Unknown. Final rule
30,400 words·~138 min read·
/register/2007/03/20/07-1354A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
--- schema: federal-register doc_type: fedreg source_file: FR-2007-03-20.xml --- 72 53 Tuesday, March 20, 2007 Contents Agency Agency for Toxic Substances and Disease Registry NOTICES Hazardous substances releases and facilities: Public health assessments and effects; list, 13115-13116 E7-5029 Agriculture Agriculture Department See Foreign Agricultural Service See Forest Service See Natural Resources Conservation Service Antitrust Antitrust Division NOTICES National cooperative research notifications:
Network Centric Operations Industry Consortium, Inc., 13125-13126 07-1322 Centers Centers for Disease Control and Prevention NOTICES Meetings: National Institute for Occupational Safety and Health— Radiation and Worker Health Advisory Board, 13116 E7-5009 Coast Guard Coast Guard RULES Drawbridge operations: New Jersey, 12981-12983 E7-5062 Commerce Commerce Department See Foreign-Trade Zones Board See Industry and Security Bureau See International Trade Administration See Minority Business Development Agency See National Oceanic and Atmospheric Administration Commodity Commodity Futures Trading Commission NOTICES Meetings;
Sunshine Act, 13093-13094 07-1364 07-1365 07-1366 07-1367 Defense Defense Department See Navy Department Education Education Department NOTICES Grants and cooperative agreements; availability, etc.: Special education and rehabilitative services— Children with disabilities; technical assistance and dissemination to improve services and results, 13098-13103 E7-5048 Technology and Media Services for Individuals with Disabilities Program, 13094-13098 E7-5047 Employee Employee Benefits Security Administration NOTICES Employee benefit plans; individual exemptions:
Mellon Financial Corp. et al., 13126-13137 E7-4982 Energy Energy Department See Energy Efficiency and Renewable Energy Office See Federal Energy Regulatory Commission Energy Energy Efficiency and Renewable Energy Office RULES Alternative Fuel Transportation Program: Alternative fueled vehicle acquisition requirements; alternative compliance waiver, 12958-12966 E7-5021 EPA Environmental Protection Agency RULES Air pollution; standards of performance for new stationary sources:
Large municipal waste combustors; reconsideration, 13016-13023 E7-5022 PROPOSED RULES Air pollution control: State operating permits programs— New Jersey, 13059-13061 E7-5026 Executive Executive Office of the President See Trade Representative, Office of United States FAA Federal Aviation Administration RULES Airworthiness directives: Alpha Aviation Design Ltd., 12966-12968 E7-4861 PROPOSED RULES Airworthiness directives: Boeing, 13048-13051 E7-5013 NOTICES Exemption petitions; summary and disposition, 13157 E7-5061 Federal Energy Federal Energy Regulatory Commission NOTICES Hydroelectric applications, 13107-13108 E7-5015 *Applications, hearings, determinations, etc.:* ANR Pipeline Co., 13104 E7-5020 Birchwood Power Partners, L.P., 13104 E7-5012 G&G Energy, LLC, 13104-13105 E7-5014 Gulf South Pipeline Co., LP, 13105 E7-5019 Northern Natural Gas Co., 13105 E7-5018 Northwest Pipeline Corp., 13106 E7-5010 Transcontinental Gas Pipe Line Corp., 13106-13107 E7-5016 E7-5017 Twin Buttes Wind LLC et al., 13107 E7-5011 Federal Highway Federal Highway Administration NOTICES Environmental statements; notice of intent:
Nueces County, TX, 13157-13158 07-1338 Federal Reserve Federal Reserve System NOTICES Banks and bank holding companies: Formations, acquisitions, and mergers, 13108 E7-4980 Permissible nonbanking activities, 13108-13109 E7-4981 FTC Federal Trade Commission PROPOSED RULES Industry guides: Advertising; endorsements and testimonials use, 13051-13052 E7-5039 Trade regulation rules: Amplifiers utilized in home entertainment products; power output claims; withdrawn, 13052-13053 E7-5038 Fish Fish and Wildlife Service RULES Endangered and threatened species:
American crocodile, 13027-13041 E7-5037 PROPOSED RULES Endangered and threatened species: Critical habitat designations— Hines emerald dragonfly, 13061-13068 07-1368 NOTICES Endangered and threatened species permit applications, determinations, etc., 13121-13122 E7-5008 Food Food and Drug Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 13117-13118 E7-5046 Foreign Foreign Agricultural Service NOTICES Committees; establishment, renewal, termination, etc.:
Agricultural Policy and Agricultural Technical Advisory Committees for Trade, 13078-13079 07-1339 Foreign Foreign Assets Control Office RULES Sudanese sanctions and Iranian transactions regulations: Agricultural commodities, medicine, and medical devices one-year export licenses; issuance policy clarification, 12980-12981 E7-4950 MISSING FOR: Foreign-Trade Zones Board Foreign-Trade Zones Board NOTICES *Applications, hearings, determinations, etc.:* Florida, 13080 E7-5056 Georgia, 13080 E7-5079 Nevada, 13080 E7-5077 South Carolina Kittel Supplier USA, Inc.; automotive door trim components manufacturing facility, 13081 E7-5063 Kravet, Inc.; textile distribution and sampling facility, 13081 E7-5064 Texas Samsung Austin Semiconductor L.L.C.; manufacturing facility, 13081-13082 E7-5067 Forest Forest Service NOTICES Meetings:
Deschutes Provincial Advisory Committee, 13079 07-1332 Southwest Oregon Provincial Advisory Committee, 13079 07-1335 Health Health and Human Services Department See Agency for Toxic Substances and Disease Registry See Centers for Disease Control and Prevention See Food and Drug Administration See National Institutes of Health See Substance Abuse and Mental Health Services Administration NOTICES Reports and guidance documents; availability, etc.: Chemical, biological, radiological, and nuclear threats; public health emergency medical countermeasures enterprise strategy, 13109-13114 E7-5066 Long-Term Field Evaluation Program Concept, 13114-13115 07-1341 Homeland Homeland Security Department See Coast Guard See Transportation Security Administration NOTICES Reports and guidance documents; availability, etc.:
Department programs and systems; privacy impact assessments published on Web, 13120-13121 07-1329 Industry Industry and Security Bureau NOTICES Export privileges, actions affecting: Fiber Materials, Inc., 13082-13083 07-1337 Lachman, Walter L., 13083-13084 07-1336 Materials International, Inc., 13084-13085 07-1334 Subilia, Maurice, 13085-13086 07-1333 Interior Interior Department See Fish and Wildlife Service See Land Management Bureau IRS Internal Revenue Service RULES Income taxes:
Business electronic filing and burden reduction; guidance; correction, 12968 E7-4962 Computer software, 12969-12974 07-1354 Corporate reorganizations; interest continuity measurement; guidance, 12974-12980 E7-5128 PROPOSED RULES Income taxes: Corporate reorganizations; interest continuity measurement; guidance; cross-reference, 13058-13059 E7-5045 Escrow accounts, trusts, and other funds used during deferred exchanges of like-kind property, 13055-13058 E7-4968 NOTICES Agency information collection activities; proposals, submissions, and approvals, 13158-13159 E7-4963 E7-4964 Meetings:
Taxpayer Advocacy Panels, 13160-13161 E7-4965 E7-4966 E7-4967 E7-4969 International International Trade Administration NOTICES Antidumping: Corrosion-resistant carbon steel flat products from— Korea, 13086-13088 E7-5041 Stainless steel wire rod from— India, 13088-13089 E7-5040 International International Trade Commission NOTICES Import investigations: Hot-rolled steel products from— Various countries, 13123 E7-5043 Imports from least-developed countries; duty-free, quota-free treatment; probable economic effect, 13123-13124 E7-5042 Switches and products containing same, 13124-13125 E7-5044 Justice Justice Department See Antitrust Division NOTICES Privacy Act; systems of records, 13125 E7-4960 Labor Labor Department See Employee Benefits Security Administration Land Land Management Bureau NOTICES Meetings:
Resource Advisory Councils— Central Montana, 13122-13123 E7-5007 Northeast California, 13122 07-1326 Minority Minority Business Development Agency NOTICES Meetings: Asian Americans and Pacific Islanders, President's Advisory Commission, 13089 E7-5054 National Archives National Archives and Records Administration NOTICES Meetings: Electronic Records Archives Advisory Committee, 13137 E7-5068 National National Institute for Literacy NOTICES Meetings: Advisory Board, 13137 E7-5024 NIH National Institutes of Health NOTICES Meetings:
National Institute of Biomedical Imaging and Bioengineering, 13119 07-1350 National Institute of Child Health and Human Development, 13118 07-1348 07-1349 National Institute of Neurological Disorders and Stroke, 13118 07-1345 Scientific Review Center, 13119-13120 07-1344 07-1346 07-1347 07-1351 NOAA National Oceanic and Atmospheric Administration RULES Fishery conservation and management: West Coast States and Western Pacific fisheries— Pacific Coast groundfish; correction, 13043-13047 07-1319 Marine mammals:
Commercial fishing authorizations— Atlantic Large Whale Take Reduction Plan, 13041-13043 07-1352 PROPOSED RULES Fishery conservation and management: Northeastern United States fisheries— Monkfish, 13069-13077 E7-5051 NOTICES Antarctic Marine Living Resources Convention Act of 1984; conservation and management measures, 13089-13092 E7-5050 Scientific research permit applications, determinations, etc., 13092-13093 E7-5053 E7-5055 NRCS Natural Resources Conservation Service NOTICES Field office technical guides; changes:
Tennessee, 13079-13080 E7-4961 Navy Navy Department NOTICES Meetings: Chief of Naval Operations Executive Panel, 13094 E7-5030 Reports and guidance documents; availability, etc.: Procurement contract controversies; binding arbitration procedures, 13094 E7-5031 Nuclear Nuclear Regulatory Commission NOTICES Environmental statements; availability, etc.: Le Tourneau, Inc. Steel Mill, Longview, TX, 13138-13139 E7-5034 Environmental statements; notice of intent: Carolina Power & Light Co., 13139-13142 E7-5033 Meetings:
Reactor Safeguards Advisory Committee, 13142 E7-5035 E7-5036 Office of U.S. Trade Office of United States Trade Representative See Trade Representative, Office of United States Personnel Personnel Management Office RULES Administrative Law Judge Program; revision, 12947-12958 E7-4959 SEC Securities and Exchange Commission NOTICES Securities: Financial Accounting Standards Board; accounting support fee review, 13143 E7-5003 Self-regulatory organizations; proposed rule changes:
American Stock Exchange LLC, 13144-13147 E7-4977 E7-4978 E7-5005 Boston Stock Exchange, Inc., 13147-13149 E7-4976 National Association of Securities Dealers, Inc., 13149-13155 E7-4973 NYSE Arca, Inc., 13155-13156 E7-4974 E7-4975 Social Social Security Administration PROPOSED RULES Social security benefits and supplemental security income: Federal old age, survivors, and disability insurance, and aged, blind, and disabled— Consultative examinations; annual onsite review of medical providers; threshold billing amount revision, 13053-13055 E7-4958 State State Department NOTICES Meetings:
International Security Advisory Board, 13156-13157 E7-5023 Substance Substance Abuse and Mental Health Services Administration NOTICES Meetings: Substance Abuse Treatment Center National Advisory Council, 13120 E7-5148 Toxic Toxic Substances and Disease Registry Agency See Agency for Toxic Substances and Disease Registry Trade Trade Representative, Office of United States NOTICES Trade Policy Staff Committee: 2005 WTO Ministerial decision on duty-free quota-free market access for the least developed countries; comment resubmission, 13142-13143 E7-5032 Transportation Transportation Department See Federal Aviation Administration See Federal Highway Administration NOTICES Aviation proceedings:
Agreements filed; weekly receipts, 13157 E7-5025 Transportation Transportation Security Administration RULES Air cargo security requirements; compliance dates, 13023-13026 07-1327 Maritime and land transportation security: Transportation Worker Identification Credential fees, 13026-13027 07-1328 Treasury Treasury Department See Foreign Assets Control Office See Internal Revenue Service Veterans Veterans Affairs Department RULES Disabilities rating schedule: Current diagnostic codes, 12983-13016 E7-4914 Readers Aids Consult the Reader Aids section at the end of this issue for phone numbers online resources, finding aids, reminders, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 72 53 Tuesday, March 20, 2007 Rules and Regulations OFFICE OF PERSONNEL MANAGEMENT 5 CFR Parts 337 and 930 RIN 3206-AK86 Examining System and Programs for Specific Positions and Examinations (Miscellaneous) AGENCY: Office of Personnel Management.
ACTION: Final rule. SUMMARY: The Office of Personnel Management
(OPM)is issuing final regulations to revise the Administrative Law Judge Program. The purpose of these revisions is to remove procedures that appear in other parts of this chapter, update outdated information, and remove the internal examining processes from the regulations. Additionally, these revisions describe OPM and agency responsibilities concerning the Administrative Law Judge Program. These regulations continue the basic intent of making administrative law judges independent in matters of appointment, tenure and compensation. DATES: This rule is effective April 19, 2007. FOR FURTHER INFORMATION CONTACT: Linda Watson by telephone at
(202)606-0830; by fax at
(202)606-2329; by TTY at
(202)418-3134; or by e-mail at *linda.watson@opm.gov.* SUPPLEMENTARY INFORMATION: On December 13, 2005, the Office of Personnel Management
(OPM)published a proposed rule at 70 FR 73646, to revise the Administrative Law Judge Program. On December 21, 2005, OPM republished the proposed rule at 70 FR 75745 due to information that was inadvertently omitted. The administrative law judge function was established by the Administrative Procedure Act
(APA)(Act of June 11, 1946, 60 Stat. 237, as amended), which is codified, in relevant part, in title 5, United States Code (U.S.C.), at sections 556, 557, 1305, 3105, 3344, 4301(2)(D), 5372, and 7521. Administrative law judges preside in formal proceedings requiring a decision on the record after the opportunity for a hearing. The APA requires that this function be carried out in an impartial manner. To ensure objectivity of administrative law judges and to insulate them from improper pressure, the law made these positions independent of the employing agencies in matters of appointment, tenure, and compensation. The goal of these revised regulations is to streamline the existing administrative law judge regulations as prescribed in title 5, Code of Federal Regulations (CFR), part 930, subpart B. The proposed regulations remove redundant procedures and outdated information, clarify bar membership requirements, and provide for the administrative law judge examination process to be established in a manner similar to other OPM competitive examinations. During the comment period, OPM received written comments from six Federal agencies; five professional organizations; the exclusive bargaining representative of administrative law judges serving at the Social Security Administration
(SSA)and the Department of Health and Human Services (HHS); and seventeen individuals. Based on these comments, OPM adopts several suggestions and clarifies areas where there appeared to be some confusion and misunderstanding. OPM is addressing the comments according to topics identified. OPM's Authority To Administer the Administrative Law Judge Program OPM's authority to administer the employment of administrative law judges (formerly called hearing examiners) was created by the APA. Text in section 11(1st) of the APA (5 U.S.C. 1010(1st)) stated that agencies must appoint “qualified and competent” administrative law judges. Although former section 1010(1st) was replaced by 5 U.S.C. 3105 when title 5 was enacted into positive law in 1966, the amendment was not substantive, and the requirement that administrative law judges be qualified and competent continued to apply. *See* Pub. L. 89-554, sec. 7(a), 80 Stat. 631 (the purpose of sections 1-6 of the 1966 Act, codifying title 5, was “to restate, without substantive change, the laws replaced by those sections on the effective date of this Act [Sept. 6, 1966]”); H.R. Rep. No. 89-901, at 36
(1965)(replacement of 5 U.S.C. 1010(1st) with 5 U.S.C. 3105 did not effect a substantive amendment); S. Rep. No. 89-1380, at 55
(1966)(same). The APA's legislative history, commenting on this requirement, states that the Civil Service Commission, OPM's forerunner, must “fix appropriate qualifications” for administrative law judges and that the agencies must “seek fit persons.” *See* S. Rep. No. 79-572 (1945), *reprinted in Administrative Procedure Act, Legislative History, 79th Congress, 1944-46,* S. Doc. No. 79-248, at 187, 215 (1946); H.R. Rep. No. 79-1980 (1946), *reprinted in* S. Doc. No. 79-248, at 235, 280. The President has the authority to set standards for individuals entering into the Federal civil service in the executive branch, and to prescribe rules for competitive examinations. 5 U.S.C. 3301, 3304; *see also Hampton* v. *Mow Sun Wong,* 426 U.S. 88, 115 n.47 (1976); *Am. Fed'n of Govt. Employees* v. *Hoffman,* 543 F.2d 930, 938 (D.C. Cir. 1976). The President delegated his authority to the Director of OPM through Executive Order 10577, Rule II, codified as amended in 5 CFR 2.1(a). *Mow Sun Wong,* 426 U.S. at 111; *Am. Fed'n,* 543 F.2d at 938. *See also* 5 U.S.C. 1104(a)(1), reflecting the President's authority to delegate the authority for competitive examinations to the Director of OPM. Additionally, Congress required OPM to prescribe regulations for competitive service examinations, including the administrative law judge examination. 5 U.S.C. 1302. *See also Mow Sun Wong,* 426 U.S. at 115 n.47. Under the preceding authorities, OPM is responsible for regulating and conducting competitive examinations for administrative law judges, and for establishing qualification standards for administrative law judge candidates and incumbents that promote the efficiency of the competitive service. Discussion of Comments Many commenters challenge OPM's authority to modify the administrative law judge program. These commenters claim that Congress established the administrative law judge position under the APA and only Congress can make the types of changes OPM is proposing. As noted above, we have identified authorities under which OPM administers the administrative law judge program. Two commenters claim that OPM does not have the authority to approve non-competitive personnel actions for administrative law judges, including but not limited to promotions, transfers, reinstatements, restorations, reassignments, and pay adjustments and that by doing so, OPM violates 5 U.S.C. 7521. OPM's authority to approve movement of administrative law judges such as promotions, reassignments, transfers, reinstatements, restorations, and pay adjustments is prescribed in the existing regulations in §§ 930.204 through 930.210. These regulations are authorized by 5 U.S.C. 1305, which states that OPM may investigate and regulate to give effect to the provisions applicable to administrative law judges in 5 U.S.C. 3105, 3344, 4301, and 5372. OPM has not changed the procedures for approving non-competitive personnel actions, which ensure that such actions are consistent with the statutes cited above. An agency suggests OPM consider giving agencies the authority to promote, transfer, and detail administrative law judges in excess of 120 days without obtaining OPM's approval. The agency is concerned about being able to bring back a specific judge with the in-depth knowledge of a case after he or she has separated from the agency. OPM is not adopting this suggestion. OPM is responsible for ensuring the independence of administrative law judges, and OPM believes it can best discharge this obligation if it continues to approve these requests. Accordingly, as prescribed in 5 CFR part 930, subpart B, OPM will continue to require agencies to obtain OPM's approval for non-competitive actions such as promotions, reassignments, transfers, reinstatements, restorations, pay adjustments, and details in excess of 120 days. OPM also will continue to work with agencies to fill their vacant administrative law judge positions with qualified administrative law judges as promptly as possible. One commenter recognizes that OPM has the authority to administer the administrative law judge program; however, the commenter asserts that OPM does not have the authority to re-delegate to agencies the authority to assign an administrative law judge to cases in rotation so far as practicable and to ensure the independence of the administrative law judge. Under the APA, OPM and the employing agencies have responsibilities related to administrative law judges. Although OPM also has the authority, pursuant to 5 U.S.C. § 1305, to issue regulations concerning the requirement in 5 U.S.C. 3105, the employing agency's obligation to assign its administrative law judges to cases in rotation, insofar as practicable, arises directly under the applicable statute, 5 U.S.C. 3105, not pursuant to any re-delegation from OPM. The language with which the commenter took issue was meant to be descriptive rather than prescriptive. OPM is revising § 930.201(e) and
(f)to clarify this point. Professional License Requirement Background Under the APA, administrative law judges preside in formal proceedings requiring a decision on the record after an opportunity for a hearing. Administrative law judges must be held to a high standard of conduct so that the integrity and independence of the administrative judiciary is preserved. OPM has a longstanding policy that an administrative law judge applicant or incumbent must have an active bar membership or a current license to practice law (i.e., must be both licensed and authorized to practice law). The purpose of a professional license is to ensure that administrative law judges, like attorneys, remain subject to a code of professional responsibility. These ethical requirements cannot be waived. Under the current “OPM Examination Announcement No. 318, as amended, Opportunities in the Federal Government as an Administrative Law Judge,” if an applicant wishes to apply for an administrative law judge position the applicant must possess a total of 7 years of experience as an attorney and must be duly licensed and authorized to practice law under the laws of a State, the District of Columbia, the Commonwealth of Puerto Rico, or any territorial court established under the United States Constitution. Applicants must continue to be licensed and authorized to practice law throughout the selection process, including any period on the standing register of eligibles. At the time of appointment, the newly appointed administrative law judge is required to be duly licensed and authorized to practice law. Once appointed, the administrative law judge is expected to maintain the qualifying requirement for a professional license to practice law while serving as an administrative law judge in the Federal competitive service. Additionally, if a retired administrative law judge wishes to return to Federal Service as a senior administrative law judge the retired judge must be duly licensed and authorized to practice law. OPM is authorized to establish standards for competitive service applicants that will best promote the efficiency of the service. The requirement for administrative law judge applicants and incumbents to be both licensed and authorized to practice law was professionally developed, is supported by a job analysis, and is rationally related to performance in the position to be filled. The bar license requirement is based on the results of three job analyses of the administrative law judge occupation conducted by OPM's Personnel Research Psychologists in 1990, 1999, and 2002. The job analyses were based on administrative law judge subject matter expert input, and developed and conducted in accordance with the *Uniform Guidelines on Employee Selection Procedures* . The results of these studies show that Integrity/Honesty is fundamental for performing the duties of an administrative law judge. In particular, the 2002 study documents the usefulness and job-relatedness of requiring, as minimum qualifications, bar membership and seven
(7)years of certain qualifying experience. Accordingly, OPM has determined to adhere to its long-standing position that an administrative law judge applicant must demonstrate he or she is an active member or has judicial status that authorizes the practice of law and requires adherence to his or her State's or jurisdiction's ethical requirements. In meeting OPM's goal to establish the administrative law judge examination process in a manner similar to other OPM competitive examinations, the requirement that a bar membership applies to both applicants and employees is in accordance with all other OPM qualification standards for the competitive service. Failure at any time (applicant or incumbent) to meet a minimum qualification requirement means the individual is not qualified to perform the duties of the position. In addition, the requirement for administrative law judge applicants and incumbents to be both licensed and authorized to practice law is historically grounded. The Federal Circuit has found that a qualification requirement's long-standing role in administrative law judge selection is an important factor in evaluating the standard's rationality. *See Meeker* v. *Merit Sys. Protection Bd.* , 319 F.3d 1368, 1378 (Fed. Cir. 2003), affirming minimum qualification requirement of seven years of relevant legal experience, and noting “the important role that experience has always played in the selection of ALJs”. At the time the APA was approved, most of the agencies and departments recommended to the Civil Service Commission, OPM's forerunner, that a law degree and bar membership be required of candidates for administrative law judge positions. In subsequent years, a report by the Committee on Hearing Officers of the President's Conference on Administrative Procedure contained recommendations that in addition to legal experience, a law degree and bar membership be required of all candidates. In the early 1960's, following the recommendations by the President's Administrative Conference, the Civil Service Commission established an Advisory Committee to review the entire program. Based on previous recommendations that bar membership be required and the nature of the work, the Advisory Committee made a similar recommendation indicating that the requirement would help ensure that candidates possessed the degree of expertise to perform satisfactorily in the job. The Civil Service Commission adopted the recommendation concerning bar membership and it has been a standard in the Program since 1964. Minimum qualification requirements do not disappear after an individual is appointed as an administrative law judge. As described in the following discussion of comments, a standard for career-entry promotes the efficiency of the competitive service only if it applies continuously to applicants and incumbents alike. Discussion of Comments OPM received comments opposing the license requirement for incumbent administrative law judges. A few commenters claim that the license requirement is a new qualification requirement; therefore, the public must be given an opportunity to comment on it. As discussed above, the license requirement is not a new requirement and the **Federal Register** notice proposing these regulations is correct in stating that OPM was clarifying bar membership. The first category of comments states that OPM exceeded its authority under authorizing statutes. This is incorrect. The President has the power to establish qualifications and conditions of employment in the competitive service under 5 U.S.C. 3301 and 3304, and has delegated this standard-setting authority to OPM under Executive Order 10577, Rule II, codified as amended in 5 CFR 2.1(a). *See also* 5 U.S.C. 1104(a)(1). OPM is required by 5 U.S.C. 1302 to promulgate regulations for competitive service examinations implementing Rule II. The Supreme Court and the District of Columbia Circuit have ruled that where OPM promulgates a standard under 5 U.S.C. 3301 and 5 CFR 2.1(a), OPM requires no further statutory or executive authority for its action. *See Mow Sun Wong* , 426 U.S. at 113 (holding that where OPM promulgates a standard under 5 U.S.C. 3301 and Rule II, it “may either retain or modify the * * * requirement without further authorization from Congress or the President”); *Hoffman* , 543 F.2d at 941 n.17 (same). It is nonetheless notable that Congress also expressed its specific intent in the legislative history of section 11 of the APA that OPM be responsible for fixing standards to ensure that qualified and competent administrative law judges are appointed. Several commenters state that while OPM has the statutory authority to establish qualifications for administrative law judge applicants and appointees, including “active” bar membership requirements, OPM's authority does not extend to incumbent administrative law judges. Under controlling District of Columbia Circuit case law, OPM's authority under 5 U.S.C. 3301 and 5 CFR 2.1(a) extends to establishing ongoing “conditions of employment for civil servants in the executive branch,” not just appointment qualifications. *Hoffman* , 543 F.2d at 938. A standard for career entry promotes the efficiency of the competitive service only if it applies continuously to applicants and incumbents alike. According to a second category of comments, even if OPM has the authority to impose a license requirement, its implementation is too broad and not rationally related to OPM's goals. These commenters assert that the representative licensing jurisdictions allow incumbent judges to take an inactive, judicial, or retired status on grounds that they are not actively engaged in the practice of law, so there is no rational basis for OPM to require “active” bar status or a current license to practice law. Some commenters assert that inactive, judicial, or retired status would continue to subject the incumbent to appropriate State bar disciplinary oversight while exempting them from potentially burdensome fees, continuing legal education requirements, and reexamination requirements. One commenter asserts that by taking judicial status in lieu of “active” status, an administrative law judge appropriately remains subject to discipline under State codes of judicial conduct, even if the administrative law judge is no longer subject to rules of professional responsibility applicable to practicing attorneys. Another commenter asserts, conversely, that administrative law judges should be allowed to maintain an inactive status specifically so that they will not be subject to disciplinary oversight by State licensing authorities. Two commenters recommend that if the “active” bar membership or current license requirement is adopted, it should be phased in to allow all incumbent administrative law judges time to come into compliance because of the potential financial burden associated with a change in bar status in some jurisdictions. We disagree with these comments and recommendations because application of the “active” bar membership or current license requirement to both applicant and incumbent administrative law judges promotes the efficiency of the competitive service. Moreover, as it is not a new requirement, a transition period is not needed. According to a third category of comments, the license requirement will cause administrative law judges to violate State law. Several commenters state that requiring incumbent administrative law judges to maintain a current license to practice law may cause administrative law judges to violate a provision of the Model Code of Judicial Conduct that bars judges from the practice of law. This argument is misplaced. Canon 4G of the Model Code and related Commentary, when incorporated in the law of the relevant licensing jurisdiction, prohibits a judge only from practicing law “in a representative capacity,” and does not prohibit, or in any way restrict, a judge from maintaining a current license to practice law. In addition, the final regulations accommodate State law by allowing an administrative law judge to take judicial status where he or she is prohibited by State law from taking “active” status. A fourth category of comments raises a concern that the regulations subject administrative law judges to overlapping ethics and license requirements. The commenters state a concern that if incumbent administrative law judges are required to maintain “active” bar membership or a current license to practice law, they may, under 28 U.S.C. 530B(a), be subject to both the rules of professional responsibility applicable to attorneys practicing in the jurisdiction where the administrative law judge conducts proceedings, and the rules of professional responsibility of the jurisdiction where the administrative law judge is licensed. Pursuant to 28 U.S.C. 530B(c) and the Department of Justice's implementing regulations in 28 CFR 77.2(a), 28 U.S.C. 530B(a) applies only to certain Department of Justice and Independent Counsel officials, and plainly does not apply to any administrative law judge performing a function under 5 U.S.C. 3105. A fifth category of comments states that the license requirement violates Federalism principles. Two commenters assert that requiring incumbent administrative law judges to maintain a current license to practice law constitutes a Federal infringement on the States' regulation of the legal profession. OPM does not assert in these regulations the authority to preempt State laws governing the licensing of attorneys. Rather, OPM's regulations establish a minimum qualification requirement for an administrative law judge position in the Federal competitive service that incorporates relevant State license requirements. In fact, OPM's regulations avoid conflict with State license requirements by allowing administrative law judges to take a judicial status where State law prohibits an “active” status. One commenter asserts that requiring incumbent administrative law judges to maintain a current license to practice law in essence gives OPM the authority to make licensing determinations currently made by the States. OPM is not asserting or exercising any authority to license the legal profession in these regulations. Certain commenters express a concern that by requiring administrative law judges to maintain an “active” bar membership or license to practice law, OPM is defining administrative law judges as persons engaged in the practice of law while performing their official duties. This interpretation is not OPM's position and it is not supported by the text of these regulations. A sixth category of comments states that the license requirement will allow collateral attacks on administrative proceedings and actions against administrative law judges. Specifically, an agency is concerned that an incumbent administrative law judge's failure to meet the license requirement would encourage a disappointed litigant to collaterally attack the administrative proceedings over which the administrative law judge presides, and could subject the presiding administrative law judge to State bar complaints related to official adjudicative duties, even though under Supreme Court case law, administrative law judges are immune from lawsuits related to the performance of their official duties. This comment is addressed to the commenter's perception of litigation risk associated with including this longstanding requirement in the revised regulations, rather than the merits or appropriateness of the requirement per se. Accordingly, OPM has disregarded this comment. A seventh category of comments asserts that the requirement for “active” bar membership or a current license to practice law has a retroactive legal effect. OPM disagrees. As OPM has repeatedly stated, these regulations clarify an existing requirement. They have prospective legal effect, consistent with 5 U.S.C. 551(4) and *Bowen* v. *Georgetown Univ. Hosp.* , 488 U.S. 204, 208 (1988). The final category of comments asserts that the license requirement is unconstitutional. Specifically, a commenter asserts that requiring an incumbent administrative law judge to maintain an “active” bar membership or current license to practice law potentially violates the 5th Amendment. OPM disagrees. The license requirement does not effect a deprivation of life, liberty, or property without due process of law. Further, this requirement does not raise an equal protection concern because it does not constitute a classification adversely affecting a category of regulated persons without a rational basis. OPM has considered all the comments submitted by individuals, professional organizations, agencies, and the exclusive bargaining representative for administrative law judges at SSA and HHS. OPM has not received any compelling argument to change its policy on the professional license requirement for administrative law judges. As we have stated previously, this is not a new requirement but a clarification of a longstanding OPM policy that an administrative law judge must have an “active” bar membership or current license to practice law. The license requirement is a qualification requirement, in addition to the requirement for 7 years of attorney experience, which must be maintained for successful performance as an administrative law judge. It is an on-going permanent requirement for any individual serving in an administrative law judge position. Consequently, to ensure that the professional license requirement is maintained, OPM is incorporating the professional license requirement in § 930.204(b) of these regulations and as a Condition of Employment in the Qualification Standard for Administrative Law Judges, which applies to both applicants and incumbents. OPM will also incorporate the requirement in the new administrative law judge vacancy announcement. The final rule expressly reaffirms OPM's longstanding requirement that an administrative law judge possess a professional license to practice law and be authorized to practice law. The requirement attaches at the time of application. If the applicant is determined to be eligible, the requirement continues to apply while the applicant is on the administrative law judge competitive register and at the time of appointment. Following appointment, the requirement continues to apply for as long as the appointee continues to serve as an administrative law judge. The requirement would also apply at the time of application to serve and while serving as a senior administrative law judge. OPM has provided two alternatives in lieu of “active” status, that is, “judicial” and “good standing” status. Judicial status is acceptable in States that prohibit sitting judges from maintaining an “active” status to practice law. Being in “good standing” is also acceptable in lieu of “active” status in States where the licensing authority construes “good standing” to mean having a current license to practice law. Elimination of the Administrative Law Judge Examination Process Background A lengthy description of the administrative law judge examination and its procedures is contained in the existing § 930.203. The method by which examinations are conducted and administered, however, is subject to periodic changes. For that reason, OPM has decided to remove from the regulations the detailed language describing the internal examining process and procedures, such as the language concerning periodic open competition, minimum qualifications, supplemental qualifications, participation in examination procedures, and final rating. OPM has concluded, based upon its experience and expertise, that a better vehicle for addressing this type of information is the vacancy announcement, as prescribed in 5 U.S.C. 3330 and 5 CFR part 330, and as required in all other competitive service vacancy announcements. Sections 1104, 1302, 3301, and 3304 of title 5, U.S.C., authorize OPM to develop and administer the administrative law judge competitive examination. To maintain the relevance and validity of the examination, OPM has periodically conducted occupational studies of the administrative law judge occupation to revise and update elements of the administrative law judge examination. The administrative law judge examination should be allowed to evolve based on new technology and advances in the state of the art of examination methodology. In order to fulfill its responsibility to develop the administrative law judge examination in the optimal manner, OPM should be in a position to incorporate these advances promptly, without having to amend its regulations. Information on the examination process will be included in the new vacancy announcement for administrative law judge positions. The revised regulations, therefore, do not include detailed information about the examination and related processes. Since 1963, 5 CFR 337.101(a) has prescribed a general process for scoring competitive examinations, while § 930.203 has prescribed a specialized process for scoring administrative law judge examinations, separate from the default process in § 337.101(a). Prior to 1987, the administrative law judge scoring process was codified in § 930.203(a), and § 337.101(a) contained a cross-reference to § 930.203(a). In 1987 and 1991, however, OPM amended § 930.203 to describe the examination process in additional paragraphs of that section, but OPM did not make a conforming amendment to the cross-reference in § 337.101(a). Because the cross-reference in § 337.101(a) has been out-of-date for several years, and because the revised regulations do not include a detailed description of the examination scoring process, we are replacing the cross-reference with a more general statement that § 337.101(a) applies “except as otherwise provided in this chapter.” Section 930.201(e)(1) of the revised regulations, in turn, states that the use of the examination scoring process published in § 337.101(a) is not required in scoring the administrative law judge examination, consistent with OPM's and the Civil Service Commission's regulatory policy, since 1963, of excepting the administrative law judge examination process from the requirements of § 337.101(a). Discussion of Comments Several commenters oppose the removal of the detailed description of the administrative law judge internal examination process and procedures from the regulations and incorporating the information in an administrative law judge vacancy announcement. The commenters assert that this action will weaken the administrative law judge rating and selection process to the detriment of the American public; may not provide uniformity of treatment or adequate opportunity for public review and comment, particularly where criteria may vary from notice to notice; and will be changeable at will without notice and comment by the public. The commenters suggest that OPM continue incorporating the examination process in the regulations to ensure public confidence, and that OPM publish any changes to the examination process for public comment, so that such changes can be fully evaluated. OPM's course of action, in laying out the detailed description of the examination process and procedures in the new vacancy announcement, is consistent with OPM's practice for other competitive examinations. There has never been any suggestion, in the statutes governing the appointment of administrative law judges, that the examination process and procedures were required to be encompassed in regulations. The examination process and procedures information described in the existing regulations are also described in the current “OPM Examination Announcement No. 318, as amended, Opportunities in the Federal Government as an Administrative Law Judge.” Any significant changes to the administrative law judge examination or examination process will be publicly announced in the vacancy announcement. In addition, OPM is developing a stand-alone administrative law judge qualification standard that will be described and supplemented in the new administrative law judge vacancy announcement. OPM, therefore, is not adopting the suggestion to retain the descriptive language of the examination process and procedures in the regulations. Several commenters express concern that OPM is eliminating the administrative law judge examination. OPM is not eliminating the administrative law judge examination; in fact, OPM is developing a new administrative law judge examination. One commenter identifies several factors that the commenter believes are a prerequisite to being an excellent candidate for an administrative law judge position such as decision-making, developing evidence, and assessing credibility. The commenter requests that OPM consider these factors in the examination process for selecting effective administrative law judge candidates. The commenter's suggestion for specific criteria to be used for rating candidates in future administrative law judge examinations is outside the scope of this rulemaking and will not, therefore, be considered in the context of revising these regulations. Two commenters express a concern related to the conforming revision. The first comment by an agency suggests that the change to 5 CFR 337.101(a) is in conflict with § 930.201(e)(1). OPM disagrees. Section 337.101(a) prescribes a scoring process while allowing alternatives. Section 930.201(e)(1) gives OPM the option to use this scoring process or an alternative, depending on the examining methodology used to develop the administrative law judge competitive examination. The second commenter did not clearly state an objection to the revision and we therefore do not address it. Elimination of OPM Examination Announcement No. 318, as Amended Background The revised regulations remove any reference to “OPM Examination Announcement No. 318, as Amended, Opportunities in the Federal Government as an Administrative Law Judge” (Announcement). The Announcement is a vacancy announcement issued in 1993 and amended in 1996 to recruit individuals for administrative law judge positions in the Federal competitive service. It describes the duties of an administrative law judge, the rating process, qualifying education and experience requirements, the rating appeal process, and general information for the applicant. The Announcement is similar to other vacancy announcements used to recruit individuals for positions into the Federal Government, except that it was incorporated by reference in the existing regulations. In the existing regulations, the Announcement is referenced to the extent that it addresses meeting the examination or qualification requirements for an administrative law judge position. Discussion of Comments Several commenters oppose the removal of the reference to the Announcement from the regulations. The commenters claim OPM is removing the administrative law judge qualification requirements, omitting qualifying military experience, and eliminating the administrative law judge examination. These commenters suggest OPM retain the Announcement in the regulations. There appears to be a misunderstanding among commenters that by eliminating the Announcement from the regulations, OPM is eliminating the qualification requirements for administrative law judges. To the contrary, § 930.201(e)(3) of the revised regulations specifically authorizes OPM to issue a qualification standard for administrative law judges. The regulations also prescribe a qualification requirement for “active” bar membership or a current license to practice law. OPM has separately posted for comment, on its Web site, a stand-alone qualification standard prescribing the proposed minimum qualification requirements for administrative law judge positions, including the bar license requirement. When the qualification requirement is finalized, it will again be posted on OPM's Web site, consistent with OPM's practice in publishing other qualification standards. The new administrative law judge vacancy announcement will describe the minimum qualification requirements for administrative law judge positions and provide supplemental information, as needed. OPM received a consolidated comment submission from the Departments of the Army, Air Force, and Navy; Headquarters, U.S. Marine Corps; and the Department of Homeland Security, U.S. Coast Guard, expressing concern that OPM omitted language to allow military experience as qualifying for an administrative law judge position. It was not OPM's intent, in drafting its proposed qualification standard, to eliminate military experience as qualifying experience for an administrative law judge position. In order to make this principle more clear, OPM is adopting the military services' comments to the extent necessary to reflect differences in terminology between military and civilian legal practice. For additional information, OPM has published on its Web site guidance on how to credit military experience, at *http://www.opm.gov/qualifications,* and on veterans' preference, at *http://www.opm.gov/veterans.* Definition of Superior Qualifications OPM proposed to revise the definition of “superior qualifications” which is covered in the existing § 930.210(g)(2). The definition of “superior qualifications” is redesignated to § 930.202 in the final regulations. Discussion of Comments Several commenters oppose the proposed expanded definition for “superior qualifications.” The commenters state that OPM's proposal to add the phrase “special skills that will meet a demonstrated need of the hiring agency” is equivalent to selective certification criteria and suggest OPM remove the phrase from the definition. OPM is adopting the suggestion and is removing this phrase from the superior qualifications definition. Definition of Removal OPM proposed to revise the definition of “removal” for clarity. Discussion of Comments Two commenters claim the proposed definition of “removal” violates 5 U.S.C. 7521 because it excludes the phrase “involuntary reassignment, demotion, or promotion to a position other than that of an administrative law judge.” The commenters suggest that OPM retain the existing definition for “removal.” OPM does not object to keeping the existing definition for “removal” and is adopting the suggestion. Administrative Law Judge Pay System OPM proposed to add a new paragraph
(i)to § 930.205 to clarify that an agency may reduce the level or rate of basic pay of an administrative law judge for good cause after the Merit Systems Protection Board
(MSPB)orders the action, as provided in § 930.211, or to reduce the level of basic pay of an administrative law judge if agreed upon by the administrative law judge with OPM's prior approval. The reason for the proposal is that OPM periodically receives requests from agencies to reduce an administrative law judge's level of basic pay, based on the administrative law judge's voluntary request for personal reasons (e.g., the desire for a position of less responsibility). These requests are thoroughly documented by the agency prior to OPM's approval. Discussion of Comments Two commenters oppose OPM's proposed revisions of § 930.205(i), asserting that the revisions violate 5 U.S.C. 7521, Actions against administrative law judges. The commenters suggest that the revisions would allow an agency to negotiate a settlement agreement with the administrative law judge prior to an MSPB “good cause” hearing which may result in a voluntary request for a reduction in pay from the administrative law judge. OPM did not intend such a result in proposing this revision. OPM's regulations governing administrative law judges do not address settlement agreements. In response to the comments, OPM is revising the proposed language to distinguish with greater precision between a reduction in an administrative law judge's level or rate of basic pay following a disciplinary proceeding, governed by §§ 930.205(i) and 930.211, and a reduction in an administrative law judge's level of basic pay based on a voluntary request for personal reasons. OPM is adding a new paragraph
(j)to § 930.205 to describe a reduction in pay based on a voluntary request for personal reasons. Priority Referral List OPM proposed revising § 930.215(c)(5) of the existing regulations, redesignated as § 930.210(c)(3), in order to emphasize a hiring flexibility that allows an agency, with OPM's approval, to fill its administrative law judge positions by reassigning administrative law judges within its workforce, in lieu of selecting a displaced administrative law judge on OPM's priority referral list. The intent of this revision was to emphasize that an agency does have the option of selecting an administrative law judge from other than the OPM priority referral list. Discussion of Comments Three commenters oppose the proposed revisions of § 930.210(c)(3). The commenters state that the revisions will permit an agency to circumvent the use of the OPM priority referral list by intra-agency reassignment of administrative law judges or appointment of an administrative law judge from an OPM certificate of eligibles; that it will allow an agency to bypass an adversely affected administrative law judge who has very few opportunities for reappointment, yet who is qualified for appointment at all agencies and in any administrative law judge position at any agency; and that by removing the phrase “extraordinary circumstances” from the existing regulations, the proposed regulations might not allow adequate oversight. After reviewing these comments, OPM is not implementing the proposed hiring flexibility. The existing provision will be restored, except for clarifying language specifically explaining that OPM has the authority “under extraordinary circumstances” to allow an agency to fill a vacant position through competitive examining, promotion, transfer, reassignment, or reinstatement procedures instead of selecting a displaced administrative law judge from OPM's priority referral list. One commenter suggests that OPM allow administrative law judges on OPM's priority referral list to have two opportunities for declining an offer of full-time employment as an administrative law judge before the administrative law judge's eligibility on the OPM priority referral list terminates. OPM disagrees with this commenter and is not adopting the suggestion. With the limited number of administrative law judge positions open at any given time and the infrequency of vacancies, OPM does not believe it is appropriate for a displaced administrative law judge to have more than one opportunity to decline an offer of full-time employment as an administrative law judge at the pay level held at the time of reduction in force and in the geographical location indicated as acceptable. OPM will continue its long-standing practice of allowing only one full-time employment offer declination before an administrative law judge is terminated from OPM's priority referral list. Suitability OPM has published suitability regulations in 5 CFR part 731 and in the existing administrative law judge regulations in §§ 930.214(c) and 930.216(f). The revised regulations clarify the suitability requirements. The revised provisions appear in §§ 930.204(a), 930.209(b)(3) and 930.211(c)(1). Discussion of Comments Two commenters state that the suitability language in the revised § 930.211(c)(1) is a new requirement and object to it. The commenters imply that suitability actions against administrative law judge applicants and incumbents are not consistent with 5 U.S.C. 7521, governing adverse actions. OPM disagrees. Administrative law judge applicants, appointees, and employees, like other competitive service applicants, appointees, and employees, are subject to suitability investigations and determinations. The adverse action provisions in 5 U.S.C. 7521, and the suitability provisions in 5 CFR parts 2, 5, and 731 apply independently to administrative law judges. The suitability requirement is not new and the text of §§ 930.204(a), 930.209(b)(3) and 930.211(c)(1) include only clarifying changes. Performance and Incentive Awards The existing regulations state, at § 930.210(b), “An agency may not grant a monetary and honorary award under 5 U.S.C. 4503 for superior accomplishment by an administrative law judge in the performance of adjudicatory functions.” OPM removed the phrase “in the performance of adjudicatory functions” in redesignated § 930.206(b), and added references to 5 U.S.C. 4502 and 4504. Discussion of Comments One commenter claims OPM made a substantial change to the regulations on the granting of any award or financial incentives to an administrative law judge. The commenter insists that by eliminating the phrase “in the performance of adjudicatory functions,” OPM strips all possibility of any awards or financial incentives for an administrative law judge, even if the administrative law judge performs executive and management functions in an exemplary manner, devises an innovative administrative technique, or makes a suggestion outside the duties of an administrative law judge that saves an agency thousands of dollars. The commenter claims this is discriminatory and, therefore, urges OPM to retain the existing language. Under the APA, OPM has the responsibility to ensure the independence of an administrative law judge in matters of appointment, tenure, and compensation, as well as to ensure independent judgments from administrative law judges. *See* 5 U.S.C. 1305 (authorizing OPM to regulate and investigate agencies to give effect to 5 U.S.C. 3105, 3344, 4301(2)(D), and 5372); *Ramspeck* v. *Fed. Trial Examiners Conf.,* 345 U.S. 128, 139-142 (1953). An award or discretionary financial incentive of any kind poses an unacceptable risk of interfering with an administrative law judge's judicial independence, and could have the additional effect of circumventing the legal prohibition against performance appraisals. *See* 5 U.S.C. 4301(2)(D), § 930.211 of OPM's existing regulations, and § 930.206(a) of the final regulations published with this notice. By removing the phrase “in the performance of adjudicatory functions” from the regulations and adding specific references to 5 U.S.C. 4502 and 4504 to the regulations, OPM is clarifying that monetary or honorary awards or financial incentives of any kind, whether granted under Chapter 45 or other authority, are prohibited. OPM is not adopting the commenter's suggestion, and is adding clarifying language to state that honorary, as well as monetary awards and incentives are prohibited. OPM received two opposing views on the issue of pay for performance for administrative law judges. OPM did not consider either view since the existing law does not permit administrative law judges to be rated on performance. General Comments One commenter suggests that all Federal administrative judges become administrative law judges for consistency and for the best interest of the public. This recommendation is both contrary to the requirements of the APA and outside the scope of these regulations, and cannot be considered. OPM received several comments requesting the reestablishment of an Office of Administrative Law Judges within OPM. This comment cannot be considered, as it concerns OPM's internal management and organization, a matter outside the scope of these regulations. Derivative Table Comparing New Section Numbers in Part 930, Subpart B With Current Section Numbers. The following derivation table has been prepared to make it easier for readers to compare OPM's new rule in part 930, subpart B, with the current regulations. Derivation Table for 5 CFR 930 Subpart B New section Current section 930.201 930.201. 930.201(a) 930.201(a). 930.201(b) 930.201(b). 930.201(c) 930.203b. 930.201(d) New. 930.201(e)(1) through
(11)New. 930.201(f)(1) through
(4)New. 930.201(f)(2) 930.212. 930.202 930.202. Administrative Law Judge Position 930.202(c). Agency 930.202(a). Detail 930.202(b). 930.202(d) (Removed). 930.202(e) (Removed). Removal 930.202(f). Senior Administrative Law Judge 930.216(a)(2). Superior Qualifications 930.210(g)(2). 930.203 930.201(c). 930.204 930.203a. 930.204(a) 930.203a(a) and (b). 930.204(b) New. 930.204(c) 930.203a(c). 930.204(c)(1) 930.203a(c)(1). 930.204(c)(2) 930.203a(c)(2). 930.204(c)(3) 930.203a(c)(3) (Revised). 930.204(c)(4) 930.203a(c)(4) (Revised). 930.203a(d) (Removed). 930.204(d) 930.203a(e). 930.204(e) 930.204 (Revised). 930.204(f) 930.205 (Revised). 930.204(g) 930.207 (Revised). 930.204(h) 930.206 (Revised). 930.208 (Removed). 930.204(i) New. 930.205 930.210. 930.205(f)(2) 930.210(g)(2). 930.205(i) New. 930.205(j) New. 930.210(j) through
(m)(Removed). 930.206 New title. 930.206(a) 930.211. 930.206(b) 930.210(b). 930.207 930.209. 930.208 930.213. 930.209 930.216. 930.210 930.215. 930.211 930.214. Executive Order 12866, Regulatory Review This proposed rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866. Regulatory Flexibility Act I certify that these regulations would not have a significant economic impact on a substantial number of small entities (including small businesses, small organizational units, and small governmental jurisdictions) because they would affect only some Federal agencies and employees. List of Subjects in 5 CFR Parts 337 and 930 Administrative practice and procedure, Computer technology, Government employees, Motor vehicles. U.S. Office of Personnel Management. Linda M. Springer, Director. Accordingly, OPM is amending 5 CFR parts 337 and 930 as follows: PART 337—EXAMINING SYSTEM 1. The authority citation for part 337 is revised to read as follows: Authority: 5 U.S.C. 1104(a), 1302, 2302, 3301, 3302, 3304, 3319, 5364; E.O. 10577, 3 CFR 1954-1958 Comp., p. 218; 33 FR 12423, Sept. 4, 1968; and 45 FR 18365, Mar. 21, 1980; 116 Stat. 2135, 2290; and 117 Stat 1392, 1665. Subpart A—General Provisions 2. Revise § 337.101 paragraph
(a)to read as follows: § 337.101 Rating applicants.
(a)OPM shall prescribe the relative weights to be given subjects in an examination, and shall assign numerical ratings on a scale of 100. Except as otherwise provided in this chapter, each applicant who meets the minimum requirements for entrance to an examination and is rated 70 or more in the examination is eligible for appointment. PART 930—PROGRAMS FOR SPECIFIC POSITIONS AND EXAMINATIONS (MISCELLANEOUS) 3. Revise Subpart B to read as follows: Subpart B—Administrative Law Judge Program Sec. 930.201 Coverage. 930.202 Definitions. 930.203 Cost of competitive examination. 930.204 Appointments and conditions of employment. 930.205 Administrative law judge pay system. 930.206 Performance rating and awards. 930.207 Details and assignments to other duties within the same agency. 930.208 Administrative Law Judge Loan Program—detail to other agencies. 930.209 Senior Administrative Law Judge Program. 930.210 Reduction in force. 930.211 Actions against administrative law judges. Authority: 5 U.S.C. 1104(a), 1302(a), 1305, 3105, 3301, 3304, 3323(b), 3344, 4301(2)(D), 5372, 7521, and E.O. 10577, 3 CFR, 1954-1958 Comp., p. 219. Subpart B—Administrative Law Judge Program § 930.201 Coverage.
(a)This subpart applies to individuals appointed under 5 U.S.C. 3105 for proceedings required to be conducted in accordance with 5 U.S.C. 556 and 557 and to administrative law judge positions.
(b)Administrative law judge positions are in the competitive service. Except as otherwise stated in this subpart, the rules and regulations applicable to positions in the competitive service apply to administrative law judge positions.
(c)The title “administrative law judge” is the official title for an administrative law judge position. Each agency must use only this title for personnel, budget, and fiscal purposes.
(d)The Director of OPM, or designee, shall prescribe the examination methodology in the design of each administrative law judge examination.
(e)OPM does not hire administrative law judges for other agencies but has the authority to:
(1)Recruit and examine applicants for administrative law judge positions, including developing and administering the administrative law judge examinations under 5 U.S.C. 3301, 3304, 1104(a), and 1302, and Executive Order 10577, as amended, except OPM is not required to use the examination scoring process in 5 CFR 337.101(a);
(2)Assure that decisions concerning the appointment, pay, and tenure of administrative law judges in Federal agencies are consistent with applicable laws and regulations;
(3)Establish classification and qualification standards for administrative law judge positions;
(4)Approve noncompetitive personnel actions for administrative law judges, including but not limited to promotions, transfers, reinstatements, restorations, and reassignments;
(5)Approve personnel actions related to pay for administrative law judges under § 930.205(c), (f)(2), (g), and (j);
(6)Approve an intra-agency detail or assignment of an administrative law judge to a non-administrative law judge position that lasts more than 120 days or when an administrative law judge cumulates a total of more than 120 days for more than one detail or assignment within the preceding 12 months;
(7)Arrange the temporary detail
(loan)of an administrative law judge from one agency to another under the provisions of the administrative law judge loan program in § 930.208;
(8)Arrange temporary reemployment of retired administrative law judges to meet changing agency workloads under the provisions of the Senior Administrative Law Judge Program in § 930.209;
(9)Maintain and administer the administrative law judge priority referral program under § 930.210(c);
(10)Promulgate regulations for purposes of sections 3105, 3344, 4301(2)(D) and 5372 of title 5, U.S.C.; and
(11)Ensure the independence of the administrative law judge.
(f)An agency employing administrative law judges under 5 U.S.C. 3105 has:
(1)The authority to appoint as many administrative law judges as necessary for proceedings conducted under 5 U.S.C. 556 and 557;
(2)The authority to assign an administrative law judge to cases in rotation so far as is practicable;
(3)The responsibility to ensure the independence of the administrative law judge; and
(4)The responsibility to obtain OPM's approval before taking any of the personnel actions described in paragraphs (e)(4) through
(8)of this section. § 930.202 Definitions. In this subpart: *Administrative law judge position* means a position in which any portion of the duties requires the appointment of an administrative law judge under 5 U.S.C. 3105. *Agency* has the same meaning given in 5 U.S.C. 551(1). *Detail* means the temporary assignment of an administrative law judge from one administrative law judge position to another administrative law judge position without change in civil service or pay status. *Removal* means discharge of an administrative law judge from the position of an administrative law judge or involuntary reassignment, demotion, or promotion to a position other than that of an administrative law judge. *Senior administrative law judge* means a retired administrative law judge who is reemployed under a temporary appointment under 5 U.S.C. 3323(b)(2) and § 930.209 of this chapter. *Superior qualifications* means an appointment made at a rate above the minimum rate based on such qualifications as experience practicing law before the hiring agency; experience practicing before another forum in a field of law relevant to the hiring agency; or an outstanding reputation among others in a field of law relevant to the hiring agency. § 930.203 Cost of competitive examination. Each agency employing administrative law judges must reimburse OPM for the cost of developing and administering the administrative law judge examination. Each agency is charged a pro rata share of the examination cost, based on the actual number of administrative law judges the agency employs. OPM computes the cost of the examination program on an annual basis and notifies the employing agencies of their respective shares after the calculations are made. § 930.204 Appointments and conditions of employment.
(a)*Appointment.* An agency may appoint an individual to an administrative law judge position only with prior approval of OPM, except when it makes its selection from the list of eligibles provided by OPM. An administrative law judge receives a career appointment and is exempt from the probationary period requirements under part 315 of this chapter. An administrative law judge appointment is subject to investigation, and an administrative law judge is subject to the suitability requirements in part 731 of this chapter.
(b)*Licensure.* At the time of application and any new appointment and while serving as an administrative law judge, the individual must possess a professional license to practice law and be authorized to practice law under the laws of a State, the District of Columbia, the Commonwealth of Puerto Rico, or any territorial court established under the United States Constitution. Judicial status is acceptable in lieu of “active” status in States that prohibit sitting judges from maintaining “active” status to practice law. Being in “good standing” is also acceptable in lieu of “active” status in States where the licensing authority considers “good standing” as having a current license to practice law.
(c)*Appointment of incumbents of newly classified administrative law judge positions.* An agency may give an incumbent employee an administrative law judge career appointment if that employee is serving in the position when it is classified as an administrative law judge position on the basis of legislation, Executive order, or a decision of a court and if:
(1)The employee has competitive status or is serving in an excepted position under a permanent appointment;
(2)The employee is serving in an administrative law judge position on the day the legislation, Executive order, or decision of the court on which the classification of the position is based becomes effective;
(3)OPM receives a recommendation for the employee's appointment from the agency concerned; and
(4)OPM determines the employee meets the qualification requirements and has passed the current examination for an administrative law judge position.
(d)*Appointment of an employee from a non-administrative law judge position.* Except as provided in paragraphs
(a)and
(c)of this section, an agency may not appoint an employee who is serving in a position other than an administrative law judge position to an administrative law judge position.
(e)*Promotion.*
(1)Except as otherwise stated in this paragraph, 5 CFR part 335 applies in the promotion of administrative law judges.
(2)To reclassify an administrative law judge position at a higher level, the agency must submit a request to OPM. When OPM approves the higher level classification, OPM will direct the promotion of the administrative law judge occupying the position prior to the reclassification.
(f)*Reassignment.* Prior to OPM's approval, the agency must provide a bona fide management reason for the reassignment.
(g)*Reinstatement.* An agency may reinstate a former administrative law judge who served under 5 U.S.C. 3105, passed an OPM administrative law judge competitive examination, and meets the professional license requirement in paragraph
(b)of this section.
(h)*Transfer.* An agency may not transfer an individual from one administrative law judge position to another administrative law judge position within 1 year after the individual's last appointment, unless the gaining and losing agencies agree to the transfer.
(i)*Conformity.* Actions under this section must be consistent with § 930.201(f). § 930.205 Administrative law judge pay system.
(a)OPM assigns each administrative law judge position to one of the three levels of basic pay, AL-3, AL-2 or AL-1 of the administrative law judge pay system established under 5 U.S.C. 5372 in accordance with this section. Pay level AL-3 has six rates of basic pay, A, B, C, D, E, and F.
(1)The rate of basic pay for AL-3, rate A, may not be less than 65 percent of the rate of basic pay for level IV of the Executive Schedule. The rate of basic pay for AL-1 may not exceed the rate for level IV of the Executive Schedule.
(2)The President determines the appropriate adjustment for each level in the administrative law judge pay system, subject to paragraph (a)(1) of this section. Such adjustments take effect on the 1st day of the first pay period beginning on or after the first day of the month in which adjustments in the General Schedule rates of basic pay under 5 U.S.C. 5303 take effect.
(3)An agency must use the following procedures to convert an administrative law judge's annual rate of basic pay to an hourly, daily, weekly, or biweekly rate:
(i)To derive an hourly rate, divide the annual rate of pay by 2,087 and round to the nearest cent, counting one-half cent and over as the next higher cent.
(ii)To derive a daily rate, multiply the hourly rate by the number of daily hours of service required by the administrative law judge's basic daily tour of duty.
(iii)To derive a weekly or biweekly rate, multiply the hourly rate by 40 or 80, respectively.
(b)Pay level AL-3 is the basic pay level for administrative law judge positions filled through a competitive examination.
(c)Subject to OPM approval, agencies may establish administrative law judge positions in pay levels AL-2 and AL-1. Administrative law judge positions are placed at these levels when they involve significant administrative and managerial responsibilities.
(d)Administrative law judges must serve at least 1 year in each AL pay level, or in an equivalent or higher level in positions in the Federal service, before advancing to the next higher level and may advance only one level at a time.
(e)Except as provided in paragraph
(f)of this section, upon appointment to an administrative law judge position and placement in level AL-3, an administrative law judge is paid at the minimum rate A of AL-3. He or she is automatically advanced successively to rates B, C, and D of that level upon completion of 52 weeks of service in the next lower rate, and to rates E and F of that level upon completion of 104 weeks of service in the next lower rate. Time in a non-pay status is generally creditable service when computing the 52-or 104-week period as long as it does not exceed 2 weeks per year for each 52 weeks of service. However, absence due to uniformed service or compensable injury is fully creditable upon reemployment as provided in part 353 of this chapter.
(f)Upon appointment to a position at AL-3, an administrative law judge may be paid at the minimum rate A, unless the administrative law judge is eligible for the higher rate B, C, D, E, or F because of prior service or superior qualifications, as provided in paragraphs (f)(1) and (f)(2) of this section.
(1)An agency may offer an administrative law judge applicant with prior Federal service a higher than minimum rate up to the lowest rate of basic pay that equals or exceeds the applicant's highest previous Federal rate of basic pay, not to exceed the maximum rate F.
(2)With prior OPM approval, an agency may pay the rate of pay that is next above the applicant's existing pay or earnings up to the maximum rate F. The agency may offer a higher than minimum rate to:
(i)An administrative law judge applicant with superior qualifications (as defined in § 930.202) who is within reach for appointment from an administrative law judge certificate of eligibles; or
(ii)A former administrative law judge with superior qualifications who is eligible for reinstatement.
(g)With prior OPM approval, an agency, on a one-time basis, may advance an administrative law judge in an AL-3 position with added administrative and managerial duties and responsibilities one rate above the administrative law judge's current AL-3 pay rate, up to the maximum rate F.
(h)Upon appointment to an administrative law judge position placed at AL-2 or AL-1, an administrative law judge is paid at the established rate for the level.
(i)An employing agency may reduce the level or rate of basic pay of an administrative law judge under § 930.211.
(j)With prior OPM approval, an employing agency may reduce the level of basic pay of an administrative law judge if the administrative law judge submits to the employing agency a written request for a voluntary reduction due to personal reasons. § 930.206 Performance rating and awards.
(a)An agency may not rate the job performance of an administrative law judge.
(b)An agency may not grant any monetary or honorary award or incentive under 5 U.S.C. 4502, 4503, or 4504, or under any other authority, to an administrative law judge. § 930.207 Details and assignments to other duties within the same agency.
(a)An agency may detail an administrative law judge from one administrative law judge position to another administrative law judge position within the same agency in accordance with 5 U.S.C. 3341.
(b)An agency may not detail an employee who is not an administrative law judge to an administrative law judge position.
(c)An agency may assign an administrative law judge to perform non-administrative law judge duties only when:
(1)The other duties are consistent with administrative law judge duties and responsibilities;
(2)The assignment is to last no longer than 120 days; and
(3)The administrative law judge has not had a total of more than 120 days of such assignments or details within the preceding 12 months.
(d)OPM may authorize a waiver of paragraphs (c)(2) and (c)(3) of this section if an agency shows that it is in the public interest to do so. In determining whether a waiver is justified, OPM may consider, but is not restricted to considering, such factors as unusual case load or special expertise of the detailee. § 930.208 Administrative Law Judge Loan Program—detail to other agencies.
(a)In accordance with 5 U.S.C. 3344, OPM administers an Administrative Law Judge Loan Program that coordinates the loan/detail of an administrative law judge from one agency to another. An agency may request from OPM the services of an administrative law judge if the agency is occasionally or temporarily insufficiently staffed with administrative law judges, or an agency may loan the services of its administrative law judges to other agencies if there is insufficient work to fully occupy the administrative law judges' work schedule.
(b)An agency's request to OPM for the services of an administrative law judge must:
(1)Identify and briefly describe the nature of the cases(s) to be heard;
(2)Specify the legal authority for which the use of an administrative law judge is required; and
(3)Demonstrate, as appropriate, that the agency has no administrative law judge available to hear the case(s).
(c)The services of an administrative law judge under this program are made from the starting date of the detail until the end of the current fiscal year, but may be extended into the next fiscal year with OPM's approval. Decisions for an extension are made by OPM on a case-by-case basis.
(d)The agency requesting the services of an administrative law judge under this program is responsible for reimbursing the agency that employs the administrative law judge for the cost of the service. § 930.209 Senior Administrative Law Judge Program.
(a)OPM administers a Senior Administrative Law Judge Program in accordance with 5 U.S.C. 3323(b)(2). The Senior Administrative Law Judge Program is subject to the requirements and limitations in this section.
(b)A senior administrative law judge must meet the:
(1)Annuitant requirements under 5 U.S.C. 3323;
(2)Professional license requirement in § 930.204(b); and
(3)Investigations and suitability requirements in part 731 of this chapter.
(c)Under the Senior Administrative Law Judge Program, OPM authorizes agencies that have temporary, irregular workload requirements for conducting proceedings in accordance with 5 U.S.C. 556 and 557 to temporarily reemploy administrative law judge annuitants. If OPM is unable to identify an administrative law judge under § 930.208 who meets the agency's qualification requirements, OPM will approve the agency's request.
(d)An agency wishing to temporarily reemploy an administrative law judge must submit a written request to OPM. The request must:
(1)Identify the statutory authority under which the administrative law judge is expected to conduct proceedings;
(2)Demonstrate the agency's temporary or irregular workload requirements for conducting proceedings;
(3)Specify the tour of duty, location, period of time, or particular cases(s) for the requested reemployment; and
(4)Describe any special qualifications the retired administrative law judge possesses that are required of the position, such as experience in a particular field, agency, or substantive area of law.
(e)OPM establishes the terms of the appointment for a senior administrative law judge. The senior administrative law judge may be reemployed either for a specified period not to exceed 1 year or for such time as may be necessary for the senior administrative law judge to conduct and complete the hearing and issue decisions for one or more specified cases. Upon agency request, OPM may reduce or extend such period of reemployment, as necessary, to coincide with changing staffing requirements.
(f)A senior administrative law judge serves subject to the same limitations as any other administrative law judge employed under this subpart and 5 U.S.C. 3105.
(g)A senior administrative law judge is paid the rate of basic pay for the pay level at which the position has been classified. If the position is classified at pay level AL-3, the senior administrative law judge is paid the lowest rate of basic pay in AL-3 that equals or exceeds the highest previous rate of basic pay attained by the individual as an administrative law judge immediately before retirement, up to the maximum rate F. § 930.210 Reduction in force.
(a)*Retention preference regulations.* Except as modified by this section, the reduction in force regulations in part 351 of this chapter apply to administrative law judges.
(b)*Determination of retention standing.* In determining retention standing in a reduction in force, each agency lists its administrative law judges by group and subgroup according to tenure of employment, veterans' preference, and service date as outlined in part 351 of this chapter. Because administrative law judges are not given performance ratings (see § 930.206), the provisions in part 351 of this chapter referring to the effect of performance ratings on retention standing are not applicable to administrative law judges.
(c)*Placement assistance.*
(1)An administrative law judge who is reached in an agency's reduction in force and receives a notification of separation is eligible for placement assistance under the agency's reemployment priority list established and maintained in accordance with subpart B of part 330 of this chapter.
(2)An administrative law judge who is reached by an agency in a reduction in force and who is notified of being separated, furloughed for more than 30 days, or demoted, is entitled to have his or her name placed on OPM's administrative law judge priority referral list for the level in which last served and for all lower levels.
(i)To have his or her name placed on the OPM priority referral list, a displaced administrative law judge must provide OPM with a request for priority referral placement, a resume or equivalent, a list of acceptable geographical locations, and a copy of the reduction in force notice at any time after the receipt of the specific reduction in force notice, but not later than 90 days after the date of separation, furlough for more than 30 days, or demotion.
(ii)Eligibility on the OPM priority referral list expires 2 years after the effective date of the reduction in force action.
(iii)Referral and selection of administrative law judges are made without regard to selective certification or special qualification procedures.
(iv)Termination of eligibility on the OPM priority referral list takes place when an administrative law judge submits a written request to terminate eligibility, accepts a permanent full-time administrative law judge position, or declines one full-time employment offer as an administrative law judge at or above the level held when reached for reduction in force at geographic locations indicated as acceptable under paragraph (c)(2)(i) of this section.
(3)When there is no administrative law judge available on the agency's reemployment priority list, an agency may fill a vacant administrative law judge position only from OPM's priority referral list, unless the agency obtains prior approval from OPM to fill the vacant position through competitive examining, promotion, transfer, reassignment, or reinstatement procedures. OPM will grant such approvals only under extraordinary circumstances. The agency must demonstrate that the potential administrative law judge candidate possesses experience and qualifications superior to any available displaced administrative law judge on OPM's priority referral list. § 930.211 Actions against administrative law judges.
(a)*Procedures.* An agency may remove, suspend, reduce in level, reduce in pay, or furlough for 30 days or less an administrative law judge only for good cause established and determined by the Merit Systems Protection Board on the record and after opportunity for a hearing before the Board as prescribed in 5 U.S.C. 7521 and 5 CFR part 1201. Procedures for adverse actions by agencies under part 752 of this chapter do not apply to actions against administrative law judges.
(b)*Status during removal proceedings.* In exceptional cases when there are circumstances in which the retention of an administrative law judge in his or her position, pending adjudication of the existence of good cause for his or her removal, is detrimental to the interests of the Federal Government, the agency may:
(1)Assign the administrative law judge to duties consistent with his or her normal duties in which these circumstances would not exist;
(2)Place the administrative law judge on leave with his or her consent;
(3)Carry the administrative law judge on annual leave, sick leave, leave without pay, or absence without leave, as appropriate, if he or she is voluntarily absent for reasons not originating with the agency; or
(4)If the alternatives in paragraphs (b)(1) through (b)(3) of this section are not available, the agency may consider placing the administrative law judge in a paid non-duty or administrative leave status.
(c)*Exceptions from procedures.* The procedures in paragraphs
(a)and
(b)of this section do not apply:
(1)In making dismissals or taking other actions under 5 CFR part 731;
(2)In making dismissals or other actions made by agencies in the interest of national security under 5 U.S.C. 7532;
(3)To reduction in force actions taken by agencies under 5 U.S.C. 3502; or
(4)In any action initiated by the Office of Special Counsel under 5 U.S.C. 1215. [FR Doc. E7-4959 Filed 3-19-07; 8:45 am] BILLING CODE 6325-39-P DEPARTMENT OF ENERGY Office of Energy Efficiency and Renewable Energy 10 CFR Part 490 RIN 1904-AB66 Alternative Fuel Transportation Program; Alternative Compliance AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Final rule. SUMMARY: The Department of Energy
(DOE)today publishes a final rule to implement section 514 of the Energy Policy Act of 1992, as amended by section 703 of the Energy Policy Act of 2005, which allows States and alternative fuel providers to petition for a waiver of the alternative fueled vehicle
(AFV)acquisition requirements. Today's final rule requires that for a State or alternative fuel provider to be granted a waiver, the State entity or alternative fuel provider must request a waiver to demonstrate that in lieu of complying with the applicable AFV acquisition requirement for a model year, it will take other actions to reduce its annual petroleum motor fuel consumption by an amount equal to 100 percent alternative fuel use in all of the fleet's AFVs, including AFVs that the State entity or alternative fuel provider would have been required to acquire if there was no waiver. DATES: *Effective Date:* The final rule is effective April 19, 2007. FOR FURTHER INFORMATION CONTACT: Ms. Linda Bluestein, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, FreedomCAR and Vehicle Technologies Program, Mailstop EE-2G, Room 5F-034, 1000 Independence Avenue, SW., Washington, DC 20585-0121;
(202)586-6116 or *linda.bluestein@ee.doe.gov* , or Mr. Chris Calamita, U.S. Department of Energy, Office of General Counsel, GC-72, Room 6B-256, 1000 Independence Avenue, SW., Washington, DC 20585-0121;
(202)586-9507 or *Christopher.calamita@hq.doe.gov* . SUPPLEMENTARY INFORMATION: I. Introduction and Background II. Public Comments III. Discussion of the Final Rule A. Eligibility for alternative compliance waiver B. Petroleum reduction calculation 1. Cumulative inventory 2. Calculation procedure C. Eligible reductions in petroleum consumption 1. Light-duty vehicles 2. Medium- and heavy-duty vehicles 3. Nonroad vehicles 4. Rollover of excess petroleum reduction D. Waiver applications E. Application deadlines F. Use of credits G. Reporting requirement H. Sanctions for violations I. Exemptions J. Record retention K. Other comments IV. Regulatory Review A. Executive Order 12866 B. National Environmental Policy Act C. Regulatory Flexibility Act D. Paperwork Reduction Act E. Unfunded Mandates Reform Act of 1995 F. Treasury and General Government Appropriations Act, 1999 G. Executive Order 13132 H. Executive Order 12988 I. Treasury and General Government Appropriations Act, 2001 J. Executive Order 13211 K. Congressional Notification V. Approval by the Office of the Secretary I. Introduction and Background Title V of the Energy Policy Act of 1992 (Pub. L. 102-486; the Act) established requirements for covered alternative fuel providers (“covered persons”) and States to acquire set percentages of AFVs. (42 U.S.C. 13251(a) and 13257(o)) As of 1999, 90 percent of light-duty motor vehicles acquired by a covered person must be AFVs. As of 2000, 75 percent of light-duty motor vehicles acquired for a State fleet 1 must be AFVs. Section 508 provides for the use of credits in complying with the AFV requirements. (42 U.S.C. 13258) Title V also provides for an exemption process from the AFV requirements. (42 U.S.C. 13251(a)(5) and 13257(i)) As directed by the Act, DOE issued regulations, 10 CFR part 490—Alternative Fuel Transportation Program, to implement the AFV provisions. (61 FR 10622; March 14, 1996). 1 Section 301 of the Act defines “fleet” as “a group of 20 or more light-duty motor vehicles, used primarily in a metropolitan statistical area or consolidated metropolitan statistical area, as established by the Bureau of the Census, with a 1980 population of more than 250,000, that are centrally fueled or capable of being centrally fueled and are owned, operated, leased, or otherwise controlled by a governmental entity or other person who owns, operates, leases, or otherwise controls 50 or more such vehicles, by any person who controls such person, by any person controlled by such person, and by any person under common control with such person, except that such term does not include—
(A)motor vehicles held for lease or rental to the general public;
(B)motor vehicles held for sale by motor vehicle dealers, including demonstration motor vehicles;
(C)motor vehicles used for motor vehicle manufacturer product evaluations or tests;
(D)law enforcement motor vehicles;
(E)emergency motor vehicles;
(F)motor vehicles acquired and used for military purposes that the Secretary of Defense has certified to the Secretary must be exempt for national security reasons;
(G)nonroad vehicles, including farm and construction motor vehicles; or
(H)motor vehicles which under normal operations are garaged at personal residences at night[.] On August 8, 2005, the Energy Policy Act of 2005, (Pub. L. 109-58; EPACT 2005) was signed into law. In part, EPACT 2005 provides additional flexibility for States and covered persons subject to AFV acquisition requirements under 10 CFR part 490. Specifically, section 703 of EPACT 2005 adds an alternative compliance program (entitled “Alternative Compliance”) under section 514 of title V of the Act. (42 U.S.C. 13263a) Section 514 authorizes DOE to grant to covered persons and States a waiver from the AFV acquisition requirements under section 501 (42 U.S.C. 13251) and section 507(o) (42 U.S.C. 13257(o)), respectively. The statute provides that any State or covered person may apply for an alternative compliance waiver, and that DOE must grant the waiver if the State or covered person demonstrates that its fleet will reduce annual petroleum consumption by an amount equal to the amount of petroleum it would reduce if the fleet's cumulative inventory of AFVs operated 100 percent of the time on alternative fuel (42 U.S.C. 13263a(a) and (b)). (Under the AFV requirements, States are not required to operate AFVs on alternative fuel and covered persons are required to operate their AFVs on alternative fuel only when it is available. (42 U.S.C. 13251(a)(4)) In addition, the State or covered person requesting a waiver must be in compliance with all applicable vehicle emission standards established by the Environmental Protection Agency under the Clean Air Act. On June 23, 2006, DOE issued a notice of proposed rulemaking
(NOPR)to establish procedures for the submission of, and action on, applications for alternative compliance waivers submitted by States and covered persons subject to AFV acquisition requirements under part 490, 71 FR 36034, June 23, 2006. In the NOPR, DOE proposed to add a new subpart I to part 490, which would include provisions regarding the timing of waiver requests and responses by DOE, waiver documentation and application requirements, annual reporting of petroleum reductions, use of credits to offset petroleum reduction shortfalls, rollover of excess petroleum reduction to future years, enforcement for violations, and record retention. In addition, using its rulemaking authority under title V and section 644 of the DOE Organization Act (42 U.SC. 7254), DOE proposed that States or covered persons may use vehicles that are not part of the “fleet,” such as medium- and heavy-duty vehicles, and excluded light-duty motor vehicles (LDVs), to meet their petroleum reduction requirement. Under the same authority, DOE sought to address a discrepancy in the statutory language between the treatment of States that have section 508 credits versus those that do not. As such, DOE proposed that both States that have section 508 credits and States that do not have section 508 credits would be required to achieve comparable annual petroleum reduction. II. Public Comments DOE received nine sets of written comments from the public. DOE also held a public hearing at DOE headquarters in Washington, DC on July 12, 2006, where the NOPR was discussed and oral comments were received from four industry associations and two fuel provider utility companies subject to 10 CFR Part 490. Written comments were received from the National Rural Electric Cooperative Association; the California Electric Transportation Coalition; the National Biodiesel Board; Florida Power and Light, a covered fuel provider utility; Southern California Edison, a covered fuel provider utility; the California Natural Gas Vehicle Coalition; NGV America, a natural gas vehicle association; the National Association of Fleet Administrators; and El Paso Electric, a covered fuel provider utility. Generally, the oral and written comments were supportive of the proposed rulemaking because of the increased flexibility for covered fleets and increased emphasis on petroleum reduction. Commenters, however, provided a variety of suggestions for incorporation into the final rule including comments on how to determine a State's or covered person's cumulative inventory of AFVs, the petroleum reductions eligible for consideration under the alternative compliance program, and the information required for a complete waiver application. The specific issues raised by commenters are addressed in the discussion below. III. Discussion of the Final Rule A. Eligibility for Alternative Compliance Waiver Under section 514(a) of the Act, any covered person subject to AFV acquisition requirements of section 501 and any State subject to AFV acquisition requirements in 507(o) may petition the Secretary of Energy for a waiver from those requirements. (42 U.S.C. 13263a(a)) Section 514(b)(1)(A) of the Act provides DOE *shall* grant a waiver for a covered person if the covered person demonstrates a reduction in petroleum consumption equal to the reduction that would result under 100 percent cumulative compliance with the fuel use required in section 501 of the Act. (42 U.S.C. 13263a(b)(1)(A)) Section 514(b)(1)(B) of the Act provides that DOE shall grant a waiver for a State entity granted credits under section 508, if that State demonstrates a reduction in petroleum motor fuel consumption equal to the amount of petroleum the fleet's 2 cumulative inventory of AFVs would reduce if the AFVs operated 100 percent of the time on alternative fuel. (42 U.S.C. 13263(b)(1)(B)) In addition, the party seeking a waiver must be in compliance with all applicable vehicle emission standards established by the Environmental Protection Agency under the Clean Air Act. 2 The term “fleet” is defined in title V of the Act to include only covered LDVs (42 U.S.C. 13211(9)). Relying on rulemaking authority under title V of the Act and section 644 of the DOE Organization Act (42 U.S.C. 7254), DOE proposed that State fleets, regardless of whether they earned section 508 credits, would be eligible for a waiver if they demonstrated a reduction in petroleum motor fuel consumption equal to the amount of petroleum the fleet's cumulative inventory of required AFV acquisitions would reduce if those required acquisitions operated 100 percent of the time on alternative fuel. The proposed regulation would treat States equally regardless of whether a State was granted credits. DOE did not receive any comments regarding which entities would be eligible to apply for a waiver. As such, today's final rule permits covered persons, States that have been issued credits, and States that have not been issued credits to apply for a waiver and meet the same requirements. B. Petroleum Reduction Calculation 1. Cumulative Inventory Consistent with section 514, the proposed rule required both covered persons and State entities to reduce petroleum fuel consumption by an amount equal to the petroleum the fleet's cumulative inventory of AFVs, including required AFV acquisitions in waiver years, would reduce if those vehicles operated 100 percent of the time on alternative fuel. Under the proposal, a fleet's cumulative inventory is equal to the number of previously required AFVs actually in the current fleet, plus the number of AFVs acquisitions that would be required if a waiver were not granted. The inclusion of AFV acquisitions in waiver years when calculating the necessary petroleum reduction is consistent with the statute's purpose of providing States and covered persons compliance flexibility in exchange for achieving the maximum level of petroleum fuel reduction. If AFV requirements for waiver years were not included in the cumulative AFV count, a waiver in successive years would have rapidly diminishing petroleum reduction requirements, because a fleet granted successive waivers would have fewer and fewer AFVs in its fleet as vehicles are retired. Fewer AFVs in the fleet would result in a lower required petroleum reduction. This result would be unreasonable in light of the petroleum replacement goal of the statute. DOE received two sets of supportive comments on its interpretation of “cumulative.” A fuel provider association, however, objected to the proposed rule with regard to what is counted toward a State or covered person's baseline for petroleum reduction. The commenter recommended that “cumulative” should mean all the AFVs that a covered person or State would have had in its fleet if it had purchased all the AFVs it was required to purchase—without consideration of previously used vehicle credits or exemptions granted. Otherwise, the commenter stated, a covered person or State that has not previously relied on credits or exemptions would be required to achieve a fuel reduction greater than a comparable covered person or State that previously relied on credits or exemptions. Consideration of all AFVs, including those requirements addressed through credits and exemptions, is overly restrictive. In employing credits and exemptions, States and covered persons were relying upon part 490. States and covered persons typically rely on credits or exemptions because it is extremely difficult or impossible for them to comply through AFV purchases. If AFV requirements that were previously satisfied through credits or exemptions were included in the waiver calculation, the waiver option would likely be prohibitive for these States and covered persons. The advantage of compliance under the waiver program is that States and covered persons are typically required to reduce petroleum consumption by a greater amount then would occur through compliance with credits or exemptions. Additionally, going forward the alternative compliance option should lead to greater petroleum reduction in fleets that previously relied on exemptions and credits because alternative compliance takes into account AFV purchase requirements waived under the program. Moreover, under a waiver, fleets will not be eligible for exemptions and credits are limited. DOE, therefore, is adopting the eligibility provisions and baseline calculation provision as proposed. One fleet association requested DOE be more specific about the AFVs required to be used in calculating a fleet's petroleum reduction baseline. Specifically, it requested wording that specifies that the AFVs to be counted are those “acquired for EPAct compliance and included in a prior Annual AFV Acquisition Report for State and Alternative Fuel Provider Fleets (Form DOE/FCVT/101).” DOE recognizes that some fleets may have purchased AFVs outside of the AFV requirements. To address this issue the final rule specifies inclusion of previously required AFVs in a fleet's inventory during the model year for which a waiver is being requested (section 490.803(a)(1)), and AFVs that would have been required in the model year for which a waiver is requested and in previous model years in which a waiver was granted (section 490.803(a)(2)). 2. Calculation Procedure As proposed, and as adopted today, calculation of the necessary petroleum reduction is essentially a three step procedure. To calculate the petroleum reduction necessary to obtain a waiver, the State or covered person first calculates the amount of alternative fuel necessary to operate existing required AFVs in a fleet's inventory, assuming operation on alternative fuel 100 percent of the time. Second, the State or covered person calculates the additional amount of fuel that would have been used by AFVs under the requirements for which a waiver is currently being requested plus, calculate any additional amount that would have been used if any previous waivers were not granted. The State or covered person then adds the first and second calculations together. Third, the State or covered person subtracts the fuel use attributed to any existing required AFVs and LDVs acquired in lieu of AFVs under a waiver that are being retired. Again, all calculations are based on alternative fuel use 100 percent of the time. A detailed example of how this works is provided below. In year 1, a covered person has 25 AFVs in its fleet and has an AFV acquisition requirement of 9. The AFV requirement is based on the number of LDVs that the fleet anticipates acquiring during the waiver year. In this example, the covered person anticipates acquiring 10 LDVs, and has an AFV acquisition requirement of 9 AFVs (10 vehicles × 90 percent fuel provider requirement). Thus, the cumulative total of AFVs for the purpose of the waiver request is 34. If the covered person's LDVs have an average fuel consumption of 500 gasoline gallon equivalents 3 (gge)/year, the total amount of petroleum that the covered person must reduce in the first waiver year is 17,000 gge (34 AFVs and AFV requirements combined, multiplied by 500 gge). 3 “Gasoline gallon equivalent” equates the energy content, in British thermal units (BTUs), in a gallon of an alternative fuel to that of a gallon of gasoline. In year 2, the fleet has retired 10 of the original required AFVs from its inventory, which leaves a total of 15 of the 25 AFVs originally counted in year 1. The fleet again plans to acquire 10 LDVs, thus generating a requirement to acquire 9 AFVs in year 2. Since the average number of years that this fleet keeps an AFV is 4 years, the 9 AFVs for which a waiver was granted in year 1 are included in the calculation of the year 2 required petroleum reduction. This results in a total of 33 AFVs (15 + 9 + 9) and a total petroleum reduction requirement of 16,500 gge for year 2 (assuming the same average fuel consumption of 500 gge per vehicle). In year 3, the fleet has retired 10 more of the original required AFVs, leaving 5 in its inventory, and it is again required to acquire 9 AFVs. The calculation of the year 3 petroleum reduction includes the 9 AFVs required for each of years 1 and 2. Therefore, the total AFV count for year 3 is 32 (5 + 9 + 9 + 9), and the petroleum reduction requirement for year 3 is 16,000 gge (assuming the same average fuel consumption of 500 gge per vehicle). In year 4, the fleet has retired the last 5 of the original required AFVs and plans to acquire 10 LDVs, generating a requirement of 9 AFVs. A total of 36 AFVs are included in the calculation (9 + 9 + 9 + 9), and the petroleum reduction requirement for year 4 is 18,000 gge (assuming the same average fuel consumption of 500 gge per vehicle). In year 5, the fleet retires the 9 LDVs that were acquired in lieu of AFVs under the first year's waiver (the fleet retires LDVs after 4 years). The fleet acquires 10 more LDVs, generating 9 AFV requirements. Therefore, the total AFV count for year 5 is 36 (9 + 9 + 9 + 9) and the total petroleum requirement for year 5 is 18,000 gge (assuming the same average fuel consumption of 500 gge per vehicle). The same approach is used to determine the reduction for a State entity, but the applicable AFV acquisition percentage (75 percent) in section 507(o) would be used. C. Eligible Reductions in Petroleum Consumption 1. Light-Duty Vehicles Section 514(b) of the Act states that DOE shall grant a waiver of the AFV acquisition requirements on a showing that a *fleet* owned, operated, leased or otherwise controlled by a covered person or State entity will achieve a specified petroleum reduction. The term “fleet” is defined to include only covered LDVs. (42 U.S.C. 13211).) However, consistent with the petroleum fuel reduction goals of title V of the Act, DOE also proposed to include petroleum reductions in previously excluded LDVs listed in section 490.3 toward a State's or covered person's annual petroleum reduction target. This provision of the proposal was based on DOE's rulemaking authority under title V and section 644 of the DOE Organization Act (42 U.S.C. 7254). No comments were received with regard to this, and DOE in today's final rule permits covered persons and States to consider reductions in petroleum consumption from LDVs excluded for purposes of calculating a fleet requirement under 10 CFR 490.3. 2. Medium- and Heavy-Duty Vehicles DOE also proposed to exercise its rulemaking authority under title V and section 644 of the DOE Authorization Act to permit consideration of reductions in fuel consumption from vehicles with a gross vehicle weight rating
(gvwr)greater than 8,500 lb, for the purpose of complying with a waiver. DOE received a comment from an industry association saying that adding medium- and heavy-duty vehicles was desirable, while another industry association argued that allowing consideration of petroleum reductions from larger vehicles reduces the momentum of replacing petroleum use in LDVs. DOE believes that because of limited availability of original equipment manufacturer
(OEM)light-duty models for some alternative fuels, particularly gaseous fuels, flexibility provided through the consideration of medium- and heavy-duty vehicles will make the alternative compliance option attractive to more fleets. This, in turn, is likely to lead to somewhat greater petroleum displacement and support of infrastructure for replacement fuels. For example, in model year 2007 OEM light-duty gaseous fuel offerings are currently limited to just one dedicated natural gas compact sedan. No propane LDVs currently are being offered by an OEM. There are, however, medium- and heavy-duty propane and natural gas OEM offerings and certified conversions from several manufacturers. Encouraging the use of gaseous fuel in medium- and heavy-duty vehicles potentially will also facilitate the use of gaseous fuel in the LDV fleet. 3. Nonroad Vehicles In the NOPR, DOE explained its intent to allow use of reductions in petroleum consumption from excluded vehicles listed in section 490.3 to achieve the requirement, but inclusion of nonroad vehicles was not specifically proposed by DOE. Several of the organizations that participated in DOE's public hearing asked to specifically include petroleum reductions attributable to nonroad vehicles. Five of the written comments urged DOE to allow the inclusion of nonroad vehicles. One fleet association stated that nonroad vehicles share infrastructure with AFVs and that consideration of nonroad vehicles would further promote replacement fuels. One commenter pointed out that nonroad vehicles can reduce much more petroleum over a vehicle's lifetime than a typical light-duty AFV in a utility fleet. Two other commenters stated that the expansion to nonroad vehicles would be consistent with the regulatory language in part 490 that permits States and covered persons to obtain credits using medium- and heavy-duty vehicles once LDV requirements are met. Two fuel provider groups were opposed to the consideration of nonroad vehicles. These commenters stated that inclusion of such vehicles would not promote increased use of replacement fuels in on-road motor vehicles, as was the original intent of the statute. Limited consideration of nonroad vehicles presents an opportunity to reduce petroleum and provide States and covered persons additional compliance flexibility, while also contributing to the development of infrastructure for replacement fuels used by LDVs. In the final rule, DOE is permitting limited consideration of replacement fuels in nonroad vehicles towards petroleum reduction requirements. Section 490.804(b) of the final rule permits consideration of reductions in petroleum consumption of nonroad vehicles acquired during a waiver year in instances in which the refueling infrastructure established or upgraded during a waiver year that provides replacement fuel for nonroad vehicles also serves to increase the use of replacement fuels in a fleet's light-duty vehicles. For example, during a waiver year if a State or covered person adds new or upgrades existing refueling infrastructure for nonroad vehicles and shows DOE that existing or planned LDV acquisitions will also use the upgraded or new infrastructure, then the petroleum reductions from nonroad vehicles acquired as a result of those additions and upgrades may be used for meeting petroleum reduction requirements. Generally, DOE views petroleum reductions from nonroad vehicles as a supplemental way for a State or covered person to expand its use of replacement fuel in on-road vehicles, particularly its LDVs. DOE does not view replacement fuel use in nonroad vehicles as a complete or even substantial substitution for a State's or covered person's annual petroleum reduction in its on-road vehicles. As provided in section 490.804(b)(2), DOE will recognize reductions attributable to nonroad vehicles in instances in which a State or covered person has taken reasonable steps to comply with the waiver requirement through reductions of petroleum in on-road motor vehicles. 4. Rollover of Excess Petroleum Reduction One fuel provider association and one fuel provider wrote comments supportive of language in the proposed rule that permits applying petroleum reductions achieved in excess of the requirement in one model year to the requirement in a later model year. One fuel association, however, commented that while agreeing with the provision, excess petroleum reduction amounts should not be tradable. It was not DOE's intention to make excess petroleum reductions tradable but rather to provide a fleet further flexibility under the waiver program. To clarify its intent, DOE has added language to the final rule stating that petroleum reduction gallons are not tradable. Section 490.804 in the final rule requires application by the State or covered person prior to receiving the benefit of rolling over petroleum reductions to satisfy annual requirements. DOE does not intend for a State's or covered person's entire petroleum reduction, or even a substantial amount of annual petroleum reduction, to be met by petroleum reduction rollovers alone. The rollover provision is intended to add compliance flexibility to States or covered persons, particularly those that may have difficulty meeting their annual requirements because of unusual circumstances or circumstances beyond their control. For example, a State or covered person asking for a substantial petroleum rollover would have to show DOE it was subject to technology failures, delivery delays by manufacturers, weather-related disasters, emergencies or other such unusual circumstances that led or may lead to the need for a substantial petroleum reduction rollover. Other reasons for using the petroleum reduction rollovers to meet a substantial percentage of annual petroleum reduction requirements will be considered on a case-by-case basis. D. Waiver Applications Proposed section 490.803 set forth the minimum information that a State or covered person must provide DOE as part of a waiver application. A reasonable amount of information is needed for DOE to understand the calculation of an applicant's annual petroleum reduction target and the methods that will be used to reduce petroleum. A waiver application must include verifiable data that is sufficient to enable DOE to determine whether a State's or covered person's fleet will achieve the amount of petroleum reduction required for alternative compliance. Information required as proposed includes the model year for the waiver required; numbers of required AFVs existing in the fleet and number of acquisition requirements for the waiver year and previous waiver years; amount of petroleum and non-petroleum fuel, calculated in gges to be used in covered LDVs in the fleet for the waiver year including average fuel use per vehicle; and certification that Clean Air Act requirements are met. In addition, DOE proposed that an application must include a plan with sufficient information to demonstrate that planned actions are verifiable, involve a reduction in petroleum in the fleet's vehicles, and show a net petroleum reduction equal to the required annual petroleum reduction. Today's final rule adopts the proposed application requirements in § 490.805. One fuel provider and one fleet association argued that a State or covered person applying for a waiver should not be required to include the amount of fuel used by all of the light-duty vehicles in the fleet because it is overly burdensome and is not a statutory requirement. In response to these commenters, DOE provides in the final rule that States and covered persons need only report fuel used by “covered light-duty vehicles.” A State or covered person need only report fuel use in the vehicles that have been used to calculate the baseline amounts in waiver applications or in AFVs that the fleet acquired for meeting requirements under part 490 previous to the waiver. It should be noted, however, that if DOE needs to verify information or use its enforcement authority, DOE does have the authority to require a fleet to submit such information to obtain an overall perspective on the activities of the fleet related to compliance with subpart I. DOE also intended by its proposal that a plan provide for petroleum reduction in a State's or covered person's vehicles and not include incentives for third parties. A fleet association and a fuel provider both commented that in proposed section 490.803(d)(2), which would exclude consideration of third party incentives in a reduction plan, use of the phrase “State's or covered person's own vehicles” could be interpreted to preclude leased vehicles. DOE agrees with these commenters. Today's final rule adopts § 490.804 to clarify the reductions of petroleum consumption that are eligible and ineligible for consideration under the waiver program. E. Application Deadlines As proposed, waiver applications would be required to be submitted to DOE by March 31 in the model year prior to which a waiver is requested. One fleet association and two fuel provider associations stated that the proposed deadline was not sufficient to prepare a waiver request because typically OEMs do not announce availability of new model year vehicles until late summer. Without knowing what vehicle models will be available, States and covered persons cannot project fuel consumption and potential fuel savings. In response to this concern the final rule establishes a March 31 deadline for a State or covered person to register its intent to submit a waiver application to DOE. Fleets that need the new model information may submit their applications to DOE no later than July 31 prior to the model year for which a waiver is sought. If the waiver is not dependent on such OEM information, DOE requires the State or covered person to submit a preliminary intent to apply for a waiver by March 31 and its application for a waiver no later than June 30 prior to the model year for which it seeks a waiver. Given the timing of today's final rule DOE will consider registrations of intent to submit a waiver received before May 31, 2007. This extension of the registration of intent deadline applies only to applications for MY 2008. F. Use of Credits One fuel provider and one fuel provider association commented that the proposed language regarding the use of credits was too restrictive and would prevent use of subpart F credits to offset a shortfall in meeting the petroleum reduction required for a waiver. After carefully considering this issue, DOE has amended the wording in section 490.808 of the final rule to require that a State or covered person “provide documentation that shows a good faith effort to meet the requirements.” DOE has determined that this language provides States and covered persons a reasonable bar for applying for credits to offset a petroleum reduction shortfall, while still promoting the goals of the program. G. Reporting Requirement Consistent with section 514(c) of the Act, DOE proposed a reporting requirement by December 31 following a model year for which a waiver is granted. A State or covered person would meet this requirement by providing DOE a statement certifying the number of petroleum gallons and alternative fuel in gges used by its covered light-duty vehicles and the amount of petroleum reduced in the waiver year due to alternative compliance. In the final rule, DOE eliminates the proposed requirement to report “a baseline quantity of the petroleum motor fuel reduction of the State or covered person during the following model year, if the State or covered person intends to request alternative compliance for that model year.” DOE determined that this information would be redundant with previously collected information. No comments were received on the other aspects of the proposed reporting requirements. H. Sanctions for Violations The proposed sanctions for violating a granted waiver reflected the statutory language of section 514(d) of the Act that states that DOE shall revoke the waiver of a State or covered person that fails to comply with the alternative compliance petroleum reduction or reporting requirements. DOE may also impose a civil penalty for any such violation (42 U.S.C. 13264(d)). No comments were received on this, and no changes were made in corresponding provisions in the final rule regarding sanctions. I. Exemptions DOE proposed that it would not grant exemptions to a State under § 490.204 or to a covered person under § 490.308 if the State or covered person has been granted an alternative compliance waiver. Exemptions are based upon lack of alternative fuels and AFVs. The waivers provide sufficient flexibility by allowing States and covered persons to consider a wider range of options for meeting their petroleum reduction requirements. If a State or covered person is granted a waiver, the flexibility provided should alleviate any need for an exemption. DOE did receive a supportive comment on this issue from one industry association but no comments from any others. DOE is not making a change in its position on exemptions in the final rule. J. Record Retention Under proposed § 490.809, a State or covered person would be required to keep all documents pertaining to its application and compliance with a waiver for a minimum of three years following the end of the waiver year. No comments were received on this section and the proposed record retention provision is adopted in the final rule § 490.810. K. Other Comments DOE focused its response to comments on those that are directly relevant to the proposed rule. Other comments included areas that may be covered in future guidance such as a request that DOE standardize inputs and outputs to help with the application process. Yet other comments were clearly outside the scope of this rule and/or DOE's authority, including providing extra credits for light-duty zero emission vehicles; requiring OEMs to make more alternative fuel vehicle products available; and applying petroleum reduction in lieu of the vehicle acquisition requirements in part 490. IV. Regulatory Review A. Executive Order 12866 Today's final rule has been determined to not be a significant regulatory action under Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (October 4, 1993). Accordingly, this action was not subject to review under that Executive Order by the Office of Information and Regulatory Affairs of the Office of Management and Budget. B. National Environmental Policy Act DOE has determined that this final rule is covered under the Categorical Exclusion found in the DOE's National Environmental Policy Act regulations at paragraph A.5 of Appendix A to subpart D, 10 CFR part 1021, which applies to rulemaking that amends an existing rule or regulation which does not change the environmental effect of the rule or regulation being amended. Under the final rule, a State entity or alternative fuel provider requesting an alternative compliance waiver must show that in lieu of acquiring AFVs for its covered light-duty vehicle fleet, it would use alternative fuel and/or other replacement fuels in various types of motor vehicles to reduce petroleum fuel consumption by an amount that equals 100 percent alternative fuel use in the fleet's AFVs, including AFVs that would be required in waiver years. The final rule, as authorized by the statute, grants the waiver applicant greater compliance flexibility in exchange for achieving the maximum level of petroleum reduction that would occur if the State or covered person were to comply with the Act's AFV acquisition requirements. Because the amount of petroleum displaced would be the same, the final rule would not change the environmental effect of compliance with part 490. Accordingly, neither an environmental assessment nor an environmental impact statement is required. C. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) requires preparation of an initial regulatory flexibility analysis for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process (68 FR 7990). DOE has made its procedures and policies available on the Office of General Counsel's Web site: *http://www.gc.doe.gov.* DOE has reviewed today's final rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. The requirements in 10 CFR part 490 apply only to alternative fuel providers with fleets containing at least 50 LDVs (20 of which are centrally fueled or capable of being centrally fueled) and to like-size State fleets in metropolitan statistical areas with a population of more than 250,000. The owners and operators of fleets of this size are not small entities. In addition, the final rule establishes optional procedures for State entities and covered persons that wish to receive a waiver from otherwise applicable AFV acquisition requirements. Alternative compliance does not impose any additional burdens on the entities subject to sections 501 and 507(o) of the Energy Policy Act of 1992. On the basis of the foregoing, DOE certifies that this final rule will not have a significant economic impact on a substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking. DOE's certification and supporting statement of factual basis will be provided to the Chief Counsel for Advocacy of the Small Business Administration pursuant to 5 U.S.C. 605(b). D. Paperwork Reduction Act Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) and the procedures implementing that Act, 5 CFR 1320.1 *et seq.* , a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. Section 490.805 (“Application for wavier”), section 490.807 (“Reporting requirement”), and § 490.810 (Record retention) contain information collection requirements. DOE did not receive any comments on the information collection requirements of this final rule. OMB Control Number 1910-5101 is assigned to the alternative fuel transportation program. E. Unfunded Mandates Reform Act of 1995 The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally requires Federal agencies to examine closely the impacts of regulatory actions on State, local, and tribal governments. Subsection 101(5) of title I of that law defines a Federal intergovernmental mandate to include any regulation that would impose upon State, local, or tribal governments an enforceable duty, except a condition of Federal assistance or a duty arising from participating in a voluntary Federal program. Title II of that law requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and tribal governments, in the aggregate, or to the private sector, other than to the extent such actions merely incorporate requirements specifically set forth in a statute. Section 202 of that title requires a Federal agency to perform a detailed assessment of the anticipated costs and benefits of any rule that includes a Federal mandate which may result in costs to State, local, or tribal governments, or to the private sector, of $100 million or more. Section 204 of that title requires each agency that proposes a rule containing a significant Federal intergovernmental mandate to develop an effective process for obtaining meaningful and timely input from elected officers of State, local, and tribal governments. This final rule provides an alternative compliance option for States and alternative fuel providers subject to AFV acquisition requirements in 10 CFR part 490. The final rule will not result in the expenditure by State, local, and tribal governments in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, no assessment or analysis is required under the Unfunded Mandates Reform Act of 1995. F. Treasury and General Government Appropriations Act, 1999 Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any proposed rule that may affect family well being. The final rule will not impact the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment. G. Executive Order 13132 Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. DOE has examined this final rule and has determined that it will not preempt State law and 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. No further action is required by Executive Order 13132. H. Executive Order 12988 With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements:
(1)Eliminate drafting errors and ambiguity;
(2)write regulations to minimize litigation; and
(3)provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation:
(1)Clearly specifies the preemptive effect, if any;
(2)clearly specifies any effect on existing Federal law or regulation;
(3)provides a clear legal standard for affected conduct while promoting simplification and burden reduction;
(4)specifies the retroactive effect, if any;
(5)adequately defines key terms; and
(6)addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the final rule meets the relevant standards of Executive Order 12988. I. Treasury and General Government Appropriations Act, 2001 The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by the Office of Management and Budget (OMB). OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed today's final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines. J. Executive Order 13211 Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001) requires Federal agencies to prepare and submit to the OMB, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that:
(1)Is a significant regulatory action under Executive Order 12866, or any successor order; and
(2)is likely to have a significant adverse effect on the supply, distribution, or use of energy, or
(3)is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. Today's final regulatory action will not have a significant adverse effect on the supply, distribution, or use of energy and is therefore not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects. K. Congressional Notification As required by 5 U.S.C. 801, DOE will submit to Congress a report regarding the issuance of today's final rule prior to the effective date set forth at the outset of this notice. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 801(2). V. Approval by the Office of Secretary The Secretary of Energy has approved the issuance of this final rule. List of Subjects in 10 CFR Part 490 Energy, Energy conservation, Fuel, Motor vehicles, Petroleum, and Recordkeeping and reporting requirements. Issued in Washington, DC, on March 12, 2007. Alexander A. Karsner, Assistant Secretary, Energy Efficiency and Renewable Energy. For the reasons set forth in the preamble, the Department of Energy is amending chapter II of title 10 of the Code of Federal Regulations as set forth below: PART 490—ALTERNATIVE FUEL TRANSPORTATION PROGRAM 1. The authority citation for part 490 is revised to read as follows: Authority: 42 U.S.C. 7191 *et seq.* ; 42 U.S.C. 13201, 13211, 13220, 13251 *et seq.* 2. Section 490.600 is revised to read as follows: § 490.600 Purpose and scope. This subpart sets forth the rules applicable to investigations under titles III, IV, V, and VI of the Act and to enforcement of sections 501, 503(b), 507, 508, or 514 of the Act, or any regulation issued under such sections. 3. Section 490.603 is revised to read as follows: § 490.603 Prohibited acts. It is unlawful for any person to violate any provision of sections 501, 503(b), 507, 514 of the Act, or any regulations issued under such sections. 4. A new subpart I is added to read as follows: Subpart I—Alternative Compliance Sec. 490.801 Purpose and scope. 490.802 Eligibility for alternative compliance waiver. 490.803 Waiver requirements. 490.804 Eligible reductions in petroleum consumption. 490.805 Application for waiver. 490.806 Action on an application for waiver. 490.807 Reporting requirement. 490.808 Use of credits to offset petroleum reduction shortfall. 490.809 Violations. 490.810 Record retention. Subpart I—Alternative Compliance § 490.801 Purpose and scope. This subpart implements section 514 of the Act (42 U.S.C. 13263a) which permits States and alternative fuel providers to petition for alternative compliance waivers from the alternative fueled vehicle acquisition requirements in subparts C and D of this part, respectively. § 490.802 Eligibility for alternative compliance waiver. Any State subject to subpart C of this part and any covered person subject to subpart D of this part may apply to DOE for a waiver from the applicable alternative fueled vehicle acquisition requirements. § 490.803 Waiver requirements. DOE grants a State or covered person a waiver:
(a)If DOE determines that the State or covered person will achieve a reduction in petroleum consumption, through eligible reductions as specified in § 490.804 of this subpart, equal to the amount of alternative fuel used if the following vehicles were operated 100 percent of the time on alternative fuel during the model year for which a waiver is requested:
(1)Previously required alternative fueled vehicles in the fleet's inventory at the start of the model year for which a waiver is requested;
(2)Alternative fueled vehicles that the State or covered person would have been required to acquire in the model year for which a waiver is requested, and in previous model years in which a waiver was granted, absent any waivers;
(b)The State or covered person is in compliance with all applicable vehicle emission standards established by the Administrator of the Environmental Protection Agency under the Clean Air Act (42 U.S.C. 7401 *et seq.* ); and
(c)The State or covered person is in compliance with all applicable requirements of this subpart. § 490.804 Eligible reductions in petroleum consumption.
(a)*Motor vehicles.* Demonstrated reductions in petroleum consumption during the model year for which a waiver is requested that are attributable to motor vehicles owned, operated, leased or otherwise under the control of a State or covered person are applicable towards the petroleum fuel reduction required in § 490.803(a) of this subpart.
(b)*Qualified nonroad vehicles.* Demonstrated reductions in petroleum consumption during the model year for which a waiver is requested that are attributable to nonroad vehicles owned, operated, leased or otherwise under the control of a State or covered person acquired during waiver years are applicable towards the petroleum fuel reduction required in § 490.803(a) of this subpart:
(1)If acquisition of the nonroad vehicles leads directly to the establishment or upgrading of refueling or recharging infrastructure during a waiver year that would also allow for increased petroleum replacement by serving the fleet's on-road light-duty vehicles; and
(2)To the extent that additional reductions attributable to motor vehicles are not reasonably available.
(c)*Rollover of excess petroleum reductions.*
(1)Petroleum reductions achieved by a fleet in excess of the amount required for alternative compliance in a previous model year are applicable towards the petroleum fuel reduction requirements for that fleet under § 490.803(a) of this subpart upon approval by DOE.
(2)Requests for approval to apply rollover reductions to future model years for which a waiver is requested must be made to DOE in writing as part of the reporting requirement specified in § 490.807 of this subpart.
(3)DOE will apply approved rollover reductions to a model year for which a waiver was granted but the required reduction in petroleum use was not achieved only to the extent that additional reductions attributable to motor vehicles were not reasonably available.
(4)Following receipt of a request to roll over excess petroleum reduction, DOE notifies the State or covered person of the amount of petroleum reduction that may be applied to a future model year's petroleum reduction requirement.
(5)Excess petroleum reductions are not tradable.
(d)*Ineligible reductions.* The petroleum reduction plan required by paragraph (c)(4) of this section must not include reductions in petroleum attributable to incentives for third parties to reduce their petroleum use, petroleum reductions that are not transportation-related, or petroleum reductions attributable to non-qualified nonroad vehicles. § 490.805 Application for waiver.
(a)A State or covered person must apply for a waiver applicable to an entire fleet for a full model year in accordance with the deadlines specified in paragraph
(b)of this section. DOE will not grant a waiver for less than an entire fleet or less than a full model year. (b)(1) A State or covered person must register a preliminary intent to apply for a waiver by March 31 prior to the model year for which a waiver is sought.
(2)If a complete waiver application is dependent on information regarding the availability of motor vehicle models to be released by motor vehicle manufacturers, the waiver application must be received by DOE no later than July 31 prior to the model year for which a waiver is sought.
(3)If a complete waiver application is not dependent on information regarding the availability of motor vehicle models to be released by motor vehicle manufacturers, the waiver application must be received by DOE no later than June 30 prior to the model year for which a waiver is sought.
(c)A waiver application must include verifiable data that is sufficient to enable DOE to determine whether the State or covered person is likely to achieve the amount of petroleum reduction required for alternative compliance and whether the fleet is in compliance with Clean Air Act vehicle emission standards. At a minimum, the State entity or covered person must provide DOE with the following information:
(1)The model year for which the waiver is requested;
(2)The total number of required alternative fueled vehicle acquisitions in the fleet including:
(i)The number of alternative fueled vehicle acquisitions that the State or covered person would, without a waiver, be required to acquire during the model year for which the waiver is requested;
(ii)The number of alternative fueled vehicle acquisitions that the State or covered person would, without a waiver, have been required to acquire during the model years for which waivers were previously granted;
(iii)The number of required alternative fueled vehicles existing in the fleet that were acquired during years in which no waiver was in force; and excluding
(iv)Any required alternative fuel vehicles acquired during a waiver or non-waiver year or light-duty vehicles acquired in lieu of alternative fuels vehicles during a waiver year that are to be retired before the beginning of the waiver year;
(3)The anticipated amount of gasoline and diesel and alternative fuel (calculated in gasoline gallon equivalents (gge)) to be used by the covered light-duty vehicles in the fleet for the waiver year including an estimate of per vehicle average fuel use in these vehicles;
(4)A petroleum reduction plan as described in paragraph
(d)of this section; and
(5)Documents, or a certification by a responsible official of the State or covered person, demonstrating that the fleet is in compliance with all applicable vehicle emission standards established by the Administrator of the Environmental Protection Agency under the Clean Air Act.
(d)The petroleum reduction plan required by paragraph (c)(4) of this section must contain a documented explanation as to how the State or covered person will meet the reduction in petroleum consumption required by § 490.803(a) of this subpart.
(1)The planned actions must:
(i)Be verifiable;
(ii)Demonstrate a reduction in petroleum use by motor vehicles or qualified nonroad vehicles owned, operated, leased or otherwise controlled by the State or covered person;
(iii)Provide for a net reduction in petroleum consumption as specified in § 490.803(a) of this subpart.
(2)The documentation for the plan may include, but is not limited to, published data on fuel efficiency, Government data, letters from manufacturers, and data on actual usage.
(e)A State or covered person must send its report, and two copies, to DOE on official company or agency letterhead, and the report must be signed by a responsible company or agency official. Send to: Regulatory Manager, Alternative Fuel Transportation Program, FreedomCAR and Vehicle Technologies Program, EE-2G/Forrestal Building, U.S. Department of Energy, 1000 Independence Avenue, SW., Washington, DC 20585. § 490.806 Action on an application for waiver.
(a)DOE grants or denies a complete waiver application within 45 business days after receipt of a complete application.
(b)If DOE determines that an application is not complete in that sufficient information is not provided for DOE to make a determination, DOE notifies the State or covered person of the information that must be submitted to complete the application.
(c)If DOE denies a waiver, and the State or covered person wishes to exhaust administrative remedies, the State or covered person must appeal within 30 days of the date of the determination, pursuant to 10 CFR part 1003, subpart C, to the Office of Hearings and Appeals, U.S. Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585. DOE's determination shall be stayed during the pendency of an appeal under this paragraph. § 490.807 Reporting requirement.
(a)By December 31 following a model year for which an alternative compliance waiver is granted, a State or covered person must submit a report to DOE that includes:
(1)A statement certifying:
(i)The total number of petroleum gallons and/or alternative fuel gge used by the fleet during the waiver year in its covered light-duty vehicles; and
(ii)The amount of petroleum motor fuel reduced by the fleet in the waiver year through alternative compliance.
(b)A State or covered person must send its report to DOE on official company or agency letterhead, and the report must be signed by a responsible company or agency official. Send to: Regulatory Manager, Alternative Fuel Transportation Program, FreedomCAR and Vehicle Technologies Program, EE-2G/Forrestal Building, U.S. Department of Energy, 1000 Independence Avenue, SW., Washington, DC 20585. § 490.808 Use of credits to offset petroleum reduction shortfall.
(a)If a State or covered person granted a waiver under this subpart wants to use alternative fueled vehicle credits purchased or earned pursuant to subpart F of this part to offset any shortfall in meeting the petroleum reduction required under § 490.803(a) of this subpart, it must make a written request to DOE.
(1)The State or covered person must provide details about the particular circumstances that led to the shortfall and provide documentation that shows a good faith effort to meet the requirements.
(2)DOE may request that a State or covered person supply additional information about the fleet and its operations if DOE deems such information necessary for a decision on the request.
(b)If DOE grants the request, it notifies the State or covered person of the credit amount required to offset the shortfall. DOE derives the credit amount using the fleet's fuel use per vehicle data.
(c)DOE gives the State entity or covered person until March 31 following the model year for which the waiver is granted, to acquire the number of credits required for compliance with this subpart. § 490.809 Violations. If a State or covered person that receives a waiver under this subpart fails to comply with the petroleum motor fuel reduction or reporting requirements of this subpart, DOE will revoke the waiver. DOE may impose on the State or covered person a penalty under subpart G of this part. § 490.810 Record retention. A State or covered person that receives a waiver under this subpart must retain documentation pertaining to its waiver application and alternative compliance, including petroleum fuel reduction by its fleet, for a period of three years following the model year for which the waiver is granted. [FR Doc. E7-5021 Filed 3-19-07; 8:45 am] BILLING CODE 6450-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-26495; Directorate Identifier 2006-CE-80-AD; Amendment 39-14997; AD 2007-06-16] RIN 2120-AA64 Airworthiness Directives; Alpha Aviation Design Limited (Type Certificate No. A48EU Previously Held by APEX Aircraft and AVIONS PIERRE ROBIN) Model R2160 Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: We are adopting a new airworthiness directive
(AD)for the products listed above. This AD results from mandatory continuing airworthiness information
(MCAI)issued by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI references Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, which describes the unsafe condition as: Development of the New Zealand produced Alpha 160A aircraft identified an issue with the fuel shut-off valve, where it may not be possible to switch the valve ON once the valve has been placed in the OFF position. This is due to friction in the shut-off system. The fuel shut-off valve, which is normally ON, is a safety feature to allow the pilot to stop fuel flow to the engine in an emergency situation such as a forced landing without power. The fuel shut-off control is guarded and requires a deliberate action by the pilot to operate. Not withstanding this, a hazardous situation is possible if the fuel shut-off valve is inadvertently switched OFF in flight and the pilot is not able to switch it back ON. We are issuing this AD to require actions to correct the unsafe condition on these products. DATES: This AD becomes effective April 24, 2007. The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of April 24, 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. FOR FURTHER INFORMATION CONTACT: Karl Schletzbaum, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:
(816)329-4146; fax:
(816)329-4090. SUPPLEMENTARY INFORMATION: Streamlined Issuance of AD The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. The streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to follow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and **Federal Register** requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products. This AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The AD contains text copied from the MCAI and for this reason might not follow our plain language principles. Discussion We issued a notice of proposed rulemaking
(NPRM)to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the **Federal Register** on January 8, 2007 (72 FR 674). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI references Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, which states that: Development of the New Zealand produced Alpha 160A aircraft identified an issue with the fuel shut-off valve, where it may not be possible to switch the valve ON once the valve has been placed in the OFF position. This is due to friction in the shut-off system. The fuel shut-off valve, which is normally ON, is a safety feature to allow the pilot to stop fuel flow to the engine in an emergency situation such as a forced landing without power. The fuel shut-off control is guarded and requires a deliberate action by the pilot to operate. Not withstanding this, a hazardous situation is possible if the fuel shut-off valve is inadvertently switched OFF in flight and the pilot is not able to switch it back ON. Comments We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM or on the determination of the cost to the public. Conclusion We reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed. Differences Between This AD and the MCAI or Service Information We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information. We might also have required different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are highlighted in a NOTE within the AD. Costs of Compliance We estimate that this AD will affect 10 products of U.S. registry. We also estimate that it will take about 3 work-hours per product to comply with basic requirements of this AD. The average labor rate is $80 per work-hour. Required parts will cost about $300 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these parts. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of this AD to the U.S. operators to be $5,400, or $540 per product. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority. We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action. Regulatory Findings We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify this AD:
(1)Is not a “significant regulatory action” under Executive Order 12866;
(2)Is not a “significant rule” under 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. Examining the AD Docket You may examine the AD docket on the Internet at *http://dms.dot.gov;* or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone
(800)647-5227) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended] 2. The FAA amends § 39.13 by adding the following new AD: **2007-06-16 Alpha Aviation Design Limited (Type Certificate No. A48EU previously held by APEX Aircraft and AVIONS PIERRE ROBIN):** Amendment 39-14997; Docket No. FAA-2006-26495; Directorate Identifier 2006-CE-80-AD. Effective Date
(a)This airworthiness directive
(AD)becomes effective April 24, 2007. Affected ADs
(b)None. Applicability
(c)This AD applies to Model R2160 airplanes, serial numbers 001 through 191, certificated in any category. Reason
(d)The mandatory continuing airworthiness information
(MCAI)references Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, which states that: Development of the New Zealand produced Alpha 160A aircraft identified an issue with the fuel shut-off valve, where it may not be possible to switch the valve ON once the valve has been placed in the OFF position. This is due to friction in the shut-off system. The fuel shut-off valve, which is normally ON, is a safety feature to allow the pilot to stop fuel flow to the engine in an emergency situation such as a forced landing without power. The fuel shut-off control is guarded and requires a deliberate action by the pilot to operate. Not withstanding this, a hazardous situation is possible if the fuel shut-off valve is inadvertently switched OFF in flight and the pilot is not able to switch it back ON. Actions and Compliance
(e)Unless already done, do the following actions:
(1)To prevent the shut-off valve from remaining partially closed when the selector is turned to the ON position, due to the possibility of excess friction in the fuel shut-off valve causing deflection of the push pull cable, accomplish the inspection and rework instructions in Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, within 25 hours time-in-service
(TIS)after the effective date of this AD.
(2)If the fuel shut-off valve cable is bent, replace the cable per Alpha Aviation Service Bulletin AA-SB-28-002, before further flight.
(3)If the force required to operate the fuel shut-off valve exceeds the limits specified in Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, rework or replace the valve as required, per Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, before further flight. FAA AD Differences Note: This AD differs from the MCAI and/or service information as follows: No differences. Other FAA AD Provisions
(f)The following provisions also apply to this AD:
(1)*Alternative Methods of Compliance (AMOCs):* The Manager, Standards Staff, FAA, ATTN: Karl Schletzbaum, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone:
(816)329-4146; fax:
(816)329-4090, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector
(PI)in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO.
(2)*Airworthy Product:* For any requirement in this AD to obtain corrective actions from a manufacturer or other source, use these actions if they are FAA-approved. Corrective actions are considered FAA-approved if they are approved by the State of Design Authority (or their delegated agent). You are required to assure the product is airworthy before it is returned to service.
(3)*Reporting Requirements:* For any reporting requirement in this AD, under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 *et seq.* ), the Office of Management and Budget
(OMB)has approved the information collection requirements and has assigned OMB Control Number 2120-0056. Related Information
(g)Refer to MCAI Airworthiness Authority of New Zealand AD DCA/R2000/39, dated August 31, 2006; and Alpha Aviation Service Bulletin AA-SB-28-002, dated June 28, 2006, for related information. Material Incorporated by Reference You must use Alpha Aviation Service Bulletin AA-SB-28-002 (Service Bulletin number is indicated at top of page), dated June 28, 2006, to do the actions required by this AD, unless the AD specifies otherwise.
(1)The Director of the Federal Register approved the incorporation by reference of this service information under 5 U.S.C. 552(a) and 1 CFR part 51.
(2)For service information identified in this AD, contact Alpha Aviation Design Ltd., Ingram Road, Hamilton Airport, R.D.2. Hamilton 3282, New Zealand.
(3)You may review copies at the FAA, Central Region, Office of the Regional Counsel, 901 Locust, Room 506, Kansas City, Missouri 64106; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.* Issued in Kansas City, Missouri, on March 9, 2007. David R. Showers, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-4861 Filed 3-19-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9264] RIN 1545-BG49 Guidance Necessary To Facilitate Business Electronic Filing and Burden Reduction; Correction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction notice. SUMMARY: This document contains a correction to final and temporary regulations (TD 9264) that were published in the **Federal Register** on Tuesday, May 30, 2006 (71 FR 30591) affecting taxpayers that file Federal income tax returns. They simplify, clarify, or eliminate reporting burdens and also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal income tax returns. DATES: The correction is effective May 30, 2006. FOR FURTHER INFORMATION CONTACT: Grid Glyer,
(202)622-7930 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The final and temporary regulations that are the subject of the correction are under sections 279, 302, 331, 332, 338, 351, 355, 368, 381, 382, 1081, 1221, 1502, 1563, and 6012 of the Internal Revenue Code. Need for Correction As published, final and temporary regulations (TD 9264) contain an error that may prove to be misleading and is in need of clarification. Correction of Publication Accordingly, the publication of the final and temporary regulations (TD 9264), which were the subject of FR Doc. 06-4873, is corrected as follows: On page 30591, in the document heading, the language “RIN 1545-BF26” is corrected to read “RIN 1545-BG49”. LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration). [FR Doc. E7-4962 Filed 3-19-07; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9317] RIN 1545-BF56 Computer Software Under Section 199(c)(5)(B) AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations. SUMMARY: This document contains final regulations concerning the application of section 199 of the Internal Revenue Code, which provides a deduction for income attributable to domestic production activities. The final regulations are necessary to provide guidance regarding certain transactions involving online software and to clarify the rules regarding the application of section 199 to certain cooperatives. The regulations will affect taxpayers engaged in certain domestic production activities involving computer software and taxpayers engaged in certain domestic production activities in cooperative form. DATES: *Effective Date:* These regulations are effective March 20, 2007. *Applicability Date:* For dates of applicability, see § 1.199-8(i)(4) and (i)(7). FOR FURTHER INFORMATION CONTACT: Paul Handleman or Lauren Ross Taylor,
(202)622-3040 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document amends 26 CFR part 1 to provide rules relating to the deduction for income attributable to domestic production activities under section 199 of the Internal Revenue Code (Code). Section 199 was added to the Code by section 102 of the American Jobs Creation Act of 2004 (Pub. L. 108-357, 118 Stat. 1418), and amended by section 403(a) of the Gulf Opportunity Zone Act of 2005 (Pub. L. 109-135, 119 Stat. 25) and section 514 of the Tax Increase Prevention and Reconciliation Act of 2005 (Pub. L. 109-222, 120 Stat. 345). On June 1, 2006, the IRS and Treasury Department published in the **Federal Register** final regulations under section 199 (71 FR 31268). Also on June 1, 2006, the IRS and Treasury Department published in the **Federal Register** temporary and proposed regulations under section 199 providing guidance on certain transactions involving computer software (71 FR 31074 and 71 FR 31128, respectively). Written and electronic comments responding to the temporary and proposed regulations were received. After consideration of the comments, the proposed regulations are adopted as amended by this Treasury decision. General Overview Section 199(a)(1) allows a deduction equal to 9 percent (3 percent in the case of taxable years beginning in 2005 or 2006, and 6 percent in the case of taxable years beginning in 2007, 2008, or 2009) of the lesser of
(A)the qualified production activities income
(QPAI)of the taxpayer for the taxable year, or
(B)taxable income (determined without regard to section 199) for the taxable year (or, in the case of an individual, adjusted gross income (AGI)). Qualified Production Activities Income Section 199(c)(1) defines QPAI for any taxable year as an amount equal to the excess (if any) of
(A)the taxpayer's domestic production gross receipts
(DPGR)for such taxable year, over
(B)the sum of
(i)the cost of goods sold
(CGS)that are allocable to such receipts; and
(ii)other expenses, losses, or deductions (other than the deduction under section 199) that are properly allocable to such receipts. Section 199(c)(4)(A)(i) defines DPGR, in part, to mean the taxpayer's gross receipts that are derived from any lease, rental, license, sale, exchange, or other disposition of qualifying production property
(QPP)that was manufactured, produced, grown, or extracted
(MPGE)by the taxpayer in whole or in significant part within the United States. Section 199(c)(5) defines QPP to mean:
(A)Tangible personal property;
(B)any computer software; and
(C)any property described in section 168(f)(4) (certain sound recordings). Patrons of Certain Cooperatives Section 199(d)(3)(A) provides that any person who receives a qualified payment from a specified agricultural or horticultural cooperative shall be allowed for the taxable year in which such payment is received a deduction under section 199(a) equal to the portion of the deduction allowed under section 199(a) to such cooperative which is
(i)allowed with respect to the portion of the QPAI to which such payment is attributable, and
(ii)identified by such cooperative in a written notice mailed to such person during the payment period described in section 1382(d). Section 199(d)(3)(B) provides that the taxable income of a specified agricultural or horticultural cooperative shall not be reduced under section 1382 by reason of that portion of any qualified payment as does not exceed the deduction allowable under section 199(d)(3)(A) with respect to such payment. Section 199(d)(3)(C) provides that, for purposes of section 199, the taxable income of a specified agricultural or horticultural cooperative shall be computed without regard to any deduction allowable under section 1382(b) or
(c)(relating to patronage dividends, per-unit retain allocations, and nonpatronage distributions). Section 199(d)(3)(E) provides that, for purposes of section 199(d)(3), the term *qualified payment* means, with respect to any person, any amount that
(i)is described in section 1385(a)(1) or (3),
(ii)is received by such person from a specified agricultural or horticultural cooperative, and
(iii)is attributable to QPAI with respect to which a deduction is allowed to such cooperative under section 199(a). Authority To Prescribe Regulations Section 199(d)(8) authorizes the Secretary to prescribe such regulations as are necessary to carry out the purposes of section 199, including regulations that prevent more than one taxpayer from being allowed a deduction under section 199 with respect to any activity described in section 199(c)(4)(A)(i). Temporary Regulations Section 1.199-3T(i)(6)(ii) provides that gross receipts derived from customer and technical support, telephone and other telecommunication services, online services (such as Internet access services, online banking services, providing access to online electronic books, newspapers, and journals), and other similar services do not constitute gross receipts derived from a lease, rental, license, sale, exchange, or other disposition of computer software. However, § 1.199-3T(i)(6)(iii) provides two exceptions under which gross receipts derived by a taxpayer from providing computer software to customers for the customers' direct use while connected to the Internet will be treated as being derived from the lease, rental, license, sale, exchange, or other disposition of such computer software. Such gross receipts will be treated as DPGR if all the other requirements of section 199 are met (for example, the taxpayer MPGE computer software in whole or in significant part within the United States). The exception in § 1.199-3T(i)(6)(iii)(A) applies to a taxpayer that derives gross receipts from providing computer software to customers for the customers' direct use while connected to the Internet (online software) and also derives gross receipts from customers that are unrelated to the taxpayer from the lease, rental, license, sale, exchange, or other disposition of computer software affixed to a tangible medium or downloaded from the Internet. The exception in § 1.199-3T(i)(6)(iii)(B) applies if a taxpayer derives gross receipts from providing online software and an unrelated person derives, on a regular and ongoing basis in the unrelated person's business, gross receipts from the lease, rental, license, sale, exchange, or other disposition of substantially identical software to its customers affixed to a tangible medium or by allowing its customers to download the substantially identical computer software from the Internet. Section 1.199-3T(i)(6)(iv) defines substantially identical software as computer software that, from a customer's perspective, has the same functional result as the online software and has a significant overlap of features or purpose with the online software. Section 1.199-3T(i)(6)(iv)(B) provides a safe harbor under which all computer software games are deemed to be substantially identical software. The exceptions outlined in § 1.199-3T(i)(6)(iii) permit gross receipts derived from providing online software to be treated as gross receipts derived from the lease, rental, license, sale, exchange, or other disposition of software. However, because the rules for online software are exceptions, all other provisions of the temporary and final regulations do not necessarily apply to online software. Specifically, § 1.199-3T(i)(6)(iv)(E) provides that the computer software maintenance agreement exception provided in § 1.199-3(i)(4)(i)(B)( *5* ) does not apply to online software. Section 1.199-3(i)(4)(i)(B)( *5* ) provides that a taxpayer may include in DPGR, the gross receipts derived from services performed pursuant to a qualified computer software maintenance agreement. Summary of Comments and Explanation of Provisions A commentator suggested that the online software exceptions should apply to transactions where access to computer software is provided over any public or private communications network and not just the Internet. The final regulations adopt this suggestion. A commentator suggested that the final regulations provide an example where computer software would not be considered substantially identical software. This suggestion has been adopted. Commentators noted that, in the future, some computer software will only be available over the Internet. In addition, newly developed computer software provided over the Internet may not have a substantially identical counterpart. The IRS and Treasury Department recognize that the computer software industry is evolving and current industry trends may result in a more limited applicability of the online software exceptions provided in the final regulation. However, there are significant differences between transactions which provide customers with access to online software and transactions involving the transfer of software to customers affixed to a tangible medium or by download. Accordingly, in order to give meaning to the statutory language requiring a lease, rental, license, sale, exchange, or other disposition, the online software exceptions have been narrowly tailored and are intended to apply only to gross receipts derived from providing customers access to computer software for the customers' direct use while connected to the Internet and only when the taxpayer (or another person) also derives gross receipts from the lease, rental, license, sale, exchange, or other disposition of the computer software (or substantially identical software) affixed to a tangible medium or by download. The final regulations clarify that, with respect to online software, taxpayers are providing customers with access to the taxpayers' software as opposed to actually transferring the software to customers either affixed to a tangible medium or by allowing them to download the computer software from the Internet. Commentators suggested that the rule in § 1.199-3T(i)(6)(iv)(E), precluding the application of the qualified computer software maintenance provision to online software, be deleted because it places taxpayers providing access to online software at a competitive disadvantage with taxpayers providing computer software to customers either affixed to a tangible medium or by allowing them to download the computer software from the Internet. In addition, commentators suggest that the advertising exception in § 1.199-3(i)(5) should be extended to include online software. The final regulations do not adopt these suggestions. As previously noted, the online software exceptions have been narrowly tailored and the IRS and Treasury Department do not believe the exceptions should be extended beyond gross receipts derived from providing customers access to computer software for the customers' direct use. Therefore, the final regulations do not extend the exception for qualified computer software maintenance agreements in § 1.199-3(i)(4)(i)(B)( *5* ) or the advertising exception in § 1.199-3(i)(5) to online software. The final regulations in § 1.199-3(i)(5)(ii)(B) do, however, extend the advertising exception to computer software that is provided to customers either affixed to a tangible medium (for example, a disk or DVD) or by allowing them to download the computer software from the Internet. However, the advertising exception only applies to advertising placed or integrated into software that is either affixed to a tangible medium or provided through download and does not apply to advertising incorporated into online software. In addition, the IRS and Treasury Department have clarified that, except as otherwise provided in § 1.199-3(i)(5)(ii), gross receipts derived from the lease, rental, license, sale, exchange, or other disposition of QPP, a qualified film, or utilities do not include advertising income or product-placement income. A commentator expressed concern that the exception for qualified computer software maintenance agreements in § 1.199-3(i)(4)(i)(B)( *5* ) does not apply if the taxpayer separately offers maintenance in subsequent years. The mere fact that a taxpayer separately offers maintenance in subsequent years does not preclude eligibility for the exception. A commentator interpreted the rule in § 1.199-3T(i)(6)(iii)(E) as possibly treating gross receipts derived from the lease, rental, license, sale, exchange, or other disposition of future updates, cyclical releases, and rewrites of the underlying software as non-DPGR if the underlying software is online software. The rule in § 1.199-3T(i)(6)(iii)(E) only provides that the qualified computer software maintenance agreement exception does not apply to online software. Therefore, to the extent a taxpayer providing online software derives gross receipts from the lease, rental, license, sale, exchange, or other disposition of future updates, cyclical releases, and rewrites of the underlying software, the gross receipts are DPGR assuming all the other requirements of § 1.199-3 are met. A commentator noted that Example 6 in the temporary regulations concludes that the gross receipts derived from storage of customers' data and telephone support are non-DPGR. Example 6 is silent as to the amount of gross receipts derived from the storage of customers' data and telephone support and does not address whether the de minimis exception in § 1.199-3(i)(4)(i)(B)( *6* ) is available. Numerous examples in the final regulations under section 199 also conclude that gross receipts are non-DPGR without reference to the de minimis exception in § 1.199-3(i)(4)(i)(B)( *6* ). However, assuming all the requirements are met, the *de minimis* exception in § 1.199-3(i)(4)(i)(B)( *6* ) can apply when an example concludes the gross receipts are non-DPGR. The IRS and Treasury Department received a comment letter on the application of section 199 to agricultural and horticultural cooperatives under § 1.199-6 of the final regulations (71 FR 31312) published on June 1, 2006. The commentator noted that the sentence in § 1.199-6(h) stating that the cooperative may not apply section 199(d)(3) and § 1.199-6 to any portion of the section 199 deduction that is not passed through to its patrons is inconsistent with section 199(d)(3) which has no such limitation. These final regulations amend § 1.199-6(h) to remove the sentence. In addition, consistent with the change to § 1.199-6(h), these final regulations amend § 1.199-6(l) to remove the phrase, “To the extent a cooperative passes through the section 199 deduction to a patron” and add the phrase, “by the patron.” The final regulations also amend § 1.199-6(c) to clarify that a cooperative's QPAI is computed without taking into account any deduction allowable under section 1382(b) or
(c)(relating to patronage dividends, per-unit retain allocations, and nonpatronage distributions). Effective Date Section 199 applies to taxable years beginning after December 31, 2004. These final regulations are applicable for taxable years beginning on or after March 20, 2007. In addition, § 1.199-8(i)(1) provides that, in certain circumstances, a taxpayer may rely on the guidance in Notice 2005-14 (2005-7 IRB 498), see § 601.602(d)(2), the proposed regulations under section 199 that were published in the **Federal Register** on November 4, 2005 (70 FR 67220), or the final regulations under section 199 that were published in the **Federal Register** on June 1, 2006 (71 FR 31268). Regardless of which guidance a taxpayer applies, the taxpayer may apply these final regulations to taxable years beginning after December 31, 2004, and before March 20, 2007. Special Analyses It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Drafting Information The principal authors of these regulations are Paul Handleman and Lauren Ross Taylor, Office of the Associate Chief Counsel (Passthroughs and Special Industries), IRS. However, other personnel from the IRS and Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 1.199-0 is amended by: 1. Revising the entries for §§ 1.199-3(i)(5)(i) and (ii), 1.199-3(i)(6)(ii) through (v), 1.199-6(c), and 1.199-8(i)(4). 2. Adding a new entry for § 1.199-8(i)(7). The revisions and addition read as follows: § 1.199-0 Table of contents. § 1.199-3 Domestic production gross receipts.
(i)* * *
(5)* * *
(i)In general.
(ii)Exceptions.
(A)Tangible personal property.
(B)Computer software.
(C)Qualified film.
(6)* * *
(ii)Gross receipts derived from services.
(iii)Exceptions.
(iv)Definitions and special rules.
(A)Substantially identical software.
(B)Safe harbor for computer software games.
(C)Regular and ongoing basis.
(D)Attribution.
(E)Qualified computer software maintenance agreements.
(F)Advertising income and product-placement income.
(v)Examples. § 1.199-6 Agricultural and horticultural cooperatives.
(c)Determining cooperative's qualified production activities income and taxable income. § 1.199-8 Other rules.
(i)* * *
(4)Computer software.
(7)Agricultural and horticultural cooperatives. **Par. 3.** Section 1.199-3 is amended by: 1. Revising paragraphs (i)(5)(i) and (i)(5)(ii). 2. Removing the language “(i)(5)(ii)” each place it appears in paragraph (i)(5)(iii) and adding the language “(i)(5)(ii)(C)” in its place. 3. Revising paragraphs (i)(6)(ii), (i)(6)(iii), (i)(6)(iv), and (i)(6)(v). The revisions read as follows: § 1.199-3 Domestic production gross receipts.
(i)* * *
(5)* * *
(i)*In general.* Except as provided in paragraph (i)(5)(ii) of this section, gross receipts derived from the lease, rental, license, sale, exchange, or other disposition of QPP, a qualified film, or utilities do not include advertising income and product-placement income.
(ii)*Exceptions* —(A) *Tangible personal property.* A taxpayer's gross receipts that are derived from the lease, rental, license, sale, exchange, or other disposition of newspapers, magazines, telephone directories, periodicals, and other similar printed publications that are MPGE in whole or in significant part within the United States include advertising income from advertisements placed in those media, but only if the gross receipts, if any, derived from the lease, rental, license, sale, exchange, or other disposition of the newspapers, magazines, telephone directories, or periodicals are (or would be) DPGR.
(B)*Computer software.* A taxpayer's gross receipts that are derived from the lease, rental, license, sale, exchange, or other disposition of computer software that is MPGE in whole or in significant part within the United States include advertising income and product-placement income with respect to that computer software, but only if the gross receipts, if any, derived from the lease, rental, license, sale, exchange, or other disposition of computer software are (or would be) DPGR. For this purpose, advertising income and product-placement income mean compensation for placing or integrating advertising or a product into the computer software. This paragraph (i)(5)(ii)(B) does not extend to the exceptions provided in paragraph (i)(6)(iii) of this section. See paragraph (i)(6)(iv)(F) of this section.
(C)*Qualified film.* A taxpayer's gross receipts that are derived from the lease, rental, license, sale, exchange, or other disposition of a qualified film include advertising income and product-placement income with respect to that qualified film, but only if the gross receipts, if any, derived from the lease, rental, license, sale, exchange, or other disposition of a qualified film are (or would be) DPGR. For this purpose, advertising income and product-placement income mean compensation for placing or integrating advertising or a product into the qualified film.
(6)* * *
(ii)*Gross receipts derived from services.* Gross receipts derived from customer and technical support, telephone and other telecommunication services, online services (such as Internet access services, online banking services, providing access to online electronic books, newspapers, and journals), and other similar services do not constitute gross receipts derived from a lease, rental, license, sale, exchange, or other disposition of computer software.
(iii)*Exceptions.* Notwithstanding paragraph (i)(6)(ii) of this section, if a taxpayer derives gross receipts from providing customers access to computer software MPGE in whole or in significant part by the taxpayer within the United States for the customers' direct use while connected to the Internet or any other public or private communications network (online software), then such gross receipts will be treated as being derived from the lease, rental, license, sale, exchange, or other disposition of computer software only if—
(A)The taxpayer also derives, on a regular and ongoing basis in the taxpayer's business, gross receipts from the lease, rental, license, sale, exchange, or other disposition to customers that are not related persons (as defined in paragraph (b)(1) of this section) of computer software that— ( *1* ) Has only minor or immaterial differences from the online software; ( *2* ) Has been MPGE by the taxpayer in whole or in significant part within the United States; and ( *3* ) Has been provided to such customers either affixed to a tangible medium (for example, a disk or DVD) or by allowing them to download the computer software from the Internet; or
(B)Another person derives, on a regular and ongoing basis in its business, gross receipts from the lease, rental, license, sale, exchange, or other disposition of substantially identical software (as described in paragraph (i)(6)(iv)(A) of this section) (as compared to the taxpayer's online software) to its customers pursuant to an activity described in paragraph (i)(6)(iii)(A)( *3* ) of this section.
(iv)*Definitions and special rules* —(A) *Substantially identical software.* For purposes of paragraph (i)(6)(iii)(B) of this section, *substantially identical software* is computer software that— ( *1* ) From a customer's perspective, has the same functional result as the online software described in paragraph (i)(6)(iii) of this section; and ( *2* ) Has a significant overlap of features or purpose with the online software described in paragraph (i)(6)(iii) of this section.
(B)*Safe harbor for computer software games.* For purposes of paragraph (i)(6)(iv)(A) of this section, all computer software games are deemed to be substantially identical software. For example, computer software sports games are deemed to be substantially identical to computer software card games.
(C)*Regular and ongoing basis.* For purposes of paragraph (i)(6)(iii) of this section, in the case of a newly-formed trade or business or a taxpayer in its first taxable year, the taxpayer is considered to be engaged in an activity described in paragraph (i)(6)(iii) of this section on a regular and ongoing basis if the taxpayer reasonably expects that it will engage in the activity on a regular and ongoing basis.
(D)*Attribution.* For purposes of paragraph (i)(6)(iii)(A) of this section— ( *1* ) All members of an expanded affiliated group (as defined in § 1.199-7(a)(1)) are treated as a single taxpayer; and ( *2* ) In the case of an EAG partnership (as defined in § 1.199-3T(i)(8)), the EAG partnership and all members of the EAG to which the EAG partnership's partners belong are treated as a single taxpayer.
(E)*Qualified computer software maintenance agreements.* Paragraph (i)(4)(i)(B)( *5* ) of this section does not apply if the computer software is online software under paragraph (i)(6)(iii) of this section.
(F)*Advertising income and product-placement income.* Paragraph (i)(5)(ii)(B) of this section does not apply if the computer software is online software under paragraph (i)(6)(iii) of this section. If a taxpayer provides a customer with access to online software in conjunction with providing computer software to such customer either affixed to a tangible medium or by download, paragraph (i)(5)(ii)(B) of this section will only apply to compensation for the placement or integration of advertising or a product into the computer software transferred to such customer either affixed to the tangible medium or by download.
(v)*Examples* . The following examples illustrate the application of this paragraph (i)(6): Example 1. L is a bank and produces computer software within the United States that enables its customers to receive online banking services for a fee. Under paragraph (i)(6)(ii) of this section, gross receipts derived from online banking services are attributable to a service and do not constitute gross receipts derived from a lease, rental, license, sale, exchange, or other disposition of computer software. Therefore, L's gross receipts derived from the online banking services are non-DPGR. Example 2. M is an Internet auction company that produces computer software within the United States that enables its customers to participate in Internet auctions for a fee. Under paragraph (i)(6)(ii) of this section, gross receipts derived from online auction services are attributable to a service and do not constitute gross receipts derived from a lease, rental, license, sale, exchange, or other disposition of computer software. M's activities constitute the provision of online services. Therefore, M's gross receipts derived from the Internet auction services are non-DPGR. Example 3. N provides telephone services, voicemail services, and e-mail services. N produces computer software within the United States that runs all of these services. Under paragraph (i)(6)(ii) of this section, gross receipts derived from telephone and related telecommunication services are attributable to a service and do not constitute gross receipts derived from a lease, rental, license, sale, exchange, or other disposition of computer software. Therefore, N's gross receipts derived from the telephone and other telecommunication services are non-DPGR. Example 4. O produces tax preparation computer software within the United States. O derives, on a regular and ongoing basis in its business, gross receipts from both the sale to customers that are unrelated persons of O's computer software that has been affixed to a compact disc as well as from the sale to customers of O's computer software that customers have downloaded from the Internet. O also derives gross receipts from providing customers access to the computer software for the customers' direct use while connected to the Internet. The computer software sold on compact disc or by download has only minor or immaterial differences from the online software, and O does not provide any other goods or services in connection with the online software. Under paragraph (i)(6)(iii)(A) of this section, O's gross receipts derived from providing access to the online software will be treated as derived from the lease, rental, license, sale, exchange, or other disposition of computer software and are DPGR (assuming all the other requirements of this section are met). Example 5. The facts are the same as in *Example 4,* except that O does not sell the tax preparation computer software to customers affixed to a compact disc or by download. In addition, one of O's competitors, P, derives, on a regular and ongoing basis in its business, gross receipts from the sale to customers of P's substantially identical tax preparation computer software that has been affixed to a compact disc as well as from the sale to customers of P's substantially identical tax preparation computer software that customers have downloaded from the Internet. Under paragraph (i)(6)(iii)(B) of this section, O's gross receipts derived from providing access to its tax preparation online software will be treated as derived from the lease, rental, license, sale, exchange, or other disposition of computer software and are DPGR (assuming all the other requirements of this section are met). Example 6. Q produces payroll management computer software within the United States. For a fee, Q provides customers access to the payroll management computer software for the customers' direct use while connected to the Internet. This is Q's sole method of providing access to its payroll management computer software to customers. In conjunction with the payroll management computer software, Q provides storage of customers' data and telephone support. One of Q's competitors, R, derives, on a regular and ongoing basis in its business, gross receipts from the sale to customers of R's substantially identical payroll management software that has been affixed to a compact disc as well as from the sale to customers of R's substantially identical payroll management software that customers have downloaded from the Internet. Under paragraph (i)(6)(iii)(B) of this section, Q's gross receipts derived from providing access to its payroll management online software will be treated as derived from the lease, rental, license, sale, exchange, or other disposition of computer software and are DPGR (assuming all the other requirements of this section are met). However, Q's gross receipts derived from the fees that are properly allocable to the storage of customers' data and telephone support are non-DPGR. Example 7. The facts are the same as in *Example 6,* except that R produces inventory computer software, not payroll management computer software. R's inventory computer software is not substantially identical software as defined in paragraph (i)(6)(iv)(A) of this section because R's inventory software, from a customer's perspective, does not have the same functional result as Q's payroll management computer software and does not have significant overlap of features or purpose with Q's payroll management computer software. No other person provides substantially identical software to customers affixed to a compact disc or by download. Under paragraph (i)(6)(ii) of this section, gross receipts derived from providing access to Q's payroll online software do not constitute gross receipts derived from a lease, rental, license, sale, exchange or other disposition of payroll computer software. Therefore, Q's gross receipts derived from the payroll management computer software are non-DPGR. Example 8. S produces computer software games within the United States. S derives, on a regular and ongoing basis in its business, gross receipts from both the sale to customers that are not related to S of S's computer software games that have been affixed to a compact disc as well as from the sale to customers of S's computer software games that customers have downloaded from the Internet. S also derives gross receipts from providing customers access to the computer software games for the customers' direct use while connected to the Internet (online software games). The computer software games sold on compact disc or by download have only minor or immaterial differences from the online software games, and S does not provide any other goods or services in connection with the online software games. Under paragraph (i)(6)(iii)(A) of this section, S's gross receipts derived from providing customers access to its online software games will be treated as derived from the lease, rental, license, sale, exchange, or other disposition of computer software and are DPGR (assuming all the other requirements of this section are met). Example 9. The facts are the same as in *Example 8* , except S's gross receipts also include advertising income from integrating advertisers' logos into the computer software games. Under paragraph (i)(5)(ii)(B) of this section, for S's computer software games sold affixed to a compact disc or by download, S's advertising income is treated as gross receipts derived from the sale of the computer software games and, therefore, is DPGR (assuming all the other requirements of this section are met). However, under paragraphs (i)(5)(i) and (i)(6)(iv)(F) of this section, for S's online software games, S's advertising income is not derived from the lease, rental, license, sale, exchange, or other disposition of computer software and, therefore, is non-DPGR. **Par. 4.** Section 1.199-3T is amended by revising paragraphs (i)(1), (i)(2), (i)(3), (i)(4), (i)(5), and (i)(6) to read as follows: § 1.199-3T Domestic production gross receipts (temporary).
(i)*Derived from the lease, rental, license, sale, exchange or other disposition.*
(1)through
(6)[Reserved]. For further guidance, see § 1.199-3(i)(1) through (6). **Par. 5.** Section 1.199-6 is amended by: 1. Revising paragraphs
(c)and (l). 2. Removing the language “qualified production activities income
(QPAI)(as defined in § 1.199-1(c))” from paragraph
(e)and adding “QPAI” in its place. 3. Removing the language “However, the cooperative may not apply section 199(d)(3) and this section to any portion of the section 199 deduction that is not passed through to its patrons.” from paragraph (h). The revisions read as follows: § 1.199-6 Agricultural and horticultural cooperatives.
(c)*Determining cooperative's qualified production activities income and taxable income.* For purposes of determining its section 199 deduction, the cooperative's qualified production activities income
(QPAI)(as defined in § 1.199-1(c)) and taxable income are computed without taking into account any deduction allowable under section 1382(b) or
(c)(relating to patronage dividends, per-unit retain allocations, and nonpatronage distributions).
(l)*No double counting.* A qualified payment received by a patron of a cooperative is not taken into account by the patron for purposes of section 199. **Par. 6.** Section 1.199-8 is amended by: 1. Revising paragraph (i)(4). 2. Adding new paragraph (i)(7). The revision and addition read as follows: § 1.199-8 Other rules.
(i)* * *
(4)*Computer software.* Section 1.199-3(i)(5)(ii)(B) and (i)(6)(ii) through
(v)are applicable for taxable years beginning on or after March 20, 2007. A taxpayer may apply § 1.199-3(i)(5)(ii)(B) and (i)(6)(ii) through
(v)to taxable years beginning after December 31, 2004, and before March 20, 2007.
(7)*Agricultural and horticultural cooperatives.* Section 1.199-6(c) is applicable for taxable years beginning on or after March 20, 2007. A taxpayer may apply § 1.199-(6)(c) to taxable years beginning after December 31, 2004, and before March 20, 2007. **Par. 7.** Section 1.199-8T is amended by revising paragraphs (i)(1), (i)(2), (i)(3), and (i)(4) to read as follows: § 1.199-8T Other rules (temporary).
(i)*Effective dates.*
(1)through
(4)[Reserved]. For further guidance, see § 1.199-8(i)(1) through (4). Kevin M. Brown, Deputy Commissioner for Services and Enforcement. Approved: March 14, 2007. Eric Solomon, Assistant Secretary of the Treasury. [FR Doc. 07-1354 Filed 3-19-07; 8:45 am]
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40 references not yet in our index
- 60 Stat. 237
- Pub. L. 89-554
- 80 Stat. 631
- 426 U.S. 88
- 543 F.2d 930
- EO 10577
- 5 CFR 2.1(a)
- 5 CFR 930
- 319 F.3d 1368
- 28 USC 530B(a)
- 28 USC 530B(c)
- 488 U.S. 204
- 5 CFR 330
- 5 CFR 337.101(a)
- 5 CFR 731
- 345 U.S. 128
- 3 CFR 1954
- 116 Stat. 2135
- 117 Stat. 1392
- 5 CFR 335
- 5 CFR 1201
- 10 CFR 490
- Pub. L. 102-486
- Pub. L. 109-58
- 10 CFR 1021
- 5 CFR 1320.1
- Pub. L. 104-4
- Pub. L. 105-277
- 10 CFR 1003
- 14 CFR 39
- 1 CFR 51
- 26 CFR 1
- T.D. 9264
- T.D. 9317
- Pub. L. 108-357
- 118 Stat. 1418
- Pub. L. 109-135
- 119 Stat. 25
- Pub. L. 109-222
- 120 Stat. 345
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SCOTUS426 U.S. 88
F. App'x543 F.2d 930
F. App'x319 F.3d 1368
Cites 88 · showing 12Cited by 0 across 0 sources