCA, for a tolerance for combined residues of fluthiacet-methyl in or on cotton, gin byproducts at 0.20 ppm and cotton, undelinted seed at 0.020 ppm. EPA's assessment of exposures and risks associated with establishing the tolerance follows. A. Toxicological Profile EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. Specific information on the studies received and the nature of the toxic effects caused by fluthiacet-methyl as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies are discussed in the **Federal Register** of December 21, 2001 (66 FR 65839) (FRL-6806-7). B. Toxicological Endpoints For hazards that have a threshold below which there is no appreciable risk, the dose at which no adverse effects are observed (the NOAEL) from the toxicology study identified as appropriate for use in risk assessment is used to estimate the toxicological level of concern (LOC). However, the lowest dose at which adverse effects of concern are identified (the LOAEL) is sometimes used for risk assessment if no NOAEL was achieved in the toxicology study selected. An uncertainty factor

(UF)is applied to reflect uncertainties inherent in the extrapolation from laboratory animal data to humans and in the variations in sensitivity among members of the human population as well as other unknowns. An UF or 100 is routinely used, 10X to account for interspecies differences and 10X for intraspecies differences. The linear default risk methodology (Q*) is the primary method currently used by the Agency to quantify non-threshold hazards such as cancer. The Q* approach assumes that any amount of exposure will lead to some degree of cancer risk, estimates risk in terms of the probability of occurrence of additional cancer cases. More information can be found on the general principles EPA uses in risk characterization at *http://www.epa.gov/fedrgstr/EPA-PEST/1997/November/Day-26/p30948.htm* . A summary of the toxicological endpoints for fluthiacet-methyl used for human risk assessment is discussed in Unit III.B. of the final rule published in the **Federal Register** of December 21, 2001 (66 FR 65839) (FRL-6806-7). C. Exposure Assessment 1. *Dietary exposure from food and feed uses* . Tolerances have been established (40 CFR 180.551) for the residues of fluthiacet-methyl, in or on a variety of raw agricultural commodities. Risk assessments were conducted by EPA to assess dietary exposures from fluthiacet-methyl in food as follows: i. *Acute exposure* . Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure. No such effects were identified in the toxicological studies for fluthiacet-methyl; therefore, a quantitative acute dietary exposure assessment is unnecessary. ii. *Chronic exposure* . In conducting the chronic dietary exposure assessment EPA used the Dietary Exposure Evaluation Model software with the Food Commodity Intake Database (DEEM-FCID TM ), which incorporates food consumption data as reported by respondents in the USDA 1994-1996 and 1998 Nationwide Continuing Surveys of Food Intake by Individuals (CSFII), and accumulated exposure to the chemical for each commodity. The following assumptions were made for the chronic exposure assessments: Tolerance level residues were assumed and refined with average values of current and projected percent crop treated

(PCT)estimates. Refined current PCT estimates for field corn, sweet corn and soybeans were determined to be on average <1% and at a maximum 1%; and projected PCT estimates for cotton were determined to be on average 30% and at a maximum 34%. iii. *Cancer* . The Hazard Identification Assessment Review Committee classified fluthiacet-methyl as likely to be a human carcinogen. *Chronic and cancer exposure assessement* . Chronic and cancer exposures were determined to be dietary from residues in raw agricultural commodities derived from the use of fluthiacet-methyl for defoliating cotton and from water. HED determined that dietary exposure to residues of fluthiacet-methyl and it acid metabolite (CGA-300402) in or on cotton gin byproducts at 0.20 ppm and in or on cotton undelinted seed at 0.020 were anticipated from the proposed use-pattern. These tolerance level exposures were used in the risk assessment. In addition, Estimated Drinking Water Concentrations (EDWCs) were determined by modeling (PRZM/EXAMS, Tier II) for California, the highest found level of potential residues for chronic (0.19 μg/L) and for cancer (0.14 μg) iv. *Anticipated residue and percent crop treated

(PCT)information* . Section 408(b)(2)(E) of the FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide chemicals that have been measured in food. If EPA relies on such information, EPA must pursuant to section 408(f)(1) require that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. Following the initial data submission, EPA is authorized to require similar data on a time frame it deems appropriate. For the present action, EPA will issue such data call-ins for information relating to anticipated residues as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Such data call-ins will be required to be submitted no later than 5 years from the date of issuance of this tolerance. Section 408(b)(2)(F) of FFDCA states that the Agency may use data on the actual percent of food treated for assessing chronic dietary risk only if the Agency can make the following findings: Condition 1, that the data used are reliable and provide a valid basis to show what percentage of the food derived from such crop is likely to contain such pesticide residue; Condition 2, that the exposure estimate does not underestimate exposure for any significant subpopulation group; and Condition 3, if data are available on pesticide use and food consumption in a particular area, the exposure estimate does not understate exposure for the population in such area. In addition, the Agency must provide for periodic evaluation of any estimates used. To provide for the periodic evaluation of the estimate of PCT as required by section 408(b)(2)(F) of FFDCA, EPA may require registrants to submit data on PCT. The Agency used PCT information as follows: The assumptions of the dietary exposure analysis were tolerance level residues, modified by default processing factors and percent crop treated

(PCT)data. The resulting chronic and cancer dietary assessments were classified as Tier 2 assessments and are considered to be partially refined. PCT information came from EPA's refined usage analysis. Refined current PCT estimates for field corn, sweet corn and soybeans were determined to be on average <1%, and at a maximum 1%. Projected PCT estimates for cotton were determined to be on average, 30%, and at a maximum 34%. Because the estimated average PCTs for field corn, sweet corn and soybeans were less than 1%, they were rounded up to 1% for use in the chronic and cancer dietary assessments. The estimated average PCT for cotton was used for both the chronic and cancer assessment. There were no data on pop corn; therefore, 100% crop treated defaults were used. Default DEEM 7.81 processing factors were applied to corn, field, syrup and corn, field, syrup-babyfood. EPA concluded that residues of fluthiacet-methyl and its acid metabolite CGA-300403, were not expected to accumulate in livestock tissues; therefore, livestock commodities were not factored into the dietary risk assessment. The Agency believes that the three conditions listed in Unit IV.C.1. have been met. With respect to Condition 1, PCT estimates are derived from Federal and private market survey data, which are reliable and have a valid basis. The Agency is reasonably certain that the percentage of the food treated is not likely to be an underestimation. As to Conditions 2 and 3, regional consumption information and consumption information for significant subpopulations are taken into account through EPA's computer-based model for evaluating the exposure of significant subpopulations including several regional groups. Use of this consumption information in EPA's risk assessment process ensures that EPA's exposure estimate does not understate exposure for any significant subpopulation group and allows the Agency to be reasonably certain that no regional population is exposed to residue levels higher than those estimated by the Agency. Other than the data available through national food consumption surveys, EPA does not have available information on the regional consumption of food to which fluthiacet-methyl may be applied in a particular area. 2. *Dietary exposure from drinking water* . The Agency lacks sufficient monitoring exposure data to complete a comprehensive dietary exposure analysis and risk assessment for fluthiacet-methyl in drinking water. Because the Agency does not have comprehensive monitoring data, drinking water concentration estimates are made by reliance on simulation or modeling taking into account data on the physical characteristics of fluthiacet-methyl. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at *http://www.epa.gov/oppefed/models/water/index.htm* . Based on the Pesticide Root Zone Model/Exposure Analysis Modeling System and Sreening Concentrations in Groundwater models, the estimated environmental concentrations

(EECs)of fluthiacet-methyl for acute exposures are estimated to be between 0.23 and 1.0 parts per billion

(ppb)for surface water and 0.08 ppb for ground water. The EECs for chronic and cancer exposures are estimated to be 0.19 and 0.l4, respectively. 3. *From non-dietary exposure* . The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Fluthiacet-methyl is not registered for use on any sites that would result in residential exposure. 4. *Cumulative effects from substances with a common mechanism of toxicity* . Section 408(b)(2)(D)(v) of the FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.” Unlike other pesticides for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not made a common mechanism of toxicity finding as to fluthiacet-methyl and any other substances and fluthiacet-methyl does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has not assumed that fluthiacet-methyl has a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see the policy statements released by EPA's Office of Pesticide Programs concerning common mechanism determinations and procedures for cumulating effects from substances found to have a common mechanism on EPA's website at *http://www.epa.gov/pesticides/cumulative* . D. Safety Factor for Infants and Children 1. *In general* . Section 408 of FFDCA provides that EPA shall apply an additional tenfold margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the data base on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. Margins of safety are incorporated into EPA risk assessments either directly through use of a MOE analysis or through using uncertainty (safety) factors in calculating a dose level that poses no appreciable risk to humans. In applying this provision, EPA either retains the default value of 10X when reliable data do not support the choice of a different factor, or, if reliable data are available, EPA uses a different additional safety factor value based on the use of traditional uncertainty factors and/or special FQPA safety factors, as appropriate. 2. *Prenatal and postnatal sensitivity* . There is no quantitative or qualitative evidence or increased susceptibility of rat and rabbit fetuses to *in utero* exposure to fluthiacet-methyl in developmental toxicity studies. There is no quantitative or qualitative evidence of increased susceptibility to fluthiacet-methyl following prenatal/postnatal exposure to a 2-generation reproduction study. 3. *Conclusion* . EPA concluded based on reliable data that it would be safe to remove the additional 10X safety factor for the protection of infants and children. This conclusion was based on the following findings: i. There is no quantitative or qualitative evidence of increased susceptibility to fluthiacet-methyl following prenatal/postnatal exposure; ii. There is no concern for developmental neurotoxicity resulting from exposure to fluthiacet-methyl. A developmental neurotoxicity study is not required; iii. The toxicological data base is complete for FQPA assessment; iv. The chronic dietary food exposure assessment utilizes tolerance level residues and 34% of cotton and 1% corn and soybean crop treated information for all commodities. By using these screening-level residue values and conservative percent crop treated assessment, actual exposures/risks will not be underestimated; and v. The dietary drinking water assessment utilizes water concentration values generated by model and associated modeling parameters that are designed to provide conservative, health protective, high-end estimates of water concentrations that will not likely be exceeded. E. Aggregate Risks and Determination of Safety 1. *Acute risk* . An effect of concern attributable to a single exposure

(dose)was not identified from the oral toxicity studies including the developmental toxicity studies in rat and rabbits. No acute risk is expected from exposure to fluthiacet-methyl. 2. *Chronic risk* . Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that exposure to fluthiacet-methyl from food will utilize <1% of the cPAD for the U.S. population, 1.4% of the cPAD for all infant <1 year old. There are no residential uses for fluthiacet-methyl that results in chronic residential exposure to fluthiacet-methyl. 3. *Short-term risk* . Fluthiacet-methyl is not registered for use on any sites that would result in residential exposure. Therefore, the aggregate risk is the sum of the risk from food and water, which do not exceed the Agency's level of concern. 4. *Aggregate cancer risk for U.S. population* . The overall cancer dietary risk for the U.S. population is 7.51 x 10 -7 , based on dietary (food and drinking water exposures). 5. *Determination of safety* . Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population, and to infants and children from aggregate exposure to fluthiacet-methyl residues. IV. Other Considerations A. Analytical Enforcement Methodology Adequate enforcement methodology (gas chromatography/mass spectrometry method which uses negative ion chemical ionization (GC/NCI-MS) is available to enforce the tolerance expression. The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number:

(410)305-2905; e-mail address: *residuemethods@epa.gov* . B. International Residue Limits There are no Codex, Canadian or Mexican maximum residue limits established for fluthiacet-methyl on corn, cotton and soybean commodities or on meat and milk commodities. V. Conclusion Therefore, the tolerance is established for combined residues of Fluthiacet-methyl, acetic acid, [[2-chloro-4-fluoro-5-[(tetrahydro-3-oxo-1H,3H-[1,3,4]thiadiazolo[3,4-α]pyridazin-1-ylidene)amino]phenyl]thio]-methyl ester, and its acid metabolite, acetic acid, [[2-chloro-4-fluoro-5-[(tetrahydro-3-oxo-1H,3H-[1,3,4]thiadiazolo[3,4-α]pyridazin-1-ylidene)amino]phenyl]thio]-, in or on cotton, gin byproducts at 0.20 ppm and cotton, undelinted seed at 0.020 ppm. VI. Statutory and Executive Order Reviews This final rule establishes a tolerance under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget

(OMB)has exempted these types of actions from review under Executive Order 12866, entitled *Regulatory Planning and Review* (58 FR 51735, October 4, 1993). Because this rule has been exempted from review under Executive Order 12866 due to its lack of significance, this rule is not subject to Executive Order 13211, *Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use* (66 FR 28355, May 22, 2001). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 *et seq.* , or impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995

(UMRA)(Public Law 104-4). Nor does it require any special considerations under Executive Order 12898, entitled *Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations* (59 FR 7629, February 16, 1994); or OMB review or any Agency action under Executive Order 13045, entitled *Protection of Children from Environmental Health Risks and Safety Risks* (62 FR 19885, April 23, 1997). This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note). Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act

(RFA)(5 U.S.C. 601 *et seq.* ) do not apply. In addition, the Agency has determined that this action will not have a substantial direct effect on 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, entitled *Federalism* (64 FR 43255, August 10, 1999). Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive order to include regulations that 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.” This final rule directly regulates growers, food processors, food handlers and food retailers, not States. This action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. For these same reasons, the Agency has determined that this rule does not have any “tribal implications” as described in Executive Order 13175, entitled *Consultation and Coordination with Indian Tribal Governments* (65 FR 67249, November 6, 2000). Executive Order 13175, requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” “Policies that have tribal implications” is defined in the Executive order to include regulations that have “substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and the Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.” This rule will not have substantial direct effects on tribal governments, 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 in Executive Order 13175. Thus, Executive Order 13175 does not apply to this rule. VII. Congressional Review Act 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 this final rule in the **Federal Register** . This final rule is not a “major rule” as defined by 5 U.S.C. 804(2). List of Subjects in 40 CFR Part 180 Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements. Dated: December 19, 2006. Lois Rossi, Director, Registration Division, Office of Pesticide Programs. Therefore, 40 CFR chapter I is amended as follows: PART 180—AMENDED 1. The authority citation for part 180 continues to read as follows: Authority: 21 U.S.C. 321(q), 346a and 371. 2. Section 180.551 is amended by redesignating existing paragraph

(a)as (a)(1), and adding paragraph (a)(2) to read as follows. § 180.551 Fluthiacet-methyl; tolerances for residues.

(a)*General* .

(1)* * *

(2)A tolerance is established for the combined residues of the herbicide fluthiacet-methyland its acid metabolite: acetic acid, [[2-chloro-4-fluoro-5-[tetrahydro-3-oxo-1H,3H-[1,3,4]thiadiazolo[3,4-α]pyridazin-1-ylidene)amino]phenyl]thio]-methyl ester, and its acid metabolite, acetic acid, [[2-chloro-4-fluoro-5-[(tetrahydro-3-oxo-1H,3H-[1,3,4]thiadiazolo[3,4-α]pyridazin-1-ylidene)amino]phenyl]thio]- , in or on the following food commodities: Commodity Parts per million Cotton, gin byproducts 0.20 Cotton undelinted seed 0.020 [FR Doc. E6-22126 Filed 12-26-06; 8:45 am] BILLING CODE 6560-50-S FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 1 [ET Docket No. 04-295; FCC 06-56] Communications Assistance for Law Enforcement Act and Broadband Access and Services AGENCY: Federal Communications Commission. ACTION: Final rule, announcement of effective date. SUMMARY: The Federal Communications Commission

(FCC)received Office of Management and Budget

(OMB)approval on December 12, 2006 for new public information collection requirements contained in the FCC's Communications Assistance for Law Enforcement Act and Broadband Access and Services, Second Report and Order and Memorandum Opinion and Order (CALEA Second Report and Order) in 71 FR 38091, July 5, 2006, OMB Control Number 3060-0809, pursuant to the requirements of the Paperwork Reduction Act of 1995, Public Law 104-13. An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid control number. DATES: The rules for §§ 1.20004 and 1.20005 published at 71 FR 38091, July 5, 2006, are effective December 12, 2006. FOR FURTHER INFORMATION CONTACT: Thomas J. Beers, Public Safety and Homeland Security Bureau, Policy Division, 445 12th Street, SW., Washington, DC 20554, at

(202)418-0952. For additional information concerning the Paperwork Reduction Act information collection requirements, contact Judith B. Herman at

(202)418-0124, or via the Internet at *Judith-B.Herman@fcc.gov.* SUPPLEMENTARY INFORMATION: The CALEA Second Report and Order noted that the effective date for the new CALEA information collection requirements was subject to Office of Management and Budget

(OMB)approval. OMB granted its approval on December 12, 2006. Accordingly,

(1)an attesting letter for pending CALEA section 107(c)(1) petitions currently on file with the FCC must be filed by February 12, 2007;

(2)compliance monitoring reports (FCC Form 445) must be filed by February 12, 2007;

(3)system security and integrity

(SSI)plans for providers of facilities-based broadband internet access and interconnected Voice over Internet Protocol

(VoIP)services must be filed by March 12, 2007. 1 1 Communications Assistance for Law Enforcement Act and Broadband Access and Services, ET Docket No. 04-295, Public Notice DA O6-2511, Public Notice DA 06-2512, and Public Notice DA 06-2513. Compliance with new CALEA section 107(c) and 109(b) petition filing requirements 2 became effective upon OMB authorization, i.e., December 12, 2006. 2 See Communications Assistance for Law Enforcement Act and Broadband Access and Services, ET Docket No. 04-295, Second Report and Order and Memorandum Opinion and Order, 21 FCC Rcd 5360 (2006), Appendices E and F. CALEA requires the FCC to create rules that regulate the conduct and recordkeeping of lawful electronic surveillance. On May 12, 2006, the FCC released its CALEA Second Report and Order which became effective August 4, 2006, except for certain information collections which required OMB approval under the Paperwork Reduction Act before the FCC could enforce them. Now that OMB approval has been granted:

(a)Each provider that has a CALEA section 107(c)(1) extension petition currently on file must submit to the FCC an attesting letter documenting that the provider's equipment, facility or service continues to qualify for compliance extension relief, given that CALEA section 107(c)(1) applies only to equipment, facilities, or services installed or deployed prior to October 25, 1998.

(b)Facilities-based broadband Internet access and interconnected VoIP service providers must file system security and integrity

(SSI)plans under the Commission's rules. SSI plans are currently approved under the existing OMB 3060-0809 information collection. 3 3 See 65 FR 8666 (2000).

(c)All providers of facilities-based broadband Internet access or interconnected VoIP services must file monitoring reports on FCC Form 445, “CALEA Monitoring Report for Broadband and VoIP Services,” with the FCC to ensure timely CALEA compliance.

(d)There are new requirements governing petitions filed under section 107(c)(1), which request additional time to comply with CALEA; these provisions apply to all providers subject to CALEA and are voluntary filings.

(e)There are modified requirements governing petitions filed under section 109(b) request for reimbursement of CALEA; these provisions apply to all providers subject to CALEA and are voluntary filings. Federal Communications Commission. William F. Caton, Deputy Secretary. [FR Doc. E6-22155 Filed 12-26-06; 8:45 am] BILLING CODE 6712-01-P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 648 [Docket No. 041110317-4364-02; I.D. 121906A] Fisheries of the Northeastern United States; Summer Flounder Fishery; Quota Transfer AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Temporary rule; inseason quota transfer. SUMMARY: NMFS announces that the State of Maryland is transferring 8,000 lb (3,629 kg) of commercial summer flounder quota to the State of New York from its 2006 quota. By this action, NMFS adjusts the quotas and announces the revised commercial quota for each state involved. DATES: Effective December 21, 2006 through December 31, 2006, unless NMFS publishes a superseding document in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: Douglas Potts, Fishery Management Specialist,

(978)281-9341, fax

(978)281-9135. SUPPLEMENTARY INFORMATION: Regulations governing the summer flounder fishery are found at 50 CFR part 648. The regulations require annual specification of a commercial quota that is apportioned among the coastal states from North Carolina through Maine. The process to set the annual commercial quota and the percent allocated to each state are described in § 648.100. The final rule implementing Amendment 5 to the Fishery Management Plan that was published on December 17, 1993 (58 FR 65936), provided a mechanism for summer flounder quota to be transferred from one state to another. Two or more states, under mutual agreement and with the concurrence of the Administrator, Northeast Region, NMFS (Regional Administrator), can transfer or combine summer flounder commercial quota under § 648.100(d). The Regional Administrator is required to consider the criteria set forth in § 648.100(d)(3) in the evaluation of requests for quota transfers or combinations. Maryland has agreed to transfer 8,000 lb (3,629 kg) of its 2006 commercial quota to New York. The Regional Administrator has determined that the criteria set forth in § 648.100(d)(3) have been met for each of these transfers. The revised quotas for calendar year 2006 are: New York, 943,943 lb (428,165 kg) and Maryland, 276,262 lb (125,310 kg). Classification This action is taken under 50 CFR part 648 and is exempt from review under Executive Order 12866. Authority: 16 U.S.C. 1801 *et seq.* Dated: December 20, 2006. Alan D. Risenhoover, Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. 06-9881 Filed 12-21-06; 2:38 pm]

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