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Code · REGISTER · 2007-06-07 · Federal Election Commission · Notices

Notices. Notice of proposed rulemaking

43,798 words·~199 min read·/register/2007/06/07/07-2806

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

BILLING CODE 3510-22-S 72 109 Thursday, June 7, 2007 Proposed Rules FEDERAL ELECTION COMMISSION 11 CFR Part 100 [Notice 2007-14] Federal Election Activity and Non-Federal Elections AGENCY: Federal Election Commission. ACTION: Notice of proposed rulemaking. SUMMARY: The Federal Election Commission requests comments on proposed revisions to the definition of the phrase “in connection with an election in which a candidate for Federal office appears on the ballot.” This phrase is part of the definition of “Federal election activity” (“FEA”) and is used to determine whether voter identification, get-out-the-vote activity, and generic campaign activities are FEA, subject to certain funding limits and prohibitions under the Federal Election Campaign Act of 1971 (“FECA”).
The proposed rule would make permanent, with certain minor revisions, an Interim Final Rule that excluded from FEA certain voter identification and get-out-the-vote activities conducted exclusively for non-Federal elections. Further information is provided in the supplementary information that follows. DATES: Comments must be received on or before July 9, 2007. ADDRESSES: All comments must be in writing, must be addressed to Mr. Ron B. Katwan, Assistant General Counsel, and must be submitted in e-mail, facsimile, or paper copy form.
Commenters are strongly encouraged to submit comments by e-mail or fax to ensure timely receipt and consideration. E-mail comments must be sent to *fea.nonfederal@fec.gov* . If e-mail comments include an attachment, the attachment must be in Adobe Acrobat (.pdf) or Microsoft Word (.doc) format. Faxed comments must be sent to
(202)219-3923, with paper copy follow-up. Paper copy comments and paper copy follow-up of faxed comments must be sent to the Federal Election Commission, 999 E Street, NW., Washington, DC 20463. All comments must include the full name and postal service address of the commenter or they will not be considered. The Commission will post comments on its Web site after the comment period ends. FOR FURTHER INFORMATION CONTACT: Mr. Ron B. Katwan, Assistant General Counsel, or Ms. Margaret G. Perl, Attorney, 999 E Street, NW., Washington, DC 20463,
(202)694-1650 or
(800)424-9530. SUPPLEMENTARY INFORMATION: I. Background The Bipartisan Campaign Reform Act of 2002, Public Law 107-155, 116 Stat. 81
(2002)(“BCRA”), amended FECA by adding a new term, “Federal election activity,” to describe certain activities that State, district, and local party committees must pay for with either Federal funds or a combination of Federal and Levin funds. 1 *See* 2 U.S.C. 431(20) and 441i(b)(1). The FEA requirements apply to all State, district, and local party committees and organizations, regardless of whether they are registered as political committees with the Commission. The term also affects fundraising on behalf of tax-exempt organizations. 2 1 “Federal funds” are funds subject to the limitations, prohibitions, and reporting requirements of the Act. *See* 11 CFR 300.2(g). “Levin funds” are funds raised by State, district, and local party committees pursuant to the restrictions in 11 CFR 300.31 and disbursed subject to the restrictions in 11 CFR 300.32. *See* 11 CFR 300.2(i). 2 National, State, district, and local party committees are prohibited from soliciting or directing non-Federal funds to tax-exempt entities organized under 26 U.S.C. 501(c) that engage in FEA or make other disbursements or expenditures in connection with a Federal election. *See* 2 U.S.C. 441i(d)(1). Also, Federal candidates and officeholders may make only limited solicitations for funds on behalf of tax-exempt entities organized under 26 U.S.C. 501(c) whose principal purpose is to conduct certain types of FEA. *See* 2 U.S.C. 441i(e)(4). A. FEA Statutory and Regulatory Provisions BCRA specifies that voter identification, get-out-the-vote activity (“GOTV activity”), and generic campaign activity (collectively “Type II FEA”) 3 constitute FEA only when these activities are conducted “in connection with an election in which a candidate for Federal office appears on the ballot.” 2 U.S.C. 431(20)(A)(ii). Commission regulations define “in connection with an election in which a candidate for Federal office appears on the ballot” as the period of time beginning on the earliest filing deadline for access to the primary election ballot for Federal candidates in each particular State, and ending on the date of the general election, up to and including any runoff date. *See* 11 CFR 100.24(a)(1)(i). For States that do not hold primary elections, the period begins on January 1 of each even-numbered year. *Id.* For special elections in which Federal candidates are on the ballot, the period begins when the date of the special election is set and ends on the date of the special election. *See* 11 CFR 100.24(a)(1)(ii). 3 Commission regulations specifically define each kind of Type II FEA activity. *See* 11 CFR 100.24(a)(3) (GOTV activity), 100.24(a)(4) (voter identification), 100.25 (generic campaign activity). Certain activities by State, district and local parties are exempt from the definition of FEA by BCRA and Commission regulations. *See* 2 U.S.C. 431(20)(B); 11 CFR 100.24(c). One of these exceptions covers public communications that refer solely to State or local candidates and do not promote, support, attack or oppose a Federal candidate, as long as these communications do not constitute voter registration, voter identification or GOTV activity. *See* 2 U.S.C. 431(20)(B)(i); 11 CFR 100.24(c)(1). Costs of traditional “grassroots campaign materials” such as buttons, bumper stickers, yard signs and posters that name only State or local candidates are also excluded from the definition of FEA. *See* 2 U.S.C. 431(20)(B)(iv); 11 CFR 100.24(c)(4). B. Interim Final Rule for Voter Identification and GOTV Activities Connected to Non-Federal Elections One of the principal sponsors of BCRA described its FEA provisions as “a balanced approach which addresses the very real danger that Federal contribution limits could be evaded by diverting funds to State and local parties,” while “not attempt[ing] to regulate State and local party spending where this danger is not present, and where State and local parties engage in purely non-Federal activities.” 148 Cong. Rec. S2138 (daily ed. Mar. 20, 2002) (statement of Sen. McCain). Because Type II FEA is limited to activities in connection with an election in which a Federal candidate is on the ballot, the Commission interprets the FEA provisions of BCRA as not regulating voter identification and GOTV activities by State, district, and local political party committees and certain other groups that are exclusively in connection with non-Federal elections. Some municipalities, counties, and States conduct entirely separate non-Federal elections in even-numbered years that fall within the Type II FEA time periods based on Federal elections held later that year. 4 The Type II FEA time period in some States begins almost a year before the general election, and the start date of this period is likely to extend even farther back into odd-numbered years as many States move up Presidential primaries into the first few months of the Presidential election year. Thus, the potential also exists for more activity by State, district and local parties connected to non-Federal elections held in odd-numbered years to be swept into the FEA restrictions based on the Type II FEA time periods. 5 The effects of the timing of the Type II FEA time period is compounded by recent revisions to the FEA definitions of “GOTV activity” and “voter identification,” which bring non-partisan associations of local candidates within the FEA funding requirements if their activity targets their local election and occurs within the Type II FEA time period. *See Final Rules on the Definition of Federal Election Activity,* 71 FR 8926, 8931 (Feb. 22, 2006) (“ *2006 FEA Final Rules* ”). 6 4 *See, e.g., http://www.sbe.virginia.gov/cms/documents/06_10Calendar.pdf* (Virginia municipal elections); *http://www.state.tn.us/sos/election/2008%20ElectionScheduleevdatesandreg.pdf* (Tennessee county elections); *http://elections.state.wi.us/docview.asp?docid=2924&locid=47* (Wisconsin county and judicial elections); *http://www.lavote.net/VOTER/PDFS/SCHEDULED_ELECTIONS_2008.pdf* (LA County municipal elections). 5 *See, e.g., http://www.sbe.virginia.gov/cms/documents/06_10Calendar.pdf* (Virginia state-wide election); *http://elect.ky.gov/NR/rdonlyres/F98ADBAA-79E2-4D25-AA35-A85ABB921BEC/0/electionschedule.pdf* (Kentucky state-wide officer election); *http://vote.nyc.ny.us/electioncalendar.html* (New York City election); *http://www.usmayors.org/uscm/elections/electioncitiesfall2007.pdf* (various municipal elections). 6 The district court ruling in *Shays* v. *FEC,* 337 F. Supp. 2d 28 (D.D.C. 2004), *aff'd,* 414 F.3d 76 (D.C. Cir. 2005), required certain changes to the rules defining GOTV activity and voter identification activity at 11 CFR 100.24(a)(3) and (a)(4). In light of these considerations, the Commission published an Interim Final Rule on March 22, 2006 refining the definition of “in connection with an election in which a candidate for Federal office appears on the ballot” to specify when activities and communications are in connection with a *non-Federal* election, instead of a Federal election, and are therefore not Type II FEA. *See Interim Final Rule Regarding Definition of Federal Election Activity,* 71 FR 14357 (Mar. 22, 2006) (“ *Interim Final Rule* ”). 7 The Interim Final Rule added new paragraph (a)(1)(iii) to 11 CFR 100.24 to “ensure[] that the FEA requirements do not extend to activities that are solely in connection with these upcoming non-Federal elections and are therefore beyond the scope of FECA.” *See Interim Final Rule,* 71 FR at 14357. New section 100.24(a)(1)(iii) exempts “any activity or communication that is in connection with a non-Federal election that is held on a date separate from a date of any Federal election” and that refers exclusively to:
(1)Non-Federal candidates participating in the non-Federal election, provided the non-Federal candidates are not also Federal candidates;
(2)ballot referenda or initiatives scheduled for the date of the non-Federal election; or
(3)the date, polling hours and locations of the non-Federal election. *See* 11 CFR 100.24(a)(1)(iii)(A)(1)-(3); *Interim Final Rule,* 71 FR at 14359-60. 7 A proposed exception to the Type II FEA time periods for activity in the time period leading up to a municipal election was included in the proposed rules but was not adopted. *See Notice of Proposed Rulemaking on the Definition of Federal Election Activity,* 70 FR 23068, 23071-72 (May 4, 2005). This rule was promulgated as an Interim Final Rule and expires on September 1, 2007. *See* 11 CFR 100.24(a)(1)(iii)(B); *Interim Final Rule* , 71 FR at 14358. The Commission sought public comment on the Interim Final Rule, and received two comments. The comments are available at *http://www.fec.gov/law/law_rulemakings.shtml* under the heading “Definition of Federal Election Activity.” II. Proposed Revisions to 11 CFR 100.24(a)(1)—Type II FEA Time Periods The proposed rule would make permanent section 100.24(a)(1)(iii) as added by the Interim Final Rule (with some stylistic and technical changes explained below). The Commission seeks public comment on whether non-Federal candidates and State, district or local party committees conducted voter identification and GOTV activities under the exemption in the Interim Final Rule in the 2006 election cycle, and invites commenters to suggest modifications of the proposed rule based on their experience, if any, with the Interim Final Rule. Would such a rule exclude “purely non-Federal” voter identification and GOTV activities by State, district and local committees? Would such a rule be consistent with Congressional intent? A. Proposed 11 CFR 100.24(a)(1)(iii)—Activities Solely in Connection With Certain Non-Federal Elections First, the proposed rule provides that voter identification or GOTV activities that are “ *solely* in connection with a non-Federal election held on a date separate from any Federal election” are exempt from Type II FEA. *See* proposed 11 CFR 100.24(a)(1)(iii) (emphasis added). For example, a GOTV program offering to transport voters to the polls on the day of an exclusively non-Federal election would be eligible for the proposed exemption. However, a voter identification program collecting information both about voters' preferences in a non-Federal election in March and a Federal primary election in April would not qualify. Thus, the proposed rule would not exclude all activities by State, district and local parties in the weeks (or months) between the start of the Type II FEA time period and a non-Federal election. The Commission seeks comment on this approach. In addition, the proposed rule would only apply if the non-Federal election were held on a wholly separate date from any Federal election. *See* proposed 11 CFR 100.24(a)(1)(iii). This proposed rule is based on the premise that this voter identification and GOTV activity for non-Federal elections held on a different date from any Federal election will have no effect on previous or subsequent Federal elections. The Commission intends the proposed exemption to be narrowly tailored and not to apply to activities that are also in connection with a Federal election. 8 For example, if a GOTV communication provides the date of a non-Federal election and offers transportation to voters for such a non-Federal election, is it likely that such activity would have any effect on voter turnout for a Federal election held on a separate, and perhaps much later, date? The Commission seeks comments, especially in the form of empirical data, on whether voter identification and GOTV efforts in connection with a non-Federal election have a measurable effect on voter turnout in a subsequent Federal election, or otherwise confer benefits on Federal candidates. Are there any relevant data from the 2006 elections to indicate whether activities conducted under the interim rule had any effect on turnout in 2006 Federal elections? 8 The Interim Final Rule did not include the word “solely,” but explained that “[a]ny activity that is also in connection with a Federal election renders the interim final rule inapplicable.” *Interim Final Rule,* 71 FR at 14359-60. Should the exemption take into account the proximity of the next Federal election? For example, should the rule distinguish between situations where the next Federal election is only six days later, as opposed to six months? The proposed exemption would not extend to any activities conducted in connection with a non-Federal election held on the same date as a Federal election, even if the activity does not refer to any Federal candidates. Are there certain conditions under which an activity in connection with a non-Federal election held on the same date as a Federal election should also be exempted from the Type II FEA time periods? For example, should the proposed rule apply if both elections were held at the same polling sites but used separate ballots? B. Proposed 11 CFR 100.24(a)(1)(iii)(A)-(C)—Content of Voter Identification and GOTV Communications The final requirement to be eligible for the proposed exemption is that the voter identification or GOTV activity must involve a communication that refers exclusively to one or more of the following:
(1)The non-Federal candidates on the non-Federal election ballot who are not also Federal candidates;
(2)ballot initiatives or referenda included in the non-Federal election; or
(3)the date, times, or polling locations of the non-Federal election. 9 *See* proposed 11 CFR 100.24(a)(1)(iii)(A)-(C). This proposed requirement implements proposed section 100.24(a)(1)(iii)'s general restriction that the voter identification or GOTV activity be solely in connection with the non-Federal election. The proposed rule's formulation is also consistent with statutory exclusions from the definition of FEA that are limited to certain types of activity that refer only to State or local candidates, as discussed above. *See* 2 U.S.C. 431(20)(B)(i) and (iv); 11 CFR 100.24(c)(1) and (4). Should the ballot initiative prong be limited to ballot issues that have no impact on Federal elections? 9 Under Commission regulations, “voter identification” activity includes “acquiring information about potential voters” and creating or modifying voter lists with information regarding “voters' likelihood of voting in an upcoming election or their likelihood of voting for specific candidates.” *See* 11 CFR 100.24(a)(4). GOTV activity includes contacting voters “to assist them in engaging in the act of voting,” such as providing information about date, times and locations of polling places and offering transport to polling places. *See* 11 CFR 100.24(a)(3). The Commission seeks comments on whether this proposed list of subjects in proposed section 100.24(a)(1)(iii)(A) through
(C)should be expanded or narrowed. Should the Commission require that communications include a reference to the date of the non-Federal election for the proposed exemption to apply? Should the exception be expanded to include communications discussing specific issues that are exclusively a state or local concern? Should “the date, polling hours, or polling locations of the non-Federal election” be defined to include absentee ballot or vote-by-mail information? With respect to candidate references, the proposed rule would specify that if a non-Federal candidate is also seeking Federal office and satisfies FECA's definition of “candidate,” then the proposed exemption would not apply. *See* proposed 11 CFR 100.24(a)(1)(iii)(A). The proposed rule would apply to communications containing specific references to non-Federal candidates by name, nickname, photograph or other likeness, as well as to general references to non-Federal candidates by party. For example, assuming that the non-Federal election is held on a date separate from a Federal election, a GOTV phone bank that urges voters to vote for “Smith for Mayor” and that also refers to “the great Democratic team” would qualify under the proposed rule. The proposed exemption would also apply to a communication that otherwise meets the definition of GOTV 10 if such a communication also includes language such as “Vote Republican on May 5” even though no individual non-Federal candidate is mentioned by name, because it refers exclusively to non-Federal candidates on the ballot on the date of the non-Federal election. The Commission seeks comment on this approach. Moreover, should the exception be limited to cover only references to clearly identified non-Federal candidates? 10 *See* 11 CFR 100.24(a)(3) (2006); *Final Rule: Definition of Federal Election Activity,* 71 FR 8926 (Feb. 22, 2006); Advisory Opinion 2006-19 (Los Angeles County Democratic Party Central Committee). With regard to references to the date or the polling hours or the polling locations of the non-Federal election, this proposed rule would revise the Interim Final Rule to clarify that it is not necessary to include all three categories of information in order to qualify for the proposed exemption. For example, a GOTV communication that refers only the date of the non-Federal election without any information regarding polling hours or locations would satisfy this proposed requirement. The Commission seeks comment on this approach. C. Type II FEA Activity Included in Proposed Rule As discussed above, three kinds of activity are governed by the Type II FEA time periods in 11 CFR 100.24(a)(1): voter identification, GOTV, and generic campaign activity. *See* 2 U.S.C. 431(20)(A)(ii). The proposed rule would only apply to voter identification and GOTV activity in connection with non-Federal elections. *See* proposed 11 CFR 100.24(a)(1)(iii). The Commission seeks comment on this approach. These types of activities, such as identifying voter preferences for updating a voter list or phone calls reminding voters to vote for a particular candidate on Election Day, are usually for the purpose of promoting specific candidates and can be conducted solely in connection with a non-Federal election. The proposed rule does not exempt generic campaign activity. Generic campaign activity is defined as “a public communication that promotes or opposes a political party and does not promote or oppose a clearly identified Federal candidate or a non-Federal candidate.” *See* 2 U.S.C. 431(21); 11 CFR 100.25. For example, “Vote for the Democrats on May 4th” could constitute generic campaign activity under this definition. The Commission notes that some generic campaign activity could be presumed to be in connection with both Federal and non-Federal elections. Should the Commission include generic campaign activity in the final rule? How could the Commission draft such a rule to ensure that only generic campaign activity affecting (and made solely in connection with) non-Federal elections is exempted? Does the inclusion of the phrase “on May 4th” in the above example serve to ensure that the communication will affect only the election held on May 4th? Alternatively, should generic campaign activity be excluded from the final rule? Although voter identification is included in the proposed rule, initial acquisition or purchase of voter lists generally would not meet the requirements of the proposed rule because most State, district and local party committees and organizations will acquire voter lists for use in connection with more than one election. However, if a State, district, or local party committee or organization were able to show that it acquired a voter list to conduct GOTV activities and/or voter identification solely for a non-Federal election held on a date separate from any Federal election, acquisition of the voter list could meet the requirements of the proposed rule. 11 11 State, district and local party committees would also have to use the voter list for a communication that refers exclusively to one or more of the three topics listed in proposed section 100.24(a)(1)(iii)
(A)through (C), as discussed above. To qualify for the proposed exemption, the voter list must be the closest available to the list of eligible voters in the qualifying non-Federal election. For example, a county-wide voter list may not be the closest matching voter list for some non-Federal elections ( *e.g.* , a municipal election), unless there were no more specific list available. Choosing a list of voters that goes beyond the voters participating in a municipal election would demonstrate that the voter identification program is not exclusively in connection with the municipal election. Accordingly, the costs of such a voter list would be treated as FEA. Are there situations in which this conclusion would not be warranted? For example, if the smaller voter list were significantly more expensive than the larger list, should acquisition of the larger list be permitted? Similarly, if a list is acquired and used for a non-Federal election, but is then also used for any activity in connection with a subsequent Federal election, or for a non-Federal election held on the same date as a Federal election, the acquisition of the list would not meet the requirements of the proposed rule and the cost of the voter list would be treated as FEA. Should the party organization be permitted to allocate the cost of the list in proportion to its use in connection with non-Federal and Federal elections? The Commission seeks comment on this approach to voter list acquisition under the proposed rule. Is it feasible for State, district and local parties to show that the acquisition of a voter list was solely in connection with a non-Federal election by tracking when a certain voter list is “used” in connection with certain elections? Section 100.24(a)(4) states that the date the list was purchased governs whether the costs of the voter list must be treated as FEA, regardless of the party's use of that list. However, the proposed exemption for voter identification would depend upon when and how the party uses a voter list. Is the proposed rule's approach to voter list acquisition inconsistent with the general definition of “voter identification?” How should the Commission apply the proposed rule to other types of voter identification activities, such as updating a voter list with revised contact information or voter preferences? Should a State, district or local party that expends time and resources to update and add voter information to a list in connection with a non-Federal election be barred from using updated information in subsequent Federal elections, or would the costs be allocated if the list is used in a subsequent Federal election? As an alternative, should the Commission eliminate voter list acquisition and maintenance, *i.e.* voter identification, from the proposed exemption? D. Allocating the Costs for Activity Under the Proposed Exemption Although voter identification and GOTV activities meeting the requirements of the proposed rule would not be considered FEA, a State, district or local party committee may be required to pay the costs of those activities using a ratio of Federal and non-Federal funds under the Commission's existing allocation rules at 11 CFR 106.7. State, district or local party committees that conduct activities in connection with non-Federal elections, but do not conduct any activity in connection with Federal elections, are not subject to the allocation rules in section 106.7. *See* 11 CFR 106.7(b). Under the proposed rule and section 106.7, those organizations may continue to pay for the activities described in the proposed rule entirely with non-Federal funds. However, State, district, and local political party committees that make expenditures and disbursements in connection with both Federal and non-Federal elections during an election cycle are required to use an allocable mix of Federal and non-Federal funds to pay for certain expenses that are not FEA pursuant to 11 CFR 100.24. See 11 CFR 106.7(b) and (c). 12 12 Pursuant to 11 CFR 106.7(b), political party organizations that are not political committees under FECA may establish separate Federal and non-Federal accounts or use a “reasonable accounting method approved by the Commission” to allocate their voter drive expenses between Federal and non-Federal funds. As an alternative to allocating expenses, party committees may pay allocable expenses entirely with Federal funds. See 11 CFR 106.7(b) Section 106.7(c) lists five categories of costs which must be allocated between Federal and non-Federal funds according to specific ratios:
(1)Certain salaries and wages;
(2)administrative costs;
(3)exempt party activities that are not FEA (such as slate cards and sample ballots);
(4)certain fundraising costs; and
(5)certain voter drive activities that are not FEA or party exempt activities. Some voter identification and GOTV activities that are eligible for the proposed exemption may also qualify as allocable voter drive activities under section 106.7(c)(5). Section 106.7(c)(5) requires allocation of certain voter identification, voter registration, GOTV activities, and any other activities that urge the general public to register or vote, or that promote or oppose a political party without promoting or opposing a Federal or non-Federal candidate. Thus, for example, a GOTV communication that exclusively refers to the date and polling location for a non-Federal election held on a date separate from any Federal election would be eligible for the proposed exemption under proposed section 100.24(a)(1)(iii)(C). This GOTV communication would, however, also be considered voter drive activity subject to allocation under section 106.7(c)(5) because it is not FEA or exempt party activity and it encourages the general public to vote without promoting or opposing any Federal or non-Federal candidates. Thus, even under the proposed rule, use of non-Federal funds would be limited for those voter identification and GOTV activities that are conducted “solely in connection with a non-Federal election,” but also qualify as allocable voter drive activity. The Commission seeks comment on this application of the allocation rules to activities eligible for the proposed exemption. Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory Flexibility Act) The Commission certifies that the attached proposed rule, if adopted, will not have a significant economic impact on a substantial number of small entities. The basis for this certification is that the organizations affected by this proposed rule are State, district, and local political party committees, which are not “small entities” under 5 U.S.C. 601. These not-for-profit committees do not meet the definition of “small organization,” which requires that the enterprise be independently owned and operated and not dominant in its field. 5 U.S.C. 601(4). State political party committees are not independently owned and operated because they are not financed and controlled by a small identifiable group of individuals, and they are affiliated with the larger national political party organizations. In addition, the State political party committees representing the Democratic and Republican parties have a major controlling influence within the political arena of their State and are thus dominant in their field. District and local party committees are generally considered affiliated with the State committees and need not be considered separately. To the extent that any State party committees representing minor political parties might be considered “small organizations,” the number affected by this proposed rule is not substantial. Finally, the proposed rule would operate to relieve funding restrictions, which reduces the economic impact on any affected entities. List of Subjects in 11 CFR Part 100 Elections. For the reasons set out in the preamble, the Federal Election Commission proposes to amend Subchapter A of Chapter 1 of Title 11 of the *Code of Federal Regulations* as follows: PART 100—SCOPE AND DEFINITIONS (2 U.S.C. 431) 1. The authority citation for 11 CFR part 100 would continue to read as follows: Authority: 2 U.S.C. 431, 434, and 438(a)(8). 2. In § 100.24, paragraph (a)(1)(iii) would be revised to read as follows: § 100.24 Federal Election Activity (2 U.S.C. 431(20)).
(a)* * *
(1)* * *
(iii)Notwithstanding paragraphs (a)(1)(i) and
(ii)of this section, in connection with an election in which a candidate for Federal office appears on the ballot does not include any voter identification or get-out-the-vote activity that is solely in connection with a non-Federal election held on a date separate from any Federal election, and that involves a communication that refers exclusively to:
(A)Non-Federal candidates participating in the non-Federal election, provided the non-Federal candidates are not also Federal candidates;
(B)Ballot referenda or initiatives scheduled for the date of the non-Federal election; or
(C)The date, polling hours or polling locations of the non-Federal election. Dated: June 1, 2007. Robert D. Lenhard, Chairman, Federal Election Commission. [FR Doc. E7-10994 Filed 6-6-07; 8:45 am] BILLING CODE 6715-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2007-28134; Airspace Docket No. 07-ASW-1] RIN 2120-AA66 Proposed Revision of Jet Routes J-29 and J-101; South Central United States AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). SUMMARY: This action proposes to revise Jet Routes J-29 and J-101 over the South Central United States in support of the Houston Area Air Traffic System Project. These actions would allow for more effective utilization of airspace and would enhance the management of aircraft operations over the Houston terminal area. DATES: Comments must be received on or before July 23, 2007. ADDRESSES: Send comments on this proposal to the Docket Management System, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590; telephone:
(202)366-9826. You must identify FAA Docket No. FAA-2007-28134 and Airspace Docket No. 07-ASW-1, at the beginning of your comments. You may also submit comments through the Internet at *http://dms.dot.gov.* FOR FURTHER INFORMATION CONTACT: Steve Rohring, Airspace and Rules Group, Office of System Operations Airspace and AIM, Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591; telephone:
(202)267-8783. SUPPLEMENTARY INFORMATION: Comments Invited Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers (FAA Docket No. FAA-2007-28134 and Airspace Docket No. 07-ASW-1) and be submitted in triplicate to the Docket Management System (see ADDRESSES section for address and phone number). You may also submit comments through the Internet at *http://dms.dot.gov.* Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2007-28134 and Airspace Docket No. 07-ASW-1.” The postcard will be date/time stamped and returned to the commenter. All communications received on or before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the closing date for comments. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket. Availability of NPRM's An electronic copy of this document may be downloaded through the Internet at *http://dms.dot.gov.* Recently published rulemaking documents can also be accessed through the FAA's web page at *http://www.faa.gov,* or the **Federal Register** 's web page at *http://www.gpoaccess.gov/fr/index.html.* You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Regional Air Traffic Division, Federal Aviation Administration, Central Service Center, 2601 Meacham Blvd. Fort Worth, TX 76137-4298. Persons interested in being placed on a mailing list for future NPRM's should contact the FAA's Office of Rulemaking,
(202)267-9677, for a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure. History As part of the Houston Area Air Traffic System Project, a review of aircraft operations has identified a need to revise the jet route structure over the South Central United States by realigning jet airways J-29 and J-101. The FAA believes this action would allow for more effective utilization of airspace and would enhance the management of aircraft operations over the Houston terminal area. Specifically, the action would segregate departure traffic and facilitate the development of additional departure procedures from the greater Houston terminal area, thereby increasing departure capacity. The Proposal The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 to revise J-29 and J-101 over the South Central United States. Specifically, this action proposes to revise J-29 between the Humble, TX, VORTAC and the El Dorado, AR, VORTAC, and revise J-101 between the Lufkin, TX, VORTAC and Little Rock, AR, VORTAC. This action would allow for more effective utilization of airspace and would enhance the management of aircraft operations over the Houston terminal area. Jet routes are published in paragraph 2004 of FAA Order 7400.9P, dated September 1, 2006 and effective September 15, 2006, which is incorporated by reference in 14 CFR 71.1. The jet routes listed in this document would be published subsequently in the Order. The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation:
(1)Is not a “significant regulatory action” under Executive Order 12866;
(2)is not a “significant rule” under Department of Transportation
(DOT)Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and
(3)does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. Environmental Review This proposal will be subject to the appropriate environmental analysis in accordance with FAA Order 1050.1E, Environmental Impacts: Policies and Procedures, prior to any FAA final regulatory action. List of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). The Proposed Amendment In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows: PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 1. The authority citation for part 71 continues to read as follows: Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389. § 71.1 [Amended] 2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.9P, Airspace Designations and Reporting Points, dated September 1, 2006, and effective September 15, 2006, is amended as follows: Paragraph 2004 Jet Routes. J-29 [Revised] From the INT of the United States/Mexican Border and the Corpus Christi, TX, 229° radial via Corpus Christi; Palacios, TX; Humble, TX; El Dorado, AR; Memphis, TN; Pocket City, IN; INT Pocket City 051° and Rosewood, OH, 230° radials; Rosewood; DRYER, OH; Jamestown, NY; Syracuse, NY; Plattsburgh, NY; Bangor, ME; to Halifax, Canada; excluding the portions within Mexico and Canada. J-101 [Revised] From Humble, TX, Lufkin, TX; Little Rock, AR; St. Louis, MO; Spinner, IL; Pontiac, IL; Joliet, IL; Northbrook, IL; Badger, WI; Green Bay, WI; to Sault Ste Marie, MI. Issued in Washington, DC, on May 29, 2007. Paul Gallant, Acting Manager, Airspace and Rules Group. [FR Doc. E7-11046 Filed 6-6-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-103842-07] RIN 1545-BG33 Qualified Films Under Section 199 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and notice of public hearing. SUMMARY: This document contains proposed amendments to the regulations involving the deduction for income attributable to domestic production activities under section 199. The proposed amendments affect taxpayers who produce qualified films under section 199(c)(4)(A)(i)(II) and (c)(6) and taxpayers who are members of an expanded affiliated group under section 199(d)(4). This document also contains a notice of a public hearing on these proposed regulations. DATES: Written or electronic comments must be received by September 5, 2007. Outlines of topics to be discussed at the public hearing scheduled for October 2, 2007, must be received by September 11, 2007. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-103842-07), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-103842-07), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically, via the Federal eRulemaking Portal at *www.regulations.gov* (IRS-REG-103842-07). The public hearing will be held in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning § 1.199-3(k) of the proposed regulations, David McDonnell, at
(202)622-3040; concerning § 1.199-7 of the proposed regulations, Ken Cohen
(202)622-7790; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Richard Hurst at *Richard.A.Hurst@irscounsel.treas.gov* or
(202)622-7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to §§ 1.199-3(k) and 1.199-7 of the Income Tax Regulations (26 CFR Part 1). Section 1.199-3(k) relates to the definition of qualified film produced by the taxpayer under section 199(c)(4)(A)(i)(II) and (c)(6) of the Internal Revenue Code
(Code)and § 1.199-7 involves expanded affiliated groups under section 199(d)(4). 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), section 514 of the Tax Increase Prevention and Reconciliation Act of 2005 (Public Law 109-222, 120 Stat. 345), and section 401 of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432, 120 Stat. 2922). 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). 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) provides that the term DPGR means the taxpayer's gross receipts that are derived from any lease, rental, license, sale, exchange, or other disposition of
(I)Qualifying production property
(QPP)that was manufactured, produced, grown, or extracted by the taxpayer in whole or in significant part within the United States;
(II)any qualified film produced by the taxpayer; or
(III)electricity, natural gas, or potable water produced by the taxpayer in the United States. Section 199(c)(6) defines a qualified film to mean any property described in section 168(f)(3) if not less than 50 percent of the total compensation relating to production of the property is compensation for services performed in the United States by actors, production personnel, directors, and producers. The term does not include property with respect to which records are required to be maintained under 18 U.S.C. 2257 (generally, films, videotapes, or other matter that depict actual sexually explicit conduct and are produced in whole or in part with materials that have been mailed or shipped in interstate or foreign commerce, or are shipped or transported or are intended for shipment or transportation in interstate or foreign commerce). Section 199(d)(4)(A) provides that all members of an expanded affiliated group
(EAG)are treated as a single corporation for purposes of section 199. Under section 199(d)(4)(B), an EAG is an affiliated group as defined in section 1504(a), determined by substituting “more than 50 percent” for “at least 80 percent” each place it appears and without regard to section 1504(b)(2) and (4). 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). Explanation of Provisions Qualified Film Produced by the Taxpayer On June 1, 2006, final regulations (TD 9263) under section 199 were published in the **Federal Register** (71 FR 31268). Subsequent to the publication of the final regulations, the IRS and Treasury Department became aware that the definition of a qualified film produced by a taxpayer as outlined in the final regulations may not be consistent with the statute. Under section 199(c)(4)(A)(i)(II), a taxpayer's gross receipts qualify as DPGR if the receipts are derived from any lease, rental, license, sale, exchange, or other disposition of any qualified film (as defined in section 199(c)(6)) produced by the taxpayer. A film must be both a “qualified film” under section 199(c)(6) and “produced by the taxpayer” under section 199(c)(4)(A)(i)(II) in order for the gross receipts to qualify as DPGR. Section 1.199-3(k)(5) of the final regulations addresses these two requirements by adding “by the taxpayer” to the not-less-than-50-percent-of-the-total-compensation requirement under § 1.199-3(k)(1). However, under the test provided in § 1.199-3(k)(5) of the final regulations, a film that was produced entirely within the United States could fail to qualify for the section 199 deduction if less than 50 percent of the total compensation relating to production was paid “by the taxpayer.” The proposed regulations more closely follow the statutory language in section 199(c)(6) by revising the fraction in § 1.199-3(k)(5) for determining the not-less-than-50-percent-of-the-total-compensation requirement under § 1.199-3(k)(1). Under the fraction set forth in the proposed regulations, the numerator of the revised fraction is the compensation for services performed in the United States and the denominator is the total compensation for services regardless of where the production activities are performed. The revised fraction essentially compares (in the numerator) the sum of the compensation for services paid by the taxpayer for services performed in the United States and the compensation for services paid by others for services performed in the United States to (in the denominator) the sum of the total compensation for services paid by the taxpayer for services and the total compensation for services paid by others for services regardless of location. The proposed regulations also clarify in § 1.199-8(a) that, for purposes of §§ 1.199-1 through 1.199-9, use of terms such as “payment,” “paid,” “incurred,” or “paid or incurred” is not intended to provide any specific rule based upon the use of one term versus another. In general, the use of the term “payment,” “paid,” “incurred,” or “paid or incurred” is intended to convey the appropriate standard under the taxpayer's method of accounting. Under § 1.199-3(k)(6) of the proposed regulations, a film that is a qualified film under § 1.199-3(k)(1) will be treated as “produced by the taxpayer” for purposes of section 199(c)(4)(A)(i)(II) if the production activity performed by the taxpayer is substantial in nature within the meaning of § 1.199-3(g)(2). The special rules of § 1.199-3(g)(4) regarding a contract with an unrelated person and aggregation apply in determining whether the taxpayer's production activity is substantial in nature. Section 1.199-3(g)(2) and
(4)are applied by substituting the term “qualified film” for QPP and disregarding the requirement that the production activity must be within the United States. Thus, a qualified film will be treated as produced by the taxpayer if the production of the qualified film by the taxpayer is substantial in nature taking into account all of the facts and circumstances, including the relative value added by, and relative cost of, the taxpayer's production activity, the nature of the qualified film, and the nature of the production activity that the taxpayer performs. The rules provided in § 1.199-3(k)(5) of the proposed regulations closely follow the statutory language in section 199(c)(6) by referencing all compensation for services related to the production as opposed to a more limited “by the taxpayer” compensation test. Commentators have expressed concern over the difficulty of obtaining information related to the compensation paid by others. In response to this concern, the IRS and Treasury Department have provided a safe harbor in § 1.199-3(k)(7) of the proposed regulations provides a safe harbor that will treat a film as a qualified film if not less than 50 percent of the total compensation for services paid by the taxpayer is compensation for services performed in the United States. The safe harbor further provides that a qualified film will be treated as produced by the taxpayer if the taxpayer satisfies the safe harbor in § 1.199-3(g)(3) with respect to the qualified film, which requires that the direct labor and overhead costs incurred by the taxpayer to produce the qualified film within the United States account for 20 percent or more of the total costs of the film. Similar to § 1.199-3(k)(6) of the proposed regulations, the special rules of § 1.199-3(g)(4) regarding a contract with an unrelated person and aggregation apply in determining whether the taxpayer satisfies § 1.199-3(g)(3). Section 1.199-3(g)(3) and
(4)are applied by substituting the term “qualified film” for QPP but not disregarding the requirement that the direct labor and overhead of the taxpayer to produce the qualified film must be within the United States. Thus, a taxpayer will be treated as having produced a qualified film if, in connection with the qualified film, the direct labor and overhead of the taxpayer to produce the qualified film within the United States account for 20 percent or more of the taxpayer's CGS of the qualified film, or in a transaction without CGS (for example, a lease, rental, or license) account for 20 percent or more of the taxpayer's “unadjusted depreciable basis” (as defined in § 1.199-3(g)(3)(ii)) in the qualified film. Expanded Affiliated Groups After issuance of the final regulations, several commentators noted that § 1.199-7(e), *Example 10* , of the final regulations misapplies § 1.1502-13 of the consolidated return regulations. In *Example 10* , a member of a consolidated group sells QPP to another member of the consolidated group. Before the QPP is sold to an unrelated party, the purchasing corporation is disaffiliated from the consolidated group. *Example 10* provides that neither the selling corporation nor the purchasing corporation has DPGR. After further consideration, the IRS and Treasury Department have determined that *Example 10* does not properly apply § 1.1502-13 of the consolidated return regulations and that both the selling corporation and the purchasing corporation have DPGR in the facts described. Accordingly, the proposed regulations remove *Example 10* of the final regulations and replace it with a new *Example 10* , properly applying § 1.1502-13 of the consolidated return regulations. In addition, the IRS and Treasury Department discovered a problem concerning the section 199 closing of the books method under § 1.199-7(f)(1)(ii) of the final regulations. A corporation that becomes or ceases to be a member of an EAG during its taxable year must allocate its taxable income or loss, QPAI, and W-2 wages between the portion of the taxable year that it is a member of the EAG and the portion of the taxable year that it is not a member of the EAG. In general, this allocation is made by using the pro rata allocation method described in § 1.199-7(f)(1)(i) of the final regulations. Section 1.199-7(f)(1)(ii) provides that in lieu of the pro rata allocation method, a corporation may elect to apply the section 199 closing of the books method under which a corporation treats its taxable year as two separate taxable years, the first of which ends at the close of the day on which the corporation's status as a member of the EAG changes and the second of which begins at the beginning of the day after the corporation's status as a member of the EAG changes. In certain situations, the section 199 closing of the books method can create a larger section 199 deduction than is warranted. The facts of the *Example* in § 1.199-7(g)(3) of the final regulations demonstrate such a situation. In the *Example,* Corporations X and Y, calendar year corporations, are members of the same EAG for the entire 2007 taxable year. Corporation Z, also a calendar year corporation, is a member of the EAG of which X and Y are members for the first half of 2007 and not a member of any EAG for the second half of 2007. During the 2007 taxable year, Z does not join in the filing of a consolidated return. Z makes a section 199 closing of the books election. As a result, Z has $80 of taxable income and $100 of QPAI that is allocated to the first half of 2007 and a $150 taxable loss and ($200) of QPAI that is allocated to the second half of 2007. In addition to the facts presented in the *Example,* assume that X and Y each have $60 of taxable income and QPAI in 2007, Z has $170 of taxable income and QPAI in 2008, and that X, Y, and Z each have W-2 wages in excess of the section 199(b) wage limitation for all relevant periods. After applying the section 199 closing of the books method, the EAG has $200 of taxable income and $220 of QPAI in 2007. Accordingly, the EAG will have a section 199 deduction of $12 (6 percent of the lesser of the EAG's $200 of taxable income and $220 of QPAI). Z, as a stand-alone corporation for the second half of 2007, will have both negative taxable income and negative QPAI and therefore will have no section 199 deduction. In 2008, notwithstanding that Z made a section 199 closing of the books election pursuant to which Z is deemed to have a $150 taxable loss for the second half of 2007, for purposes of computing its taxable income in 2008, Z only has a $70 NOL carryover from 2007. Accordingly, Z will have taxable income of $100 in 2008 and will have a section 199 deduction of $6 (6 percent of the lesser of its $100 of taxable income and $170 of QPAI). Because X and Y had a total of $120 of taxable income and Z had total taxable income in 2007 and 2008 of $100, the maximum aggregate section 199 deduction should have been $13.20 (6 percent of the aggregate taxable income of X, Y, and Z of $220), instead of the aggregate $18 deduction derived in the above example because of the use of the section 199 closing of the books method. The section 199 closing of the books method effectively eliminated $80 of Z's losses from being used to offset taxable income for purposes of the section 199 deduction in either 2007 or 2008. The proposed regulations remove the section 199 closing of the books method and revise the *Example* in § 1.199-7(g)(3) to apply the pro rata allocation method. However, the IRS and Treasury Department invite comments concerning the necessity for a section 199 closing of the books method and suggestions under which a section 199 closing of the books election would be allowable, provided that the election does not create an unwarranted section 199 deduction nor does it impose an undue burden on either taxpayers or the government. Proposed Effective Date Sections 1.199-3(k), 1.199-7(e), *Example 10* , and 1.199-7(f)(1) are proposed to be applicable to taxable years beginning on or after the date the final regulations are published in the **Federal Register** . Until the date the final regulations are published in the **Federal Register** , taxpayers may rely on § 1.199-3(k) and § 1.199-7(e), *Example 10* , of the proposed regulations for taxable years beginning after December 31, 2004. However, for taxable years beginning before June 1, 2006, a taxpayer may rely on § 1.199-3(k) of the proposed regulations only if the taxpayer does not apply Notice 2005-14 (2005-1 C.B. 498) (see § 601.601(d)(2)) or REG-105847-05 (2005-2 CB 987) (see § 601.601(d)(2)(ii)( *b* )) to the taxable year. Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight
(8)copies) or electronic comments that are submitted timely to the IRS. Comments are requested on all aspects of the proposed regulations. In addition, the IRS and Treasury Department specifically request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing has been scheduled for October 2, 2007, at 10 a.m. in the auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Because of access restrictions, visitors will not be admitted beyond the Internal Revenue Building lobby more than 30 minutes before the hearing starts. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit electronic or written comments by September 5, 2007 and submit an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight
(8)copies) by September 11, 2007. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal authors of these regulations are Lauren Ross Taylor and David M. McDonnell, 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. Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * Section 1.199-3 also issued under 26 U.S.C. 199(d). * * * Section 1.199-7 also issued under 26 U.S.C. 199(d). * * * Section 1.199-8 also issued under 26 U.S.C. 199(d). * * * **Par. 2.** Section 1.199-3 is amended by: 1. Revising paragraphs (k)(1), (k)(4), and (k)(5). 2. Redesignating paragraph (k)(6) as (k)(9). 3. Redesignating paragraph (k)(7) as (k)(10). 4. Adding new paragraphs (k)(6), (k)(7), and (k)(8). 5. Revising *Example 6* of newly designated paragraph (k)(10). The revisions and additions read as follows: § 1.199-3 Domestic production gross receipts.
(k)* * *
(1)*In general.* The term *qualified film* means any motion picture film or video tape under section 168(f)(3), or live or delayed television programming (film), if not less than 50 percent of the total compensation relating to the production of such film is compensation for services performed in the United States by actors, production personnel, directors, and producers. For purposes of this paragraph (k), the term *actors* includes players, newscasters, or any other persons who are compensated for their performance or appearance in a film. For purposes of this paragraph (k), the term *production personnel* includes writers, choreographers and composers who are compensated for providing services during the production of a film, as well as casting agents, camera operators, set designers, lighting technicians, make-up artists, and other persons who are compensated for providing services that are directly related to the production of the film. Except as provided in paragraph (k)(2) of this section, the definition of a qualified film does not include tangible personal property embodying the qualified film, such as DVDs or videocassettes.
(4)*Compensation for services.* For purposes of this paragraph (k), the term *compensation for services* means all payments for services performed by actors, production personnel, directors, and producers relating to the production of the film, including participations and residuals. Payments for services include all elements of compensation as provided for in § 1.263A-1(e)(2)(i)(B) and (3)(ii)(D). Compensation for services is not limited to W-2 wages and includes compensation paid to independent contractors. In the case of a taxpayer that uses the income forecast method of section 167(g) and capitalizes participations and residuals into the adjusted basis of the qualified film, the taxpayer must use the same estimate of participations and residuals in determining compensation for services. In the case of a taxpayer that excludes participations and residuals from the adjusted basis of the qualified film under section 167(g)(7)(D)(i), the taxpayer must use the amount expected to be paid as participations and residuals based on the total forecasted income used in determining income forecast depreciation in determining compensation for services.
(5)*Determination of 50 percent.* The not-less-than-50-percent-of-the-total-compensation requirement under paragraph (k)(1) of this section is calculated using a fraction. The numerator of the fraction is the compensation for services performed in the United States and the denominator is the total compensation for services regardless of where the production activities are performed. A taxpayer may use any reasonable method that is satisfactory to the Secretary based on all of the facts and circumstances, including all historic information available, to determine the compensation for services performed in the United States and the total compensation for services regardless of where the production activities are performed. Among the factors to be considered in determining whether a taxpayer's method of allocating compensation is reasonable is whether the taxpayer uses that method consistently from one taxable year to another.
(6)*Produced by the taxpayer.* A qualified film will be treated as produced by the taxpayer for purposes of section 199(c)(4)(A)(i)(II) if the production activity performed by the taxpayer is substantial in nature within the meaning of paragraph (g)(2) of this section. The special rules of paragraph (g)(4) of this section regarding a contract with an unrelated person and aggregation apply in determining whether the taxpayer's production activity is substantial in nature. Paragraphs (g)(2) and
(4)of this section are applied by substituting the term *qualified film* for QPP and disregarding the requirement that the production activity must be within the United States. The production activity of the taxpayer must consist of more than the minor or immaterial combination or assembly of two or more components of a film. For purposes of paragraph (g)(2) of this section, the relative value added by affixing trademarks or trade names as defined in § 1.197-2(b)(10)(i) will be treated as zero.
(7)*Qualified film produced by the taxpayer—safe harbor.* A film will be treated as a qualified film under paragraph (k)(1) of this section and produced by the taxpayer under paragraph (k)(6) of this section (qualified film produced by the taxpayer) if the taxpayer meets the requirements of paragraphs (k)(7)(i) and
(ii)of this section. A taxpayer that chooses to use this safe harbor must apply all the provisions of this paragraph (k)(7).
(i)*Safe harbor* . A film will be treated as a qualified film produced by the taxpayer if not less than 50 percent of the total compensation for services paid by the taxpayer is compensation for services performed in the United States and the taxpayer satisfies the safe harbor in paragraph (g)(3) of this section. The special rules of paragraph (g)(4) of this section regarding a contract with an unrelated person and aggregation apply in determining whether the taxpayer satisfies paragraph (g)(3) of this section. Paragraphs (g)(3) and
(4)of this section are applied by substituting the term *qualified film* for QPP but not disregarding the requirement that the direct labor and overhead of the taxpayer to produce the qualified film must be within the United States. Paragraph (g)(4)(ii)(A) of this section includes any election under section 181.
(ii)*Determination of 50 percent* . The not-less-than-50-percent-of-the-total-compensation requirement under paragraph (k)(7)(i) of this section is calculated using a fraction. The numerator of the fraction is the compensation for services paid by the taxpayer for services performed in the United States and the denominator is the total compensation for services paid by the taxpayer regardless of where the production activities are performed. For purposes of this paragraph (k)(7)(ii), the term *paid by the taxpayer* includes amounts that are treated as paid by the taxpayer under paragraph (g)(4) of this section. A taxpayer may use any reasonable method that is satisfactory to the Secretary based on all of the facts and circumstances, including all historic information available, to determine the compensation for services paid by the taxpayer for services performed in the United States and the total compensation for services paid by the taxpayer regardless of where the production activities are performed. Among the factors to be considered in determining whether a taxpayer's method of allocating compensation is reasonable is whether the taxpayer uses that method consistently from one taxable year to another.
(8)*Production pursuant to a contract* . With the exception of the rules applicable to an expanded affiliated group
(EAG)under § 1.199-7 and EAG partnerships under § 1.199-3T(i)(8), only one taxpayer may claim the deduction under § 1.199-1(a) with respect to any activity related to the production of a qualified film performed in connection with the same qualified film. If one taxpayer performs a production activity pursuant to a contract with another party, then only the taxpayer that has the benefits and burdens of ownership of the qualified film under Federal income tax principles during the period in which the production activity occurs is treated as engaging in the production activity.
(10)* * * Example 6. X creates a television program in the United States that includes scenes from films licensed by X from unrelated persons Y and Z. Assume that Y and Z produced the films licensed by X. The not-less-than-50-percent-of-the-total-compensation requirement under paragraph (k)(1) of this section is determined by reference to all compensation for services paid in the production of the television program, including the films licensed by X from Y and Z, and is calculated using a fraction as described in paragraph (k)(5) of this section. The numerator of the fraction is the compensation for services performed in the United States and the denominator is the total compensation for services regardless of where the production activities are performed. However, for purposes of calculating the denominator, in determining the total compensation paid by Y and Z, X need only include the total compensation paid by Y and Z to actors, production personnel, directors, and producers for the production of the scenes used by X in creating its television program. **Par. 3.** Section 1.199-7 is amended by: 1. Revising *Example 10* of paragraph (e). 2. Revising paragraphs (f)(1) and (g)(3). The revisions read as follows: § 1.199-7 Expanded affiliated groups.
(e)* * * Example 10.
(i)*Facts* . Corporation P owns all of the stock of Corporations S and B. P, S, and B file a consolidated Federal income tax return on a calendar year basis. P, S, and B each use the section 861 method for allocating and apportioning their deductions. In 2010, S MPGE QPP in the United States at a cost of $1,000. On November 30, 2010, S sells the QPP to B for $2,500. On February 28, 2011, P sells 60% of the stock of B to X, an unrelated person. On June 30, 2011, B sells the QPP to U, another unrelated person, for $3,000.
(ii)*Consolidated group's 2010 QPAI* . Because S and B are members of a consolidated group in 2010, pursuant to § 1.199-7(d)(1) and § 1.1502-13, neither S's $1,500 of gain on the sale of QPP to B nor S's $2,500 gross receipts from the sale are taken into account in 2010. Accordingly, neither S nor B has QPAI in 2010.
(iii)*Consolidated group's 2011 QPAI* . B becomes a nonmember of the consolidated group at the end of the day on February 28, 2011, the date on which P sells 60% of the B stock to X. Under § 1.199-7(d)(1) and § 1.1502-13(d), S takes the intercompany transaction into account immediately before B becomes a non-member of the consolidated group. Pursuant to § 1.1502-13(d)(1)(ii)(A)( *1* ), because the QPP is owned by B, a nonmember of the consolidated group immediately after S's gain is taken into account, B is treated as selling the QPP to a nonmember for $2,500, B's adjusted basis in the property, immediately before B becomes a nonmember of the consolidated group. Accordingly, immediately before B becomes a nonmember of the consolidated group, S takes into account $1,500 of QPAI (S's $2,500 DPGR received from B-S's $1,000 cost of MPGE the QPP).
(iv)*B's 2011 QPAI* . Pursuant to § 1.1502-13(d)(2)(i)(B), the attributes of B's corresponding item, that is, its sale of the QPP to U, are determined as if the S division (but not the B division) were transferred by the P, S, and B consolidated group (treated as a single corporation) to an unrelated person. Thus, S's activities in MPGE the QPP before the intercompany sale of the QPP to B continue to affect the attributes of B's sale of the QPP. As such, B is treated as having MPGE the QPP. Accordingly, upon its sale of the QPP, B has $500 of QPAI (B's $3,000 DPGR received from U-B's $2,500 cost of MPGE the QPP).
(f)*Allocation of income and loss by a corporation that is a member of the expanded affiliated group for only a portion of the year* —(1) *In general* . A corporation that becomes or ceases to be a member of an EAG during its taxable year must allocate its taxable income or loss, QPAI, and W-2 wages between the portion of the taxable year that it is a member of the EAG and the portion of the taxable year that it is not a member of the EAG. This allocation of items is made by using the pro rata allocation method described in this paragraph (f)(1). Under the pro rata allocation method, an equal portion of a corporation's taxable income or loss, QPAI, and W-2 wages for the taxable year is assigned to each day of the corporation's taxable year. Those items assigned to those days that the corporation was a member of the EAG are then aggregated.
(g)* * *
(3)*Example* . The following example illustrates the application of paragraphs
(f)and
(g)of this section: Example.
(i)*Facts* . Corporations X and Y, calendar year corporations, are members of the same EAG for the entire 2010 taxable year. Corporation Z, also a calendar year corporation, is a member of the EAG of which X and Y are members for the first half of 2010 and not a member of any EAG for the second half of 2010. During the 2010 taxable year, neither X, Y, nor Z join in the filing of a consolidated Federal income tax return. Assume that X, Y, and Z each have W-2 wages in excess of the section 199(b) wage limitation for all relevant periods. In 2010, X has taxable income of $2,000 and QPAI of $600, Y has a taxable loss of $400 and QPAI of ($200), and Z has taxable income of $1,400 and QPAI of $2,400.
(ii)*Analysis* . Pursuant to the pro rata allocation method, $700 of Z's 2010 taxable income and $1,200 of Z's 2010 QPAI are allocated to the first half of the 2010 taxable year (the period in which Z is a member of the EAG) and $700 of Z's 2010 taxable income and $1,200 of Z's 2010 QPAI are allocated to the second half of the 2010 taxable year (the period in which Z is not a member of any EAG). Accordingly, in 2010, the EAG has taxable income of $2,300 (X's $2,000 + Y's ($400) + Z's $700) and QPAI of $1,600 (X's $600 + Y's ($200) + Z's $1,200). The EAG's section 199 deduction for 2010 is therefore $144 (9% of the lesser of the EAG's $2,300 of taxable income or $1,600 of QPAI). Pursuant to § 1.199-7(c)(1), this $144 deduction is allocated to X, Y, and Z in proportion to their respective QPAI. Accordingly, X is allocated $48 of the EAG's section 199 deduction, Y is allocated $0 of the EAG's section 199 deduction, and Z is allocated $96 of the deduction. For the second half of 2010, Z has taxable income of $700 and QPAI of $1,200. Therefore, for the second half of 2010, Z has a section 199 deduction of $63 (9% of the lesser of its $700 taxable income or $1,200 QPAI for the second half of 2010). Accordingly, X's 2010 section 199 deduction is $48, Y's 2010 section 199 deduction is $0, and Z's 2010 section 199 deduction is $159, the sum of the $96 section 199 deduction of the EAG allocated to Z for the first half of 2010 and Z's $63 section 199 deduction for the second half of 2010. **Par. 4.** Section 1.199-8 is amended by: 1. Adding two sentences at the end of paragraph (a). 2. Adding new paragraphs (i)(8) and (i)(9). The revisions and additions read as follows: § 1.199-8 Other rules.
(a)* * * For purposes of §§ 1.199-1 through 1.199-9, use of terms such as *payment,* *paid,* *incurred,* or *paid or incurred* is not intended to provide any specific rule based upon the use of one term versus another. In general, the use of the term *payment,* *paid,* *incurred,* or *paid or incurred* is intended to convey the appropriate standard under the taxpayer's method of accounting.
(i)* * *
(8)*Qualified film produced by the taxpayer* . Section 1.199-3(k) is proposed to be applicable to taxable years beginning on or after the date the final regulations are published in the **Federal Register** . Until the date the final regulations are published in the **Federal Register** , taxpayers may rely on § 1.199-3(k) of these proposed regulations for taxable years beginning after December 31, 2004. However, for taxable years beginning before June 1, 2006, a taxpayer may rely on § 1.199-3(k) of the proposed regulations only if the taxpayer does not apply Notice 2005-14 (2005-1 CB 498) (see § 601.601(d)(2)(ii)( *b* ) of this chapter) or REG-105847-05 (2005-2 CB 987) (see § 601.601(d)(2)(ii)( *b* ) of this chapter) to the taxable year.
(9)*Expanded affiliated groups* . Section 1.199-7(e), *Example 10,* and § 1.199-7(f)(1) are proposed to be applicable to taxable years beginning on or after the date the final regulations are published in the **Federal Register** . Until the date the final regulations are published in the **Federal Register,** taxpayers may rely on § 1.199-7(e), *Example 10,* of these proposed regulations for taxable years beginning after December 31, 2004. Kevin M. Brown, Deputy Commissioner for Services and Enforcement. [FR Doc. E7-10821 Filed 6-6-07; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-157711-02] RIN 1545-BB61 Unified Rule for Loss on Subsidiary Stock; Correction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction to notice of proposed rulemaking. SUMMARY: This document contains corrections to a notice of proposed rulemaking that were published in the **Federal Register** on Tuesday, January 23, 2007 (72 FR 2964). These regulations apply to corporations filing consolidated returns. The regulations implement aspects of the repeal of the *General Utilities* doctrine by redetermining members' bases in subsidiary stock and requiring certain reductions in subsidiary stock basis on a transfer of the stock. The regulations promote the clear reflection of income by redetermining members' bases in subsidiary's stock and reducing the subsidiary's attributes to prevent the duplication of loss, and they also, provide guidance limiting the application of section 362(e)(2) with respect to transactions between members of a consolidated group. FOR FURTHER INFORMATION CONTACT: Theresa Abell
(202)622-7700 or Phoebe Bennett
(202)622-7770 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background The notice of proposed rulemaking (REG-157711-02) that is the subject of these corrections are under sections 358, 362(e)(2) and 1502 of the Internal Revenue Code. Need for Correction As published, the notice of proposed rulemaking (REG-157711-02) contains errors that may prove to be misleading and are in need of clarification. Correction of Publication Accordingly, the publication of the notice of proposed rulemaking (REG-157711-02), that is the subject of FR Doc. 07-187, is corrected as follows: 1. On page 2964, column 2, in the preamble, under the paragraph heading “Paperwork Reduction Act”, eighth paragraph of the column, line 3, the language “13(e)(4)(v) and 1.1502-36(d)(7). The” is corrected to read “13(e)(4)(v) and 1.1502-36(d)(6). The”. 2. On page 2964, column 3, in the preamble, under the paragraph heading “Background”, second paragraph of the column, line 10, the language “ *v. United States,* 255 F.3d 1357 (2001),” is corrected to read “ *v. United States,* 255 F.3d 1357 (Fed. Cir. 2001),”. 3. On page 2965, column 1, in the preamble, under the paragraph heading “2. The Administrative Response to GU Repeal: § 1.1502-20.”, first paragraph, line 2 from bottom of the paragraph, the language “determine adjustments to member's” is corrected to read “determine adjustments to members ” ‘. 4. On page 2972, column 1, in the preamble, under the paragraph heading “2. Hybrid Tracing-Presumptive Model: Asset Tracing.”, first paragraph, line 3, the language “presumption approach that would” is corrected to read “presumptive approach that would”. 5. On page 2972, column 2, in the preamble, the paragraph heading “3. Presumption-Based Models” is corrected to read “3. Presumptive-Based Models.”. 6. On page 2975, column 1, in the preamble, under the paragraph heading “d. *Netting of items from different tax periods.”,* first paragraph, line 6, the language, “investments were not. The IRS and” is corrected to read “investment adjustments were not. The IRS and”. 7. On page 2975, column 1, in the preamble, under the paragraph heading “d. *Netting of items from different tax periods.* ”, second paragraph, line 8, the language, “account by the group. Thus, IRS and” is corrected to read “account by the group. Thus, the IRS and”. 8. On page 2975, column 2, in the preamble under the paragraph heading “e. *Summary and conclusions.* ”, second paragraph, line 12 from the bottom of the paragraph, the language “administrative and other concerns” is corrected to read “administrative burden and other concerns”. 9. On page 2977, column 1, in the preamble, under the paragraph heading “ *E. Noneconomic and Duplicated Loss From Investment Adjustment System.* ”, first paragraph, line 2, the language “preamble, IRS and Treasury Department” is corrected to read “preamble, the IRS and Treasury Department”. 10. On page 2978, column 3, under paragraph heading “1. Overview.”, third paragraph of the column, line 4 from the bottom of the paragraph, the language “implement a loss limitation approach” is correct to read “implements a loss limitation approach”. 11. On page 2980, column 1, under paragraph heading “4. The Attribute Reduction Rule.”, second paragraph, lines 16 and 17, the language “the value of all of the S shares. Net the inside attributes generally has the same” is corrected to read “the value of all the S shares. The term net inside attributes generally has the same”. 12. On page 2980, column 1, under paragraph heading “4. The Attribute Reduction Rule.”, third paragraph, last line of the column, the language “stock loss for a later recognition (for” is corrected to read “stock loss for later recognition (for”. 13. On page 2980, column 2, under paragraph heading “4. The Attribute Reduction Rule.”, second paragraph of the column, lines 1 and 2 from bottom of the paragraph, the language “attributes are reduced reflects this principle.” is corrected to read “attributes are reduced reflects these principles.”. 14. On page 2980, column 3, under subparagraph heading “a. *Special rules applicable when S holds stock of lower-tier subsidiary.* ”, second paragraph, line 16, the language “inside attributes. For example, if P owns” is corrected to read “inside attributes. For example, assume P owns”. 15. On page 2981, column 3, under subparagraph heading “b. *Election to reduce stock basis and/or reattribute loss.* ”, first paragraph of the column, line 22 from bottom of the paragraph, the language “transaction. Proposed regulations under” is corrected to read “transaction.” 16. On page 2981, column 3, under subparagraph heading “b. *Election to reduce stock basis and/or reattribute loss.* ”, second paragraph, line 21 from bottom of the paragraph, the language “§ 1.1502-32 treat the reattributed” is corrected and added with new paragraph to read “Proposed regulations under § 1.1502-32 treat the reattributed”. 17. On page 2982, column 1, under subparagraph heading “6. Special Rules for Section 362(e)(2) Transaction.”, second paragraph, lines 1 and 2 from bottom of the column, the language “under section 362(e)(2)(C) been made Similarly, to adjust for distortions” is corrected to read “under section 362(e)(2)(C) been made. Similarly, to adjust for distortions”. 18. On page 2982, column 2, under subparagraph heading “6. Special Rules for Section 362(e)(2) Transaction.”, second paragraph of the column, line 9 from the bottom of the paragraph, the language, “stock basis and net inside attributes that” is corrected to read “stock basis, net inside attributes, and value that”. 19. On page 2983, column 2, under subparagraph heading “2. Suspension of Section 362(e)(2) for Intercompany Transactions.”, last paragraph of the column, line 2 from bottom of the column, the language “investment adjustment system has not” is corrected to read “investment adjustment system has not eliminated”. 20. On page 2984, column 2, under subparagraph heading “4. Application of Section 362(e)(2) to Intercompany Transactions.”, first paragraph of the column, line 7 from the bottom of the paragraph, the language “attributes is applied to proportionately” is corrected to read “attributes is applied proportionately”. 21. On page 2984, column 3, under subparagraph heading “5. Special Allocations Under § 1.1502-32.”, line 7 of the paragraph, the language “entirely to member's shares. In other” is corrected to read “entirely to members” shares. In other”. 22. On page 2986, column 2, under subparagraph heading, “8. Retention of, and Nonsubstantive Revisions to, § 1.1502-80(c).”, third paragraph of the column, line 8 of the paragraph, the language “under the LDR and, since LDR no longer” is corrected to read “under the LDR and, since the LDR no longer”. 23. On page 2986, column 3, under subparagraph heading, “8. Retention of, and Nonsubstantive Revisions to, § 1.1502-80(c).”, first paragraph of the column, line 2 of the column, the language “deduction. See, *In re Prudential Lines,* ” is corrected to read “deduction. See *In re Prudential Lines,* ”. § 1.1502-13 [Corrected] 24. On page 2988, column 1, § 1.1502-13(e)(4)(ii)(C)( *2* ), line 12 from bottom of the column, the language “otherwise is eliminated (other than” is corrected to read “otherwise eliminated (other than”. 25. On page 2989, column 3, § 1.1502-13(e)(4)(vi), *Example 3* .(iv), line 18 of the paragraph, the language “in § 1.1502-32(b)(3)(iii)(B), and will effect P's” is corrected to read “in § 1.1502-32(b)(3)(iii)(B), and will affect P's”. § 1.1502-32 [Corrected] 26. On page 2991, column 3, § 1.1502-32(b)(3)(iii)(C), line 3 from bottom of the paragraph, the language “ **Federal Register** , see 1.1502-” is corrected to read “ **Federal Register** , see § 1.1502-”. 27. On page 2991, column 3, § 1.1502-32(b)(3)(iii)(D), line 3 from bottom of the paragraph, the language “see 1.1502-32(b)(3)(iii)(D) as contained” is corrected to read “see § 1.1502-32(b)(3)(iii)(D) as contained”. 28. On page 2991, column 3, § 1.1502-32(c)(1)(i), line 2 from bottom of the column, the language “allocated to the shares of S's stock to” is corrected to read “allocated to the shares of S stock to”. 29. On page 2993, column 1, § 1.1502-32(c)(1)(ii)(A)( *2* ) *Example.* (iv)(D), line 7 from bottom of the column, the language “nondeductible basis recovery item if it is” is corrected to read “nondeductible basis recovery item if it were”. 30. On page 2994, column 1, § 1.1502-32(c)(2)(i), line 11, the language “that member's excess loss accounts and” is corrected to read “that member's excess loss account and”. 31. On page 2994, column 2, § 1.1502-32(c)(4)(i), line 3 of the paragraph, the language “share of S's preferred and common stock” is corrected to read “share of S preferred and common stock”. 32. On page 2994, column 2, § 1.1502-32(c)(4)(i), line 8 of the paragraph, the language “made by reallocating S's adjustments” is corrected to read “made by reallocating S stock adjustments”. 33. On page 2994, column 2, § 1.1502-32(c)(4)(i), last line of the paragraph, the language “of S's shares. * * *” is corrected to read “of the S shares. * * *”. § 1.1502-35 [Corrected] 34. On page 2994, column 3, § 1.1502-35(a), line 5 from bottom of the paragraph, the language “of April 1, 2006. For transfers and” is corrected to read “of April 1, 2007. For transfers and”. 35. On page 2995, column 1, § 1.1502-35(b)(3)(iii), line 4, the language “year of the group) is a noncapital,” is corrected to read “year of the selling group) is a noncapital,”. § 1.1502-36 [Corrected] 36. On page 2995, column 2, the language of the section heading “§ 1.1502-36 Loss on subsidiary stock.” is corrected to read “§ 1.1502-36 Unified rule for loss on subsidiary stock.”. 37. On page 2996, column 2, § 1.1502-36(b)(1)(i), line 4 of the paragraph, the language “(b) reduce the extent to which there is” is corrected to read “(b) reduce (but do not increase) the extent to which there is”. 38. On page 2997, column 1, § 1.1502-36(b)(2)(iii)(A), line 2 of the paragraph, the language “ Reallocations are made in a manner that” is corrected to read “All reallocations (both to and from members’ shares of S stock) are made in a manner that”. 39. On page 2997, column 2, § 1.1502-36(b)(2)(iii)(B)( *2* )( *ii* ) *Example.* ( *iii* ), line 6 from the bottom of the column, the language “would have tiered up to the M share P sold,” is corrected to read “would have tiered up to the M share that P sold,”. 40. On page 2998, column 2, § 1.1502-36(b)(3) *Example 2.* (i), line 10 of the paragraph, the language “Asset 1 for $100. On December 31, year 2, S” is corrected to read “Asset 1 for $100. On December 31, year 2, P”. 41. On page 2999, column 2, § 1.1502-36(b)(3) *Example 3.* (i), line 5 of the paragraph, the language “preferred shares to reflect their entitlement to” is corrected to read “preferred shares to reflect its entitlement to”. 42. On page 2999, column 3, § 1.1502-36(b)(3) *Example 3.* (ii)(C), line 8 of the paragraph, the language “Accordingly $25 of that amount is reallocated” is corrected to read “Accordingly, $25 of that amount is reallocated”. 43. On page 3000, column 2, § 1.1502-36(c)(6)(i), line 5 from the bottom of the paragraph, the language “S1's investment adjustments increased” is corrected to read “S1's investment adjustments increase”. 44. On page 3000, column 3, § 1.1502-36(c)(6)(v) *Example.* ( *ii* ), line 3 from the bottom of the paragraph, the language “the loss share stock of S1, the lowest-tier” is corrected to read “the loss share of S1 stock, the lowest-tier”. 45. On page 3000, column 3, § 1.1502-36(c)(6)(v) *Example.* ( *iii* ), line 3 from the bottom of the paragraph, the language “recognized on the transfer of S3 tiers up to” is corrected to read “recognized on the transfer of S3 stock tiers up to”. 46. On page 3001, column 3, § 1.1502-36(c)(8) *Example 1.* ( *i* )(C), line 13 of the paragraph, the language “recognized on the sale of Asset 1. Thus the” is corrected to read “recognized on the sale of Asset 1. Thus, the”. 47. On page 3001, column 3, § 1.1502-36(c)(8) *Example 1.* ( *ii* ), line 5 from the bottom of the paragraph, the language “Asset 1 to $0) Because the net positive” is corrected to read “Asset 1 to $0). Because the net positive”. 48. On page 3002, column 3, § 1.1502-36(c)(8) *Example 1.* ( *iv* )(B), line 4 of the paragraph, the language “there redetermination would change no” is corrected to read “redetermination would change no”. 49. On page 3003, column 2, § 1.1502-36(c)(8) *Example 4.* ( *ii* ), lines 4 through 10 of the column, the language “Because the net positive adjustment includes items of income (and not just gain), the analysis of the application of this paragraph
(c)is the same here as in paragraph (i)(C) of this *Example 4.* Furthermore, the analysis of the application of this paragraph
(C)would also be the same if the $60 loss carryover were subject to a section 382 limitation from a prior ownership change, and if, instead, it would subject to the limitation in § 1.1502-” is corrected to read “The analysis of the application of this paragraph
(c)is the same here as in paragraph (i)(C) of this *Example 4.* Furthermore, the analysis of the application of this paragraph
(c)would also be the same if the $60 loss carryover were subject to a section 382 limitation from a prior ownership change, if, instead, it were subject to the limitation in § 1.1502-”. 50. On page 3003, column 2, § 1.1502-36(c)(8) *Example 5.* ( *i* ), lines 7 through 10 of the paragraph, the language “December 31, year 1, P sells one of its shares, Share 1, for $20. After applying and giving effect to all generally applicable rules of law (other than this section), P's basis in its Share” is corrected to read “December 31, year 1, P sells one of its S shares, Share 1, for $20. After applying and giving effect to all generally applicable rules of law (other than this section), P's basis in Share”. 51. On page 3003, column 2, § 1.1502-36(c)(8) *Example 5.* ( *iii* ), line 6 from the bottom of the paragraph, the language “($100 from the sale of the asset), and Share” is corrected to read “($100 from the sale of Asset), and Share”. 52. On page 3004, column 3, § 1.1502-36(c)(8) *Example 7.* ( *i* ), line 8 from the bottom of the paragraph, the language “basis in S1 under § 1.1502-32 by $40 (to” is corrected to read “basis in the S1 share under § 1.1502-32 by $40 (to”. 53. On page 3006, column 2, § 1.1502-36(d)(5)(ii)(B)( *3* ), line 3 from the bottom of the paragraph, the language “extent necessary to reduce the bases of” is corrected to read “extent necessary to reduce the basis of”. 54. On page 3006, column 2, § 1.1502-36(d)(5)(ii)(B)( *4* ), line 2 from the bottom of the paragraph, the language “the basis of such shares without” is corrected to read “the bases of such shares without”. 55. On page 3007, column 1, § 1.1502-36(d)(6)(ii)(B), line 5 from the bottom of the paragraph, the language “immediately tier up (under the” is corrected to read “immediately tiers up (under the”. 56. On page 3007, column 3, § 1.1502-36(d)(6)(iv), line 4 of the paragraph, the language “all members' basis in loss shares of S” is corrected to read “all members' bases in loss shares of S”. 57. On page 3007, column 3, § 1.1502-36(d)(7) *Example 1.* ( *i* )(B), line 3 of the paragraph, the language “under paragraph
(b)of this section either” is corrected to read “under paragraph
(b)of this section because”. 58. On page 3008, column 1, § 1.1502-36(d)(7) *Example 1.* ( *i* )(B), line 2 of the column, the language “disparity in the basis of the shares). See” is corrected to read “disparity in the bases of the shares). See”. 59. On page 3009, column 2, § 1.1502-36(d)(7) *Example 4.* ( *i* )(A), line 4 of the column, the language “the $500 income earned). The sale is” is corrected to read “the $500 of income earned). The sale is”. 60. On page 3010, column 2, § 1.1502-36(d)(7) *Example 5.* ( *i* )(C)(3), line 10 from the bottom of the paragraph, the language “the transaction ($50) over the sum of” is corrected to read “the transaction ($50) over the sum of the”. 61. On page 3010, column 3, § 1.1502-36(d)(7) *Example 5.* ( *ii* )(C)( *4* ), lines 15 to 21 of the paragraph, the language “reductions to share A and to share B under this paragraph
(d)are reversed to restore the basis of each share to $12.50. Thus, $25 of the $27.50 attribute reduction applied to reduce the basis of share A and $25 of the $47.50 attribute reduction applied to reduce the basis of share B are reversed, restoring the” is corrected to read “reductions to Share A and to Share B under this paragraph
(d)are reversed to restore the basis of each share to $12.50. Thus, $25 of the $27.50 attribute reduction applied to reduce the basis of Share A and $25 of the $47.50 attribute reduction applied to reduce the basis of Share B are reversed, restoring the”. 62. On page 3011, column 2, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(B), line 2 from the bottom of the column, the language “basis in subsidiary stock under the principles” is corrected to read “bases in subsidiary stock under the principles”. 63. On page 3011, column 3, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(B), line 2 from the top of the column, the language “the transaction the sale is not subject to” is corrected to read “the transaction, the sale is not subject to”. 64. On page 3011, column 3, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(C), line 3 of the paragraph, the language “ *this section* ). The next highest tier transfer is” is corrected to read “ *this section* ). The next higher tier transfer is”. 65. On page 3011, column 3, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(C), line 8 from the bottom of the paragraph, the language “of the transferred Share E minus the $20” is corrected to read “of the transferred share E minus the $20”. 66. On page 3011, column 3, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(D)( *1* ), line 6 from the bottom of the paragraph, the language “basis in its asset)) minus S's liability ($20).” is corrected to read “basis in its asset))) minus S's liability ($20).”. 67. On page 3011, column 3, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(D)( *2* ), lines 5 to 6 from the bottom of the paragraph, the language “applied to reduce the basis of share E because share E was transferred in a transaction in” is corrected to read “applied to reduce the basis of share E, because share E was transferred in a transfer in”. 68. On page 3011, column 3, § 1.1502-36(d)(7) *Example 6.* ( *ii* )(D)( *3* ), line 3 from the bottom of the column, the language “apportioned to or applied to reduced the” is corrected to read “apportioned to or applied to reduce the”. 69. On page 3012, column 3, § 1.1502-36(d)(7) *Example 7.* ( *iii* )(C)( *3* ), line 16 of the paragraph, the language “reducing the basis of both assets to $0.” is corrected to read “reducing the basis of each asset to $0.”. 70. On page 3012, column 3, § 1.1502-36(d)(7) *Example 7.* ( *iii* )(C)( *3* ), line 2 from the bottom of the paragraph, the language “attribute reduction amount is disregarded has” is corrected to read “attribute reduction amount is disregarded and has”. 71. On page 3013, column 1, § 1.1502-36(d)(7) *Example 8.* ( *i* )(E), line 5 of the paragraph, the language “basis in the S shares by the full attribute” is corrected to read “bases in the S shares by the full attribute”. 72. On page 3013, column 2, § 1.1502-36(d)(7) *Example 8.* ( *i* )(E), line 7 of the paragraph, the language “transfer. The reduction of M's basis in the S” is corrected to read “transfer. The reduction of M's bases in the S”. 73. On page 3014, column 1, § 1.1502-36(d)(7) *Example 8.* ( *ii* )(E), lines 2 through 5 of the paragraph, the language “are the same as paragraph (ii)(A) of this *Example 8* , except that P elects under paragraph (d)(6) of this section to reduce M's basis in the S shares by the full attribute” is corrected to read “are the same as in paragraph (ii)(A) of this *Example 8* , except that P elects under paragraph (d)(6) of this section to reduce M's bases in the S shares by the full attribute”. 74. On page 3014, column 1, § 1.1502-36(d)(7) *Example 8.* ( *ii* )(F), is removed. 75. On page 3014, column 1, § 1.1502-36(d)(7) *Example 8.* ( *ii* )(G), is the newly designated paragraph (F). 76. On page 3014, column 2, § 1.1502-36(d)(7) *Example 9.* ( *i* ), line 5 from the bottom of the column, the language “to P1 (the common parent of a consolidated” is corrected to read “to P1 (the common parent of a different consolidated”. 77. On page 3014, column 3, § 1.1502-36(d)(7) *Example 9.* ( *ii* ), line 7 from the bottom of the column, the language “computed and is applied to adjust the basis” is corrected to read “computed and is applied to adjust the bases”. 78. On page 3015, column 1, § 1.1502-36(d)(7) *Example 9.* ( *iii* ), line 1 of the paragraph, the language “(iii) *Transfers in next highest tier (loss* ” is corrected to read “(iii) *Transfers in next higher tier (loss* ”. 79. On page 3015, column 3, § 1.1502-36(d)(7) *Example 9.* ( *iv* )(B)( *2* ), line 30 from the bottom of the paragraph, the language “allocated amount is apportioned among other” is corrected to read “allocated amount is apportioned among the other”. 80. On page 3017, column 1, § 1.1502-36(e)(1), last line of the paragraph, the language “the section.” is corrected to read “this section.”. 81. On page 3017, column 2, § 1.1502-36(e)(2)(iii), line 6 of the paragraph, the language “allocable portion of S's attributes has” is corrected to read “allocable portion of S's net inside attributes has”. 82. On page 3017, column 2, § 1.1502-36(e)(2)(iv) *Example.* ( *i* )(A), line 11 of the paragraph, the language “basis of A1 would have been reduced by $80” is corrected to read “basis in Asset 1 would have been reduced by $80”. 83. On page 3017, column 2, § 1.1502-36(e)(2)(iv) *Example.* ( *i* )(B), last line of the paragraph, the language “to this paragraph (c).” is corrected to read “to paragraph
(c)of this section.”. 84. On page 3018, column 1, § 1.1502-36(f)(2), line 6 of the column, the language “dealers in securities) and 481” is corrected to read “dealers in securities) and section 481”. 85. On page 3018, column 1, § 1.1502-36(f)(4), lines 6 through 15 of the paragraph, the language “basis of shares of S2 stock under § 1.1502-32 affect the investment adjustments made to the basis of the stock of S1. A subsidiary
(S1)(and its shares of stock) is *lower tier* with respect to another subsidiary
(S)(and its shares of stock) if investment adjustments made to the basis of shares of S1 stock affect the investment adjustments made to the basis of shares of S stock. The” is corrected to read “bases of shares of S2 stock under § 1.1502-32 affect the investment adjustments made to the bases of shares of S1 stock. A subsidiary
(S1)(and its shares of stock) is lower tier with respect to another subsidiary
(S)(and its shares of stock) if investment adjustments made to the bases of shares of S1 stock affect the investment adjustments made to the bases of shares of S stock. The”. 86. On page 3019, column 1, § 1.1502-36(g)(2) *Example 3.* ( *ii* ), line 4 of the paragraph, the language “there is no disparity in the basis of the” is corrected to read “there is no disparity in the bases of the”. 87. On page 3019, column 1, § 1.1502-36(g)(2) *Example 4.* ( *i* ), lines 5 through 6 from the bottom of the paragraph, the language “equal basis that exceeds value. S owns Asset 1 with a basis that exceeds value and cash.” is corrected to read “equal basis that exceeds value. S owns Cash and Asset 1 with a basis that exceeds value.”. 88. On page 3019, column 1, § 1.1502-36(g)(2) *Example 4.* ( *ii* ), line 4 of the paragraph, the language “there is no disparity in the basis of the” is corrected to read “there is no disparity in the bases of the”. LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E7-11057 Filed 6-6-07; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 20 [REG-119097-05] RIN 1545-BE52 Grantor Retained Interest Trusts—Application of Sections 2036 and 2039 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and notice of public hearing. SUMMARY: This document contains proposed regulations providing guidance on the portion of a trust properly includible in a grantor's gross estate under Internal Revenue Code
(Code)sections 2036 and 2039 if the grantor has retained the use of property in a trust or the right to an annuity, unitrust, or other income payment from such trust for life, for any period not ascertainable without reference to the grantor's death, or for a period that does not in fact end before the grantor's death. This document also provides notice of a public hearing on these proposed regulations. DATES: Written or electronic comments must be received by September 5, 2007. Outlines of topics to be discussed at the public hearing scheduled for September 26, 2007, must be received by September 5, 2007. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-119097-05), Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered to the Courier's Desk, Internal Revenue Service, Attn: CC:PA:LPD:PR (REG-119097-05), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington DC 20044. Alternatively, submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-119097-05), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington DC, or sent electronically via the Federal eRulemaking Portal at *http://www.regulations.gov* (IRS REG-119097-05). The public hearing will be held in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Theresa M. Melchiorre,
(202)622-7830; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard Hurst,
(202)622-7180 (not toll-free numbers) or e-mail at *Richard.A.Hurst@irscounsel.treas.gov.* SUPPLEMENTARY INFORMATION: Background The proposed regulations provide guidance on what portion of a trust is includible in the deceased grantor's gross estate under section 2036 if the grantor retained the right to use property in the trust or the right to receive from that trust an annuity, unitrust, or other income payment for the grantor's life, for any period not ascertainable without reference to the grantor's death, or for any period that does not in fact end before the grantor's death. In addition, the proposed regulations provide guidance on the possible application of section 2039 to trusts in which the decedent has retained the use of property held in the trust or has retained an annuity, unitrust, or other income interest that is includible in the decedent's gross estate under section 2036. These trusts include without limitation certain charitable trusts (collectively CRTs) such as charitable remainder annuity trusts (CRATs) within the meaning of section 664(d)(1), charitable remainder unitrusts (CRUTs) within the meaning of section 664(d)(2) or (d)(3), and charitable remainder trusts that do not qualify under section 664, as well as other trusts established by a grantor (collectively GRTs) such as grantor retained annuity trusts (GRATs), grantor retained unitrusts (GRUTs), and various forms of grantor retained income trusts (GRITs), such as qualified personal residence trusts (QPRTs) and personal residence trusts (PRTs). A CRT is within the scope of these proposed regulations whether or not the CRT meets the qualifications of sections 664(d)(1), (2), or
(3)and a GRT is within the scope of these proposed regulations whether or not the grantor's retained interest is a “qualified interest” as defined in section 2702(b). This guidance does not apply to trusts or other contractual arrangements arising by reason of a decedent's employment and generally does not apply to annuities purchased by the decedent, as these types of interests fall within the ambit of section 2039. Under section 2036(a), a decedent's gross estate includes the value of any interest in property transferred by the decedent in which the decedent retained for the decedent's life, for any period not ascertainable without reference to the decedent's death, or for any period that does not in fact end before the decedent's death, either the possession or enjoyment of the property or a right to the income from the property, or the right (either alone or with another) to designate the persons who may possess or enjoy the property or its income. Section 20.2036-1(a) provides generally that, if the decedent retained or reserved an interest with respect to all of the property transferred by the decedent, the amount to be included in the gross estate under section 2036 is the value of the entire property on the date of death. If the decedent retained a right with respect to only part of the property transferred, the amount to be included in the decedent's gross estate under section 2036 is the corresponding proportionate amount of the corpus. Rev. Rul. 76-273, 1976-2 CB 268, and Rev. Rul. 82-105, 1982-1 CB 133 (See § 601.601(d)(2)), generally provide that the portion of the corpus of a CRUT and CRAT includible in the decedent's gross estate under section 2036 is that portion of the trust corpus necessary to generate a return sufficient to provide the decedent's retained annuity or unitrust payment. Rev. Rul. 76-273 considers a situation where the decedent created an intervivos trust that provided for a stated unitrust percentage of 6 percent to be paid each year to the decedent during life. At the decedent's death, the remainder is to be paid to a charitable organization. The revenue ruling concludes that, for purposes of section 2036(a), the portion of the value of the trust corpus includible in the decedent's gross estate is the portion necessary to yield (at the then current interest rate specified under the applicable regulations) the amount of the annual unitrust payment in perpetuity. Based upon the valuation rules and interest rate assumptions specified in § 20.2031-10 (the regulations applicable at the time the ruling was issued), the revenue ruling provides the following formula to be used to determine this includible portion of the trust corpus: Equivalent income interest rate divided by the interest rate mandated by the applicable regulations at the date of death, where the equivalent income interest rate = adjusted payout rate/1 minus adjusted payout rate. The result, however, is limited to 100 percent of the trust corpus. (Since the issuance of this revenue ruling, the regulations (§ 20.2031-7(d)(1)) have been changed to instead require the use of the section 7520 interest rate in lieu of the rate specified in § 20.2031-10). The revenue ruling concludes that, because the equivalent income interest of the unitrust payment exceeds the equivalent income interest required to produce that unitrust payment, the grantor retained an interest in the entire corpus of the trust, and thus the entire trust corpus is includible in the deceased grantor's gross estate under section 2036. Rev. Rul. 82-105 considers a situation where the decedent created an intervivos CRAT, pursuant to which the decedent retained the right to receive a fixed annuity for life. The ruling confirms that the decedent's retained annuity represents the retained right to receive all of the income from all or a specific portion of the trust for purposes of section 2036. That portion of the trust corpus with respect to which the decedent retained a right to receive all of the income is properly includible in the decedent's gross estate under section 2036(a)(1). Under the ruling, the amount of the corpus with respect to which the decedent retained the income is that amount of corpus that would be sufficient to yield the annual annuity based on the assumed rate of return prescribed by the regulations as of the applicable valuation date. The ruling prescribes the following formula for this determination: (Annual Annuity) / (Assumed Rate of Return) = Amount Includible. Assuming a rate of return of 6 percent, as specified under § 20.2031-10 (the regulation applicable at the time the ruling was issued), the ruling concludes that only a portion of the trust's corpus is includible in the deceased grantor's gross estate. (Since the issuance of this revenue ruling, the regulations (§ 20.2031-7(d)(1)) have been changed to instead require the use of the section 7520 interest rate in place of the rate specified in § 20.2031-10.) Rev. Rul. 82-105 expressly qualifies this conclusion by stating that the ruling does not consider the amount, if any, that may be includible in the gross estate under any other provisions of the Code. Section 2039(a) provides that a decedent's gross estate includes the value of an annuity or other payment under any form of contract or agreement (other than an insurance policy on the decedent's life) receivable by any beneficiary by reason of surviving the decedent if, under the contract or agreement, an annuity or other payment was payable to the decedent, or the decedent possessed the right to receive such annuity or other payment, for the decedent's life or for any period not ascertainable without reference to the decedent's death, or for any period that does not in fact end before the decedent's death. Section 2039(b) provides, in part, that the amount includible in the decedent's gross estate is limited to that portion of the value of the annuity or other payment receivable under the contract or agreement as is proportionate to the portion of the purchase price of the contract or agreement that was contributed by the decedent. Section 20.2039-1(b)(1) provides, in part, that the term “annuity or other payment,” as used with respect to both the payment receivable by the decedent and by the beneficiary, has reference to one or more payments extending over any period of time, whether the payments are equal or unequal, conditional or unconditional, periodic or sporadic. The term “contract or agreement” includes any arrangement, understanding, or plan, or any combination of them, arising by reason of the decedent's employment. Section 20.2039-1(b)(1). As is acknowledged in Rev. Rul. 82-105, section 2036 as well as other sections of the Code might apply to the same interest or trust for purposes of the Federal estate tax. Although either section 2036 or section 2039 may be applied to include at least some portion of a trust in the decedent's gross estate if the decedent transfers property during life to a trust and retains the right to use the trust's property or the right to an annuity, unitrust, or other payment from the trust, the amount includible may differ depending upon which section is applied for this purpose. Explanation of Provisions The proposed regulations amend § 20.2036-1 to incorporate the guidance provided in Rev. Rul. 76-273 and Rev. Rul. 82-105. The proposed regulations provide that, if a decedent transfers property during life to a trust and retains the right to an annuity, unitrust, or other income payment from, or retains the use of an asset in, the trust for the decedent's life, for a period that does not in fact end before the decedent's death, or for a period not ascertainable without reference to the decedent's death, the decedent has retained the right to income from all or a specific portion of the property transferred as described in section 2036. The portion of the trust corpus includible in the decedent's gross estate is that portion of the trust corpus, valued as of the decedent's death (or the alternate valuation date, if applicable) necessary to yield that annual payment (or use) using the appropriate section 7520 interest rate. In this regard, because the specific portion of corpus includible in the gross estate is properly determined as of the decedent's death, the appropriate section 7520 rate is the rate in effect on the decedent's date of death (or on the alternate valuation date, if applicable). The proposed regulations provide both rules and examples for calculating the amount of trust corpus to be included in a deceased grantor's gross estate under section 2036 in such a case. The IRS and Treasury Department believe that in many cases both section 2036 and section 2039 may be applicable to these annuity and unitrust interests and to such other payments retained by a deceased grantor. Although the language of section 2039 is broad enough to include all or a portion of a trust's corpus if the grantor retains an annuity or unitrust interest in, or other payments from, a trust, the IRS and Treasury Department believe that, in the interest of ensuring similar tax treatment for similarly situated taxpayers, it is appropriate in this circumstance to provide regulatory rules under which only one of these two potentially applicable Code sections (section 2036 and section 2039) will be applied in the future. For the reasons mentioned below, the IRS and Treasury Department have concluded that section 2036 (and therefore, when applicable, section 2035), rather than section 2039, will be applied in the future to these interests. First, section 2039 appears to have been intended to address annuities purchased by or on behalf of the decedent and annuities provided by the decedent's employer. Second, the interests retained by grantors in the types of trusts described in this guidance are more similar in most relevant respects to the interests addressed under section 2036 than those most clearly addressed under section 2039. Accordingly, the proposed regulations also amend § 20.2039-1(b)(1) by providing that section 2039 shall not be applied to an annuity, unitrust, or other payment retained by a deceased grantor in a CRT or GRT. Although these proposed regulations provide guidance as to which section of the Code (specifically, section 2036 or section 2039) is to be used in certain circumstances when each of those sections applies to the same CRT or GRT, these proposed regulations should not be construed to imply that only one section of the Code may apply to a particular situation or interest. These proposed regulations are not intended to foreclose the possibility that any applicable section of the Code (sections 2035 through 2039, or any other section) properly may be applied in the future by the IRS in appropriate circumstances beyond those described in these proposed regulations. (For example, although section 2039 generally will apply to govern the includability of annuities purchased by or on behalf of the decedent and annuities provided by the decedent's employer in the decedent's gross estate, section 2036 may instead be applied if the facts and circumstances indicate that the annuity constituted a retained interest in the property exchanged for that annuity.) Proposed Effective Date The first, second, and fourth sentences in § 20.2039-1(a) and the provisions in § 20.2036-1(a)(1), (a)(2), and (c)(1)(i) are applicable to the estates of decedents dying after August 16, 1954. The fifth sentence of § 20.2039-1(a) is applicable to the estates of decedents dying on or after October 27, 1972, and to the estates of decedents for which the period for filing a claim for credit or refund of an estate tax overpayment ends on or after October 27, 1972. The provisions of § 20.2036-1(c)(1)(ii) and (2), § 20.2039-1(e), and the third, sixth, and seventh sentences of § 20.2039-1(a) apply to the estates of decedents for which the valuation date of the gross estate is on or after the date of publication of the Treasury decision adopting these rules as final regulations in the **Federal Register** . Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations and, because these regulations do not impose on small entities a collection of information requirement, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight
(8)copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department also request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing has been scheduled for September 26, 2007 in the auditorium Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must use the main building entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For more information about having your name placed on the list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written (a signed original and eight
(8)copies) or electronic comments by September 5, 2007 and an outline of the topics to be discussed and the time to be devoted to each topic by September 5, 2007. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal author of these regulations is Theresa M. Melchiorre, Office of Chief Counsel, IRS. List of Subjects in 26 CFR Part 20 Estate taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, 26 CFR part 20 is proposed to be amended as follows: PART 20—ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 **Paragraph 1.** The authority citation for part 20 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 20.2036-1 is amended by: 1. Redesignating paragraphs (a)(i) and (a)(ii) as paragraphs (a)(1) and (a)(2), respectively. 2. Designating the undesignated text following newly-designated paragraph (a)(2) as paragraph (c)(1)(i) and adding new paragraph headings. 3. Adding paragraphs (c)(1)(ii), (c)(2), and (c)(3). The additions read as follows: § 20.2036-1 Transfers with retained life estate.
(c)*Retained or reserved interest* —(1) *Amount included in gross estate* —(i) *In general* .* * *
(ii)*Example.* The application of paragraph (c)(1)(i) of this section is illustrated in the following example: *Example.* In 2001, Decedent
(D)creates an irrevocable intervivos trust. The terms of the trust provide that all of the trust's income is to be paid to D and E, D's spouse who is a U.S. citizen, in equal shares during their joint lives and, on the death of either of them, all of the income is to be paid to the survivor of them. On the death of the survivor of D and E, the remainder is to be paid to another individual, F. In 2006, D dies with E still surviving. A portion of the trust's corpus is includible in D's gross estate because D retained the right to receive a portion of the income from the trust for a period that does not in fact end before D's death. The portion of the trust's corpus includible in D's gross estate bears the same ratio to the entire corpus as D's income interest in the trust bears to the entire income interest in the trust. Therefore, in this case, because D and E share equally in the trust's income, 50 percent of the trust's corpus is includible in D's gross estate under section 2036. If instead E had predeceased D, D would have died while entitled to all of the income from the trust, so that the entire trust corpus would have been includible in D's gross estate under section 2036.
(2)*Retained annuity and unitrust interests in trusts* —(i) *In general.* This paragraph (c)(2) applies to a grantor's retained use of an asset held in trust or a retained annuity, unitrust, or other income interest in any trust (other than a trust constituting an employee benefit) including without limitation the following (collectively referred to in this paragraph (c)(2) as “trusts”): Certain charitable trusts (collectively CRTs) such as a charitable remainder annuity trust
(CRAT)within the meaning of section 664(d)(1), a charitable remainder unitrust
(CRUT)within the meaning of section 664(d)(2) or (d)(3), and any charitable remainder trust that does not qualify under section 664(d), as well as other trusts established by a grantor (collectively GRTs) such as a grantor retained annuity trust (GRAT), a grantor retained unitrust (GRUT), and various other forms of grantor retained income trusts (GRITs), whether or not the grantor's retained interest is a qualified interest as defined in section 2702(b), including without limitation qualified personal residence trusts (QPRTs) and personal residence trusts (PRTs). If a decedent transferred property into such a trust, and retained or reserved the right to use such property or the right to an annuity, unitrust, other income interest in such trust with respect to the property so transferred by the decedent, or to determine the persons who may possess or enjoy the property or its income, for the decedent's life, for any period not ascertainable without reference to the decedent's death, or for a period that does not in fact end before the decedent's death, then the decedent's right to use the property or retained annuity, unitrust, or other income interest (or to designate the beneficiaries of the property) represents the retained right to receive all of the income from all or a specific portion of the trust for purposes of section 2036. The portion of the trust's corpus includible in the decedent's gross estate for Federal estate tax purposes is that portion of the trust corpus necessary to yield the decedent's retained use or retained annuity, unitrust, other income payment as determined in accordance with § 20.2031-7 (or § 20.2031-7A, if applicable).
(ii)*Examples.* The application of paragraph (c)(2)(i) of this section is illustrated in the following examples: Example 1.
(i)In 2000, Decedent
(D)transferred $100,000 to a trust that qualifies as a CRAT under section 664(d)(1). The trust agreement provides for an annuity of $12,000 to be paid each year to D for D's life, then to D's child
(C)for C's life, with the remainder to be distributed upon the survivor's death to N, a charitable organization described in sections 170(c), 2055(a), and 2522(a). The annuity is payable to D or C, as the case may be, annually on each December 31st. D died in 2006, survived by C who was then age 40. On D's death, the value of the trust assets was $300,000 and the section 7520 interest rate was 6 percent. D's executor did not elect to use the alternate valuation date.
(ii)The amount of corpus with respect to which D retained the right to the income, and thus the amount includible in D's gross estate under section 2036, is that amount of corpus necessary to yield the annual annuity payment to D. In this case, the formula for determining the amount of corpus necessary to yield the annual annuity payment to D is: annual annuity/section 7520 interest rate = amount includible under section 2036. The amount of corpus necessary to yield the annual annuity is $12,000/.06 = $200,000. Therefore, $200,000 is includible in D's gross estate under section 2036(a)(1). (The result would be the same if D had irrevocably relinquished D's annuity interest no more than 3 years prior to D's death because of the application of section 2035.) D's estate is entitled to a charitable deduction under section 2055 for the present value of N's remainder interest in the CRAT. The applicable annuity factor (based on C's age on D's death and the section 7520 rate applicable on that date) is 14.1646. Therefore, the present value of the annuity is $169,975.20 (14.1646×$12,000). As a result, the allowable charitable deduction for D's estate is $30,024.80 ($200,000—$169,975.20). Under the facts presented, the Internal Revenue Service
(IRS)will not seek (and the estate will not be permitted) to include under section 2039 any amount in D's gross estate by reason of this retained annuity. See § 20.2039-1(e). Example 2.
(i)D transferred $100,000 to a GRAT in which D's annuity is a qualified interest described in section 2702(b). The trust agreement provides for an annuity of $12,000 per year to be paid to D for a term of ten years or until D's earlier death. The annuity amount is payable at the end of each month in twelve equal installments. At the expiration of the term of years or on D's earlier death, the remainder is to be distributed to C, D's child. No additional contributions were made to the trust after D's transfer at the creation of the trust. D dies prior to the expiration of the ten-year term. On the date of D's death, the value of the trust assets was $300,000 and the section 7520 interest rate was 6 percent. D's executor did not elect to use the alternate valuation date.
(ii)The amount of corpus with respect to which D retained the right to the income, and thus the amount includible in D's gross estate under section 2036, is that amount of corpus necessary to yield the annual annuity payment to D. In this case, the formula for determining the amount of corpus necessary to yield the annual annuity payment to D is: annual annuity (adjusted for monthly payments)/section 7520 interest rate = amount includible under section 2036. The Table K adjustment factor for monthly annuity payments in this case is 1.0272. Thus, the amount of corpus necessary to yield the annual annuity is ($12,000×1.0272)/.06 = $205,440. Therefore, $205,440 is includible in D's gross estate under section 2036(a)(1). Under the facts presented, the IRS will not seek (and the estate will not be permitted) to include under section 2039 any amount in D's gross estate by reason of this retained annuity. See § 20.2039-1(e). Example 3.
(i)In 2000, D created a CRUT within the meaning of section 664(d)(2). The trust instrument directs the trustee to hold, invest, and reinvest the corpus of the trust and to pay to D for D's life, and then to D's child
(C)for C's life, in equal quarterly installments payable at the end of each calendar quarter, an amount equal to 6 percent of the fair market value of the trust as valued on December 15 of the prior taxable year of the trust. At the termination of the trust, the then corpus, together with any and all the accrued income, is to be distributed to N, a charitable organization described in sections 170(c), 2055(a), and 2522(a). D died in 2006, survived by C, who was then age 55. The value of the trust assets on D's death was $300,000 and D's executor did not elect to use the alternate valuation date.
(ii)The amount of the corpus with respect to which D retained the right to the income, and thus the amount includible in D's gross estate under section 2036, is that amount of corpus necessary to yield the unitrust payments. In this case, such amount of corpus is determined by dividing the trust's equivalent income interest rate by the section 7520 rate (which was 6 percent at the time of D's death). The equivalent income interest rate is determined by dividing the trust's adjusted payout rate by the excess of 1 over the adjusted payout rate. Based on § 1.664-4(e)(3) of the Income Tax Regulations, the appropriate adjusted payout rate for the trust at D's death is 5.786 percent (6 percent × .964365). Thus, the equivalent income interest rate is 6.141 percent (5.786 percent / (1—5.786 percent)). The ratio of the equivalent interest rate to the assumed interest rate under section 7520 is 102.35 percent (6.141 percent / 6 percent). Because this exceeds 100 percent, D's retained payout interest exceeds a full income interest in the trust, and D effectively retained the income from all the assets transferred to the trust. Accordingly, because D retained for life an interest at least equal to the right to the income from all the property transferred by D to the CRUT, the entire value of the corpus of the CRUT is includible in D's gross estate under section 2036(a)(1). D's estate is entitled to a charitable deduction under section 2055 for the present value of N's remainder interest in the CRAT. The remainder factor (based on C's age at D's death, the section 7520 rate in effect on D's death, and the timing and frequency of the payments) is 0.28253. Therefore, the charitable deduction allowable to D's estate is $84,759 ($300,000 x 0.28253). Under the facts presented, the IRS will not seek (and the estate will not be permitted) to include under section 2039 any amount in D's gross estate by reason of D's retained unitrust interest. See § 20.2039-1(e).
(iii)If instead D had retained the right to a unitrust amount having an adjusted payout for which the corresponding equivalent interest rate would be less than the 6 percent assumed interest rate of section 7520, then a correspondingly reduced proportion of the trust corpus would be includible in D's gross estate under section 2036(a)(1). Alternatively, if the interest retained by D was instead only one-half of the 6 percent unitrust interest, the computation of the portion of the trust includable in D's gross estate (set forth in *Example 3* (ii)) would be reduced by one-half. In each case, the amount of the estate's charitable deduction for the remainder interest in the trust also would be reduced. All of the results in this *Example 3* (except those relating to the charitable deduction) would be the same if the trust was a GRUT instead of a CRUT. Example 4. During D's life, D established a 15-year GRIT for the benefit of individuals who are not members of D's family within the meaning of section 2704(c)(2). D retained the right to receive all of the net income from the GRIT, payable annually, during the GRIT's term. D died during the third year of the GRIT term. D's executor did not elect to use the alternate valuation date. In this case, the GRIT's corpus is includible in D's gross estate under section 2036 because D retained the right to receive all of the income from the GRIT for a period that did not in fact end before D's death. If instead, D had retained the right to receive 60 percent of the GRIT's net income, then 60 percent of the GRIT's corpus would have been includible in D's gross estate under section 2036. Example 5. D transfered D's personal residence to a trust that met the requirements of a qualified personal residence trust
(QPRT)as set forth in § 25.2702-5(c) of this chapter. Pursuant to the terms of the QPRT, D retained the right to use the residence for 10 years or until D's prior death. D died before the end of the term. D's executor did not elect to use the alternate valuation date. In this case, the fair market value of the QPRT's assets on the date of D's death are includible in D's gross estate under section 2036 because D retained the right to use the residence for a period that did not in fact end before D's death.
(3)*Effective dates.* Paragraphs (a)(1), (a)(2), and (c)(1)(i) of this section are applicable to the estates of decedents dying after August 16, 1954. Paragraphs (c)(1)(ii) and (c)(2) of this section apply to the estates of decedents for which the valuation date of the gross estate is on or after the date of publication of the Treasury decision adopting these rules as final regulations in the **Federal Register** . **Par. 3** . Section 20.2039-1 is amended by: 1. Revising paragraph (a). 2. Adding a new paragraph (e). The revision and addition reads as follows: § 20.2039-1 Annuities.
(a)*In general.* A decedent's gross estate includes under section 2039(a) and
(b)the value of an annuity or other payment receivable by any beneficiary by reason of surviving the decedent under certain agreements or plans to the extent that the value of the annuity or other payment is attributable to contributions made by the decedent or his employer. Section 2039(a) and (b), however, has no application to an amount which constitutes the proceeds of insurance under a policy on the decedent's life. Paragraph
(b)of this section describes the agreements or plans to which section 2039(a) and
(b)applies; paragraph
(c)of this section provides rules for determining the amount includible in the decedent's gross estate; paragraph
(d)of this section distinguishes proceeds of life insurance; and paragraph
(e)of this section distinguishes annuity, unitrust, and other income interests retained by a decedent in certain trusts. The fact that an annuity or other payment is not includible in a decedent's gross estate under section 2039(a) and
(b)does not mean that it is not includible under some other section of part III of subchapter A of chapter 11. However, see section 2039(c) and
(d)and § 20.2039-2 for rules relating to the exclusion from a decedent's gross estate of annuities and other payments under certain “qualified plans.” Further, the fact that an annuity or other payment may be includible under section 2039(a) will not preclude the application of another section of chapter 11 with regard to that interest. For annuity interests in trust, see paragraph (e)(1) of this section. (e)(1) *No application to certain trusts.* Section 2039 shall not be applied to include in a decedent's gross estate all or any portion of a trust (other than a trust constituting an employee benefit, but including those described in the following sentence) if the decedent retained a right to use property of the trust or retained an annuity, unitrust, or other income interest in the trust, in either case as described in section 2036. Such trusts include without limitation the following (collectively referred to in this paragraph (e)(1) as “trusts”): certain charitable trusts (collectively CRTs) such as a charitable remainder annuity trust
(CRAT)within the meaning of section 664(d)(1), a charitable remainder unitrust
(CRUT)within the meaning of section 664(d)(2) or (d)(3), and any other charitable remainder trust that does not qualify under section 664(d), as well as other trusts established by a grantor (collectively GRTs) such as a grantor retained annuity trust (GRAT), a grantor retained unitrust (GRUT), and various forms of grantor retained income trusts (GRITs), whether or not the grantor's retained interest is a qualified interest as defined in section 2702(b), including without limitation qualified personal residence trusts (QPRTs) and personal residence trusts (PRTs). For purposes of determining the extent to which a retained interest causes all or a portion of a trust to be included in a decedent's gross estate, see § 20.2036-1(c)(1), (2), and (3).
(2)*Effective date.* The first, second, and fourth sentences in paragraph
(a)of this section are applicable to the estates of decedents dying after August 16, 1954. The fifth sentence of paragraph
(a)of this section is applicable to the estates of decedents dying on or after October 27, 1972, and to the estates of decedents for which the period for filing a claim for credit or refund of an estate tax overpayment ends on or after October 27, 1972. The third, sixth, and seventh sentences of paragraph
(a)of this section and this paragraph
(e)are applicable to the estates of decedents for which the valuation date of the gross estate is on or after the date of publication of the Treasury decision adopting these rules as final regulations in the **Federal Register** . Kevin M. Brown, Deputy Commissioner for Services and Enforcement. [FR Doc. E7-11062 Filed 6-6-07; 8:45 am] BILLING CODE 4830-01-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 51 and 52 [EPA-HQ-OAR-2005-0163; FRL-8321-9] RIN-2060-AN28 Supplemental Notice of Proposed Rulemaking for Prevention of Significant Deterioration
(PSD)and Nonattainment New Source Review (NSR): Emission Increases for Electric Generating Units AGENCY: Environmental Protection Agency (EPA). ACTION: Notice of public hearing. SUMMARY: The EPA is announcing a public hearing to be held on June 29, 2007 for the supplemental proposed rule on “Prevention of Significant Deterioration
(PSD)and Nonattainment New Source Review (NSR): Emission Increases for Electric Generating Units.” This rulemaking action was published in the **Federal Register** on May 8, 2007 and proposes options to change the emissions increase test used to determine if the NSR permitting program would apply when an existing power plant makes a physical or operational change. The public hearing will provide interested parties the opportunity to present data, views, or arguments concerning these proposed changes. DATES: The public hearing will convene at 9 a.m. on June 29, 2007, and continue until 1 hour after the last registered speaker has spoken. People wishing to present oral testimony must pre-register by 5 p.m. on June 28, 2007. The EPA is willing to keep the public hearing open into the evening hours of June 29, 2007, if speakers are pre-registered by the registration deadline of 5 p.m. on June 28, 2007, and have registered to speak during evening hours. For updates and additional information on the public hearing, please check EPA's Web site for this rulemaking at *http://www.epa.gov.nsr/.* ADDRESSES: The public hearing will be held at U.S. Environmental Protection Agency, 109 TW Alexander Drive, Research Triangle Park, North Carolina 27709, Building C, Auditorium. Because this hearing is being held at U.S. government facilities, everyone planning to attend the hearing should be prepared to show valid picture identification to the security staff in order to gain access to the meeting room. In addition, you will need to obtain a property pass for any personal belongings you bring with you. Upon leaving the building, you will be required to return this property pass to the security desk. No large signs will be allowed in the building, cameras may only used inside the classroom and outside of the building, and demonstrations will not be allowed on Federal property for security reasons. Directions to the EPA Campus are available on the Internet at *http://www.epa.gov/rtp/facilities/maindirections.htm* , along with a map showing the area designated for visitor parking. From there, walk toward the main facility and enter the center building (by the U.S. and EPA flags). FOR FURTHER INFORMATION CONTACT: If you would like to speak at the public hearing or have questions concerning the public hearing, please contact Ms. Pamela Long, U.S. Environmental Protection Agency, OAQPS, Air Quality Planning Division, (C504-03), Research Triangle Park, NC 27711, telephone
(919)541-0641, fax number
(919)541-5509, e-mail address, *long.pam@epa.gov* . Questions concerning the May 8, 2007, proposed rule should be addressed to Mr. David Svendsgaard, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Policy Division, (C504-03), Research Triangle Park, NC 27711, telephone number
(919)541-2380, e-mail at *svendsgaard.dave@epa.gov.* SUPPLEMENTARY INFORMATION: The May 8, 2007, proposed rule is a supplemental notice to EPA's October 20, 2005 notice of proposed rulemaking. In the October 2005 notice, we proposed three options to revise the NSR emissions test for existing electric generating units: A maximum achievable hourly emissions test, a maximum achieved hourly emissions test, and an output-based hourly emissions test. The May 2007 notice recast the previously proposed options so that the output-based test becomes an alternative method to implement the maximum achieved or maximum achievable hourly tests, rather than a separate option. It also proposed a new option in which the hourly emissions increase test is added to the existing requirements for computing a significant increase and a significant net emissions increase on an annual basis. It also included proposed rule language and supplemental information for the October 2005 proposal, including an examination of the impacts on emissions and air quality. *Public hearing:* The proposal for which EPA is holding the public hearing was published in the **Federal Register** on May 8, 2007, (72 FR 26202) and is available at: *http://www.access.gpo.gov/su_docs/fedreg/a070508c.html* . The public hearing will provide interested parties the opportunity to present data, views, or arguments concerning the supplemental rule proposal. The EPA may ask clarifying questions during the oral presentations, but will not respond to the presentations at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as any oral comments and supporting information presented at the public hearing. Written comments on the proposed rule must be postmarked by July 9, 2007, which is the closing date for the comment period, as specified in the proposal for the rule. However, the record will remain open until July 30, 2007, to allow 30 days after the public hearing for submittal of additional information related to the hearing. Commenters should notify Ms. Long if they will need specific equipment, or if there are other special needs related to providing comments at the hearing. The EPA will provide equipment for commenters to show overhead slides or make computerized slide presentations if we receive special requests in advance. Oral testimony will be limited to 5 minutes for each commenter. The EPA encourages commenters to provide EPA with a copy of their oral testimony electronically (via e-mail or CD) or in hard copy form. The hearing schedule, including lists of speakers, will be posted on EPA's Web site *http://www.epa.gov/nsr/* . Verbatim transcripts of the hearing and written statements will be included in the docket for the rulemaking. How Can I Get Copies of This Document and Other Related Information? The EPA has established the official public docket for the supplemental proposed rule entitled “Supplemental Notice of Proposed Rulemaking for Prevention of Significant Deterioration
(PSD)and Nonattainment New Source Review (NSR): Emission Increases for Electric Generating Units” under Docket ID No. EPA-HQ-OAR-2005-0163. As stated previously, the proposed rule was published in the **Federal Register** on May 8, 2007 (72 FR 26202) and is available at *http://www.access.gpo.gov/su_docs/fedreg/a070508c.html.* Dated: May 29, 2007. Jenny Noonan Edmonds, Acting Director, Office of Air Quality Planning and Standards. [FR Doc. E7-10855 Filed 6-6-07; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R06-OAR-2007-0386; FRL-8321-8] Approval and Promulgation of Air Quality Implementation Plans; Texas; Revision to the Texas State Implementation Plan Regarding a Negative Declaration for the Synthetic Organic Chemical Manufacturing Industry Batch Processing Source Category in El Paso County AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: Section 172(c)(1) of the Clean Air Act
(CAA)requires areas that are not attaining a National Ambient Air Quality Standard (NAAQS) to reduce emissions from existing sources by adopting, at a minimum, reasonably available control technology (RACT). EPA has established source categories for which RACT must be implemented. If no major sources of volatile organic compound
(VOC)emissions in a particular source category exist in a nonattainment area, a State may submit a negative declaration for that category. Texas submitted a State Implementation Plan
(SIP)revision which included negative declarations for certain source categories in the El Paso 1-hour ozone standard nonattainment area. EPA previously approved the State's declaration that no major sources existed for 9 source categories in the El Paso area. In the approval EPA neglected to approve the negative declaration for the synthetic organic chemical manufacturing industry (SOCMI) batch processing category in the El Paso area. EPA is proposing to approve this negative declaration for the El Paso 1-hour ozone standard nonattainment area. DATES: Written comments must be received by July 9, 2007. ADDRESSES: Comments may be mailed to Mr. Carl Young, Acting Chief, Air Planning Section (6PD-L), Environmental Protection Agency, 1445 Ross Avenue, Suite 1200, Dallas, Texas 75202-2733. Comments may also be submitted electronically or through hand delivery/courier by following the detailed instructions in the ADDRESSES section of the direct final rule located in the rules section of this **Federal Register** . FOR FURTHER INFORMATION CONTACT: Jeffrey Riley, Air Planning Section (6PD-L), Environmental Protection Agency, Region 6, 1445 Ross Avenue, Suite 700, Dallas, Texas 75202-2733, telephone 214-665-8542; fax number 214-665-7263; e-mail address *riley.jeffrey@epa.gov* . SUPPLEMENTARY INFORMATION: In the final rules section of this **Federal Register** , EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no relevant adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no relevant adverse comments are received in response to this action, no further activity is contemplated. If EPA receives relevant adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of the rule, and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. For additional information, see the direct final rule which is located in the rules section of this **Federal Register** . Dated: May 21, 2007. Richard E. Greene, Regional Administrator, Region 6. [FR Doc. E7-10766 Filed 6-6-07; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R03-OAR-2007-0200; FRL-8323-1] Approval and Promulgation of Air Quality Implementation Plans; Virginia; Amendments to the Open Burning Regulation AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: EPA is proposing to approve a State Implementation Plan
(SIP)revision submitted by the Commonwealth of Virginia. This SIP revision pertains to the amendments of Virginia's open burning regulation. This action is being taken under the Clean Air Act (CAA or the Act). DATES: Written comments must be received on or before July 9, 2007. ADDRESSES: Submit your comments, identified by Docket ID Number EPA-R03-OAR-2007-0200 by one of the following methods: A. *www.regulations.gov.* Follow the on-line instructions for submitting comments. B. *E-mail: miller.linda@epa.gov.* C. *Mail:* EPA-R03-OAR-2007-0200, Linda Miller, Acting Chief, Air Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. D. *Hand Delivery:* At the previously-listed EPA Region III address. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information. *Instructions:* Direct your comments to Docket ID No. EPA-R03-OAR-2007-0200. EPA's policy is that all comments received will be included in the public docket without change, and may be made available online at *www.regulations.gov,* including any personal information provided, unless the comment includes information claimed to be Confidential Business Information
(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through *www.regulations.gov* or e-mail. The *www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through www.regulations.gov, your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. *Docket:* All documents in the electronic docket are listed in the *www.regulations.gov* index. Although listed in the index, some information is not publicly available, *i.e.* , CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in *www.regulations.gov* or in hard copy during normal business hours at the Air Protection Division, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal are available at the Virginia Department of Environmental Quality, 629 East Main Street, Richmond, Virginia, 23219. FOR FURTHER INFORMATION CONTACT: Rose Quinto,
(215)814-2182, or by e-mail at *quinto.rose@epa.gov.* SUPPLEMENTARY INFORMATION: I. Background On February 5, 2007, the Virginia Department of Environmental Quality (VADEQ) submitted a revision to its State Implementation Plan
(SIP)for Open Burning Regulation. The SIP revision consists of regulation amendments to the April 26, 1996 submittal. The SIP revision expands the geographic applicability of the control measure to implement the open burning seasonal restrictions as part of its plans to reduce and maintain volatile organic compound
(VOC)emissions in VOC emissions control areas in Virginia. The amendments include: 9 VAC 5-40-5600—Applicability; 9 VAC 5-40-5610—Definitions; 9 VAC 5-40-5620—Open Burning Prohibitions; and 9 VAC 5-40-5630—Permissible Open Burning. II. Summary of SIP Revision Virginia's Open Burning Regulation (9 VAC 5 Chapter 40) applies to any person who permits or engages in open burning or who permits or engages in burning using special incineration devices. A special incineration device is a pit incinerator, conical or teepee burner, or any other device specifically designed to provide combustion performance. Modifications of 9 VAC 5 Chapter 40 are made to ensure that the regulation is consistent with the existing incinerator regulations of the board and waste management regulations. The provisions of this amended regulation are applicable only in the volatile organic emission control areas identified in 9 VAC 5-20-206 of the Virginia Regulations during the months of May, June, July, August and September. The volatile organic emission control areas applicable to this regulation include: 1. Western Virginia Emissions Control Area: Botetourt County, Frederick County, Roanoke County, Salem County and Winchester County. 2. Northern Virginia Emissions Control Area: Arlington County, Fairfax County, Loudon County, Prince William County, Stafford County, Alexandria City, Fairfax City, Falls Church City, Manassas City and Manassas Park City. 3. Hampton Roads Emissions Control Area: James City County, York County, Chesapeake City, Hampton City, Newport News City, Norfolk City, Poquoson City, Portsmouth City, Suffolk County, Virginia Beach City and Williamsburg City. 4. Richmond Emissions Control Area: Charles City County, Chesterfield County, Hanover County, Henrico County, Colonial Heights City, Hopewell City and Richmond City. 5. Fredericksburg Emissions Control Area: Spotsylvania County and Fredericksburg City. Definitions included in this SIP revision are: Air curtain incinerator, clean burning waste, clean lumber, clean wood, commercial waste, construction waste, debris waste, demolition waste, garbage, hazardous waste, household waste, industrial waste, landfill, local landfill, open burning, open pit incinerator, refuse, salvage operation, sanitary landfill, special incineration device, wood waste, and yard waste. This SIP revision provides for the control of open burning and use of special incineration devices for destruction of rubber tires, asphaltic materials, crankcase oil, impregnated wood or other rubber or petroleum based materials except when conducting bona fide fire fighting instruction at fire fighting training schools having permanent facilities. This SIP revision also provides for the control of open burning and use of special incineration device for the destruction of hazardous waste or containers for such materials. In addition, this SIP revision provides for the control of open burning and use of special incineration device for the purpose of salvage operation or for the destruction of commercial/industrial waste. Open burning or the use of special incineration devices is permitted on-site for the destruction of clean burning waste and debris waste resulting from property maintenance, from the development or maintenance of roads and highways, parking areas, railroad tracks, pipelines, power and communication lines, buildings or building areas, sanitary landfills, or from any other clearing operations. Such destruction is prohibited in the VOC emissions control areas (see 9 VAC 5-20-206) during May, June, July, August and September. Open burning or the use of special incineration devices is also permitted for the destruction of clean burning waste and debris waste on the site of local landfills provided that the burning does not take place on land that has been filled and covered so as to present an underground fire hazard due to the presence of methane gas. Such destruction is prohibited in the VOC emissions control areas (see 9 VAC 5-20-206) during May, June, July, August and September. III. General Information Pertaining to SIP Submittals From the Commonwealth of Virgina In 1995, Virginia adopted legislation that provides, subject to certain conditions, for an environmental assessment (audit) “privilege”' for voluntary compliance evaluations performed by a regulated entity. The legislation further addresses the relative burden of proof for parties either asserting the privilege or seeking disclosure of documents for which the privilege is claimed. Virginia's legislation also provides, subject to certain conditions, for a penalty waiver for violations of environmental laws when a regulated entity discovers such violations pursuant to a voluntary compliance evaluation and voluntarily discloses such violations to the Commonwealth and takes prompt and appropriate measures to remedy the violations. Virginia's Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-1198, provides a privilege that protects from disclosure documents and information about the content of those documents that are the product of a voluntary environmental assessment. The Privilege Law does not extend to documents or information
(1)That are generated or developed before the commencement of a voluntary environmental assessment;
(2)that are prepared independently of the assessment process;
(3)that demonstrate a clear, imminent and substantial danger to the public health or environment; or
(4)that are required by law. On January 12, 1998, the Commonwealth of Virginia Office of the Attorney General provided a legal opinion that states that the Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege to documents and information “required by law,” including documents and information “required by Federal law to maintain program delegation, authorization or approval,” since Virginia must “enforce Federally authorized environmental programs in a manner that is no less stringent than their Federal counterparts. * * *” The opinion concludes that “[r]egarding § 10.1-1198, therefore, documents or other information needed for civil or criminal enforcement under one of these programs could not be privileged because such documents and information are essential to pursuing enforcement in a manner required by Federal law to maintain program delegation, authorization or approval.” Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that “[t]o the extent consistent with requirements imposed by Federal law,” any person making a voluntary disclosure of information to a state agency regarding a violation of an environmental statute, regulation, permit, or administrative order is granted immunity from administrative or civil penalty. The Attorney General's January 12, 1998 opinion states that the quoted language renders this statute inapplicable to enforcement of any Federally authorized programs, since “no immunity could be afforded from administrative, civil, or criminal penalties because granting such immunity would not be consistent with Federal law, which is one of the criteria for immunity.” Therefore, EPA has determined that Virginia's Privilege and Immunity statutes will not preclude the Commonwealth from enforcing its program consistent with the Federal requirements. In any event, because EPA has also determined that a state audit privilege and immunity law can affect only state enforcement and cannot have any impact on Federal enforcement authorities, EPA may at any time invoke its authority under the Clean Air Act, including, for example, sections 113, 167, 205, 211 or 213, to enforce the requirements or prohibitions of the state plan, independently of any state enforcement effort. In addition, citizen enforcement under section 304 of the Clean Air Act is likewise unaffected by this, or any, state audit privilege or immunity law. IV. Proposed Action In implementing the open burning restrictions, this amended regulation (9 VAC 5 Chapter 40) will reduce and maintain VOC emissions in the volatile organic emission control areas identified in 9 VAC 5-20-206 of the Virginia regulations. EPA is proposing to approve the Virginia SIP revision for the Open Burning Regulation submitted on February 5, 2007. EPA is soliciting public comments on the issues discussed in this document. These comments will be considered before taking final action. V. Statutory and Executive Order Reviews Under Executive Order 12866 (58 FR 51735, October 4, 1993), this proposed action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)). This action merely proposes to approve State law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). Because this rule proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). This proposed rule also does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely proposes to approve a state rule implementing a Federal requirement, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This proposed rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it approves a state rule implementing a Federal standard. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this proposed rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings” issued under the executive order. This proposed rule pertaining to the amendments of Virginia's Open Burning Regulation, does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). List of Subjects in 40 CFR Part 52 Environmental protection, Air pollution control, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds. Authority: 42 U.S.C. 7401 *et seq.* Dated: May 31, 2007. William T. Wisniewski, Acting Regional Administrator, Region III. [FR Doc. E7-11038 Filed 6-6-07; 8:45 am] BILLING CODE 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 52 and 81 [EPA-R03-OAR-2007-0245; FRL-8322-8] Approval and Promulgation of Air Quality Implementation Plans; Pennsylvania; Redesignation of the Altoona 8-Hour Ozone Nonattainment Area to Attainment and Approval of the Associated Maintenance Plan and 2002 Base-Year Inventory AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: EPA is proposing to approve a redesignation request and State Implementation Plan
(SIP)revisions submitted by the Commonwealth of Pennsylvania. The Pennsylvania Department of Environmental Protection (PADEP) is requesting that the Altoona ozone nonattainment area (“Altoona Area” or “Area”) be redesignated as attainment for the 8-hour ozone national ambient air quality standard (NAAQS). The Area is comprised of Blair County, Pennsylvania. EPA is proposing to approve the ozone redesignation request for the Altoona Area. In conjunction with its redesignation request, the Commonwealth submitted a SIP revision consisting of a maintenance plan for the Altoona Area that provides for continued attainment of the 8-hour ozone NAAQS for at least 10 years after redesignation. EPA is proposing to make a determination that the Altoona Area has attained the 8-hour ozone NAAQS, based upon three years of complete, quality-assured ambient air quality monitoring data for 2003-2005. EPA's proposed approval of the 8-hour ozone redesignation request is based on its determination that the Altoona Area has met the criteria for redesignation to attainment specified in the Clean Air Act (CAA). In addition, the Commonwealth of Pennsylvania has also submitted a 2002 base-year inventory for the Altoona Area, and EPA is proposing to approve that inventory for the Altoona Area as a SIP revision. EPA is also providing information on the status of its adequacy determination for the motor vehicle emission budgets (MVEBs) that are identified in the maintenance plan for the Altoona Area for purposes of transportation conformity, and is also proposing to approve those MVEBs. EPA is proposing approval of the redesignation request and of the maintenance plan and 2002 base-year inventory SIP revisions in accordance with the requirements of the CAA. DATES: Written comments must be received on or before July 9, 2007. ADDRESSES: Submit your comments, identified by Docket ID Number EPA-R03-OAR-2007-0245 by one of the following methods: A. *www.regulations.gov.* Follow the on-line instructions for submitting comments. B. *E-mail: miller.linda@epa.gov* C. *Mail:* EPA-R03-OAR-2007-0245, Linda Miller, Acting Chief, Air Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. D. *Hand Delivery:* At the previously-listed EPA Region III address. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information. *Instructions:* Direct your comments to Docket ID No. EPA-R03-OAR-2007-0245. EPA's policy is that all comments received will be included in the public docket without change, and may be made available online at *www.regulations.gov,* including any personal information provided, unless the comment includes information claimed to be Confidential Business Information
(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through *www.regulations.gov* or e-mail. The *www.regulations.gov* Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through *www.regulations.gov* , your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. *Docket:* All documents in the electronic docket are listed in the *www.regulations.gov* index. Although listed in the index, some information is not publicly available, i.e., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in *www.regulations.gov* or in hard copy during normal business hours at the Air Protection Division, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal are available at the Pennsylvania Department of Environmental Protection Bureau of Air Quality Control, P.O. Box 8468, 400 Market Street, Harrisburg, Pennsylvania 17105. FOR FURTHER INFORMATION CONTACT: Amy Caprio,
(215)814-2156, or by e-mail at *caprio.amy@epa.gov* SUPPLEMENTARY INFORMATION: Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. Table of Contents I. What Are the Actions EPA Is Proposing To Take? II. What Is the Background for These Proposed Actions? III. What Are the Criteria for Redesignation to Attainment? IV. Why Is EPA Taking These Actions? V. What Would Be the Effect of These Actions? VI. What Is EPA's Analysis of the Commonwealth's Request? VII. Are the Motor Vehicle Emissions Budgets Established and Identified in the Maintenance Plan for the Altoona Area Adequate and Approvable? VIII. Proposed Actions IX. Statutory and Executive Order Reviews I. What Are the Actions EPA Is Proposing To Take? On February 8, 2007, the PADEP formally submitted a request to redesignate the Altoona Area from nonattainment to attainment of the 8-hour NAAQS for ozone. Concurrently, Pennsylvania submitted a maintenance plan for the Altoona Area as a SIP revision to ensure continued attainment in the Area over the next 11 years. PADEP also submitted a 2002 base-year inventory for the Altoona Area as a SIP revision. The Altoona Area is comprised of Blair County. It is currently designated a basic 8-hour ozone nonattainment area. EPA is proposing to determine that the Altoona Area has attained the 8-hour ozone NAAQS and that it has met the requirements for redesignation pursuant to section 107(d)(3)(E) of the CAA. EPA is, therefore, proposing to approve the redesignation request to change the designation of the Altoona Area from nonattainment to attainment for the 8-hour ozone NAAQS. EPA is also proposing to approve the Altoona maintenance plan as a SIP revision for the Area (such approval being one of the CAA criteria for redesignation to attainment status). The maintenance plan is designed to ensure continued attainment in the Altoona Area for the next 11 years. EPA is also proposing to approve the 2002 base-year inventory for the Altoona Area as a SIP revision. Additionally, EPA is announcing its action on the adequacy process for the MVEBs identified in the Altoona maintenance plan, and proposing to approve the MVEBs identified for volatile organic compounds
(VOCs)and nitrogen oxides (NO <sup>X</sup> ) for the Altoona Area for transportation conformity purposes. II. What Is the Background for These Proposed Actions? A. General Ground-level ozone is not emitted directly by sources. Rather, emissions of NO <sup>X</sup> and VOC react in the presence of sunlight to form ground-level ozone. The air pollutants NO <sup>X</sup> and VOC are referred to as precursors of ozone. The CAA establishes a process for air quality management through the attainment and maintenance of the NAAQS. On July 18, 1997, EPA promulgated a revised 8-hour ozone standard of 0.08 parts per million (ppm). This new standard is more stringent than the previous 1-hour standard. EPA designated, as nonattainment, any area violating the 8-hour ozone NAAQS based on the air quality data for the three years of 2001-2003. These were the most recent three years of data at the time EPA designated 8-hour areas. The Altoona Area was designated a basic 8-hour ozone nonattainment area in a **Federal Register** notice signed on April 15, 2004 and published on April 30, 2004 (69 FR 23857), based on its exceedance of the 8-hour health-based standard for ozone during the years 2001-2003. On April 30, 2004, EPA issued a final rule (69 FR 23951, 23996) to revoke the 1-hour ozone NAAQS in the Altoona Area (as well as most other areas of the country), effective June 15, 2005. *See,* 40 CFR 50.9(b); 69 FR at 23996 (April 30, 2004); 70 FR 44470 (August 3, 2005). However, on December 22, 2006, the U.S. Court of Appeals for the District of Columbia Circuit vacated EPA's Phase 1 Implementation Rule for the 8-hour Ozone Standard. (69 FR 23951, April 30, 2004). *See, South Coast Air Quality Management Dist.* v. *EPA* , 472 F.3d 882 (D.C. Cir. 2006) (hereafter “ *South Coast* .”). The Court held that certain provisions of EPA's Phase 1 Rule were inconsistent with the requirements of the Clean Air Act. The Court rejected EPA's reasons for implementing the 8-hour standard in nonattainment areas under subpart 1 in lieu of subpart 2 of Title I, part D of the Act. The Court also held that EPA improperly failed to retain four measures required for 1-hour nonattainment areas under the anti-backsliding provisions of the regulations:
(1)Nonattainment area New Source Review
(NSR)requirements based on an area's 1-hour nonattainment classification;
(2)Section 185 penalty fees for 1-hour severe or extreme nonattainment areas;
(3)measures to be implemented pursuant to section 172(c)(9) or 182(c)(9) of the Act, on the contingency of an area not making reasonable further progress toward attainment of the 1-hour NAAQS, or for failure to attain that NAAQS; and
(4)the certain conformity requirements for certain types of federal actions. The Court upheld EPA's authority to revoke the 1-hour standard provided there were adequate anti-backsliding provisions. Elsewhere in this document, mainly in section VI. B. “The Altoona Area Has Met All Applicable Requirements Under Section 110 and Part D of the CAA and Has a Fully Approved SIP Under Section 110(k) of the CAA,” EPA discusses its rationale why the decision in *South Coast* is not an impediment to redesignating the Altoona Area to attainment of the 8-hour ozone NAAQS. The CAA, title I, part D, contains two sets of provisions—subpart 1 and subpart 2—that address planning and control requirements for nonattainment areas. Subpart 1 (which EPA refers to as “basic” nonattainment) contains general, less prescriptive requirements for nonattainment areas for any pollutant—including ozone—governed by a NAAQS. Subpart 2 (which EPA refers to as “classified” nonattainment) provides more specific requirements for ozone nonattainment areas. In 2004, the Altoona Area was classified a basic 8-hour ozone nonattainment area based on air quality monitoring data from 2001-2003. Therefore, the Altoona Area is subject to the requirements of subpart 1 of part D. Under 40 CFR part 50, the 8-hour ozone standard is attained when the 3-year average of the annual fourth-highest daily maximum 8-hour average ambient air quality ozone concentrations is less than or equal to 0.08 ppm (i.e., 0.084 ppm when rounding is considered). *See* 69 FR 23857 (April 30, 2004) for further information. Ambient air quality monitoring data for the 3-year period must meet data completeness requirements. The data completeness requirements are met when the average percent of days with valid ambient monitoring data is greater than 90 percent, and no single year has less than 75 percent data completeness as determined in Appendix I of 40 CFR part 50. The ozone monitoring data indicates that the Altoona Area has a design value of 0.077 ppm for the 3-year period of 2003-2005, using complete, quality-assured data. Additionally, certified 2006 ozone monitoring data indicates that the Altoona Area continues to attain the ozone NAAQS. Therefore, the ambient ozone data for the Altoona Area indicates no violations of the 8-hour ozone standard. B. The Altoona Area The Altoona Area consists of Blair County, Pennsylvania. Prior to its designation as an 8-hour ozone nonattainment area, the Altoona Area was a marginal 1-hour ozone nonattainment Area, and therefore, was subject to requirements for marginal nonattainment areas pursuant to section 182(a) of the CAA. *See* 56 FR 56694 (November 6, 1991). EPA determined that the Altoona Area has attained the 1-hour ozone NAAQS by the November 15, 1993 attainment date (60 FR 3349, January 17, 1995). On February 8, 2007, the PADEP requested that the Altoona Area be redesignated to attainment for the 8-hour ozone standard. The redesignation request included three years of complete, quality-assured data for the period of 2003-2005, indicating that the 8-hour NAAQS for ozone had been achieved in the Altoona Area. The data satisfies the CAA requirements that the 3-year average of the annual fourth-highest daily maximum 8-hour average ozone concentration (commonly referred to as the area's design value), must be less than or equal to 0.08 ppm ( *i.e.* , 0.084 ppm when rounding is considered). Under the CAA, a nonattainment area may be redesignated if sufficient complete, quality-assured data is available to determine that the area attained the standard and the area meets the other CAA redesignation requirements set forth in section 107(d)(3)(E). III. What Are the Criteria for Redesignation to Attainment? The CAA provides the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA, allows for redesignation, providing that:
(1)EPA determines that the area has attained the applicable NAAQS;
(2)EPA has fully approved the applicable implementation plan for the area under section 110(k);
(3)EPA determines that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementation of the applicable SIP and applicable Federal air pollutant control regulations and other permanent and enforceable reductions;
(4)EPA has fully approved a maintenance plan for the area as meeting the requirements of section 175A; and
(5)The State containing such area has met all requirements applicable to the area under section 110 and part D. EPA provided guidance on redesignations in the General Preamble for the Implementation of Title I of the CAA Amendments of 1990, on April 16, 1992 (57 FR 13498), and supplemented this guidance on April 28, 1992 (57 FR 18070). EPA has provided further guidance on processing redesignation requests in the following documents: • “Ozone and Carbon Monoxide Design Value Calculations,” Memorandum from Bill Laxton, June, 18, 1990; • “Maintenance Plans for Redesignation of Ozone and Carbon Monoxide Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, April 30, 1992; • “Contingency Measures for Ozone and Carbon Monoxide
(CO)Redesignations,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, June 1, 1992; • “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992; • “State Implementation Plan
(SIP)Actions Submitted in Response to Clean Air Act
(Act)Deadlines,” Memorandum from John Calcagni Director, Air Quality Management Division, October 28, 1992; • “Technical Support Documents
(TSDs)for Redesignation Ozone and Carbon Monoxide
(CO)Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon Monoxide Programs Branch, August 17, 1993; • “State Implementation Plan
(SIP)Requirements for Areas Submitting Requests for Redesignation to Attainment of the Ozone and Carbon Monoxide
(CO)National Ambient Air Quality Standards (NAAQS) on or after November 15, 1992,” Memorandum from Michael H. Shapiro, Acting Assistant Administrator for Air and Radiation, September 17, 1993; • Memorandum from D. Kent Berry, Acting Director, Air Quality Management Division, to Air Division Directors, Regions 1-10, “Use of Actual Emissions in Maintenance Demonstrations for Ozone and CO Nonattainment Areas,” dated November 30, 1993; • “Part D New Source Review (part D NSR) Requirements for Areas Requesting Redesignation to Attainment,” Memorandum from Mary D. Nichols, Assistant Administrator for Air and Radiation, October 14, 1994; and • “Reasonable Further Progress, Attainment Demonstration, and Related Requirements for Ozone Nonattainment Areas Meeting the Ozone National Ambient Air Quality Standard,” Memorandum from John S. Seitz, Director, Office of Air Quality Planning and Standards, May 10, 1995. IV. Why Is EPA Taking These Actions? On February 8, 2007, the PADEP requested redesignation of the Altoona Area to attainment for the 8-hour ozone standard. On February 8, 2007, PADEP submitted a maintenance plan for the Altoona Area as a SIP revision, to ensure continued attainment of the 8-hour ozone NAAQS over the next 11 years, until 2018. PADEP also submitted a 2002 base-year inventory concurrently with its maintenance plan as a SIP revision. EPA has determined that the Altoona Area has attained the 8-hour ozone standard and has met the requirements for redesignation set forth in section 107(d)(3)(E). V. What Would Be the Effect of These Actions? Approval of the redesignation request would change the official designation of the Altoona Area from nonattainment to attainment for the 8-hour ozone NAAQS found at 40 CFR part 81. It would also incorporate into the Pennsylvania SIP a 2002 base-year inventory and a maintenance plan ensuring continued attainment of the 8-hour ozone NAAQS in the Altoona Area for the next 11 years, until 2018. The maintenance plan includes contingency measures to remedy any future violations of the 8-hour NAAQS (should they occur), and identifies the NO <sup>X</sup> and VOC MVEBs for transportation conformity purposes for the years 2009 and 2018. These MVEBs are displayed in the following table: Table 1.—Motor Vehicle Emissions Budgets in Tons per Summer Day
(tpsd)Year VOC NO <sup>X</sup> 2009 4.2 6.5 2018 2.8 3.3 VI. What Is EPA's Analysis of the Commonwealth's Request? EPA is proposing to determine that the Altoona Area has attained the 8-hour ozone standard, and that all other redesignation criteria have been met. The following is a description of how the PADEP's February 8, 2007 submittal satisfies the requirements of section 107(d)(3)(E) of the CAA. A. The Altoona Area Has Attained the 8-Hour NAAQS EPA is proposing to determine that the Altoona Area has attained the 8-hour ozone NAAQS. For ozone, an area may be considered to be attaining the 8-hour ozone NAAQS if there are no violations, as determined in accordance with 40 CFR 50.10 and Appendix I of Part 50, based on three complete, consecutive calendar years of quality-assured air quality monitoring data. To attain this standard, the design value, which is the 3-year average of the fourth-highest daily maximum 8-hour average ozone concentrations measured at each monitor, within the area, over each year must not exceed the ozone standard of 0.08 ppm. Based on the rounding convention described in 40 CFR part 50, Appendix I, the standard is attained if the design value is 0.084 ppm or below. The data must be collected and quality-assured in accordance with 40 CFR part 58, and recorded in the Air Quality System (AQS). The monitors generally should have remained at the same location for the duration of the monitoring period required for demonstrating attainment. In the Altoona Area, there is one ozone monitor, located in Blair County that measures air quality with respect to ozone. As part of its redesignation request, Pennsylvania referenced ozone monitoring data for the years 2003-2005 for the Altoona Area. This data has been quality assured and is recorded in the AQS. The PADEP uses the AQS as the permanent database to maintain its data and quality assures the data transfers and content for accuracy. The fourth-high 8-hour daily maximum concentrations, along with the three-year average are summarized in Table 2. Table 2.—Altoona Area Fourth Highest 8-Hour Average Values, Altoona County Monitor/AIRS ID 42-013-0801 Year Annual 4th highest reading
(ppm)2003 0.083 2004 0.073 2005 0.077 2006 0.071 The average for the 3-year period 2003-2005 is 0.077 ppm. The average for the 3-year period 2004-2006 is 0.074 ppm. The air quality data for 2003-2005 show that the Altoona Area has attained the standard with a design value of 0.077 ppm. The data collected at the Altoona Area monitor satisfies the CAA requirement that the 3-year average of the annual fourth-highest daily maximum 8-hour average ozone concentration is less than or equal to 0.08 ppm. EPA believes this conclusion remains valid after review of the certified 2006 data because the design value for 2004-2006 would be 0.074 ppm. The PADEP's request for redesignation for the Altoona Area indicates that the data is complete and was quality assured in accordance with 40 CFR part 58. In addition, as discussed below with respect to the maintenance plan, PADEP has committed to continue monitoring in accordance with 40 CFR part 58. In summary, EPA has determined that the data submitted by Pennsylvania and data taken from AQS indicate that the Area has attained the 8-hour ozone NAAQS. B. The Altoona Area Has Met All Applicable Requirements Under Section 110 and Part D of the CAA and Has a Fully Approved SIP Under Section 110(k) of the CAA EPA has determined that the Altoona Area has met all SIP requirements applicable for purposes of this redesignation under section 110 of the CAA (General SIP Requirements) and that it meets all applicable SIP requirements under part D of Title I of the CAA, in accordance with section 107(d)(3)(E)(v). In addition, EPA has determined that the SIP is fully approved with respect to all requirements applicable for purposes of redesignation in accordance with section 107(d)(3)(E)(ii). In making these proposed determinations, EPA ascertained which requirements are applicable to the Altoona Area and determined that the applicable portions of the SIP meeting these requirements are fully approved under section 110(k) of the CAA. We note that SIPs must be fully approved only with respect to applicable requirements. The September 4, 1992 Calcagni memorandum (“Procedures for Processing Requests To Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992) describes EPA's interpretation of section 107(d)(3)(E) with respect to the timing of applicable requirements. Under this interpretation, to qualify for redesignation, States requesting redesignation to attainment must meet only the relevant CAA requirements that came due prior to the submittal of a complete redesignation request. *See also,* Michael Shapiro memorandum, September 17, 1993, and 60 FR 12459, 12465-66 (March 7, 1995) (redesignation of Detroit-Ann Arbor). Applicable requirements of the CAA that come due subsequent to the area's submittal of a complete redesignation request remain applicable until a redesignation is approved, but are not required as a prerequisite to redesignation. Section 175A(c) of the CAA. *Sierra Club* v. *EPA,* 375 F.3d 537 (7th Cir. 2004). *See also,* 68 FR at 25424, 25427 (May 12, 2003) (redesignation of St. Louis). This section also sets forth EPA's views on the potential effect of the Court's ruling in *South Coast* on this redesignation action. For the reasons set forth below, EPA does not believe that the Court's ruling alters any requirements relevant to this redesignation action so as to preclude redesignation, and does not prevent EPA from finalizing this redesignation. EPA believes that the Court's decision, as it currently stands or as it may be modified based upon any petition for rehearing that has been filed, imposes no impediment to moving forward with redesignation of this area to attainment, because in either circumstance redesignation is appropriate under the relevant redesignation provisions of the Act and longstanding policies regarding redesignation requests. 1. Section 110 General SIP Requirements Section 110(a)(2) of Title I of the CAA delineates the general requirements for a SIP, which includes enforceable emissions limitations and other control measures, means, or techniques, provisions for the establishment and operation of appropriate devices necessary to collect data on ambient air quality, and programs to enforce the limitations. The general SIP elements and requirements set forth in section 110(a)(2) include, but are not limited to the following: • Submittal of a SIP that has been adopted by the State after reasonable public notice and hearing; • Provisions for establishment and operation of appropriate procedures needed to monitor ambient air quality; • Implementation of a source permit program; provisions for the implementation of part C requirements (Prevention of Significant Deterioration (PSD)); • Provisions for the implementation of part D requirements for New Source Review
(NSR)permit programs; • Provisions for air pollution modeling; and • Provisions for public and local agency participation in planning and emission control rule development. Section 110(a)(2)(D) requires that SIPs contain certain measures to prevent sources in a state from significantly contributing to air quality problems in another State. To implement this provision, EPA has required certain states to establish programs to address transport of air pollutants in accordance with the NO <sup>X</sup> SIP Call, October 27, 1998 (63 FR 57356), amendments to the NO <sup>X</sup> SIP Call, May 14, 1999 (64 FR 26298) and March 2, 2000 (65 FR 11222), and the Clean Air Interstate Rule (CAIR), May 12, 2005 (70 FR 25162). However, the section 110(a)(2)(D) requirements for a State are not linked with a particular nonattainment area's designation and classification in that State. EPA believes that the requirements linked with a particular nonattainment area's designation and classifications are the relevant measures to evaluate in reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the State. Thus, we do not believe that these requirements are applicable requirements for purposes of redesignation. In addition, EPA believes that the other section 110 elements not connected with nonattainment plan submissions and not linked with an area's attainment status are not applicable requirements for purposes of redesignation. The Altoona Area will still be subject to these requirements after it is redesignated. The section 110 and Part D requirements which are linked with a particular area's designation and classification, are the relevant measures to evaluate in reviewing a redesignation request. This policy is consistent with EPA's existing policy on applicability of conformity (i.e., for redesignations) and oxygenated fuels requirement. *See* Reading, Pennsylvania, proposed and final rulemakings (61 FR 53174, October 10, 1996), (62 FR 24826, May 7, 1997); Cleveland-Akron-Lorain, Ohio final rulemaking (61 FR 20458, May 7, 1996); and Tampa, Florida, final rulemaking (60 FR 62748, December 7, 1995). *See also* , the discussion on this issue in the Cincinnati redesignation (65 FR at 37890, June 19, 2000), and in the Pittsburgh redesignation (66 FR at 53099, October 19, 2001). Similarly, with respect to the NO <sup>X</sup> SIP Call rules, EPA noted in its Phase 1 Final Rule to Implement the 8-hour Ozone NAAQS, that the NO <sup>X</sup> SIP Call rules are not “an” ‘applicable requirement' for purposes of section 110(1) because the NO <sup>X</sup> rules apply regardless of an area's attainment or nonattainment status for the 8-hour (or the 1-hour) NAAQS.” 69 FR 23951, 23983 (April 30, 2004). EPA believes that section 110 elements not linked to the area's nonattainment status are not applicable for purposes of redesignation. As we explain later in this notice, no Part D requirements applicable for purposes of redesignation under the 8-hour standard became due for the Altoona Area prior to submission of the redesignation request 2. Part D Nonattainment Requirements Under the 8-Hour Standard Pursuant to an April 30, 2004, final rule (69 FR 23951), the Altoona Area was designated a basic nonattainment area under subpart 1 for the 8-hour ozone standard. Sections 172-176 of the CAA, found in subpart 1 of part D, set forth the basic nonattainment requirements applicable to all nonattainment areas. Section 182 of the CAA, found in subpart 2 of part D, establishes additional specific requirements depending on the area's nonattainment classification. With respect to the 8-hour standard, the court's ruling rejected EPA's reasons for classifying areas under subpart 1 for the 8-hour standard, and remanded that matter to the Agency. Consequently, it is possible that this area could, during a remand to EPA, be reclassified under subpart 2. Although any future decision by EPA to classify this area under subpart 2 might trigger additional future requirements for the area, EPA believes that this does not mean that redesignation of the area cannot now go forward. This belief is based upon
(1)EPA's longstanding policy of evaluating redesignation requests in accordance with the requirements due at the time the request is submitted; and,
(2)consideration of the inequity of applying retroactively any requirements that might in the future be applied. First, at the time the redesignation request was submitted, the Altoona Area was classified under subpart 1 and was obligated to meet subpart 1 requirements. Under EPA's longstanding interpretation of section 107(d)(3)(E) of the Clean Air Act, to qualify for redesignation, states requesting redesignation to attainment must meet only the relevant SIP requirements that came due prior to the submittal of a complete redesignation request. *See* September 4, 1992 Calcagni memorandum (“Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division). *See also* , Michael Shapiro Memorandum, September 17, 1993, and 60 FR 12459, 12465-66 (March 7, 1995) (Redesignation of Detroit-Ann Arbor); *Sierra Club* v. *EPA* , 375 F.3d 537 (7th Cir. 2004), which upheld this interpretation. *See* 68 FR 25418, 25424, 25427 (May 12, 2003) (Redesignation of St. Louis). Moreover, it would be inequitable to retroactively apply any new SIP requirements that were not applicable at the time the request was submitted. The D.C. Circuit has recognized the inequity in such retroactive rulemaking, *See* , *Sierra Club* v. *Whitman* , 285 F. 3d 63 (D.C. Cir. 2002), in which the D.C. Circuit upheld a District Court's ruling refusing to make retroactive an EPA determination of nonattainment that was past the statutory due date. Such a determination would have resulted in the imposition of additional requirements on the area. The Court stated: “Although EPA failed to make the nonattainment determination within the statutory time frame, Sierra Club's proposed solution only makes the situation worse. Retroactive relief would likely impose large costs on the States, which would face fines and suits for not implementing air pollution prevention plans in 1997, even though they were not on notice at the time.” *Id.* at 68. Similarly here it would be unfair to penalize the area by applying to it for purposes of redesignation additional SIP requirements under subpart 2 that were not in effect at the time it submitted its redesignation request. With respect to 8-hour subpart 2 requirements, if the Altoona Area initially had been classified under subpart 2, the first two part D subpart 2 requirements applicable to the Altoona Area under section 182(a) of the CAA would be: A base-year inventory requirement pursuant to section 182(a)(1) of the CAA, and, the emissions statement requirement pursuant to section 182(a)(3)(B). As stated previously, these requirements are not yet due for purposes of redesignation of the Altoona Area, but nevertheless, Pennsylvania already has in its approved SIP, an emissions statement rule for the 1-hour standard that covers all portions of the designated 8-hour nonattainment area and, that satisfies the emissions statement requirement for the 8-hour standard. *See* , 25 Pa. Code 135.21(a)(1), codified at 40 CFR 52.2020; 60 FR 2881, January 12, 1995. With respect to the base year inventory requirement, in this notice of proposed rulemaking, EPA is proposing to approve the 2002 base-year inventory for the Altoona Area, which was submitted on February 8, 2007, concurrently with its maintenance plan, into the Pennsylvania SIP. EPA is proposing to approve the 2002 base year inventory as fulfilling the requirements, if necessary, of both section 182(a)(1) and section 172(c)(3) of the CAA. A detailed evaluation of Pennsylvania's 2002 base-year inventory for the Altoona Area can be found in a Technical Support Document
(TSD)prepared by EPA for this rulemaking. EPA has determined that the emission inventory and emissions statement requirements for the Altoona Area have been satisfied. In addition to the fact that Part D requirements applicable for purposes of redesignation did not become due prior to submission of the redesignation request, EPA believes that the general conformity and NSR requirements do not require approval prior to redesignation. With respect to section 176, Conformity Requirements, section 176(c) of the CAA requires states to establish criteria and procedures to ensure that Federally supported or funded projects conform to the air quality planning goals in the applicable SIP. The requirement to determine conformity applies to transportation plans, programs, and projects developed, funded or approved under Title 23 U.S.C. and the Federal Transit Act (“transportation conformity”) as well as to all other Federally supported or funded projects (“general conformity”). State conformity revisions must be consistent with Federal conformity regulations relating to consultation, enforcement and enforceability that the CAA required the EPA to promulgate. EPA believes it is reasonable to interpret the conformity SIP requirements as not applying for purposes of evaluating the redesignation request under section 107(d) since State conformity rules are still required after redesignation and Federal conformity rules apply where State rules have not been approved. *See* , *Wall* v. *EPA* , 265 F. 3d 426, 438-440 (6th Cir. 2001), upholding this interpretation. *See also* , 60 FR 62748 (December 7, 1995). In the case of the Altoona Area, EPA has also determined that before being redesignated, the Altoona Area need not comply with the requirement that a NSR program be approved prior to redesignation. EPA has determined that areas being redesignated need not comply with the requirement that a NSR program be approved prior to redesignation, provided that the area demonstrates maintenance of the standard without Part D NSR in effect. The rationale for this position is described in a memorandum from Mary Nichols, Assistant Administrator for Air and Radiation, dated October 14, 1994, entitled, “Part D NSR Requirements or Areas Requesting Redesignation to Attainment.” Normally, State's Prevention of Significant Deterioration
(PSD)program will become effective in the area immediately upon redesignation to attainment. See the more detailed explanations in the following redesignation rulemakings: Detroit, MI (60 FR 12467-12468 (March 7, 1995); Cleveland-Akron-Lorrain, OH (61 FR 20458, 20469-70, May 7, 1996); Louisville, KY (66 FR 53665, 53669, October 23, 2001); Grand Rapids, MI (61 FR 31831, 31836-31837, June 21, 1996). In the case of the Altoona Area the Chapter 127 Part D NSR regulations in the Pennsylvania SIP (codified at 40 CFR 52.2020(c)(1)) explicitly apply the requirements for NSR in section 184 of the CAA to ozone attainment areas within the OTR. The OTR NSR requirements are more stringent than that required for a marginal or basic ozone nonattainment area. On October 19, 2001 (66 FR 53094), EPA fully approved Pennsylvania's NSR SIP revision consisting of Pennsylvania's Chapter 127 Part D NSR regulations that cover the Altoona Area. EPA has also interpreted the section 184 OTR requirements, including the NSR program, as not being applicable for purposes of redesignation. The rationale for this is based on two considerations. First, the requirement to submit SIP revisions for the section 184 requirements continues to apply to areas in the OTR after redesignation to attainment. Therefore, the State remains obligated to have NSR, as well as RACT, and Vehicle Inspection and Maintenance programs even after redesignation. Second, the section 184 control measures are region-wide requirements and do not apply to the Altoona Area by virtue of the Area's designation and classification. *See* 61 FR 53174, 53175-53176 (October 10, 1996) and 62 FR 24826, 24830-32 (May 7, 1997). 3. Part D Nonattainment Area Requirements Under the 1-Hour Standard In its December 22, 2006 decision in *South Coast* , the Court also addressed EPA's revocation of the 1-hour ozone standard. The current status of the revocation and associated anti-backsliding rules is dependent on whether the Court's decision stands as originally issued or is modified in response to any petition for rehearing or request for clarification that has been filed. As described more fully below, EPA determined that the Altoona Area attained the 1-hour standard by its attainment date (60 FR 3349, January 17, 1995), continues to attain that standard, and has fulfilled any requirements of the 1-hour standard that would apply even if the 1-hour standard is reinstated and those requirements are viewed as applying under the statute itself. Thus, the Court's decision, as it currently stands, imposes no impediment to moving forward with redesignation of the Area to attainment. The conformity portion of the Court's ruling does not impact the redesignation request for the Altoona Area because there are no conformity requirements that are relevant to redesignation request for any standard, including the requirement to submit a transportation conformity SIP. 1 As we have previously noted, under longstanding EPA policy, EPA believes it is reasonable to interpret the conformity SIP requirements as not applying for purposes of evaluating a redesignation request under section 107(d) because state conformity rules are still required after redesignation and federal conformity rules apply where state rules have not been approved. 40 CFR 51.390. *See* , *Wall* v. *EPA* , 265 F.3d 426 (6th Cir. 2001), upholding this interpretation. *See also* , 60 FR 62748 (Dec. 7, 1995) (Tampa, Florida redesignation). 1 Clean Air Act section 176(c)(4)(E) currently requires States to submit revisions to their SIPs to reflect certain federal criteria and procedures for determining transportation conformity. Transportation conformity SIPs are different from the motor vehicle emissions budgets that are established in control strategy SIPs and maintenance plans. With respect to the requirement for submission of contingency measures for the 1-hour standard, section 182(a) does not require contingency measures for marginal areas, and, therefore, that portion of the Court's ruling does not impact the redesignation request for the Altoona Area. Prior to its designation as an 8-hour ozone nonattainment area, the Altoona Area was designated a marginal nonattainment area for the 1-hour standard. With respect to the 1-hour standard, the applicable requirements of subpart 1 and of subpart 2 of Part D (section 182) for the Altoona Area are discussed in the following paragraphs: Section 182(a)(2)(A) required SIP revisions to correct or amend RACT for sources in marginal areas, such as the Altoona Area, that were subject to control technique guidelines
(CTGs)issued before November 15, 1990 pursuant to CAA section 108. On December 22, 1994, EPA fully approved into the Pennsylvania SIP all corrections required under section 182(a)(2)(A) of the CAA (59 FR 65971, December 22, 1994). EPA believes that this requirement applies only to marginal and higher classified areas under the 1-hour NAAQS pursuant to the 1990 amendments to the CAA; therefore, this is a one-time requirement. After an area has fulfilled the section 182(a)(2)(A) requirement for the 1-hour NAAQS, there is no requirement under the 8-hour NAAQS. Section 182(a)(2)(B) relates to the savings clause for vehicle inspection and maintenance (I/M). It requires marginal areas to adopt vehicle I/M programs. This provision was not applicable to the Altoona Area because this area did not have and was not required to have an I/M program before November 15, 1990. Section 182(a)(3)(A) requires a triennial Periodic Emissions Inventory for the nonattainment area. The most recent inventory for the Altoona Area was compiled for 2002 and submitted to EPA as a SIP revision with the maintenance plan for the Altoona Area. With respect to NSR, EPA has determined that areas being redesignated need not have an approved New Source Review program for the same reasons discussed previously with respect to the applicable part D requirements for the 8-hour standard. Section 182(a)(3)(B)—This provision of the Act requires sources of VOCs and NO <sup>X</sup> in the nonattainment area to submit annual Emissions Statements regarding the quantity of emissions from the previous year. As discussed previously, Pennsylvania already has in its approved SIP, a previously approved emissions statement rule for the 1-hour standard, which applies to the Altoona Area. Section 182(a)(1)—This provision of the Act provides for the submission of a comprehensive, accurate, current inventory of actual emissions from all sources, as described in section 172(c)(3), in accordance with guidance provided by the Administrator. In this proposed rule, EPA is proposing to approve a 2002 base year emissions inventory for the Altoona Area as meeting the requirement of section 182(a)(1). While EPA generally required that the base year inventory for the 1-hour standard be for calendar year 1990, EPA believes that Pennsylvania's 2002 inventory fulfills this requirement because it meets EPA's guidance and because it is more current than 1990. EPA also proposes to determine that, if the 1-hour standard is deemed to be reinstated, the 2002 base year inventory for the 8-hour standard will provide an acceptable substitute for the base year inventory for the 1-hour standard. EPA has previously determined that the Altoona Area has attained the 1-hour ozone NAAQS by the November 15, 1993 attainment date (60 FR 3349, January 17, 1995), and we believe that the Altoona Area is still in attainment for the 1-hour ozone NAAQS based upon the ozone monitoring data for the years 2003-2005. To demonstrate attainment, i.e., compliance with this standard, the annual average of the number of expected exceedances of the 1-hour standard over a three-year period must be less than or equal to 1. Table 3 provides a summary of the number of expected exceedances for each of the years 2003 through 2005 and three-year annual average. Table 3.—Altoona Area Number of Expected Exceedances of the 1-Hour Ozone Standard; Altoona County Monitor/AIRS ID 42-013-0801 Year Number of expected exceedances 2003 1.0 2004 0.0 2005 0.0 2006 0.0 The average number of expected exceedances for the 3-year period 2003 through 2005 is 0.3. The average number of expected exceedances for the 3-year period 2004-2006 is 0.0. In summary, EPA has determined that the data submitted by Pennsylvania and taken from AQS indicates that Altoona Area is maintaining air quality that conforms to the 1-hour ozone NAAQS. EPA believes this conclusion remains valid after review of the certified 2006 data because no exceedances were recorded in the Altoona Area in 2006. 4. Transport Region Requirements All areas in the Ozone Transport Region (OTR), both attainment and nonattainment, are subject to additional control requirements under section 184 for the purpose of reducing interstate transport of emissions that may contribute to downwind ozone nonattainment. The section 184 requirements include reasonably available control technology (RACT), NSR, enhanced vehicle inspection and maintenance, and Stage II vapor recovery or a comparable measure. In the case of the Altoona Area, which is located in the OTR, nonattainment NSR will be applicable after redesignation. As discussed previously, EPA has fully approved Pennsylvania's NSR SIP revision which applies the requirements for NSR of section 184 of the CAA to attainment areas within the OTR. As discussed previously in this notice, EPA has also interpreted the section 184 OTR requirements, including NSR, as not being applicable for purposes of redesignation. *See* , 61 FR 53174, October 10, 1996 and 62 FR 24826, May 7, 1997 (Reading, Pennsylvania Redesignation). 5. Altoona Has a Fully Approved SIP for Purposes of Redesignation EPA has fully approved the Pennsylvania SIP for the purposes of this redesignation. EPA may rely on prior SIP approvals in approving a redesignation request. Calcagni Memo, p. 3; *Southwestern Pennsylvania Growth Alliance* v. *Browner* , 144 F.3d 984, 989-90 (6th Cir. 1998), *Wall* v. *EPA* , 265 F.3d 426 (6th Cir. 2001), plus any additional measures it may approve in conjunction with a redesignation action. *See* , 68 FR at 25425 (May 12, 2003) and citations therein. C. The Air Quality Improvement in the Altoona Area Is Due to Permanent and Enforceable Reductions in Emissions Resulting From Implementation of the SIP and Applicable Federal Air Pollution Control Regulations and Other Permanent and Enforceable Reductions EPA believes that the Commonwealth has demonstrated that the observed air quality improvement in the Altoona Area is due to permanent and enforceable reductions in emissions resulting from implementation of the SIP, Federal measures, and other State-adopted measures. Emissions reductions attributable to these rules are shown in Table 4. Table 4.—Total VOC and NO <sup>X</sup> Emissions for 2002 and 2004 in Tons per Summer Day
(tpsd)Year Point * Area Nonroad Mobile Total Volatile Organic Compounds
(VOC)2002 1.2 5.8 2.0 6.3 15.3 2004 1.2 5.6 1.8 5.4 14.0 Diff (02-04) −0.0 −0.2 −0.2 −0.9 −1.3 Nitrogen Oxides (NO X ) 2002 1.6 0.9 5.5 10.0 18.0 2004 2.3 0.9 5.1 8.8 17.1 Diff (02-04) 0.7 0.0 −0.4 −1.2 −0.9 * The stationary point source emissions shown here do not include banked emission credits of 68.9 tpd of VOC and 4.4 tpd of NO <sup>X</sup> as indicated in Technical Appendix A-4 to Pennsylvania's SIP submission. Between 2002 and 2004, VOC emissions decreased by 1.3 tpsd from 15.3 tpsd to 14.0 tpsd; NO <sup>X</sup> emissions decreased by 0.9 tpsd from 18.0 tpsd to 17.1 tpsd. These reductions, and anticipated future reductions, are due to the following permanent and enforceable measures. 1. Stationary Point Sources Federal NO <sup>X</sup> SIP Call (66 FR 43795, August 21, 2001) 2. Stationary Area Sources Solvent Cleaning (68 FR 2206, January 16, 2003) Portable Fuel Containers (69 FR 70893, December 8, 2004) 3. Highway Vehicle Sources Federal Motor Vehicle Control Programs (FMVCP) —Tier 1 (56 FR 25724, June 5, 1991) —Tier 2 (65 FR 6698, February 10, 2000) Heavy-duty Engine and Vehicle Standards (62 FR 54694, October 21, 1997, and 65 FR 59896, October 6, 2000) National Low Emission Vehicle
(NLEV)Program
(PA)(64 FR 72564, December 28, 1999) Vehicle Emission Inspection/Maintenance Program (70 FR 58313, October 6, 2005) 4. Non-Road Sources Non-road Diesel (69 FR 38958, June 29, 2004) EPA believes that permanent and enforceable emissions reductions are the cause of the long-term improvement in ozone levels and are the cause of the Area achieving attainment of the 8-hour ozone standard. D. The Altoona Area Has a Fully Approvable Maintenance Plan Pursuant to Section 175A of the CAA In conjunction with its request to redesignate the Altoona Area to attainment status, Pennsylvania submitted a SIP revision to provide for maintenance of the 8-hour ozone NAAQS in the Area for at least 11 years after redesignation. The Commonwealth is requesting that EPA approve this SIP revision as meeting the requirement of CAA 175A. Once approved, the maintenance plan for the 8-hour ozone NAAQS will ensure that the SIP for Altoona meets the requirements of the CAA regarding maintenance of the applicable 8-hour ozone standard. What Is Required in a Maintenance Plan? Section 175 of the CAA sets forth the elements of a maintenance plan for areas seeking redesignation from nonattainment to attainment. Under section 175A, the plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after approval of a redesignation of an area to attainment. Eight years after the redesignation, the Commonwealth must submit a revised maintenance plan demonstrating that attainment will continue to be maintained for the 10 years following the initial 10-year period. To address the possibility of future NAAQS violations, the maintenance plan must contain such contingency measures, with a schedule for implementation, as EPA deems necessary to assure prompt correction of any future 8-hour ozone violations. Section 175A of the CAA sets forth the elements of a maintenance plan for areas seeking redesignation from nonattainment to attainment. The Calcagni memorandum dated September 4, 1992, provides additional guidance on the content of a maintenance plan. An ozone maintenance plan should address the following provisions:
(a)An attainment emissions inventory;
(b)A maintenance demonstration;
(c)A monitoring network;
(d)Verification of continued attainment; and
(e)A contingency plan. Analysis of the Altoona Area Maintenance Plan
(a)Attainment inventory—An attainment inventory includes the emissions during the time period associated with the monitoring data showing attainment. PADEP determined that the appropriate attainment inventory year is 2004. That year establishes a reasonable year within the three-year block of 2003-2005 as a baseline and accounts for reductions attributable to implementation of the CAA requirements to date. The 2004 inventory is consistent with EPA guidance and is based on actual “typical summer day” emissions of VOC and NO <sup>X</sup> during 2004 and consists of a list of sources and their associated emissions. The 2002 and 2004 point source data was compiled from actual sources. Pennsylvania requires owners and operators of larger facilities to submit annual production figures and emission calculations each year. Throughput data are multiplied by emission factors from Factor Information Retrieval
(FIRE)Data Systems and EPA's publication series AP-42, and are based on Source Classification Codes (SCC). The 2002 area source data was compiled using county-level activity data, from census numbers, from county numbers, etc. The 2004 area source data was projected from the 2002 inventory using temporal allocations provided by the Mid-Atlantic Regional Air Management Association (MARAMA). The on-road mobile source inventories for 2002 and 2004 were compiled using MOBILE6.2 and Pennsylvania Department of Transportation (PENNDOT) estimates for VMT. The PADEP has provided detailed data summaries to document the calculations of mobile on-road VOC and NO <sup>X</sup> emissions for 2002, as well as for the projection years of 2004, 2009, and 2018 (shown in Tables 5 and 6 below). The 2002 and 2004 emissions for the majority of non-road emission source categories were estimated using the EPA NONROAD 2005 model. The NONROAD model calculates emissions for diesel, gasoline, liquefied petroleum gasoline, and compressed natural gas-fueled non-road equipment types and includes growth factors. The NONROAD model does not estimate emissions from locomotives or aircraft. For 2002 and 2004 locomotive emissions, the PADEP projected emissions from a 1999 survey using national fuel consumption information and EPA emission and conversion factors. There are no significant commercial aircraft operations (aircraft that can seat over 60 passengers) in Blair County. The Altoona Airport in Blair County supports some air taxi operations that account for a very small amount of emissions. For 2002 and 2004 aircraft emissions, PADEP estimated emissions using small airport operations statistics from *http://www.airnav.com,* and emission factors and operational characteristics in the EPA-approved model, Emissions and Dispersion Modeling System (EDMS). More detailed information on the compilation of the 2002, 2004, 2009, and 2018 inventories can be found in the Technical Appendices, which are part of this submittal.
(b)Maintenance Demonstration—On February 8, 2007, the PADEP submitted a maintenance plan as required by section 175A of the CAA. The Altoona maintenance plan shows maintenance of the 8-hour ozone NAAQS by demonstrating that current and future emissions of VOC and NO <sup>X</sup> remain at or below the attainment year 2004 emissions levels throughout the Altoona Area through the year 2018. A maintenance demonstration need not be based on modeling. *See Wall* v. *EPA, supra; Sierra Club* v. *EPA, supra. See also* 66 FR at 53099-53100; 68 FR at 25430-32. Tables 5 and 6 specify the VOC and NO <sup>X</sup> emissions for the Altoona Area for 2004, 2009, and 2018. The PADEP chose 2009 as an interim year in the maintenance demonstration period to demonstrate that the VOC and NO <sup>X</sup> emissions are not projected to increase above the 2004 attainment level during the time of the maintenance period. Table 5.—Total VOC Emissions for 2004-2018
(tpsd)Source category 2004 VOC emissions 2009 VOC emissions 2018 VOC emissions Point * 1.2 1.2 1.5 Area 5.6 5.8 5.3 Mobile 5.4 4.2 2.8 Nonroad 1.8 1.4 1.3 Total 14.0 12.6 10.9 * Totals may vary due to rounding. Table 6.—Total NO <sup>X</sup> Emissions for 2004-2018
(tpsd)Source category 2004 NO <sup>X</sup> emissions 2009 NO <sup>X</sup> emissions 2018 NO <sup>X</sup> emissions Point * 2.3 1.7 1.8 Area 0.9 0.9 0.9 Mobile 8.8 6.5 3.3 Non-road 5.1 4.2 3.1 Total 17.1 13.3 9.1 * Totals may vary due to rounding. Additionally, the following programs are either effective or due to become effective and will further contribute to the maintenance demonstration of the 8-hour ozone NAAQS: • The Clean Air Interstate Rule
(CAIR)(71 FR 25328, April 28, 2006). • The Federal NO <sup>X</sup> SIP Call (66 FR 43795, August 21, 2001). • Area VOC regulations concerning portable fuel containers (69 FR 70893, December 8, 2004), consumer products (69 FR 70895, December 8, 2004), and architectural and industrial maintenance coatings
(AIM)(69 FR 68080, November 23, 2004). • Federal Motor Vehicle Control Programs (light-duty ) (Tier 1, Tier 2; 56 FR 25724, June 5, 1991; 65 FR 6698, February 10, 2000). • Vehicle emission/inspection/maintenance program (70 FR 58313, October 6, 2005). • Heavy duty diesel on-road (2004/2007) and low sulfur on-road (2006); 66 FR 5002, (January 18, 2001). • Non-road emission standards
(2008)and off-road diesel fuel 2007/2010); 69 FR 38958 (June 29, 2004). • NLEV/PA Clean Vehicle Program (54 FR 72564, December 28, 1999)—Pennsylvania will implement this program in car model year 2008 and beyond. • Pennsylvania Heavy-Duty Diesel Emissions Control Program. (May 10, 2002). Based on the comparison of the projected emissions and the attainment year emissions along with the additional measures, EPA concludes that PADEP has successfully demonstrated that the 8-hour ozone standard should be maintained in the Altoona Area.
(c)Monitoring Network—There is currently one monitor measuring ozone in the Altoona Area. PADEP will continue to operate its current air quality monitor (located in Blair County), in accordance with 40 CFR part 58.
(d)Verification of Continued Attainment—In addition to maintaining the key elements of its regulatory program, the Commonwealth will track the attainment status of the ozone NAAQs in the Area by reviewing air quality and emissions data during the maintenance period. The Commonwealth will perform an annual evaluation of Vehicle Miles Traveled
(VMT)data and emissions reported from stationary sources, and compare them to the assumptions about these factors used in the maintenance plan. The Commonwealth will also evaluate the periodic (every three years) emission inventories prepared under EPA's Consolidated Emission Reporting Regulation (40 CFR part 51, subpart A) to see if they exceed the attainment year inventory
(2004)by more than 10 percent. The PADEP will also continue to operate the existing ozone monitoring station in the Area pursuant to 40 CFR part 58 throughout the maintenance period and submit quality-assured ozone data to EPA through the AQS system. Section 175A(b) of the CAA states that eight years following redesignation of the Altoona Area, PADEP will be required to submit a second maintenance plan that will ensure attainment through 2028. PADEP has made that commitment to meet the requirement section 175A(b).
(e)The Maintenance Plan's Contingency Measures—The contingency plan provisions are designed to promptly correct a violation of the NAAQS that occurs after redesignation. Section 175A of the CAA requires that a maintenance plan include such contingency measures as EPA deems necessary to ensure that the Commonwealth will promptly correct a violation of the NAAQS that occurs after redesignation. The maintenance plan should identify the events that would “trigger” the adoption and implementation of a contingency measure(s), the contingency measure(s) that would be adopted and implemented, and the schedule indicating the time frame by which the state would adopt and implement the measure(s). The ability of the Altoona Area to stay in compliance with the 8-hour ozone standard after redesignation depends upon VOC and NO <sup>X</sup> emissions in the Area remaining at or below 2004 levels. The Commonwealth's maintenance plan projects VOC and NO <sup>X</sup> emissions to decrease and stay below 2004 levels through the year 2018. The Commonwealth's maintenance plan outlines the procedures for the adoption and implementation of contingency measures to further reduce emissions should a violation occur. Contingency measures will be considered if for two consecutive years the fourth highest 8-hour ozone concentrations at the Blair County monitor are above 84 ppb. If this trigger point occurs, the Commonwealth will evaluate whether additional local emission control measures should be implemented in order to prevent a violation of the air quality standard. PADEP will also analyze the conditions leading to the excessive ozone levels and evaluate which measures might be most effective in correcting the excessive ozone levels. PADEP will also analyze the potential emissions effect of Federal, state, and local measures that have been adopted but not yet implemented at the time the excessive ozone levels occurred. PADEP will then begin the process of implementing any selected measures. Contingency measures will also be considered in the event that a violation of the 8-hour ozone standard occurs at the Altoona County, Pennsylvania monitor. In the event of a violation of the 8-hour ozone standard, PADEP will adopt additional emissions reduction measures as expeditiously as practicable in accordance with the implementation schedule listed later in this notice and in the Pennsylvania Air Pollution Control Act in order to return the Area to attainment with the standard. Contingency measures to be considered for Altoona will include, but not be limited to the following: Regulatory measures: —Additional controls on consumer products. —Additional controls on portable fuel containers. Non-Regulatory measures: —Voluntary diesel engine “chip reflash” (installation software to correct the defeat device option on certain heavy-duty diesel engines). —Diesel retrofit, including replacement, repowering or alternative fuel use, for public or private local on-road or off-road fleets. —Idling reduction technology for Class 2 yard locomotives. —Idling reduction technologies or strategies for truck stops, warehouses and other freight-handling facilities. —Accelerated turnover of lawn and garden equipment, especially commercial equipment, including promotion of electric equipment. —Additional promotion of alternative fuel (e.g., biodiesel) for home heating and agricultural use. The plan lays out a process to have any regulatory contingency measures in effect within 19 months of the trigger. The plan also lays out a process to implement the non-regulatory contingency measures within 12-24 months of the trigger. VII. Are the Motor Vehicle Emissions Budgets Established and Identified in the Altoona Maintenance Plan Adequate and Approvable? A. What Are the Motor Vehicle Emissions Budgets? Under the CAA, States are required to submit, at various times, control strategy SIPs and maintenance plans in ozone areas. These control strategy SIPs (i.e., RFP SIPs and attainment demonstration SIPs) and maintenance plans identify and establish MVEBs for certain criteria pollutants and/or their precursors to address pollution from on-road mobile sources. In the maintenance plan, the MVEBs are termed “on-road mobile source emission budgets.” Pursuant to 40 CFR part 93 and 51.112, MVEBs must be established in an ozone maintenance plan. An MVEB is the portion of the total allowable emissions that is allocated to highway and transit vehicle use and emissions. An MVEB serves as a ceiling on emissions from an area's planned transportation system. The MVEB concept is further explained in the preamble to the November 24, 1993, transportation conformity rule (58 FR 62188). The preamble also describes how to establish and revise the MVEBs in control strategy SIPs and maintenance plans. Under section 176(c) of the CAA, new transportation projects, such as the construction of new highways, must “conform” to (i.e., be consistent with) the part of the State's air quality plan that addresses pollution from cars and trucks. “Conformity” to the SIP means that transportation activities will not cause new air quality violations, worsen existing violations, or delay timely attainment of or reasonable progress towards the NAAQS. If a transportation plan does not “conform,” most new projects that would expand the capacity of roadways cannot go forward. Regulations at 40 CFR part 93 set forth EPA policy, criteria, and procedures for demonstrating and ensuring conformity of such transportation activities to a SIP. When reviewing submitted “control strategy” SIPs or maintenance plans containing MVEBs, EPA must affirmatively find the MVEB contained therein “adequate” for use in determining transportation conformity. After EPA affirmatively finds the submitted MVEB is adequate for transportation conformity purposes, that MVEB can be used by state and federal agencies in determining whether proposed transportation projects “conform” to the SIP as required by section 176(c) of the CAA. EPA's substantive criteria for determining “adequacy” of a MVEB are set out in 40 CFR 93.118(e)(4) EPA's process for determining “adequacy” consists of three basic steps: Public notification of a SIP submission, a public comment period, and EPA's adequacy finding. This process for determining the adequacy of submitted SIP MVEBs was initially outlined in EPA's May 14, 1999 guidance, “Conformity Guidance on Implementation of March 2, 1999, Conformity Court Decision.” This guidance was finalized in the Transportation Conformity Rule Amendments for the “New 8-Hour Ozone and PM2.5 National Ambient Air Quality Standards and Miscellaneous Revisions for Existing Areas; Transportation Conformity Rule Amendments—Response to Court Decision and Additional Rule Change” on July 1, 2004 (69 FR 40004). EPA consults this guidance and follows this rulemaking in making its adequacy determinations. The MVEBS for the Altoona Area are listed in Table 1 of this document for 2009 and 2018, and are the projected emissions for the on-road mobile sources plus any portion of the safety margin allocated to the MVEBs (safety margin allocation for 2009 and 2018 only). These emission budgets, when approved by EPA, must be used for transportation conformity determinations. B. What Is a Safety Margin? A “safety margin” is the difference between the attainment level of emissions (from all sources) and the projected level of emissions (from all sources) in the maintenance plan. The attainment level of emissions is the level of emissions during one of the years in which the area met the NAAQS. The following example is for the 2018 safety margin: The Altoona Area first attained the 8-hour ozone NAAQS during the 2002 to 2004 time period. The State used 2004 as the year to determine attainment levels of emissions for the Altoona Area. The total emissions from point, area, mobile on-road, and mobile non-road sources in 2004 equaled 14.0 tpsd of VOC and 17.1 tpsd of NO <sup>X</sup> . The PADEP projected emissions out to the year 2018 and projected a total of 10.9 tpsd of VOC and 9.1 tpsd of NO <sup>X</sup> from all sources in the Altoona Area. The safety margin for 2018 would be the difference between these amounts, or 3.1 tpsd of VOC and 8.0 tpsd of NO <sup>X</sup> . The emissions up to the level of the attainment year including the safety margins are projected to maintain the area's air quality consistent with the 8-hour ozone NAAQS. The safety margin is the extra emissions reduction below the attainment levels that can be allocated for emissions by various sources as long as the total emission levels are maintained at or below the attainment levels. Table 7 shows the safety margins for the 2009 and 2018 years. Table 7.—2009 and 2018 Safety Margins for Altoona Inventory year VOC emissions
(tpsd)NO <sup>X</sup> emissions
(tpsd)2004 Attainment 14.0 17.1 2009 Interim 12.6 13.3 2009 Safety Margin 1.4 3.8 2004 Attainment 14.0 17.1 2018 Final 10.9 9.1 2018 Safety Margin 3.1 8.0 The PADEP allocated 0.4 tpsd VOC and 0.4 tpsd NO <sup>X</sup> to the 2009 interim VOC projected on-road mobile source emissions projection and the 2009 interim NO <sup>X</sup> projected on-road mobile source emissions projection to arrive at the 2009 MVEBs. For the 2018 MVEBs the PADEP allocated 0.6 tpsd VOC and 0.5 tpsd NO <sup>X</sup> from the 2018 safety margins to arrive at the 2018 MVEBs. Once allocated to the mobile source budgets these portions of the safety margins are no longer available, and may no longer be allocated to any other source category. Table 8 shows the final 2009 and 2018 MVEBS for Altoona. Table 8.—2009 and 2018 Final MVEBs for Altoona Inventory year VOC emissions
(tpsd)NO <sup>X</sup> emissions
(tpsd)2009 projected on-road mobile source projected emissions 3.8 6.1 2009 Safety Margin Allocated to MVEBs 0.4 0.4 2009 MVEBs 4.2 6.5 2018 projected on-road mobile source projected emissions 2.2 2.8 2018 Safety Margin Allocated to MVEBs 0.6 0.5 2018 MVEBs 2.8 3.3 C. Why Are the MVEBs Approvable? The 2009 and 2018 MVEBs for the Altoona Area are approvable because the MVEBs for VOCs and NO <sup>X</sup> continue to maintain the total emissions at or below the attainment year inventory levels as required by the transportation conformity regulations. D. What Is the Adequacy and Approval Process for the MVEBs in the Altoona Maintenance Plan? The MVEBs for the Altoona Area maintenance plan are being posted to EPA's conformity Web site concurrently with this proposal. The public comment period will end at the same time as the public comment period for this proposed rule. In this case, EPA is concurrently processing the action on the maintenance plan and the adequacy process for the MVEBs contained therein. In this proposed rule, EPA is proposing to find the MVEBs adequate and also proposing to approve the MVEBs as part of the maintenance plan. The MVEBs cannot be used for transportation conformity until the maintenance plan and associated MVEBs are approved in a final **Federal Register** notice, or EPA otherwise finds the budgets adequate in a separate action following the comment period. If EPA receives adverse written comments with respect to the proposed approval of the Altoona MVEBs, or any other aspect of our proposed approval of this updated maintenance plan, we will respond to the comments on the MVEBs in our final action or proceed with the adequacy process as a separate action. Our action on the Altoona Area MVEBs will also be announced on EPA's conformity Web site: *http://www.epa.gov/otaq/stateresources/transconf/index.htm* (once there, click on “Adequacy Review of SIP Submissions”). VIII. Proposed Actions EPA is proposing to determine that the Altoona Area has attained the 8-hour ozone NAAQS. EPA is also proposing to approve the redesignation of the Altoona Area from nonattainment to attainment for the 8-hour ozone NAAQS. EPA has evaluated Pennsylvania's redesignation request and determined that it meets the redesignation criteria set forth in section 107(d)(3)(E) of the CAA. EPA believes that the redesignation request and monitoring data demonstrate that the Altoona Area has attained the 8-hour ozone standard. The final approval of this redesignation request would change the designation of the Altoona Area from nonattainment to attainment for the 8-hour ozone standard. EPA is also proposing to approve the associated maintenance plan for the Altoona Area, submitted on February 8, 2007, as a revision to the Pennsylvania SIP. EPA is proposing to approve the maintenance plan for the Altoona Area because it meets the requirements of section 175A as described previously in this notice. EPA is also proposing to approve the 2002 base-year inventory for the Altoona Area, and the MVEBs submitted by Pennsylvania for the Altoona Area in conjunction with its redesignation request. EPA is soliciting public comments on the issues discussed in this document. These comments will be considered before taking final action. IX. Statutory and Executive Order Reviews Under Executive Order 12866 (58 FR 51735, October 4, 1993), this proposed action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely proposes to approve state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ). Because this rule proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). This proposed rule also does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely proposes to approve a state rule implementing a Federal requirement, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This proposed rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it approves a state rule implementing a Federal standard. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Redesignation is an action that affects the status of a geographical area and does not impose any new requirements on sources. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this proposed rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings” issued under the executive order. This rule, proposing to approve the redesignation of the Altoona Area to attainment for the 8-hour ozone NAAQS, the associated maintenance plan, the 2002 base-year inventory, and the MVEBs identified in the maintenance plan, does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ). List of Subjects 40 CFR Part 52 Environmental protection, Air pollution control, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds. 40 CFR Part 81 Air pollution control, National parks, Wilderness areas. Authority: 42 U.S.C. 7401 *et seq.* Dated: May 31, 2007. William T. Wisniewski, Acting Regional Administrator, Region III. [FR Doc. E7-11019 Filed 6-6-07; 8:45 am] BILLING CODE 6560-50-P DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 411, 412, 413, and 489 [CMS-1533-CN] RIN 0938-A070 Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2008 Rates; Correction AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Correction of proposed rule. SUMMARY: This document corrects technical errors that appeared in the proposed rule entitled “Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2008 Rates” that appeared in the May 3, 2007 **Federal Register** . FOR FURTHER INFORMATION CONTACT: Marc Hartstein,
(410)786-4548. SUPPLEMENTARY INFORMATION: I. Background In FR Doc. 07-1920 of May 3, 2007 (72 FR 24680), there were a number of technical errors that are identified and corrected in the Correction of Errors section of this notice. We issued the fiscal year
(FY)2008 hospital inpatient prospective payment systems
(IPPS)proposed rule on April 13, 2007. The FY 2008 IPPS proposed rule appeared in the May 3, 2007 **Federal Register** . II. Summary of Errors We recently discovered that an error was made in the calculation of the DRG relative weights presented in the FY 2008 IPPS proposed rule. We have revised the relative weights to correct the error and have recalculated the standardized amounts. These changes increase the standardized amounts slightly and reduce the proposed FY 2008 outlier threshold by $85. Further, these revisions affect the DRG-specific costs thresholds for new technology add-on payments. Therefore, in this notice we are correcting the following: • Preamble language regarding the methodology used to calculate charge-based and cost-based relative weights. • Outlier threshold. • Recalibration, wage and recalibration, geographic reclassification, and rural floor budget neutrality factors. • Tables 1A through 1D, 2, 4A, 4C, 4J, 5, 10. • Impact analysis tables (Tables I and II). In addition, we have posted these corrected tables on our Web site at *http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp.* III. Correction of Errors In FR Doc. 07-1920 of May 3, 2007 (72 FR 24680), make the following corrections: A. Corrections to the Preamble 1. On page 24711, second column, last paragraph, sixth line from the bottom, the figure “$23,015” is corrected to read “$22,930.” 2. On page 24746, second column, a. Third full paragraph, line 9, the phrase, “in the FY 2005 MedPAR” is corrected to read “in the FY 2006 MedPAR.” b. Fifth full paragraph, last line, after the phrase “cost of living adjustment.”, the following sentence is added to read as follows: “Beginning with FY 2008, because hospital charges include charges for both operating and capital costs, we are proposing to standardize total charges to remove the effects of differences in geographic adjustment factors, large urban add-on payments, cost-of-living adjustment, disproportionate share payments, and IME adjustments under the capital IPPS as well.” 3. On page 24747, first column, third full paragraph, last line, after the phrase “cost of living adjustment.” and before the phrase “Charges were then”, the following sentence is added to read as follows: “Beginning with FY 2008, because hospital charges include charges for both operating and capital costs, we are proposing to standardize total charges to remove the effects of differences in geographic adjustment factors, large urban add-on payments, cost-of-living adjustment, disproportionate share payments, and IME adjustments under the capital IPPS as well.” B. Corrections to the Addendum 1. On page 24836, a. First column, second full paragraph,
(1)Line 14, the figure “0.999317” is corrected to read “0.999367.”
(2)Lines 19 and 29, the figure “0.998557” is corrected to read “0.998573.” b. Second column, first partial paragraph, line 17, the figure “0.991938” is corrected to read “0.991925.” 2. On page 24837, second column, second full paragraph, line 6, the figure “$23,015” is corrected to read “$22,930”. 3. On page 24839, top half of the page, in the table Comparison of FY 2007 Standardized Amounts to Proposed FY 2008 Single Standardized Amount with Full Update and Reduced Update, the figures in the listed entries are corrected to read as follows: Full update (3.3 percent) Reduced update (1.3 percent) FY 2008 DRG Recalibrations and Wage Index Budget Neutrality Factor 0.999367 0.999367 FY 2008 Reclassification Budget Neutrality Factor 0.991925 0.991925 4. On page 24846, third column, first full paragraph, a. Line 38, the figure “$417.26” is corrected to read “$417.12.” b. Line 40, the figure “$413.87” is corrected to read “$413.73.” 5. On page 24847, a. Middle of the page, in the table Comparison of Factors and Adjustments: FY 2007 Capital Federal Rate and Proposed FY 2008 Capital Federal Rate for Urban Hospitals, third column, last row, the figure, “$413.87” is corrected to read “$413.73.” b. Lower third of the page, in the table Comparison of Factors and Adjustments: FY 2007 Capital Federal Rate and Proposed FY 2008 Capital Federal Rate for Rural Hospitals, third column, last row, the figure “$417.26” is corrected to read “$417.12.” 6. On page 24848, a. First column, fourth full paragraph,
(1)Line 10, the phrase “is $197.21” is corrected to read “is $197.11.”.
(2)Line 12, the figure “$195.60” is corrected to read “$195.51.” b. Second column, third paragraph, last line, the figure “$23,015” is corrected to read “$22,930”. 7. On page 24850, in Table 1A.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If Wage Index Greater Than 1), the table is corrected to read as follows: Table 1A.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If Wage Index Greater Than 1) Full update (3.3 percent) Labor-related Nonlabor-related Reduced update (1.3 Percent) Labor-related Nonlabor-related $3,430.41 $1,491.27 $3,363.99 $1,462.40 8. On page 24850, in Table 1B.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Less Than Or Equal To 1), the table is corrected to read as follows: Table 1B.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Less Than or Equal to 1) Full update (3.3 percent) Labor-related Nonlabor-related Reduced update (1.3 Percent) Labor-related Nonlabor-related $3,051.44 $1,870.24 $2,992.36 $1,834.03 9. On page 24850, in Table 1C.—Adjusted Operating Standardized Amounts For Puerto Rico Labor, Labor/Nonlabor, the table is corrected to read as follows: Table 1C.—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Rates if wage index greater than 1 Labor Nonlabor Rates if wage index less than or equal to 1 Labor Nonlabor National $3,430.41 $1,491.27 $3,363.99 $1,462.40 Puerto Rico 1,442.16 883.90 1,365.40 960.66 10. On page 24850, in Table 1D.—Capital Standard Federal Payment Rate, the table is corrected to read as follows: Table 1D.—Capital Standard Federal Payment Rate Urban rate Rural rate National $413.73 $417.12 Puerto Rico 195.51 197.11 11. On pages 24851 through 24917, in Table 2.—Hospital Case-Mix Indexes For Discharges Occurring in Federal Fiscal Year 2006; Hospital Wage Indexes For Federal Fiscal Year 2008; Hospital Average Hourly Wages For Federal Fiscal Years 2006 (2002 Wage Data), 2007 (2003 Wage Data), And 2008 (2004 Wage Data); And 3-Year Average Of Hospital Average Hourly Wages, the wage index for the listed provider numbers are corrected to read as follows: Provider No. FY 2008 wage index 010012 0.9390 010047 0.7776 010052 0.7701 010109 0.8049 010110 0.7900 010164 0.8042 040014 0.8720 040017 0.8718 040041 0.8720 040071 0.8720 040076 0.8720 040078 0.8720 040100 0.8720 040119 0.8720 050007 1.4907 050008 1.4792 050009 1.4200 050013 1.4200 050016 1.2015 050047 1.4792 050055 1.4792 050070 1.4907 050113 1.4907 050152 1.4792 050228 1.4792 050232 1.2015 050280 1.2826 050289 1.4907 050407 1.4792 050454 1.4792 050457 1.4792 050506 1.2015 050633 1.2015 050667 1.4200 050668 1.4792 050697 1.2826 050707 1.4907 050733 1.2826 050754 1.4907 060010 0.9730 060030 0.9730 080001 1.0777 080003 1.0777 100102 0.8874 100290 0.9331 110107 0.9752 110164 0.9752 110201 0.9752 130066 0.9680 130068 0.9680 150015 0.8904 160030 1.0022 180013 0.9407 180064 0.8131 180066 0.9407 180079 0.8075 180080 0.8042 180124 0.9407 190044 0.7849 190190 0.7752 190246 0.7752 200032 0.8878 210028 0.9429 230036 0.9398 230041 0.9398 230047 1.0091 230080 0.9398 230105 0.9398 230195 1.0091 230204 1.0091 230222 0.9398 230227 1.0091 230257 1.0091 230264 1.0091 230297 1.0091 230299 1.0091 230300 1.0091 240006 1.0760 240010 1.0760 240018 1.0084 240061 1.0760 240069 1.0760 240071 1.0760 270081 0.8574 280065 0.9746 310010 1.0812 310011 1.0864 310014 1.0777 310044 1.0812 310081 1.0777 310092 1.0812 310110 1.0812 320001 0.9739 320005 0.9739 320006 0.9739 320009 0.9739 320011 0.9407 320017 0.9739 320019 0.9739 320021 0.9739 320037 0.9739 320074 0.9739 320079 0.9739 320083 0.9739 330135 1.1528 330205 1.1528 330264 1.1528 340133 0.8916 360044 0.8825 370113 0.8718 380029 1.0479 380051 1.0479 380056 1.0479 390044 1.0777 390096 1.0777 390133 1.0777 410013 1.1793 430012 0.9394 430013 0.9394 430048 0.8398 440011 0.8042 440015 0.8042 440019 0.8042 440030 0.7972 440034 0.8042 440035 0.9407 440056 0.8042 440073 0.9407 440084 0.7949 440110 0.8042 440120 0.8042 440125 0.8042 440144 0.9407 440148 0.9407 440151 0.9407 440153 0.7923 440173 0.8042 440175 0.9407 440192 0.9407 440225 0.8042 440226 0.8042 450370 0.8444 450565 0.8690 450755 0.8498 12. On pages 24924, 29426, and 24941, in Table 4A.—Wage Index and Capital Geographic Adjustment Factor
(GAF)for Urban Areas by CBSA—FY 2008, the wage index and GAF for the listed CBSAs are corrected to read as follows: CBSA code Urban area Wage index GAF 10740 Albuquerque, NM 0.9739 0.9821 Bernalillo County, NM Sandoval County, NM Torrance County, NM Valencia County, NM 13020 Bay City MI 0.9398 0.9584 Bay County, MI 40340 Rochester, MN 1.0760 1.0514 Dodge County, MN Olmsted County, MN Wabasha County, MN 13. On pages 24948 through 24951, in Table 4C.—Wage Index And Capital Geographic Adjustment Factor
(GAF)For Hospitals That Are Reclassified By CBSA FY 2008, the wage indices and GAFs for the listed areas are corrected to read as follows: CBSA code Area Wage index GAF 10740 Albuquerque, NM 0.9739 0.9821 13020 Bay City, MI 0.9398 0.9584 22220 Fayetteville-Springdale-Rogers, AR-MO 0.8718 0.9103 35980 Norwich-New London, CT 1.1793 1.1196 40340 Rochester, MN 1.0760 1.0514 40660 Rome, GA 0.9390 0.9578 43620 Sioux Falls, SD 0.9394 0.9581 14. On pages 24952 through 24960, in Table 4J.—Out-Migration Adjustment—FY 2008, the entries for the listed providers are corrected to read as follows: Provider No. Reclassified for FY 2008 Out-migration adjustment Qualifying county name County code 010009 * 0.0092 MORGAN 01510 010025 * 0.0235 CHAMBERS 01080 010038 0.0039 CALHOUN 01070 010047 0.0178 BUTLER 01060 010052 0.0103 TALLAPOOSA 01610 010054 * 0.0092 MORGAN 01510 010065 * 0.0103 TALLAPOOSA 01610 010078 0.0039 CALHOUN 01070 010085 * 0.0092 MORGAN 01510 010109 0.0451 PICKENS 01530 010110 0.0302 BULLOCK 01050 010146 0.0039 CALHOUN 01070 010150 * 0.0178 BUTLER 01060 050007 0.0141 SAN MATEO 05510 050008 0.0026 SAN FRANCISCO 05480 050016 0.0103 SAN LUIS OBISPO 05500 050047 0.0026 SAN FRANCISCO 05480 050055 0.0026 SAN FRANCISCO 05480 050070 0.0141 SAN MATEO 05510 050076 * 0.0026 SAN FRANCISCO 05480 050113 0.0141 SAN MATEO 05510 050152 0.0026 SAN FRANCISCO 05480 050194 * 0.0052 SANTA CRUZ 05540 050197 * 0.0141 SAN MATEO 05510 050228 0.0026 SAN FRANCISCO 05480 050232 0.0103 SAN LUIS OBISPO 05500 050242 * 0.0052 SANTA CRUZ 05540 050289 0.0141 SAN MATEO 05510 050407 0.0026 SAN FRANCISCO 05480 050454 0.0026 SAN FRANCISCO 05480 050457 0.0026 SAN FRANCISCO 05480 050506 0.0103 SAN LUIS OBISPO 05500 050541 * 0.0141 SAN MATEO 05510 050633 0.0103 SAN LUIS OBISPO 05500 050668 0.0026 SAN FRANCISCO 05480 050707 0.0141 SAN MATEO 05510 050714 * 0.0052 SANTA CRUZ 05540 050754 0.0141 SAN MATEO 05510 060010 0.0153 LARIMER 06340 060030 0.0153 LARIMER 06340 080001 * 0.0063 NEW CASTLE 08010 080003 * 0.0063 NEW CASTLE 08010 100102 0.0125 COLUMBIA 10110 100156 * 0.0125 COLUMBIA 10110 100290 0.0582 SUMTER 10590 110146 * 0.0805 CAMDEN 11170 130049 * 0.032 KOOTENAI 13270 130066 0.032 KOOTENAI 13270 130067 * 0.0696 BINGHAM 13050 130068 0.032 KOOTENAI 13270 140167 * 0.1055 IROQUOIS 14460 150006 * 0.0113 LA PORTE 15450 150015 0.0113 LA PORTE 15450 150146 * 0.0319 NOBLE 15560 160030 0.004 STORY 16840 170137 * 0.0336 DOUGLAS 17220 180064 0.0319 MONTGOMERY 18860 180066 * 0.0449 LOGAN 18700 180079 0.0263 HARRISON 18480 190044 0.0258 ACADIA 19000 190099 * 0.0188 AVOYELLES 19040 190184 * 0.0161 CALDWELL 19100 190190 0.0161 CALDWELL 19100 190246 0.0161 CALDWELL 19100 200032 0.0466 OXFORD 20080 210028 0.0512 ST. MARY'S 21180 230069 * 0.0209 LIVINGSTON 23460 230279 * 0.0209 LIVINGSTON 23460 240018 0.0872 GOODHUE 24240 270081 0.0237 MUSSELSHELL 27320 300011 * 0.0069 HILLSBOROUGH 30050 300012 * 0.0069 HILLSBOROUGH 30050 300020 * 0.0069 HILLSBOROUGH 30050 300034 * 0.0069 HILLSBOROUGH 30050 310010 0.0092 MERCER 31260 310011 0.0115 CAPE MAY 31180 310021 * 0.0092 MERCER 31260 310044 0.0092 MERCER 31260 310092 0.0092 MERCER 31260 310110 0.0092 MERCER 31260 320003 * 0.0629 SAN MIGUEL 32230 320011 0.0442 RIO ARRIBA 32190 330027 * 0.0149 NASSAU 33400 330106 * 0.0149 NASSAU 33400 330167 * 0.0149 NASSAU 33400 330181 * 0.0149 NASSAU 33400 330182 * 0.0149 NASSAU 33400 330198 * 0.0149 NASSAU 33400 330225 * 0.0149 NASSAU 33400 330259 * 0.0149 NASSAU 33400 330331 * 0.0149 NASSAU 33400 330332 * 0.0149 NASSAU 33400 330372 * 0.0149 NASSAU 33400 340133 0.0308 MARTIN 34580 360010 * 0.0076 TUSCARAWAS 36800 360013 * 0.0136 SHELBY 36760 360025 * 0.0072 ERIE 36220 360044 0.0124 DARKE 36190 360096 * 0.0072 COLUMBIANA 36140 360175 * 0.0176 CLINTON 36130 360185 * 0.0072 COLUMBIANA 36140 380022 * 0.0068 LINN 38210 380029 0.0075 MARION 38230 380051 0.0075 MARION 38230 380056 0.0075 MARION 38230 390030 * 0.0284 SCHUYLKILL 39650 390031 * 0.0284 SCHUYLKILL 39650 390065 * 0.049 ADAMS 39000 390138 * 0.0213 FRANKLIN 39350 390151 * 0.0213 FRANKLIN 39350 390162 * 0.02 NORTHAMPTON 39590 390181 * 0.0284 SCHUYLKILL 39650 390183 * 0.0284 SCHUYLKILL 39650 390313 * 0.0284 SCHUYLKILL 39650 420009 * 0.0113 OCONEE 42360 420039 * 0.0153 UNION 42430 420062 * 0.0109 CHESTERFIELD 42120 440030 0.0056 HAMBLEN 44310 440067 * 0.0056 HAMBLEN 44310 440084 0.0033 MONROE 44610 440153 0.0007 COCKE 44140 450324 * 0.0132 GRAYSON 45564 450370 0.024 COLORADO 45312 450393 * 0.0132 GRAYSON 45564 450395 * 0.0451 POLK 45850 450438 * 0.024 COLORADO 45312 450469 * 0.0132 GRAYSON 45564 450565 0.0486 PALO PINTO 45841 450755 0.0294 HOCKLEY 45652 510077 * 0.0021 MINGO 51290 15. On pages 24960 through 24977, in Table 5.—List of Proposed Medicare Severity-Diagnosis Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay, the table is corrected to read as follows: BILLING CODE 4120-01-P EP07JN07.000 EP07JN07.001 EP07JN07.002 EP07JN07.003 EP07JN07.004 EP07JN07.005 EP07JN07.006 EP07JN07.007 EP07JN07.008 EP07JN07.009 EP07JN07.010 EP07JN07.011 EP07JN07.012 EP07JN07.013 EP07JN07.014 EP07JN07.015 EP07JN07.016 EP07JN07.017 EP07JN07.018 BILLING CODE 4120-01-C 16. On pages 25095 through 25099, in Table 10.—Geometric Mean Plus The Lesser of .75 Of The National Adjusted Operating Standardized Payment Amount (Increased To Reflect The Difference Between Costs And Charges) Or .75 Of One Standard Deviation Of Mean Charges By Proposed Medicare Severity Diagnosis Related Group (MS-DRG) April 2007, 1 the table is corrected to read as follows: 1 Cases taken from the FY 2006 MedPAR file; proposed MS-DRGs are from GROUPER Version 25.0. Proposed MS-DRG Number of cases Threshold 1 629 $337,776 2 328 177,459 3 23,999 266,199 4 21,742 162,448 5 842 159,506 6 495 90,877 7 413 130,276 8 560 92,482 9 1,358 96,148 10 177 72,498 11 1,289 71,569 12 1,923 51,377 13 1,484 36,890 20 901 138,451 21 558 107,625 22 251 74,547 23 3,112 81,762 24 2,576 60,740 25 8,417 79,522 26 11,626 52,970 27 14,454 41,141 28 1,609 73,994 29 2,862 45,280 30 3,751 30,578 31 1,057 59,862 32 2,987 35,341 33 4,263 30,562 34 813 58,045 35 2,506 42,020 36 7,710 36,365 37 4,777 51,688 38 14,602 33,107 39 55,357 25,687 40 4,549 58,682 41 7,720 39,547 42 5,430 34,186 52 1,156 29,433 53 593 22,836 54 4,664 30,610 55 16,896 24,934 56 7,716 29,072 57 48,432 19,657 58 789 28,525 59 2,639 22,939 60 4,201 17,679 61 1,340 53,318 62 2,288 41,979 63 1,185 36,186 64 55,552 34,358 65 112,189 27,004 66 94,547 21,586 67 1,383 30,616 68 12,393 23,506 69 103,747 18,936 70 7,092 34,031 71 10,001 26,444 72 6,056 20,628 73 8,655 26,844 74 32,523 21,427 75 1,197 33,931 76 874 24,318 77 1,101 32,854 78 1,307 24,933 79 957 20,523 80 2,077 24,135 81 8,190 17,502 82 1,646 33,910 83 1,940 28,383 84 2,591 22,654 85 5,328 35,679 86 10,382 26,404 87 12,152 20,144 88 717 30,107 89 2,641 23,706 90 3,319 17,874 91 6,676 29,690 92 14,890 22,313 93 15,484 17,172 94 1,521 56,938 95 1,088 42,964 96 755 36,338 97 1,252 51,314 98 1,048 35,977 99 642 30,167 100 15,837 28,714 101 56,905 19,341 102 1,352 24,321 103 15,023 17,133 113 568 31,544 114 601 21,640 115 1,098 25,563 116 665 23,828 117 1,400 16,827 121 587 22,514 122 674 13,518 123 2,843 19,108 124 679 24,153 125 4,705 16,568 129 1,374 37,663 130 1,072 28,539 131 655 35,824 132 728 27,050 133 1,352 31,142 134 2,661 20,306 135 781 35,301 136 1,113 24,451 137 1,108 28,410 138 1,370 20,587 139 2,145 22,300 146 687 35,060 147 1,422 25,142 148 935 18,944 149 39,248 15,883 150 939 25,105 151 6,801 13,607 152 2,352 22,958 153 16,028 15,145 154 1,843 27,851 155 4,207 22,020 156 5,140 16,103 157 1,145 28,232 158 3,039 21,662 159 2,418 15,345 163 13,431 79,829 164 18,047 47,971 165 14,553 37,942 166 20,290 58,779 167 20,772 40,117 168 5,758 30,294 175 11,954 33,475 176 40,173 26,670 177 57,179 36,617 178 71,192 30,381 179 27,454 24,673 180 22,474 32,948 181 32,156 26,822 182 6,163 22,468 183 1,654 29,694 184 4,141 22,561 185 2,593 15,740 186 8,533 31,857 187 9,968 25,761 188 5,148 20,974 189 104,531 28,757 190 57,041 27,770 191 121,659 24,280 192 196,903 18,419 193 88,053 29,668 194 266,599 24,679 195 147,744 18,274 196 5,143 30,999 197 6,894 25,721 198 4,943 21,129 199 3,257 33,231 200 8,185 23,984 201 3,523 17,676 202 31,587 20,635 203 41,587 15,003 204 26,039 17,394 205 5,775 26,368 206 22,415 18,854 207 46,165 83,212 208 79,432 41,398 215 150 151,502 216 8,411 165,422 217 7,609 118,088 218 3,256 98,470 219 10,062 132,460 220 13,481 94,478 221 8,383 81,144 222 2,865 149,784 223 5,770 116,219 224 1,919 138,213 225 5,871 109,030 226 7,048 112,464 227 50,536 88,444 228 3,084 126,976 229 4,128 89,139 230 1,989 73,311 231 1,478 138,287 232 1,795 107,403 233 16,911 119,988 234 39,167 86,734 235 9,628 97,022 236 32,871 68,172 237 21,789 85,211 238 44,929 53,794 239 13,814 64,168 240 13,349 43,051 241 3,350 31,297 242 17,179 64,273 243 37,856 50,218 244 68,201 42,102 245 6,241 54,054 246 32,661 64,613 247 279,972 46,787 248 5,013 58,218 249 29,657 41,876 250 5,739 53,408 251 39,905 38,200 252 44,602 48,168 253 46,864 43,475 254 59,029 34,550 255 2,609 39,961 256 3,833 30,250 257 774 23,818 258 598 49,682 259 7,328 35,034 260 867 47,446 261 2,804 28,303 262 3,378 23,301 263 788 29,053 264 30,137 39,708 280 60,735 36,717 281 57,734 28,584 282 60,951 23,031 283 15,852 30,928 284 4,911 23,409 285 3,254 17,351 286 23,282 40,266 287 172,488 28,923 288 3,245 50,617 289 1,423 36,464 290 484 28,249 291 183,774 29,157 292 217,052 24,421 293 226,688 17,810 294 1,704 21,989 295 1,658 13,805 296 1,730 26,654 297 943 20,306 298 554 12,889 299 17,443 28,063 300 46,820 21,997 301 39,910 15,712 302 7,873 23,741 303 81,458 15,192 304 2,084 24,110 305 35,646 15,139 306 1,379 27,644 307 6,447 18,857 308 33,528 27,255 309 79,751 20,827 310 160,738 14,816 311 24,867 13,364 312 169,247 18,273 313 220,769 14,894 314 60,053 30,750 315 30,730 23,629 316 20,101 16,823 326 11,567 88,786 327 10,901 49,818 328 9,333 32,074 329 48,135 80,371 330 66,303 47,127 331 31,391 35,021 332 1,890 74,102 333 6,196 46,130 334 4,023 34,266 335 7,161 68,407 336 12,516 43,200 337 8,835 32,563 338 1,499 58,047 339 3,192 39,795 340 3,607 30,753 341 874 42,806 342 2,536 31,921 343 6,875 24,258 344 898 51,426 345 2,915 33,636 346 2,909 27,779 347 1,568 36,443 348 3,985 27,800 349 5,787 19,265 350 1,669 41,035 351 3,997 28,329 352 8,419 19,894 353 3,182 44,303 354 9,118 30,612 355 17,451 23,281 356 8,366 58,953 357 8,046 40,130 358 2,714 31,167 368 3,052 31,502 369 4,005 25,728 370 3,914 20,084 371 16,843 32,446 372 22,903 26,907 373 14,897 20,598 374 9,414 34,760 375 19,730 26,563 376 4,816 22,403 377 50,503 30,943 378 84,806 24,936 379 128,748 19,140 380 2,917 32,583 381 4,894 26,915 382 5,445 20,581 383 1,303 28,065 384 8,664 21,556 385 2,107 33,476 386 7,221 25,067 387 5,230 20,543 388 18,267 29,699 389 46,328 23,347 390 48,052 16,336 391 47,511 24,761 392 306,515 17,829 393 23,917 28,925 394 45,952 23,434 395 26,460 17,594 405 3,903 83,940 406 5,241 49,125 407 2,310 36,497 408 1,644 67,203 409 1,713 46,400 410 722 35,648 411 978 65,359 412 1,063 47,834 413 881 37,325 414 5,596 59,660 415 6,847 40,610 416 6,222 30,251 417 16,671 46,291 418 27,563 36,466 419 38,264 28,533 420 714 61,258 421 1,091 36,437 422 364 28,520 423 1,500 63,840 424 912 44,260 425 157 35,667 432 16,259 30,416 433 9,022 22,852 434 945 17,210 435 11,908 32,613 436 13,987 26,367 437 4,357 23,539 438 14,426 31,691 439 24,816 25,250 440 27,346 18,913 441 13,912 29,122 442 12,756 23,365 443 6,698 18,374 444 12,447 31,276 445 16,757 25,851 446 16,849 20,274 453 846 162,178 454 1,496 110,006 455 1,875 85,089 456 764 132,358 457 1,763 93,955 458 1,534 78,607 459 3,180 93,067 460 50,317 61,555 461 1,062 78,144 462 14,234 58,820 463 5,283 64,018 464 6,322 42,171 465 2,942 31,102 466 4,152 70,822 467 10,818 52,840 468 28,701 44,445 469 29,730 57,143 470 410,173 41,440 471 2,227 71,285 472 6,218 48,040 473 22,546 39,667 474 2,829 51,053 475 3,530 35,636 476 1,698 26,070 477 2,257 57,109 478 7,144 41,570 479 10,267 33,395 480 25,866 50,686 481 59,136 38,146 482 64,739 33,332 483 5,729 44,536 484 17,949 37,665 485 967 55,459 486 1,535 40,900 487 1,214 33,214 488 1,551 33,205 489 3,866 26,495 490 19,803 34,057 491 58,396 24,028 492 4,700 48,148 493 15,248 36,196 494 30,563 28,910 495 1,867 51,435 496 5,049 34,292 497 7,519 27,156 498 1,177 36,767 499 1,245 22,858 500 1,349 47,836 501 3,679 30,766 502 6,825 23,032 503 736 38,112 504 2,155 30,857 505 3,214 24,352 506 909 25,023 507 779 33,035 508 2,722 26,249 509 465 25,608 510 957 38,420 511 4,008 30,072 512 11,961 23,087 513 1,287 29,502 514 1,339 20,718 515 3,577 51,402 516 10,963 37,292 517 18,263 30,388 533 828 27,486 534 3,634 15,819 535 6,844 27,022 536 34,321 15,408 537 654 20,405 538 1,164 12,954 539 3,379 34,667 540 4,187 27,375 541 1,858 22,002 542 6,158 33,306 543 18,413 25,124 544 12,644 18,008 545 4,016 34,451 546 5,881 24,102 547 4,880 18,469 548 591 33,006 549 1,077 25,270 550 904 18,381 551 9,502 29,646 552 87,859 18,492 553 2,790 24,265 554 20,253 14,944 555 1,995 22,555 556 19,168 14,428 557 3,184 29,321 558 14,178 19,372 559 1,635 28,972 560 3,979 20,901 561 7,617 13,636 562 4,996 26,929 563 36,056 15,451 564 1,606 27,237 565 3,237 21,478 566 2,779 15,695 573 5,687 46,949 574 12,100 33,325 575 6,468 25,393 576 558 44,896 577 2,179 31,142 578 3,299 23,686 579 3,088 44,811 580 6,766 31,460 581 5,288 23,941 582 8,972 24,930 583 15,549 19,001 584 1,431 27,897 585 2,818 20,786 592 3,982 30,226 593 12,832 23,538 594 2,955 16,562 595 1,082 29,610 596 5,755 19,571 597 548 29,514 598 1,483 23,497 599 350 15,943 600 572 21,988 601 865 15,125 602 21,307 26,948 603 130,923 18,145 604 2,627 25,150 605 22,672 16,152 606 1,363 22,966 607 7,169 14,791 614 1,376 44,346 615 1,626 32,541 616 1,132 61,354 617 6,822 37,382 618 343 28,522 619 663 60,076 620 1,877 41,119 621 6,556 35,242 622 1,234 45,937 623 3,268 33,291 624 487 24,889 625 1,098 40,232 626 2,522 27,537 627 14,305 19,134 628 3,267 51,514 629 3,958 40,808 630 684 31,392 637 16,283 26,892 638 40,811 20,070 639 41,135 14,010 640 55,690 23,971 641 188,104 16,575 642 1,542 23,138 643 5,014 31,125 644 11,845 24,210 645 8,402 18,520 652 10,437 57,281 653 1,585 86,150 654 3,231 54,167 655 1,650 40,670 656 3,721 56,568 657 7,359 38,736 658 8,479 32,186 659 4,442 51,032 660 7,444 36,348 661 4,745 29,748 662 988 41,594 663 2,131 29,231 664 4,676 23,754 665 690 46,858 666 2,213 30,439 667 3,948 19,910 668 3,757 39,537 669 12,491 27,870 670 13,411 19,410 671 884 28,518 672 965 19,128 673 12,577 43,111 674 10,503 40,270 675 11,704 31,229 682 75,827 30,254 683 112,129 25,615 684 43,451 19,020 685 2,493 19,996 686 1,581 31,234 687 3,322 24,255 688 1,198 18,441 689 55,398 25,904 690 200,059 18,352 691 898 31,887 692 654 25,534 693 2,235 27,712 694 19,213 17,667 695 974 24,032 696 10,565 14,808 697 575 17,475 698 21,061 27,909 699 22,820 23,309 700 15,089 17,723 707 4,874 35,532 708 17,015 29,281 709 755 34,020 710 2,037 27,689 711 921 34,145 712 819 20,449 713 11,755 25,154 714 32,745 15,644 715 638 34,191 716 1,382 26,921 717 634 31,538 718 633 19,455 722 871 28,980 723 2,037 23,777 724 666 15,999 725 802 23,413 726 3,940 16,420 727 1,098 26,180 728 6,176 16,848 729 578 22,426 730 552 14,387 734 1,470 39,650 735 1,328 26,263 736 840 68,822 737 3,429 39,321 738 954 28,973 739 975 48,200 740 4,366 31,584 741 6,554 24,119 742 10,705 29,966 743 35,310 21,122 744 1,498 28,762 745 2,189 20,066 746 2,486 27,713 747 11,218 20,664 748 21,171 19,841 749 1,037 42,792 750 484 24,671 754 1,083 31,715 755 3,152 24,245 756 831 16,790 757 1,322 31,004 758 1,597 24,623 759 1,186 19,161 760 1,703 19,848 761 1,918 13,557 765 2,497 22,146 766 2,634 14,889 767 119 15,750 768 10 28,201 769 86 29,901 770 181 18,191 774 1,442 12,637 775 5,224 9,066 776 491 15,413 777 177 19,480 778 489 8,798 779 107 14,082 780 47 5,638 781 3,004 13,343 782 125 8,369 794 7 2,880 799 623 76,151 800 699 45,583 801 602 35,355 802 691 51,739 803 1,003 33,630 804 996 25,527 808 8,315 34,115 809 15,527 24,895 810 3,818 21,504 811 18,344 24,532 812 83,082 18,156 813 15,031 25,132 814 1,631 29,730 815 3,337 23,820 816 2,355 18,234 820 1,481 83,993 821 2,529 40,735 822 2,139 28,780 823 2,436 64,907 824 3,039 40,522 825 2,009 29,739 826 562 77,350 827 1,318 40,156 828 872 29,232 829 1,374 44,261 830 531 25,785 834 5,257 51,445 835 1,469 30,879 836 1,526 23,524 837 1,623 85,432 838 900 41,508 839 1,385 26,968 840 15,152 38,374 841 11,012 29,060 842 7,678 22,849 843 1,477 32,639 844 2,854 25,034 845 1,008 21,623 846 2,480 37,292 847 23,667 25,136 848 1,699 20,748 849 1,498 26,843 853 31,444 77,914 854 6,881 50,010 855 467 36,089 856 6,187 69,506 857 10,059 36,989 858 3,500 28,786 862 7,425 33,012 863 21,807 21,882 864 19,826 20,564 865 2,019 27,840 866 9,406 16,786 867 5,306 38,488 868 2,369 24,746 869 1,100 20,520 870 13,710 90,935 871 203,702 33,685 872 92,118 25,456 876 968 40,268 880 10,494 15,328 881 4,576 11,727 882 1,656 12,481 883 786 17,701 884 21,619 19,048 885 77,763 16,598 886 376 14,393 887 423 18,850 894 4,480 8,389 895 6,474 16,201 896 5,369 25,303 897 35,835 13,689 901 917 48,598 902 2,135 31,632 903 1,739 24,530 904 941 39,574 905 798 25,597 906 745 23,573 907 8,098 53,982 908 7,884 35,453 909 5,971 26,248 913 813 26,149 914 6,958 16,346 915 915 24,023 916 5,369 10,725 917 14,155 28,466 918 34,847 14,539 919 10,569 27,881 920 12,135 22,284 921 11,659 15,316 922 1,005 26,606 923 4,211 16,053 927 182 181,306 928 794 60,107 929 459 32,721 933 155 31,143 934 694 23,842 935 2,179 21,397 939 423 43,099 940 690 32,755 941 1,077 26,227 945 5,053 21,694 946 3,199 17,198 947 6,544 23,445 948 34,325 15,485 949 742 18,955 950 476 12,079 951 990 14,489 955 446 82,175 956 3,718 55,062 957 1,157 102,443 958 737 70,330 959 816 53,566 963 1,395 46,322 964 1,578 32,525 965 2,016 27,560 969 598 75,122 970 231 47,821 974 7,276 34,615 975 3,463 29,344 976 2,728 23,762 977 4,871 23,005 981 26,280 77,452 982 18,594 53,442 983 6,766 38,481 984 669 55,818 985 1,048 38,813 986 890 27,837 987 8,036 54,475 988 11,880 36,064 989 6,537 26,243 999 18 16,006 17. On pages 25118 through 25123, in Table I.—Impact Analysis of Proposed Changes For FY 2008, the listed entries and footnotes are corrected to read as follows: BILLING CODE 4120-01-P EP07JN07.019 EP07JN07.020 EP07JN07.021 BILLING CODE 4120-01-C 18. On page 25124, 6 Shown here are the tentative effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB). The effects demonstrate the FY 2008 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2008. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflect the geographic budget neutrality factor of 0.991925. 7 This column displays the effects of the proposed changes in the rural floor budget neutrality adjustment applied on the wage index instead of on the standardized amount. The column reflects a proposed rural floor budget neutrality factor of 0.997080. 11 This column shows tentative changes in payments from FY 2007 to FY 2008 including a 0.976 case mix index adjustment for coding and documentation improvements that are anticipated with the adoption of the MS-DRGs prior to the assumed growth occurring. In incorporates all of the changes displayed in Columns 4, 5, 6, 7, 8, 9, 10 and (the changes displayed in Columns 2 and 3 are included in Column 4). 12 This column shows tentative changes in payments from FY 2007 to FY 2008 with a case mix index adjustment and the assumed growth for improvements in documentation and coding. It incorporates all of the changes displayed in Columns 4, 5, 6, 7, 8, 9, 10 and (the changes displayed in Columns 2 and 3 are included in Column 4). It also reflects the impact of the proposed FY 2008 update, and changes in hospitals' reclassification status in FY 2008 compared to FY 2007. The sum of these impacts may be different from the percentage changes shown here due to rounding and interactive effects. a. First column, second full paragraph, line 25, the figure “0.999317” is corrected to read “0.999367.” b. Second column, last paragraph, line 3, the figure “0.999317” is corrected to read “0.999367.” 19. On page 25125, a. First column, last paragraph, line 5, the figure “0.991938” is corrected to read “0.991925.” b. Second column, first full paragraph, line 17, the figure “0.997084” is corrected to read “0.997080.” 20. On pages 25126 through 25128, in Table II.—Impact Analysis of Proposed Changes For FY 2008 Operating Prospective Payment System, the listed entries are corrected to read as follows: Table II.—Impact Analysis of Proposed Changes for FY 2008 Operating Prospective Payment System (Payments per Case) [Percent changes in payments per case] Number of hospitals Published average proposed FY 2008 payment per case 1 Corrected average proposed FY 2008 payment per case 1 Published all proposed FY 2008 changes Corrected all proposed FY 2008 changes
(4)All hospitals 3535 9299 9299 3.3 3.3 By Geographic Location: Urban hospitals 2540 9678 9680 3.6 3.6 Large urban areas (populations over 1 million) 1409 10156 10157 4.2 4.2 Other urban areas (populations of 1 million or fewer) 1131 9103 9107 2.8 2.9 Rural hospitals 995 7123 7110 0.9 0.7 Bed Size (Urban): 0-99 beds 632 7263 7261 0.4 0.3 100-199 beds 849 8170 8159 3.4 3.2 200-299 beds 480 9120 9117 3.5 3.4 300-499 beds 412 10136 10143 4.0 4.0 500 or more beds 167 12234 12254 4.0 4.2 Bed Size (Rural): 0-49 beds 342 6065 6045 −1.6 −1.9 50-99 beds 369 6588 6572 0.5 0.2 100-149 beds 172 6960 6945 1.3 1.1 150-199 beds 67 7735 7727 1.4 1.3 200 or more beds 45 8938 8937 2.0 2.0 Urban by Region: New England 126 10001 10004 2.6 2.6 Middle Atlantic 350 10529 10532 2.8 2.8 South Atlantic 388 9175 9176 4.2 4.3 East North Central 395 9197 9199 3.4 3.5 East South Central 166 8784 8786 3.2 3.2 West North Central 156 9321 9334 2.8 3.0 West South Central 358 9174 9175 4.0 4.0 Mountain 153 9826 9836 3.3 3.5 Pacific 395 11657 11656 4.7 4.7 Puerto Rico 53 4525 4511 3.6 3.3 Rural by Region: New England 19 9714 9716 0.4 0.4 Middle Atlantic 72 7525 7514 0.8 0.6 South Atlantic 173 6700 6683 1.8 1.6 East North Central 124 7574 7567 0.7 0.6 East South Central 177 6479 6462 1.2 1.0 West North Central 115 7792 7786 0.6 0.6 West South Central 194 6339 6322 −0.7 −0.9 Mountain 80 7834 7822 0.9 0.7 Pacific 41 8896 8881 2.0 1.8 By Payment Classification: Urban hospitals 2619 9629 9631 3.6 3.6 Large urban areas (populations over 1 million) 1436 10127 10128 4.1 4.1 Other urban areas (populations of 1 million or fewer) 1183 9034 9038 2.8 2.8 Rural areas 916 7242 7230 0.9 0.8 Teaching Status: Non-teaching 2479 7851 7844 2.7 2.6 Fewer than 100 Residents 816 9384 9385 3.5 3.5 100 or more Residents 240 13533 13555 4.1 4.2 Urban DSH: Non-DSH 879 8307 8314 2.0 2.1 100 or more beds 1527 10182 10183 4.0 4.0 Less than 100 beds 359 6697 6682 1.9 1.6 Rural DSH: SCH 391 7013 6994 0.3 0.0 RRC 189 7818 7809 1.7 1.6 100 or more beds 36 6028 6010 2.1 1.8 Less than 100 beds 154 5353 5335 0.4 0.0 Urban teaching and DSH: Both teaching and DSH 805 11185 11192 4.0 4.1 Teaching and no DSH 192 9078 9089 2.5 2.6 No teaching and DSH 1081 8283 8273 3.7 3.5 No teaching and no DSH 541 7812 7817 1.9 2.0 Rural Hospital Types: RRC 59 8358 8359 2.5 2.5 SCH 45 9301 9296 0.8 0.8 MDH 21 6339 6319 0.3 0.0 SCH and RRC 17 10239 10236 2.7 2.7 MDH and RRC 1 9674 9677 −0.8 −0.8 Type of Ownership: Voluntary 2069 9424 9427 3.2 3.2 Proprietary 823 8478 8471 3.7 3.6 Government 598 9593 9589 3.5 3.4 Medicare Utilization as a Percent of Inpatient Days: 0-25 230 13443 13434 5.6 5.5 25-50 1292 10570 10576 4.0 4.1 50-65 1453 8116 8113 2.6 2.5 Over 65 441 7331 7325 1.2 1.2 Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2008 Reclassifications: All Reclassified Hospitals FY 2008 801 8938 8937 2.8 2.8 All Non-Reclassified Hospitals FY 2008 2734 9417 9416 3.4 3.4 Urban Reclassified Hospitals FY 2008 434 9581 9595 3.3 3.4 Urban Non-reclassified Hospitals FY 2008 2105 9701 9705 3.6 3.7 Rural Reclassified Hospitals FY 2008 367 7669 7663 1.5 1.4 Rural Nonreclassified Hospitals FY 2008 568 6392 6374 −0.3 −0.6 All Section 401 Reclassified Hospitals 31 8799 8787 1.8 1.6 Other Reclassified Hospitals (Section 1886(d)(8)(B)) 61 6729 6710 1.4 1.1 Former Section 508 Hospitals 107 9814 9823 0.5 0.6 Specialty Hospitals Cardiac Specialty Hospitals 22 10676 10727 −0.6 −0.1 1 These payment amounts per case do not reflect any estimates of annual case-mix increase. (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) Dated: June 1, 2007. Ann C. Agnew, Executive Secretary to the Department. [FR Doc. 07-2806 Filed 6-1-07; 2:04 pm]
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Traces to 30 documents
32 references not yet in our index
  • 11 CFR 100
  • Pub. L. 107-155
  • 337 F. Supp. 2d 28
  • 414 F.3d 76
  • 14 CFR 71
  • 26 CFR 1
  • Pub. L. 108-357
  • 118 Stat. 1418
  • Pub. L. 109-135
  • 119 Stat. 25
  • Pub. L. 109-222
  • 120 Stat. 345
  • Pub. L. 109-432
  • 120 Stat. 2922
  • T.D. 9263
  • 255 F.3d 1357
  • 26 CFR 20
  • Rev. Rul. 76-273
  • Rev. Rul. 82-105
  • 40 CFR 52
  • Pub. L. 104-4
  • 472 F.3d 882
  • 40 CFR 50
  • 40 CFR 81
  • 40 CFR 58
  • 375 F.3d 537
  • 285 F.3d 63
  • 265 F.3d 426
  • 144 F.3d 984
  • 40 CFR 51
  • 40 CFR 93
  • 40 CFR 93.118(e)(4)
Citation graph
cites case law
Notices
Notice of proposed rulemaking
Stat.Public Law 107–154
U.S.C.§ 431
C.F.R.§ 300.2
C.F.R.§ 300.31
C.F.R.§ 300.32
U.S.C.§ 501
U.S.C.§ 441i
C.F.R.§ 100.24
C.F.R.§ 100.25
F. Supp.337 F. Supp. 2d 28
F. App'x414 F.3d 76
F. App'x255 F.3d 1357
Cites 62 · showing 12Cited by 0 across 0 sources
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