Tap any paragraph to write a margin note. Your notes collect in the Desk below the text and file under cases with @. The side-by-side margin rail opens on a larger screen.

§
Marginalia
Code · REGISTER · 2007-08-03 · PROPOSED RULES · Unknown

Unknown. Direct final rule

26,235 words·~119 min read·/register/2007/08/03/07-3786

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

--- schema: federal-register doc_type: fedreg source_file: FR-2007-08-03.xml --- 72 149 Friday, August 3, 2007 Contents Agency Agency for Healthcare Research and Quality NOTICES Agency information collection activities; proposals, submissions, and approvals, 43273-43277 07-3813 07-3814 Agriculture Agriculture Department See Animal and Plant Health Inspection Service See Forest Service See Rural Utilities Service Animal Animal and Plant Health Inspection Service NOTICES Organization, functions, and authority delegations:
Alfalfa producers; contact information to determine proximity to Roundup Ready alfalfa fields, 43222-43223 E7-15120 Architectural Architectural and Transportation Barriers Compliance Board PROPOSED RULES Telecommunications Act accessibility guidelines and electronic and information technology accessibility standards: Telecommunications and Electronic and Information Technology Advisory Committee; meetings, 43211-43212 E7-15062 Army Army Department See Engineers Corps RULES Personnel:
Regular Army and Reserve Components; recruiting and enlistment, 43161-43163 E7-15122 NOTICES Patent licenses; non-exclusive, exclusive, or partially exclusive: Artillery rocket trajectory correction kit; correction, 43250 07-3790 Trauma training mannequin, 43250 07-3791 Blind Blind or Severely Disabled, Committee for Purchase From People Who Are See Committee for Purchase From People Who Are Blind or Severely Disabled Centers Centers for Medicare & Medicaid Services RULES Medicare:
Skilled nursing facilities; prospective payment system and consolidated billing; 2008 FY rates update, 43412-43463 07-3784 Coast Guard Coast Guard RULES Regattas and marine parades: Seattle Seafair, 43163-43165 E7-15141 Commerce Commerce Department See Foreign-Trade Zones Board See International Trade Administration See National Oceanic and Atmospheric Administration Committee for Purchase Committee for Purchase From People Who Are Blind or Severely Disabled NOTICES Procurement list; additions and deletions, 43229-43232 E7-15091 E7-15092 Defense Defense Department See Army Department See Engineers Corps See Navy Department NOTICES Meetings;
Sunshine Act, 43248-43250 07-3821 07-3822 07-3823 Education Education Department NOTICES Agency information collection activities; proposals, submissions, and approvals, 43253-43254 E7-15081 Grants and cooperative agreements; availability, etc.: Special education and rehabilitative services— Technology and Media Services for Individuals with Disabilities Program, 43254-43262 E7-15130 E7-15131 Meetings: Tribal Colleges and Universities President's Board of Advisors, 43263 E7-15097 Energy Energy Department See Federal Energy Regulatory Commission NOTICES Committees; establishment, renewal, termination, etc.:
Basic Energy Sciences Advisory Committee, 43263 E7-15078 Meetings: Environmental Management Site-Specific Advisory Board— Paducah Gaseous Diffusion Plant, KY, 43264 E7-15077 Engineers Engineers Corps NOTICES Environmental statements; notice of intent: Brazoria County, TX; Freeport Harbor Navigation Project, 43251 07-3817 EPA Environmental Protection Agency RULES Air quality implementation plans; approval and promulgation; various States: Kentucky, 43172-43176 E7-14982 Michigan, 43169-43172 E7-15011 Cross-media electronic reporting:
Authorized programs; rule deadline extension, 43165-43169 E7-15013 PROPOSED RULES Air quality implementation plans; approval and promulgation; various States: Michigan, 43215-43216 E7-15012 Cross-media electronic reporting: Authorized programs; rule deadline extension, 43212-43215 E7-15014 NOTICES Environmental statements; availability, etc.: Agency comment availability, 43270-43271 E7-15116 Agency weekly receipts, 43271 E7-15115 Reports and guidance documents; availability, etc.:
Environment; highlights of national trends, 43272-43273 E7-15123 Equal Equal Employment Opportunity Commission NOTICES Meetings; Sunshine Act, 43273 07-3827 FAA Federal Aviation Administration RULES Airworthiness directives: M7 Aerospace LP, 43139-43144 E7-15018 Airworthiness standards: Centex Aerospace Inc.; Model SR22, 43137-43139 E7-14935 PROPOSED RULES Airworthiness directives: Airbus, 43199-43202 07-3774 NOTICES Meetings: RTCA, Inc., 43316-43317 07-3780 07-3793 Passenger facility charges; applications, etc.:
Colorado Springs, CO, et al., 43317-43318 07-3816 Federal Energy Federal Energy Regulatory Commission NOTICES Electric rate and corporate regulation combined filings, 43266-43268 E7-15087 Environmental statements; availability, etc.: Southern LNG, Inc., et al., 43268 E7-15076 Hydroelectric applications, 43268-43270 E7-15089 *Applications, hearings, determinations, etc.:* Dominion Transmission, Inc., 43264 E7-15075 Electric Transmission Texas, LLC, 43264-43265 E7-15073 Enbridge Pipelines (Southern Lights) LLC, 43265 E7-15074 Southern Star Central Gas Pipeline, Inc., 43265-43266 E7-15072 Southwest Power Pool, Inc., 43266 E7-15090 Transcontinental Gas Pipe Line Corp., 43266 E7-15071 Federal Highway Federal Highway Administration NOTICES Federal agency actions on proposed highways; judicial review claims:
Kern County, CA; State Route 46 highway project and Westside Parkway Project, 43318-43319 E7-15098 Federal Mediation Federal Mediation and Conciliation Service PROPOSED RULES Freedom of Information Act; implementation, 43209-43211 E7-14818 Federal Railroad Federal Railroad Administration NOTICES Exemption petitions, etc.: Capital Metropolitan Transportation Authority, 43319 E7-15157 Kansas City Southern Railway Co., 43319-43320 E7-15150 Maryland Transit Administration, 43320-43321 E7-15140 E7-15148 Union Pacific Railroad Co., 43321-43322 E7-15144 Traffic control systems; discontinuance or modification:
Canadian National-Illinois Central Railroad, 43322 E7-15151 CSX Transportation, Inc, 43322-43323 E7-15133 Union Pacific Railroad Co., 43323-43324 E7-15129 Federal Reserve Federal Reserve System NOTICES Banks and bank holding companies: Change in bank control, 43273 E7-15088 Federal Transit Federal Transit Administration PROPOSED RULES Major capital investment projects: New Starts Program and proposed Small Starts program category, 43328-43377 E7-14285 NOTICES Environmental statements; notice of intent:
Mesa, AZ; Central Mesa Corridor high-capacity transit improvements, 43324-43326 07-3815 Reports and guidance documents; availability, etc.: New Starts and Small Starts Programs; evaluation measures; policy guidance, 43378 E7-14279 Fish Fish and Wildlife Service NOTICES Boundary establishment, descriptions, etc. Rocky Flats National Wildlife Refuge, CO, 43293-43294 07-3773 Food Food and Drug Administration RULES Medical devices: General and plastic surgery devices— Absorbable polyhydroxybutyrate surgical suture; classification, 43144-43146 E7-15064 NOTICES Grants and cooperative agreements; availability, etc.:
Food Safety and Security Monitoring Project, 43277-43281 E7-15061 Reports and guidance documents; availability, etc.: Absorbable polyhydroxybutyrate surgical suture; Class II special controls, 43282 E7-15063 MISSING FOR: Foreign-Trade Zones Board Foreign-Trade Zones Board NOTICES *Applications, hearings, determinations, etc.:* Mississippi Bauhaus USA, Inc.; upholstered furniture manufacturing facility, 43232-43233 E7-15169 H.M. Richards, Inc.; upholstered furniture facility, 43232 07-3831 Lane Furniture Industries, Inc.; upholstered furniture manufacturing facility, 43233 E7-15173 Puerto Rico Merck Sharpe & Dohme Quimica De Puerto Rico, Inc.; pharmaceutical manufacturing facility, 43233-43234 E7-15166 Forest Forest Service NOTICES Environmental statements; notice of intent:
Coronado National Forest, AZ, 43225-43228 07-3812 Manti-La Sal National Forest, UT, 43228-43229 07-3743 Environmental statements; notice of intent, etc.: Salmon-Challis National Forest, ID, 43223-43225 E7-14977 GSA General Services Administration PROPOSED RULES Federal travel: Relocation allowances; Governmentwide Relocation Advisory Board; recommendations, 43216-43221 E7-15156 Health Health and Human Services Department See Agency for Healthcare Research and Quality See Centers for Medicare & Medicaid Services See Food and Drug Administration See Health Resources and Services Administration See National Institutes of Health See Substance Abuse and Mental Health Services Administration Health Health Resources and Services Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 43283 E7-15107 Meetings:
Heritable Disorders and Genetic Diseases in Newborns and Children Advisory Committee, 43283 E7-15103 National Health Service Corps National Advisory Council, 43284 E7-15102 Training in Primary Care Medicine and Dentistry Advisory Committee, 43284 E7-15100 Homeland Homeland Security Department See Coast Guard Housing Housing and Urban Development Department NOTICES Grants and cooperative agreements; availability, etc.: Homeless assistance; excess and surplus Federal properties, 43293 E7-14706 Interior Interior Department See Fish and Wildlife Service See Land Management Bureau See Minerals Management Service See National Park Service IRS Internal Revenue Service RULES Income taxes:
Reportable transactions; disclosure by material advisors; American Jobs Creation Act modifications, 43157-43161 07-3788 Reportable transactions; material advisors obligation to prepare and maintain lists, 43154-43157 07-3787 Reportable transactions disclosure requirements; American Jobs Creation Act modifications; cross-reference, 43146-43154 07-3786 International International Trade Administration NOTICES Antidumping: Cased pencils from— China, 43234-43235 E7-15137 Frozen fish fillets from— Vietnam, 43235 E7-15033 Oil country tubular goods from— Japan, 43235-43236 E7-15158 Stainless steel sheet and strip in coils from— Taiwan, 43236-43245 E7-15155 Scope rulings and anticircumvention determinations; list, 43245-43248 E7-15159 International International Trade Commission NOTICES Import investigations:
Circular welded carbon-quality steel pipe from— China, 43295-43296 E7-15067 Justice Justice Department See Prisons Bureau NOTICES Pollution control; consent judgments: Alaska Sutherlin Knolls, 43296 07-3792 Land Land Management Bureau NOTICES Closure of public lands: Idaho, 43294 E7-15080 Millennium Millennium Challenge Corporation NOTICES Millennium Challenge Act: Lesotho compact, 43380-43410 E7-14812 Minerals Minerals Management Service NOTICES Outer Continental Shelf Operations:
Alaska region— Chukchi Sea oil and gas lease sales, 43294 E7-15079 NIH National Institutes of Health NOTICES Inventions, Government-owned; availability for licensing, 43284-43287 E7-15054 E7-15056 Meetings: Dietary Supplements Office— Analytical Methods and Reference Materials Program; stakeholders meeting, 43287 E7-15048 National Institute of General Medical Sciences, 43287-43288 07-3775 National Institute of Mental Health, 43288 07-3777 National Institute on Deafness and Other Communication Disorders, 43288 07-3778 Office of the Director, 43289 07-3776 Scientific Review Center, 43289 07-3779 NOAA National Oceanic and Atmospheric Administration RULES Fishery conservation and management:
Northeastern United States fisheries— State and Federal Commercial Fishing Vessel Permit Programs; reconciliation, 43188-43192 E7-15135 West Coast States and Western Pacific fisheries— Pacific Coast groundfish; correction, 43193-43198 07-3811 Marine mammals: Incidental taking— Atlantic Large Whale Take Reduction Plan, 43186-43188 07-3810 Sea turtle conservation— Observer requirements for fisheries, 43176-43186 E7-15145 National Park National Park Service NOTICES Agency information collection activities; proposals, submissions, and approvals, 43294-43295 07-3809 Navy Navy Department NOTICES Environmental statements; availability, etc.:
Hawaii Range Complex, HI; training, testing, and operational capability enhancement; hearings, 43251-43252 E7-15127 Valiant Shield 07; training exercise, 43252-43253 E7-15128 Nuclear Nuclear Regulatory Commission NOTICES Privacy Act; systems of records, 43296-43297 E7-15082 *Applications, hearings, determinations, etc.:* Southern Nuclear Operating Co., Inc., 43296 E7-15117 Pension Pension Benefit Guaranty Corporation NOTICES Employee Retirement Income Security Act: Sale of assets by employer who contributes to multiemployer plan; bond/escrow requirement; exemption requests, 43297-43298 E7-15060 Presidential Presidential Documents EXECUTIVE ORDERS Lebanon; blocking property of persons undermining its sovereignty or its democratic processes and institutions (EO 13441), 43497-43501 07-3835 Prisons Prisons Bureau PROPOSED RULES Inmate control, custody, care, etc.:
Sexually dangerous person; civil commitment, 43205-43209 E7-14943 RUS Rural Utilities Service RULES Grants: Community Connect Broadband Program, 43131-43137 E7-15106 PROPOSED RULES Grants: Community Connect Broadband Program, 43199 E7-15108 SEC Securities and Exchange Commission PROPOSED RULES Securities: Company proxy materials; shareholder proposals, 43466-43488 E7-14954 Election of directors; shareholder proposals, 43488-43496 E7-14955 NOTICES Investment Company Act of 1940:
Medallion Financial Corp., 43298-43300 E7-15058 Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC, 43300-43302 E7-15059 Boston Stock Exchange, Inc, 43302-43303 E7-15095 Chicago Board Options Exchange, Inc., 43303-43305 E7-15066 International Securities Exchange, Inc., 43305-43306 E7-15068 International Securities Exchange, LLC, 43306-43309 E7-15070 E7-15093 NASDAQ Stock Market LLC, 43309-43310 E7-15069 New York Stock Exchange, LLC, 43310-43312 E7-15096 Philadelphia Stock Exchange, Inc., 43312-43314 E7-15094 Social Social Security Administration PROPOSED RULES Social security benefits:
Federal old age, survivors, and disability insurance— Government Pension Offset exemption; sixty-month period of employment requirement, 43202-43205 E7-15057 State State Department NOTICES Agency information collection activities; proposals, submissions, and approvals, 43314 E7-15132 Environmental statements; availability, etc.: San Luis, AZ; new livestock crossing; construction, 43314-43316 E7-15136 Substance Substance Abuse and Mental Health Services Administration NOTICES Agency information collection activities; proposals, submissions, and approvals, 43289-43291 E7-15126 E7-15142 E7-15143 Federal agency urine drug testing; certified laboratories meeting minimum standards, list, 43291-43293 E7-15149 Transportation Transportation Department See Federal Aviation Administration See Federal Highway Administration See Federal Railroad Administration See Federal Transit Administration Treasury Treasury Department See Internal Revenue Service Separate Parts In This Issue Part II Transportation Department, Federal Transit Administration, 43328-43378 E7-14279 E7-14285 Part III Millennium Challenge Corporation, 43380-43410 E7-14812 Part IV Health and Human Services Department, Centers for Medicare & Medicaid Services, 43412-43463 07-3784 Part V Securities and Exchange Commission, 43466-43496 E7-14954 E7-14955 Part VI Executive Office of the President, Presidential Documents, 43497-43501 07-3835 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions. 72 149 Friday, August 3, 2007 Rules and Regulations DEPARTMENT OF AGRICULTURE Rural Utilities Service 7 CFR Part 1739 RIN 0572-AC09 Community Connect Broadband Grant Program AGENCY: Rural Utilities Service, USDA. ACTION: Direct final rule.
SUMMARY: The Rural Utilities Service, an agency delivering the United States Department of Agriculture
(USDA)Rural Development Utilities Program, hereinafter referred to as Rural Development and/or the Agency, amends its regulations for the Community-Oriented Connectivity Broadband Grant Program (Community Connect Grant Program). Since the inception of the Community Connect Grant Program, the Agency has faced the challenge of identifying eligible rural communities. The Agency has reviewed its method of identifying eligible communities and has determined that modifications to the program regulations are required in order to expand the resource material used to identify eligible communities. The use of additional resources should increase the number of communities eligible for grant funding. Additionally, the Agency has changed the test for economic hardship. The current regulations compare an applicant community's per capita personal income to the national per capita personal income. Because of the varying costs of living among the states, it was determined that a better measure of economic distress would be a comparison of the applicant community's median household income to that of its state. This change is also expected to increase the number of eligible grant applicants. Lastly, this rule amends the current regulations by specifying operating expenses which the Agency has approved for grant funding. These changes have been determined to be non controversial and are being enacted as a direct final rule. This rule is not applicable to Community Connect grant applications filed for funding during fiscal year 2007. DATES: *Effective Date:* This rule is effective September 17, 2007, without further action, unless the Agency receives adverse comments within September 4, 2007. If adverse comments are received, the Agency will publish a timely **Federal Register** document withdrawing this rule. *Comment Due Date:* Comments must be received on or before September 4, 2007. ADDRESSES: Submit comments by either of the following methods: • *Federal eRulemaking Portal:* Go to *http://www.regulations.gov* and, in the lower “Search Regulations and Federal Actions” box, select “Rural Utilities Service” from the agency drop-down menu, then click on “Submit.” In the Docket ID column, select RUS-07-Telecom-0008 to submit or view public comments and to view supporting and related materials available electronically. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available through the site's “User Tips” link. • *Postal Mail/Commercial Delivery:* Please send your comment addressed to Michele Brooks, Acting Deputy Director, Program Development and Regulatory Analysis, USDA Rural Development, STOP 1522, Room 5159, 1400 Independence Avenue, Washington, DC 20250-1522. Please state that your comment refers to Docket No. RUS-07-Telecom-0008. Other Information: Additional information about Rural Development and its programs is available at *http://www.rurdev.usda.gov/index.html.* FOR FURTHER INFORMATION CONTACT: Kenneth Kuchno, Director, Broadband Division, USDA Rural Development Utilities Program, STOP 1599, 1400 Independence Avenue, SW., Washington, DC 20250-1599, Telephone
(202)690-4673, Facsimile
(202)690-4389. E-mail address: *kenneth.kuchno@usda.gov.* SUPPLEMENTARY INFORMATION: Executive Order 12866 This final rule has been determined to be not significant for purposes of Executive Order 12866, and therefore has not been reviewed by the Office of Management and Budget (OMB). Catalog of Federal Domestic Assistance The Catalog of Federal Domestic Assistance
(CFDA)Program number assigned to the Community Connect Grant Program is 10.863. The Catalog is available on a subscription basis from the Superintendent of Documents, the United States Government Printing Office, Washington, DC 20402-9325; telephone
(202)512-1800. Executive Order 12372 This program is not subject to the requirements of Executive Order 12372, “Intergovernmental Review of Federal Programs,” as implemented under USDA's regulations at 7 CFR part 3015. Executive Order 12988 This rule has been reviewed under Executive Order 12988, Civil Justice Reform. The Agency has determined that this rule meets the applicable standards provided in section 3 of the Executive Order. In addition, all state and local laws and regulations that are in conflict with this rule will be preempted, no retroactive effect will be given to this rule, and, in accordance with Sec 212(e) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)), administrative appeal procedures, if any, must be exhausted before an action against the Department or its agencies may be initiated. Executive Order 13132, Federalism The policies contained in this rule do not have any substantial direct effect on states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Nor does this final rule impose substantial direct compliance costs on state and local governments. Therefore, consultation with states is not required. Regulatory Flexibility Certification Pursuant to 5 U.S.C. 553(a)(2), this final rule related to grants is exempt from the rulemaking requirements of the Administrative Procedure Act (5 U.S.C. 551 *et seq.* ), including the requirement to provide prior notice and an opportunity for public comment. Because this final rule is not subject to a requirement to provide prior notice and an opportunity for public comment pursuant to 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) are inapplicable. Unfunded Mandates This final rule contains no Federal mandates (under the regulatory provision of Title II of the Unfunded Mandates Reform Act of 1995) for State, local, and tribal governments or the private sector. Therefore, this final rule is not subject to the requirements of sections 202 and 205 of the Unfunded Mandates Reform Act of 1995. Environmental Impact Statement This final rule has been examined under Agency environmental regulations at 7 CFR part 1794. The Administrator has determined that this action is not a major Federal action significantly affecting the environment. Therefore, in accordance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321 *et seq.* ), an Environmental Impact Statement or Assessment is not required. Information Collection and Recordkeeping Requirements This rule contains no new reporting or recordkeeping burdens under OMB control number 0572-0127 that would require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). Background Overview The USDA Rural Development Utilities Programs (the Agency) improve the quality of life in rural America by providing investment capital, in the form of loans and grants, for the deployment of rural telecommunications infrastructure. Financial assistance is provided to rural utilities; municipalities; commercial corporations; limited liability companies; public utility districts; Indian tribes; and cooperative, nonprofit, limited-dividend, or mutual associations. In order to achieve the goal of increasing economic opportunity in rural America, the Agency finances infrastructure that enables access to a seamless, nation-wide telecommunications network. With access to the same advanced telecommunications networks of its urban counterparts, especially broadband networks designed to accommodate distance learning, telework and telemedicine, rural America will see improving educational opportunities, health care, economies, safety and security, and ultimately higher employment. Of particular concern to the Agency are communities where broadband service is not available and where population densities are such that the cost of deployment to them is high and build-out of infrastructure is unlikely. The Agency is committed to ensuring rural communities will have access to affordable, reliable, advanced communications services, comparable to those available throughout the rest of the United States, to provide a healthy, safe and prosperous place to live and work. The Community Connect Grant Program was started as a Pilot Program with the Fiscal Year 2002 budget and has been funded ever since through the appropriations process. After administering the program as a pilot program for two years, the Agency proposed rules for the program, and on July 28, 2004, the current rules were published, and the program was formally implemented. Since then more than 670 requests for grant funds totaling over $410 million were requested through Fiscal Year 2006. Of those requests, 129 were granted for $57 million to bring broadband service to 129 communities in 26 states and Puerto Rico. While the Agency is proud of the results achieved in the Community Connect Grant Program thus far, it believes that the overall effectiveness of the program can be improved by modifying the existing rules. Through these changes, the Agency is increasing eligibility criteria to include communities that clearly meet the intent of the program. Specifically, this rule will:
(1)Add the Rand McNally Atlas as a community locator;
(2)change the income measure for eligibility from a national comparison to a state comparison; and
(3)clarify the items that are eligible to be considered as operating expenses. Discussion of Changes 1. Adding the Rand McNally Atlas as a community locator. Currently the regulation states that a project must serve an incorporated or unincorporated town, village, or borough recognized in the latest decennial census of the Bureau of the Census to be eligible for funding. While this program has been successful in reaching much of rural America, the Agency recognizes that areas not identified in the 2000 census are excluded from funding. It is advisable to add another resource, updated more frequently than the decennial census and including communities not found in the census, to identify rural communities. The Agency therefore adds the Rand McNally Atlas as a resource to identify rural communities. It is anticipated that the addition of the Rand McNally Atlas as a community locator will increase the number of communities eligible for funding. 2. Change the income measure from a national comparison to a state comparison. Rural communities that would otherwise be eligible for grant funding have been previously excluded because their per capita personal income is relatively high in comparison to the national average. However, using the communities median household income compared to their state's median household income, these communities would qualify as economically challenged. Given the variable cost of living among the states, the comparison of state statistics is a better indicator of economic distress. The intent of this program is to allow all rural communities without broadband service facing economic hardship to fairly compete for funding. By comparing a community's median household income to their state's median household income, all rural economically challenged communities may compete fairly for funding. 3. Clarify the items that are eligible to be considered as operating expenses. Currently the regulation states that operating expenses incurred in providing broadband transmission service to critical facilities is an eligible purpose and that the salaries and administrative costs associated with these expenses may be limited by the Agency. Through the course of this program, applicants have not clearly understood what operating expenses are eligible. Many applicants have requested funds for ineligible operating expenses and had to be eliminated from the grant competition. To assist the applicant with better understanding what operating expenses are considered eligible, the Agency is specifically defining the eligible operating expenses. Other corresponding changes were made throughout the regulation to reflect the addition of the Rand McNally Atlas and the change to state income measures. List of Subjects in 7 CFR 1739 Broadband, Grant programs—Communications, Rural Areas, Telecommunications, and Telephone. For reasons set forth in the preamble, the Rural Utilities Service amends Chapter XVII of title 7 of the Code of Federal Regulations by revising part 1739 as follows: PART 1739—BROADBAND GRANT PROGRAM Subpart A—Community Connect Grant Program Sec. 1739.1 Purpose. 1739.2 Funding availability and application dates and addresses. 1739.3 Definitions. 1739.4-1739.9 [Reserved] 1739.10 Eligible applicant. 1739.11 Eligible project. 1739.12 Eligible grant purposes. 1739.13 Ineligible grant purposes. 1739.14 Matching contributions. 1739.15 Completed application. 1739.16 Review of grant applications. 1739.17 Scoring of applications. 1739.18 Grant documents. 1739.19 Reporting and oversight requirements. 1739.20 Audit requirements. 1739.21 OMB control number. Subpart B—[Reserved] Authority: Title III, Pub. L. 108-199, 118 Stat. 3. Subpart A—Community Connect Grant Program § 1739.1 Purpose.
(a)The provision of broadband transmission service is vital to the economic development, education, health, and safety of rural Americans. The purpose of the Community Connect Grant Program is to provide financial assistance in the form of grants to eligible applicants that will provide, on a “community-oriented connectivity” basis, broadband transmission service that fosters economic growth and delivers enhanced educational, health care, and public safety services. The Agency will give priority to rural areas that it believes have the greatest need for broadband transmission services, based on the criteria contained herein.
(b)Grant authority will be used for the deployment of broadband transmission service to extremely rural, lower-income communities on a “community-oriented connectivity” basis. The “community-oriented connectivity” concept will stimulate practical, everyday uses and applications of broadband by cultivating the deployment of new broadband transmission services that improve economic development and provide enhanced educational and health care opportunities in rural areas. Such an approach will also give rural communities the opportunity to benefit from the advanced technologies that are necessary to achieve these goals. § 1739.2 Funding availability and application dates and submission.
(a)The Agency will publish, annually in the **Federal Register** , a Notice of Funds Availability (hereinafter “NOFA”) that will set forth the total amount of funding available; the maximum and minimum funding for each grant; the application submission dates; and the appropriate addresses and agency contact information. The NOFA will also outline and explain the procedures for submission of applications, including electronic submissions. The Agency may publish more than one NOFA should additional funding become available.
(b)Notwithstanding paragraph
(a)of this section, the Agency may, in response to a surplus of qualified eligible applications which could not be funded from the previous fiscal year, decline to publish a NOFA for the following fiscal year and fund said applications without further public notice. § 1739.3 Definitions. As used in this subpart: *Agency* shall mean the Rural Utilities Service, which administers the United States Department of Agriculture
(USDA)Rural Development Utilities Programs. *Bandwidth* means the capacity of the radio frequency band or physical facility needed to carry the Broadband Transmission Service. *Basic Broadband Transmission Service* means the broadband transmission service level provided by the applicant at the lowest rate or service package level for residential or business customers, as appropriate, provided that such service meets the requirements of this part. *Broadband Transmission Service* means providing an information-rate equivalent to at least 200 kilobits/second in the consumer's connection to the network, both from the provider to the consumer (downstream) and from the consumer to the provider (upstream). *Community* means any incorporated or unincorporated town, village, or borough recognized in the latest decennial census as published by the Bureau of the Census or in the most recent edition of a Rand McNally Atlas that is located in a Rural Area. *Community Center* means a public building, or a section of a public building with at least ten
(10)Computer Access Points, that is used for the purposes of providing free access to and/or instruction in the use of broadband Internet service, and is of the appropriate size to accommodate this purpose. The community center must be open and accessible to area residents before, during, and after normal working hours and on Saturday or Sunday. *Computer Access Point* means a new computer terminal with access to Basic Broadband Transmission Service. *Critical Community Facilities* means the Community Center and every public school or education center, public library, public medical clinic, public hospital, community college, public university, or law enforcement, fire and ambulance stations in the proposed Service Area. *Eligible Applicant* shall have the meaning as set forth in § 1739.10. *Eligible Grant Purposes* shall have the meaning as set forth in § 1739.12. *End-User Equipment* means computer hardware and software, audio or video equipment, computer network components, telecommunications terminal equipment, inside wiring, interactive video equipment, or other facilities required for the provision and use of Broadband Transmission Service. *Matching Contribution* means the applicant's qualified contribution to the Project, as outlined in § 1739.14 of this part. *Project* means the applicant's proposed Basic Broadband Transmission Service financed by the grant and Matching Contribution for the proposed Service Area. *Rural Area* means any area, as verified by the latest decennial census of the Bureau of the Census or the latest edition of the Rand McNally Atlas, which is not located within the boundaries of any incorporated or unincorporated city, village, or borough having a population in excess of 20,000 inhabitants. *Service Area* means a single Community, and may include the unincorporated areas located outside and contiguous to the Community's boundaries, in which the applicant proposes to provide Broadband Transmission Service. *Spectrum* means a defined band of frequencies that will accommodate the Broadband Transmission Service. *Telecommunications Terminal Equipment* means the assembly of telecommunications equipment at the end of a circuit or path of a signal, including but not limited to facilities that receive or transmit over-the-air broadcast, satellite, and microwave, normally located on the premises of the end user, that interfaces with telecommunications transmission facilities, and that is used to modify, convert, encode, or otherwise prepare signals to be transmitted via such telecommunications facilities, or that is used to modify, reconvert, or carry signals received from such facilities, the purpose of which is to accomplish the goal for which the circuit or signal was established. §§ 1739.4-1739.9 [Reserved]. § 1739.10 Eligible applicant. To be eligible for a grant, the applicant must:
(a)Be legally organized as an incorporated organization, an Indian tribe or tribal organization, as defined in *25 U.S.C. 450b(b) and (c),* a state or local unit of government, or other legal entity, including cooperatives or private corporations or limited liability companies organized on a for-profit or not-for-profit basis.
(b)Have the legal capacity and authority to own and operate the broadband facilities as proposed in its application, to enter into contracts and to otherwise comply with applicable federal statutes and regulations. § 1739.11 Eligible project. To be eligible for a grant, the Project must:
(a)Serve a Rural Area where Broadband Transmission Service does not currently exist, to be verified by the Agency prior to the award of the grant;
(b)Serve one Community recognized in the latest U.S. Census or the latest edition of the Rand McNally Atlas;
(c)Deploy Basic Broadband Transmission Service, free of all charges for at least 2 years, to all Critical Community Facilities located within the proposed Service Area;
(d)Offer Basic Broadband Transmission Service to residential and business customers within the proposed Service Area; and
(e)Provide a Community Center with at least ten
(10)Computer Access Points within the proposed Service Area, and make Broadband Transmission Service available therein, free of all charges to users for at least 2 years. § 1739.12 Eligible grant purposes. Grant funds may be used to finance:
(a)The construction, acquisition, or leasing of facilities, including spectrum, to deploy Broadband Transmission Service to all participating Critical Community Facilities and all required facilities needed to offer such service to residential and business customers located within the proposed Service Area;
(b)The improvement, expansion, construction, or acquisition of a Community Center that furnishes free access to broadband Internet service, provided that the Community Center is open and accessible to area residents before, during, and after normal working hours and on Saturday or Sunday. Grant funds provided for such costs shall not exceed the greater of five percent (5%) of the grant amount requested or $100,000;
(c)End-User Equipment needed to carry out the Project;
(1)Operating expenses incurred in providing Broadband Transmission Service to Critical Community Facilities for the first 2 years of operation and in providing training and instruction. In order to qualify as eligible costs for grant coverage or as matching fund contributions, operating expenses for providing broadband transmission service to Critical Community Facilities must:
(i)Be incurred for the purpose of providing broadband service to the Critical Community Facilities and be for costs incurred during the first two years of operation; and
(ii)Be for the following purposes subject to the specified maximum amounts:
(A)Salary for operations manager, not to exceed $30,000 per year.
(B)Salary for technical support staff, not to exceed $30,000 per year.
(C)Salary for community center staff, not to exceed $25,000 per year.
(D)Bandwidth expenses, not to exceed $25,000 per year.
(E)Training courses on the use of the Internet, not to exceed $15,000 per year.
(2)The operating costs to be funded by the grant or used as matching contributions cannot exceed in the aggregate $250,000. No other operating expenses are eligible for grant funding or to be considered as matching funds; and
(e)The purchase of land, buildings, or building construction needed to carry out the Project. § 1739.13 Ineligible grant purposes.
(a)Grant funds may not be used to finance the duplication of any existing Broadband Transmission Service provided by another entity.
(b)Facilities financed with grant funds cannot be utilized, in any way, to provide local exchange telecommunications service to any person or entity already receiving such service. § 1739.14 Matching contributions.
(a)The grant applicant must contribute a Matching Contribution which is at least fifteen percent (15%) of the grant amount requested and shall be in the form of:
(1)Cash for eligible grant purposes.
(2)In-kind contributions for purposes that could have been financed with grant funds under this part. In-kind contributions must be new or non-depreciated assets with established monetary values. Manufacturers' or service providers' discounts shall not be considered as a Matching Contribution.
(3)The rental value of space provided within an existing building to be used as the Community Center, provided that the space is free of charge to the applicant, for the first 2 years of operation.
(b)Costs incurred by the applicant, or by others on behalf of the applicant, for facilities, installed equipment, or other services rendered prior to submission of a completed application shall not be considered as an Eligible Grant Purpose or Matching Contribution.
(c)Rental values of space provided must be substantiated by rental agreements documenting the cost of space of a similar size in a similar location.
(d)Any financial assistance from federal sources shall not be considered as a Matching Contribution unless there is a federal statutory exception specifically authorizing the federal financial assistance to be considered as such. § 1739.15 Completed application. A completed application must include the following documentation, studies, reports and information in form satisfactory to the Agency. Applications should be prepared in conformance with the provisions of this part and applicable USDA regulations including 7 CFR parts 3015, 3016, and 3019. Applicants must use the Agency's Application Guide for this program, found at *http://www.usda.gov/rus/telecom/* containing instructions and all necessary forms, as well as other important information, in preparing their application. Paper copies of the application guide can be requested by contacting the Director, Broadband Division at the following address: Stop 1599, South Agriculture Building, Room 2868, Washington, DC 20250. Completed applications must include the following:
(a)*An Application for Federal Assistance.* A completed Standard Form 424.
(b)*An executive summary of the Project.* The applicant must provide the Agency with a general project overview that addresses the following categories:
(1)A description of why the Project is needed;
(2)A description of the applicant;
(3)An explanation of the total Project cost;
(4)A general overview of the broadband telecommunications system to be developed, including the types of equipment, technologies, and facilities to be used;
(5)Documentation describing the procedures used to determine the unavailability of existing Broadband Transmission Service; and
(6)A description of the participating Critical Community Facilities.
(c)*Scoring criteria documentation.* Each grant applicant must address and provide documentation on how it meets each of the scoring criteria detailed in § 1739.17.
(d)*System design.* The applicant must submit a system design that contains the following, satisfactory to the Agency:
(1)A narrative discussing the proposed Community Center, all costs of the Project, all existing and proposed facilities that are a part of the Project, the services to be provided by the Project, and the proposed Service Area;
(2)Engineering design studies providing an economical and practical engineering design of the Project, including a detailed description of the facilities to be funded, technical specifications, data rates, and costs; and
(3)A map of the proposed Service Area reflecting the proposed location of the Community Center and all participating Critical Community Facilities.
(e)*Scope of work.* The scope of work must include, at a minimum:
(1)The specific activities and services to be performed under the Project;
(2)Who will carry out the activities and services;
(3)The time-frames for accomplishing the Project objectives and activities; and
(4)A budget for all capital and administrative expenditures reflecting the line item costs for Eligible Grant Purposes, the Matching Contribution, and other sources of funds necessary to complete the Project.
(f)*Community-Oriented Connectivity Plan.* The applicant must provide a Community-Oriented Connectivity Plan consisting of the following:
(1)A listing of all participating Critical Community Facilities to be connected. For those Critical Community Facilities in the Service Area which will not be included in the Project, an explanation of why they are not being included should be provided. The applicant must also provide documentation that it has consulted with agents of all Critical Community Facilities in the Service Area, and must provide statements as to their willingness to participate, or not to participate, in the proposed Project;
(2)A description of the services available to local residents through the use of the Community Center;
(3)A listing of the proposed Telecommunications Terminal Equipment, telecommunications transmission facilities, data terminal equipment, interactive video equipment, computer hardware and software systems, and components that process data for transmission via telecommunications, computer network components, communication satellite ground station equipment, or any other elements of the Project designed to further the deployment and use of Broadband Transmission Service, that the applicant intends to build or fund using the Agency's grant funds and the Matching Contribution; and
(4)If other telecommunications carriers (including interexchange carriers, cable television operators, enhanced service providers, providers of satellite services and telecommunications equipment manufacturers and distributors) are participating in the delivery of services, a description of the consultations and the anticipated role of such providers in the proposed Project.
(g)*Financial information and sustainability.* The applicant must provide a narrative description demonstrating the sustainability of the Project during the first two years and after completion and the sufficiency of resources and expertise necessary to undertake and complete the Project. The following financial information is required:
(1)Certified financial statements, if available; otherwise, the most current income statement and balance sheet for existing operations; and
(2)Pro-forma financial information for 5 years, evidencing the sustainability of the Project.
(h)*A statement of experience.* Information on the owners' and principal employees' relevant work experience that would ensure the success of the Project. The applicant must provide a written narrative describing its demonstrated capability and experience, if any, in operating a broadband telecommunications system.
(i)*Evidence of legal authority and existence.* The applicant must provide evidence of its legal existence and authority to enter into a grant agreement with the Agency and to perform the activities proposed under the grant application.
(j)*Funding commitment from other sources.* If the Project requires additional funding from other sources in addition to the Agency's grant, the applicant must provide evidence that funding agreements have been obtained to ensure completion of the Project.
(k)*Compliance with other federal statutes.* The applicant must provide evidence of compliance with other federal statutes and regulations, including, but not limited to the following:
(1)7 CFR part 15, subpart A—Nondiscrimination in Federally Assisted Programs of the Department of Agriculture—Effectuation of Title VI of the Civil Rights Act of 1964.
(2)7 CFR part 3015—Uniform Federal Assistance Regulations.
(3)7 CFR part 3017—Governmentwide Debarment and Suspension (Non-procurement).
(4)7 CFR part 3018—New Restrictions on Lobbying.
(5)7 CFR part 3021—Governmentwide Requirements for Drug-Free Workplace (Financial Assistance).
(6)Certification regarding Architectural Barriers.
(7)Certification regarding Flood Hazard Precautions.
(8)An environmental report, in accordance with 7 CFR 1794.
(9)Certification that grant funds will not be used to duplicate lines, facilities, or systems providing Broadband Transmission Service.
(10)Federal Obligation Certification on Delinquent Debt. § 1739.16 Review of grant applications.
(a)All applications for grants must be delivered to the Agency at the address and by the date specified in the NOFA (see § 1739.2) to be eligible for funding. The Agency will review each application for conformance with the provisions of this part. The Agency may contact the applicant for additional information or clarification.
(b)Incomplete applications as of the deadline for submission will not be considered. If an application is determined to be incomplete, the applicant will be notified in writing and the application will be returned with no further action.
(c)Applications conforming with this part will then be evaluated competitively by a panel of the Agency's employees selected by the Administrator of the Agency, and will be awarded points as described in the scoring criteria in § 1739.17. Applications will be ranked and grants awarded in rank order until all grant funds are expended.
(d)Regardless of the score an application receives, if the Agency determines that the Project is technically or financially infeasible, the Agency will notify the applicant, in writing, and the application will be returned with no further action. § 1739.17 Scoring of applications.
(a)All eligible applications will receive points for the following scoring criteria:
(1)The rurality of the Project (up to 40 points);
(2)The economic need of the Project's Service Area (up to 30 points); and
(3)The “community-oriented connectivity” benefits derived from the proposed service (up to 30 points).
(b)Scoring criteria:
(1)*The rurality of the project* —up to 40 points.
(i)This criterion will be used to evaluate the rurality of the Community served by the Project, in accordance with the following method of scoring. If a Community is identified in the latest decennial Census, the applicant must use the Census information. If a Community is not identified in the Census but is identified in the latest edition of the Rand McNally Atlas, the applicant will use the Rand McNally Atlas information. Rurality shall be determined by the following criteria:
(A)The 2000 population data contained in the U.S. Bureau of the Census at *http://factfinder.census.gov:* or
(B)The population data contained in the latest edition of the Rand McNally Atlas. If no population data is contained in the Rand McNally Atlas for a community that is recognized in the Atlas, then that community is not eligible for a grant.
(ii)The following categories are used in the evaluation of rurality:
(A)Level 1 means any Community having a population of less than 500 inhabitants.
(B)Level 2 means any Community having a population of at least 500 and not in excess of 1,000 inhabitants.
(C)Level 3 means any Community having a population over 1,000 and not in excess of 2,000 inhabitants.
(D)Level 4 means any Community having a population over 2,000 and not in excess of 3,000 inhabitants.
(E)Level 5 means any Community having a population over 3,000 and not in excess of 4,000 inhabitants.
(F)Level 6 means any Community having a population over 4,000 and not in excess of 5,000 inhabitants.
(G)Level 7 means any Community having a population over 5,000 and not in excess of 10,000 inhabitants.
(H)Level 8 means any Community having a population over 10,000 and not in excess of 20,000 inhabitants.
(iii)Each application will receive points based on the location of the facilities financed using the definitions in paragraphs (b)(1)(i) and (b)(1)(ii) of this section.
(A)For a Service Area that includes a Level 1 Community, it will receive 40 points.
(B)For a Service Area that includes a Level 2 Community, it will receive 35 points.
(C)For a Service Area that includes a Level 3 Community, it will receive 30 points.
(D)For a Service Area that includes a Level 4 Community, it will receive 25 points.
(E)For a Service Area that includes a Level 5 Community, it will receive 20 points.
(F)For a Service Area that includes a Level 6 Community, it will receive 15 points.
(G)For a Service Area that includes a Level 7 Community, it will receive 10 points.
(H)For a Service Area that includes a Level 8 Community, it will receive 5 points.
(2)*The economic need of the Project Service Area* —up to 30 points. This criterion will be used to evaluate the economic need of the Service Area. Applicants must utilize the median household income
(MHI)for the Community serviced and the state in which the Community is located, as determined by the U.S. Bureau of the Census at *http://factfinder.census.gov.* If the community was qualified using the Rand McNally Atlas, the applicant must use the MHI, contained in the decennial census, of the county in which the Community resides as the Community MHI. Applicants will be awarded points as outlined below for service provided in the Community where the MHI is less than 75 percent of the state MHI:
(i)MHI is 75 percent or greater of state MHI; 0 points;
(ii)MHI is less than 75 percent and greater than or equal to 70 percent of state MHI; 5 points;
(iii)MHI is less than 70 percent and greater than or equal to 65 percent of state MHI; 10 points;
(iv)MHI is less than 65 percent and greater than or equal to 60 percent of the state MHI; 15 points;
(v)MHI is less than 60 percent and greater than or equal to 55 percent of the state MHI; 20 points;
(vi)MHI is less than 55 percent and greater than or equal to 50 percent of the state MHI; 25 points;
(vii)MHI is less than 50 percent of the state MHI; 30 points;
(3)*The “community-oriented connectivity” benefits derived from the proposed service* —up to 30 points.
(i)This criterion will be used to score applications based on the documentation in support of the need for services, benefits derived from the services proposed by the Project, and local community involvement in planning and implementation of the Project. Applicants may receive up to 30 points for documenting the need for services and benefits derived from service as explained in this section.
(ii)The Agency will consider:
(A)The extent of the applicant's documentation explaining the economic, education, health care, and public safety issues facing the community and the applicant's proposed plan to address these challenges on a community-wide basis;
(B)The extent of the Project's planning, development, and support by local residents, institutions, and community facilities will be considered. This includes evidence of community-wide involvement, as exemplified in community meetings, public forums, and surveys. In addition, applicants should provide evidence of local residents' participation in the Project planning and development;
(C)The extent to which the Community Center will be used for instructional purposes including Internet usage, Web-based curricula, and Web page development; and
(D)Web-based community resources enabled or provided by the applicant, such as community bulletin boards, directories, and public web-hosting. § 1739.18 Grant documents. The terms and conditions of grants shall be set forth in grant documents prepared by the Agency. The documents shall require the applicant to own all equipment and facilities financed by the grant. Among other matters, the Agency may prescribe conditions to the advance of funds that address concerns regarding the Project feasibility and sustainability. The Agency may also prescribe terms and conditions applicable to the construction and operation of the Project and the delivery of Broadband Transmission Service to Rural Areas, as well as other terms and conditions applicable to the individual Project. § 1739.19 Reporting and oversight requirements.
(a)A project performance activity report will be required of all recipients on an annual basis until the Project is complete and the funds are expended by the applicant. Recipients are to submit an original and one copy of all project performance reports, including, but not limited to, the following:
(1)A comparison of actual accomplishments to the objectives established for that period;
(2)A description of any problems, delays, or adverse conditions which have occurred, or are anticipated, and which may affect the attainment of overall Project objectives, prevent the meeting of time schedules or objectives, or preclude the attainment of particular Project work elements during established time periods. This disclosure shall be accompanied by a statement of the action taken or planned to resolve the situation; and
(3)Objectives and timetable established for the next reporting period.
(b)A final project performance report must be provided by the recipient. It must provide an evaluation of the success of the Project in meeting the objectives of the program. The final report may serve as the last annual report.
(c)The Agency will monitor recipients, as it determines necessary, to assure that Projects are completed in accordance with the approved scope of work and that the grant is expended for Eligible Grant Purposes.
(d)Recipients shall diligently monitor performance to ensure that time schedules are being met, projected work within designated time periods is being accomplished, and other performance objectives are being achieved. § 1739.20 Audit requirements. A grant recipient shall provide the Agency with an audit for each year, beginning with the year in which a portion of the financial assistance is expended, in accordance with the following:
(a)If the recipient is a for-profit entity, an existing Telecommunications or Electric Borrower with the Agency, or any other entity not covered by the following paragraph, the recipient shall provide an independent audit report in accordance with 7 CFR part 1773, “Policy on Audits of the Agency's Borrowers.”
(b)If the recipient is a State or local government, or non-profit organization, the recipient shall provide an audit in accordance with 7 CFR part 3052, “Audits of States, Local Governments, and Non-Profit Organizations.” § 1739.21 OMB Control Number. The information collection requirements in this part are approved by the Office of Management and Budget
(OMB)and assigned OMB control number 0572-0127. Subpart B—[Reserved] Dated: July 19, 2007. James M. Andrew, Administrator, Rural Utilities Service. [FR Doc. E7-15106 Filed 8-2-07; 8:45 am] BILLING CODE 3410-15-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 23 [Docket No. CE272; Special Conditions No. 23-212-SC] Special Conditions: Centex Aerospace Inc., Cirrus Design Corporation Model SR22; Installation of a Full Authority Digital Engine Control (FADEC) Engine and the Protection of the System From the Effects of High Intensity Radiated Fields
(HIRF)AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final special conditions; request for comments. SUMMARY: These special conditions are issued for the Centex Aerospace Inc. modified Cirrus Design Corporation Model SR22. This airplane as modified by Centex Aerospace Inc. will have a novel or unusual design feature(s) associated with the installation of a full authority digital engine control (FADEC) engine. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards. DATES: The effective date of these special conditions is July 26, 2007. Comments must be received on or before September 4, 2007. ADDRESSES: Comments may be mailed in duplicate to: Federal Aviation Administration (FAA), Regional Counsel, ACE-7, Attention: Rules Docket, Docket No. CE272, 901 Locust, Room 506, Kansas City, Missouri 64106, or delivered in duplicate to the Regional Counsel at the above address. Comments must be marked: Docket No. CE272. Comments may be inspected in the Rules Docket weekdays, except Federal holidays, between 7:30 a.m. and 4 p.m. FOR FURTHER INFORMATION CONTACT: Peter L. Rouse, Federal Aviation Administration, Aircraft Certification Service, Small Airplane Directorate, ACE-111, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone: 816-329-4135, fax: 816-329-4090. SUPPLEMENTARY INFORMATION: The FAA has determined that notice and opportunity for prior public comment hereon are impracticable because these procedures would significantly delay issuance of the design approval and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA, therefore, finds that good cause exists for making these special conditions effective upon issuance. Comments Invited We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments. We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel about these special conditions. You can inspect the docket before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays. We will consider all comments we receive by the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change these special conditions based on the comments we receive. If you want us to let you know we received your comments on these special conditions, send us a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it back to you. Background On March 15, 2004, Centex Aerospace, Inc. applied for a supplemental type certificate for the Cirrus Model SR22 to install a full authority digital engine control in the Cirrus Model SR22. CenTex Aerospace, Inc. plans to install a Teledyne Continental Motors model IOF-550-N engine in the Cirrus Design Corporation Model SR-22 airplane. This type certified engine, approved under FAA Type Certificate E3SO; Revision 7, dated February 4, 2002, incorporates Full Authority Digital Electronic Controls (FADEC) fuel and ignition control system. Even though the engine control system is certificated as part of the engine and does not interface or share data with any of the airplane systems, the installation of an engine with an electronic control system requires evaluation due to critical environmental effects and possible effects on or by other airplane systems. For example, indirect effects of lightning, radio interference with other airplane electronic systems, shared engine and airplane data and power sources. The Cirrus Model SR22 is currently approved under Type Certificate No. A00009CH. The Cirrus Model SR22 is a 3,400 pound single-engine, four-place, fixed-gear airplane powered by a 310 hp reciprocating engine. It has a conventional tractor configuration and uses composites for the structure. Some unique features of the SR-22 include sidestick controls and a ballistic recovery system, and a single combination throttle/propeller control lever. Type Certification Basis Under the provisions of § 21.101, Centex Aerospace, Inc. must show that the Cirrus Model SR22, as changed, continues to meet the applicable provisions of the regulations incorporated by reference in Type Certificate No. A00009CH, or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The regulations incorporated by reference in Type Certificate No. A00009CH are as follows: Model SR22: Part 23 of the Federal Aviation Regulations effective February 1, 1965, as amended by 23-1 through 23-53, except as follows: 23.301 through Amendment 47 23.855, 23.1326, 23.1359, not applicable Federal Aviation Regulation 36, dated December 1, 1969, as amended by current amendment as of the date of type Certification. Equivalent Safety Items: Equivalent Levels of Safety finding (ACE-96-5) made per the provisions of 14 CFR part 23, § 23.221; Refer to FAA ELOS letter dated June 10, 1998 for models SR20, SR22. Equivalent Levels of Safety finding (ACE-00-09) made per the provisions of 14 CFR part 23, §§ 23.1143(g) and 23.1147(b); Refer to FAA ELOS letter dated September 11, 2000 for model SR22. Special Conditions: 23-ACE-88 for ballistic parachute. 23-134-SC for protection of systems for High Intensity Radiated Fields (HIRF). 23-163-SC for inflatable restraint system. In addition, if the regulations incorporated by reference do not provide adequate standards regarding the change, the applicant must comply with certain regulations in effect on the date of application for the change. If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 23, § 23.1309) do not contain adequate or appropriate safety standards for the Model SR22 because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16. The FAA issues special conditions, as defined in § 11.19, under § 11.38 and they become part of the type certification basis under § 21.101. Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate to incorporate the same novel or unusual design feature, the special conditions would also apply to the other model. Novel or Unusual Design Features The Centex Aerospace Inc. modified Cirrus Model SR22 will incorporate the following novel or unusual design features: An engine that includes an electronic control system with Full Authority Digital Engine control (FADEC) capability. Many advanced electronic systems are prone to either upsets or damage, or both, at energy levels lower than analog systems. The increasing use of high power radio frequency emitters mandates requirements for improved high intensity radiated fields
(HIRF)protection for electrical and electronic equipment. Since the electronic engine control system used on the Centex Aerospace, Inc. modified Cirrus Design Corporation Model SR22 will perform critical functions, provisions for protection from the effects of HIRF should be considered and, if necessary, incorporated into the airplane design data. The FAA policy contained in Notice 8110.71, dated April 2, 1998, establishes the HIRF energy levels that airplanes will be exposed to in service. The guidelines set forth in this notice are the result of an Aircraft Certification Service review of existing policy on HIRF, in light of the ongoing work of the Aviation Rulemaking Advisory Committee
(ARAC)Electromagnetic Effects Harmonization Working Group (EEHWG). The EEHWG adopted a set of HIRF environment levels in November 1997 that were agreed upon by the FAA, the Joint Aviation Authorities (JAA), and industry participants. As a result, the HIRF environments in this notice reflect the environment levels recommended by this working group. This notice states that a FADEC is an example of a system that should address the HIRF environments. Even though the control system will be certificated as part of the engine, the installation of an engine with an electronic control system requires evaluation due to the possible effects on or by other airplane systems (e.g., radio interference with other airplane electronic systems, shared engine and airplane power sources). The regulatory requirements in 14 CFR part 23 for evaluating the installation of complex systems, including electronic systems, are contained in § 23.1309. However, when § 23.1309 was developed, the use of electronic control systems for engines was not envisioned; therefore, the § 23.1309 requirements were not applicable to systems certificated as part of the engine (reference § 23.1309(f)(1)). Also, electronic control systems often require inputs from airplane data and power sources and outputs to other airplane systems (e.g., automated cockpit powerplant controls such as mixture setting). Although the parts of the system that are not certificated with the engine could be evaluated using the criteria of § 23.1309, the integral nature of systems such as these makes it unfeasible to evaluate the airplane portion of the system without including the engine portion of the system. However, § 23.1309(f)(1) again prevents complete evaluation of the installed airplane system since evaluation of the engine system's effects is not required. Therefore, special conditions are issued for the Centex Aerospace, Inc. modified Cirrus Design Corporation Model SR22 to provide HIRF protection. Applicability As discussed above, these special conditions are applicable to the Centex Aerospace, Inc. modified Cirrus Design Corporation Model SR22. Should Centex Aerospace, Inc. apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A00009CH, to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well. Conclusion This action affects only certain novel or unusual design features on one model of airplane. It is not a rule of general applicability and affects only the applicant who applied to the FAA for approval of these features on the airplane. The substance of these special conditions has been subjected to the notice and comment period in several prior instances and has been derived without substantive change from those previously issued. It is unlikely that prior public comment would result in a significant change from the substance contained herein. Therefore, because a delay would significantly affect the certification of the airplane, which is imminent, the FAA has determined that prior public notice and comment are unnecessary and impracticable, and good cause exists for adopting these special conditions upon issuance. The FAA is requesting comments to allow interested persons to submit views that may not have been submitted in response to the prior opportunities for comment described above. List of Subjects in 14 CFR Part 23 Aircraft, Aviation safety, Signs and symbols. Citation The authority citation for these special conditions is as follows: Authority: 49 U.S.C. 106(g), 40113 and 44701; 14 CFR 21.16 and 21.101; and 14 CFR 11.38 and 11.19. The Special Conditions Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for the Centex Aerospace, Inc. modified Cirrus Design Corporation Model SR22. 1. *High Intensity Radiated Fields
(HIRF)Protection.* In showing compliance with 14 CFR part 21 and the airworthiness requirements of 14 CFR part 23, protection against hazards caused by exposure to HIRF fields for the full authority digital engine control system, which performs critical functions, must be considered. To prevent this occurrence, the electronic engine control system must be designed and installed to ensure that the operation and operational capabilities of this critical system are not adversely affected when the airplane is exposed to high energy radio fields. At this time, the FAA and other airworthiness authorities are unable to precisely define or control the HIRF energy level to which the airplane will be exposed in service; therefore, the FAA hereby defines two acceptable interim methods for complying with the requirement for protection of systems that perform critical functions.
(1)The applicant may demonstrate that the operation and operational capability of the installed electrical and electronic systems that perform critical functions are not adversely affected when the aircraft is exposed to the external HIRF threat environment defined in the following table: Frequency Field strength (volts per meter) Peak Average 10 kHz-100 kHz 50 50 100 kHz-500 kHz 50 50 500 kHz-2 MHz 50 50 2 MHz-30 MHz 100 100 30 MHz-70 MHz 50 50 70 MHz-100 MHz 50 50 100 MHz-200 MHz 100 100 200 MHz-400 MHz 100 100 400 MHz-700 MHz 700 50 700 MHz-1 GHz 700 100 1 GHz-2 GHz 2000 200 2 GHz-4 GHz 3000 200 4 GHz-6 GHz 3000 200 6 GHz-8 GHz 1000 200 8 GHz-12 GHz 3000 300 12 GHz-18 GHz 2000 200 18 GHz-40 GHz 600 200 The field strengths are expressed in terms of peak root-mean-square
(rms)values. or,
(2)The applicant may demonstrate by a system test and analysis that the electrical and electronic systems that perform critical functions can withstand a minimum threat of 100 volts per meter peak electrical strength, without the benefit of airplane structural shielding, in the frequency range of 10 KHz to 18 GHz. When using this test to show compliance with the HIRF requirements, no credit is given for signal attenuation due to installation. Data used for engine certification may be used, when appropriate, for airplane certification. Issued in Kansas City, Missouri on July 26, 2007. James E. Jackson, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-14935 Filed 8-2-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2006-25927; Directorate Identifier 2006-CE-52-AD; Amendment 39-15142; AD 2007-16-03] RIN 2120-AA64 Airworthiness Directives; M7 Aerospace LP SA226 and SA227 Series Airplanes AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: We are adopting a new airworthiness directive
(AD)to supersede AD 98-19-15 R1 and AD 2000-03-17, which apply to M7 Aerospace LP SA226 and SA227 series airplanes equipped with certain pitch trim actuators. AD 98-19-15 R1 currently requires you to incorporate changes into the Limitations Section of the FAA-approved airplane flight manual
(AFM)if certain part number (P/N) pitch trim actuators are installed. AD 2000-03-17 requires repetitive inspections and repetitive replacements of the pitch trim actuator. The repetitive inspection and repetitive replacement times vary depending on the combination of airplane model and pitch trim actuator P/N installed. Since we issued AD 98-19-15 R1 and AD 2000-03-17, we have determined that reliance on critical repetitive inspections on aging commuter-class airplanes carries an unnecessary safety risk when a design change exists that could eliminate or, in certain instances, reduce the number of those critical inspections. Consequently, this AD retains all of the actions of the previously referenced ADs, places life limits on certain P/N pitch trim actuators, and requires the replacement of certain P/N pitch trim actuators with one of an improved design. Once installed, the improved design pitch trim actuator will terminate the AFM limitations in this AD and reduce the repetitive inspection and repetitive replacement requirements. We are issuing this AD to detect excessive freeplay or rod slippage in the pitch trim actuator, which, if not detected and corrected, could result in pitch trim actuator failure. We are also issuing this AD to lessen the severity of pitch upset if a pitch trim actuator mechanical failure occurs. These conditions could lead to possible loss of control. DATES: This AD becomes effective on September 7, 2007. As of April 10, 2000 (65 FR 8037, February 17, 2000), the Director of the Federal Register approved the incorporation by reference of the following Fairchild Aircraft service information listed in this AD: • Fairchild Aircraft SA226 Series Service letter
(SL)226-SL-005, Revised: August 3, 1999; • Fairchild Aircraft SA227 Series SL 227-SL-011, Revised August 3, 1999; • Fairchild Aircraft SA227 Series SL CC7-SL-028, Issued: August 12, 1999; • Fairchild Aircraft SA226 Series SL 226-SL-014, Revised: February 1, 1999; • Fairchild Aircraft SA227 Series SL 227-SL-031, Revised: February 1, 1999; and • Fairchild Aircraft SA227 Series SL CC7-SL-021, Revised: February 1, 1999. ADDRESSES: For service information identified in this AD, contact M7 Aerospace LP, 10823 N.E. Entrance, San Antonio, Texas 78216. To view the AD docket, go to U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, or on the Internet at *http://dms.dot.gov.* The docket number is FAA-2006-25927; Directorate Identifier 2006-CE-52-AD. FOR FURTHER INFORMATION CONTACT: Werner Koch, Aerospace Engineer, 2601 Meacham Blvd, Fort Worth, Texas 76137-4298; telephone:
(817)222-5133; fax:
(817)222-5960. SUPPLEMENTARY INFORMATION: Discussion On April 20, 2007, we issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to M7 Aerospace LP SA226 and SA227 series airplanes equipped with certain pitch trim actuators. This proposal was published in the **Federal Register** as a notice of proposed rulemaking
(NPRM)on April 30, 2007 (72 FR 21171). The NPRM proposed to supersede AD 98-19-15 R1 and AD 2000-03-17 with a new AD that would retain all of the actions of the previously referenced ADs but limit the part numbers of the pitch trim actuators that can be used for replacement. The NPRM also proposed placing a life limit on Barber-Coleman pitch trim actuators P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, and P/N 27-19008-005. The NPRM proposed to require you to use the service information described previously to perform these actions. Comments We provided the public the opportunity to participate in developing this AD. We received no comments on the proposal or on the determination of the cost to the public. Conclusion We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections: • Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and • Do not add any additional burden upon the public than was already proposed in the NPRM. Costs of Compliance We estimate that this AD affects 307 airplanes in the U.S. registry. This AD requires pitch trim actuators to have a combination of inspections, overhaul, and/or replacement. We have presented the fleet cost as the lowest cost based on all airplanes needing the inspection and the highest cost based on all airplanes needing the overhaul. The actual fleet cost will be somewhere between the lowest and highest fleet cost presented. We have no way of determining the number of airplanes needing replacement. (See below for airplane replacement cost.) We estimate the following costs to do the inspection or overhaul: Labor cost Parts cost Total cost per airplane Total cost on U.S. operators For inspection: 4 work-hours × $80 per hour = $320 None $320 $98,240 For overhaul: 4 work-hours × $80 per hour = $320 $9,000 9,320 2,861,240 We estimate the following costs to do any necessary replacements that are required through the actions of this AD. We have no way of determining the number of airplanes that may need this replacement: Labor cost Parts cost Total cost per airplane 4 work-hours × $80 per hour = $320 $64,000 $64,320 The replacement estimate is based on replacing the pitch trim actuator with a new Simmonds-Precision P/N DL5040M8 pitch trim actuator. If the pitch trim actuator is replaced with a different P/N FAA-approved pitch trim actuator or a zero-timed FAA-approved pitch trim actuator the cost to the owner/operator could be less. The estimated costs represented in the above actions include the costs associated with AD 98-19-15 R1, AD 2000-03-17, and the costs of this AD. The added cost impact this AD imposes upon an owner/operator over that already required by AD 98-19-15 R1 and AD 2000-03-17 is the eventual replacement of the pitch trim actuator if the airplane currently has installed a Barber-Coleman pitch trim actuator P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005. Authority for This Rulemaking Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this AD. Regulatory Findings We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. For the reasons discussed above, I certify that this AD: 1. Is not a “significant regulatory action” under Executive Order 12866; 2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and 3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. We prepared a summary of the costs to comply with this AD (and other information as included in the Regulatory Evaluation) and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES . Include “Docket No. FAA-2006-25927; Directorate Identifier 2006-CE-52-AD” in your request. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. Adoption of the Amendment Accordingly, under the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 [Amended]. 2. The FAA amends § 39.13 by removing Airworthiness Directive
(AD)98-19-15 R1, Amendment 39-11507 (65 FR 1540, January 11, 2000), and AD 2000-03-17, Amendment 39-11576 (65 FR 8037, February 17, 2000); and by adding the following new AD: **2007-16-03 M7 Aerospace LP (Type Certificate No. A5SW, A8SW, and A18SW formerly held by Fairchild Aircraft Incorporated):** Amendment 39-15142; Docket No. FAA-2006-25927; Directorate Identifier 2007-CE-52-AD. Effective Date
(a)This AD becomes effective on September 7, 2007. Affected ADs
(b)This AD supersedes the following ADs:
(1)AD 98-19-15 R1, Amendment 39-11507; and
(2)AD 2000-03-17, Amendment 39-11576. Applicability
(c)This AD applies to all Models SA226-AT, SA226-T, SA226-T(B), SA226-TC, SA227-AC (C-26A), SA227-AT, SA227-BC (C-26A), SA227-CC, SA227-DC (C-26B), SA227-PC, and SA227-TT airplanes, all serial numbers, that:
(1)are certificated in any category; and
(2)are equipped with pitch trim actuator Barber-Coleman part number (P/N) 27-19008-001, Barber-Coleman P/N 27-19008-002, Barber-Coleman P/N 27-19008-004, Barber-Coleman P/N 27-19008-005, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, Simmonds-Precision P/N DL5040M5, Simmonds-Precision P/N DL5040M6, or Simmonds-Precision P/N DL5040M8. Unsafe Condition
(d)This AD results from reports of mechanical failure of the pitch trim actuator causing the horizontal stabilizer to move to full aircraft nose up. We are issuing this AD to detect excessive freeplay or rod slippage in the pitch trim actuator, which, if not detected and corrected, could result in pitch trim actuator failure. We are also issuing to lessen the severity of pitch upset if a pitch trim actuator mechanical failure occurs. These conditions could lead to possible loss of control. In addition, we are issuing to eliminate the use of certain pitch trim actuators that require frequent critical inspections or replacements. Compliance
(e)To address this problem, you must do the following, unless already done:
(1)*For airplanes with a Barber-Coleman pitch trim actuator P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005:* Before further flight after September 25, 1998 (the effective date of AD 98-19-15), incorporate the text in paragraphs (e)(1)(i) and (e)(1)(ii) of this AD into the Limitations Section of the FAA-approved airplane flight manual (AFM). The owner/operator holding at least a private pilot certificate as authorized by section 43.7 of the Federal Aviation Regulations (14 CFR 43.7) may insert the information specified in paragraphs (e)(1)(i) and (e)(1)(ii) of this AD into the AFM Limitations Section. This may be done by inserting a copy of this AD into the AFM. Make an entry into the aircraft records showing compliance with this portion of the AD in accordance with section 43.9 of the Federal Aviation Regulations (14 CFR 43.9).
(i)“Limit the maximum indicated airspeed to maneuvering airspeed
(Va)as shown in the appropriate airplane flight manual (AFM)”; and
(ii)“The minimum crew required is two pilots.” Note 1: Fairchild Service Letter 226-SL-017, Fairchild Service Letter 227-SL-033, and Fairchild Service Letter CC7-SL-023, all FAA Approved: August 26, 1998; Revised: September 2, 1998, address the subject matter of this AD. Note 2: The before further flight compliance time of paragraph (e)(1) of this AD is retained from AD 98-19-15 R1. Note 3: Installation of any FAA-approved pitch trim actuator other than the Barber-Coleman P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005 terminates the requirements of paragraph (e)(1) of this AD.
(2)*For all airplanes:* Do the following actions at the times specified in the initial inspection or overhaul column and the repetitive inspection or overhaul column in table 1 of this AD:
(i)*For airplanes equipped with a Simmonds-Precision pitch trim actuator P/N DL5040M5, P/N DL5040M6, or P/N DL5040M8:* Measure the freeplay of the pitch trim actuator and inspect the pitch trim actuator for rod slippage using the INSTRUCTIONS section of Fairchild Aircraft SA226 Series Service Letter
(SL)226-SL-005 or Fairchild Aircraft SA227 Series SL 227-SL-011, both Revised: August 3, 1999; or Fairchild Aircraft SA227 Series Service Letter CC7-SL-028, Issued: August 12, 1999, as applicable.
(ii)*For airplanes equipped with Barber-Colman pitch trim actuators P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005:* Do a functional inspection of the pitch trim actuator using the INSTRUCTIONS section of Fairchild Aircraft SA226 Series SL 226-SL-014, Fairchild Aircraft SA227 Series SL 227-SL-031, or Fairchild Aircraft SA227 Series SL CC7-SL-021; all Revised: February 1, 1999; as applicable. Note 4: The actions in paragraphs (e)(2)(i) and (e)(2)(ii) of this AD are the same as the actions in AD 2000-03-17. The only difference between this AD and AD 2000-03-17 is the addition of life limits to Barber-Coleman pitch trim actuators P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005.
(iii)*For airplanes equipped with Barber-Colman pitch trim actuators P/N 27-19008-006 or P/N 27-19008-007:* Overhaul the pitch trim actuator following the applicable maintenance manual.
(3)*For all airplanes:* Before further flight, replace the pitch trim actuator following the applicable maintenance manual when any of the following occurs:
(i)The pitch trim actuator is inspected following paragraphs (e)(2)(i) and (e)(2)(ii) of this AD and the freeplay limitations are exceeded, rod slippage is found, or a ratcheting sound occurs, as specified in the applicable service letters; or
(ii)The installed pitch trim actuator reaches its repetitive replacement time as specified in table 1 in paragraph (e)(4) of this AD.
(4)Table 1 below presents the pitch trim actuators that could be installed and the compliance times for the initial inspections or overhaul, repetitive inspections or overhaul, and repetitive replacements required by this AD: Table 1.—Inspection/Overhaul and Replacement Requirements for Pitch Trim Actuators Condition Initial inspection or overhaul Repetitive inspection or overhaul Repetitive replacement
(i)For all affected airplane models (except for the Models SA227-CC and SA227-DC) that have an original Simmonds-Precision pitch trim actuator, P/N DL5040M5, installed Inspect following paragraph (e)(2)(i) of this AD before accumulating 3,000 hours time-in-service
(TIS)on the pitch trim actuator or within 50 hours TIS after April 17, 1995 (the effective date of AD 93-15-02 R1), whichever occurs later Inspect following paragraph (e)(2)(i) of this AD before accumulating 250 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 250 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(i) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M6, Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 5,000 hours TIS on the pitch trim actuator, 500 hours TIS after the initial inspection, or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(ii)For all affected airplane models (except for the Models SA227-CC and SA227-DC) that have a replacement Simmonds-Precision pitch trim actuator, P/N DL5040M5, installed Inspect following paragraph (e)(2)(i) of this AD before accumulating 5,000 hours TIS on the pitch trim actuator or within 50 hours TIS after April 17, 1995 (the effective date of AD 93-15-02 R1), whichever occurs later Inspect following paragraph (e)(2)(i) of this AD before accumulating 300 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 300 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(ii) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M6, Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 6,500 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(iii)For all affected airplane models (except for the Models SA227-CC and SA227-DC) that have a replacement Simmonds-Precision pitch trim actuator, P/N DL5040M6, installed. This part can be new, modified from a P/N DL5040M5 pitch trim actuator, or overhauled and zero-timed Inspect following paragraph (e)(2)(i) of this AD before accumulating 7,500 hours TIS on the pitch trim actuator or within 50 hours TIS after April 17, 1995 (the effective date of AD 93-15-02 R1), whichever occurs later Inspect following paragraph (e)(2)(i) of this AD before accumulating 300 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 300 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(iii) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M6, Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 9,900 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(iv)For all affected airplane models (except for the Models SA227-CC and SA227-DC) that have a replacement Simmonds-Precision pitch trim actuator, P/N DL5040M5, installed that was overhauled and zero-timed where both nut assemblies, P/N AA56142, were replaced with new assemblies during overhaul Inspect following paragraph (e)(2)(i) of this AD before accumulating 5,000 hours TIS on the pitch trim actuator or within 50 hours TIS after April 17, 1995 (the effective date of AD 93-15-02 R1), whichever occurs later Inspect following paragraph (e)(2)(i) of this AD before accumulating 300 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 300 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(iv) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M6, Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 6,500 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(v)For all affected airplane models (except for the Models SA227-CC and SA227-DC) that have a replacement Simmonds-Precision P/N DL5040M5 pitch trim actuator installed that was overhauled and zero-timed where both nut assemblies, P/N AA56142, were *not* replaced with new assemblies during overhaul Inspect following paragraph (e)(2)(i) of this AD before accumulating 3,000 hours TIS on the pitch trim actuator or within 50 hours TIS after April 17, 1995 (the effective date of AD 93-15-02 R1), whichever occurs later Inspect following paragraph (e)(2)(i) of this AD before accumulating 250 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 250 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(v) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M6, Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 5,000 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(vi)For all affected airplane models (except for the Models SA227-CC and SA227-DC) that have a newly fabricated or overhauled and zero-timed Barber-Colman pitch trim actuator, P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005 Inspect following paragraph (e)(2)(ii) of this AD before accumulating 500 hours total TIS on the pitch trim actuator or within 50 hours TIS after December 1, 1997 (the effective date of AD 97-23-01), whichever occurs later Inspect following paragraph (e)(2)(ii) of this AD before accumulating 300 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 300 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(vi) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M6, Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 5,000 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(vii)For the Models SA227-CC and SA227-DC that have a Simmonds-Precision pitch trim actuator P/N DL5040M5 or P/N DL5040M6 installed None None Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006 or P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 1,500 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(viii)For the Models SA227-CC and SA227-DC that have a newly fabricated or overhauled and zero-timed Barber-Colman pitch trim actuator, P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005 Inspect following paragraph (e)(2)(ii) of this AD before accumulating 500 hours total TIS on the pitch trim actuator or within 50 hours TIS after December 1, 1997 (the effective date of AD 97-23-01), whichever occurs later Inspect following paragraph (e)(2)(ii) of this AD before accumulating 300 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 300 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(viii) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 5,000 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(ix)For all affected airplanes with a Simmonds-Precision pitch trim actuator, P/N DL5040M8, installed Inspect following paragraph (e)(2)(i) of this AD before accumulating 7,500 hours TIS on the pitch trim actuator or within the next 50 hours TIS after April 10, 2000 (the effective date of AD 2000-03-17), whichever occurs later Inspect following paragraph (e)(2)(i) of this AD before accumulating 300 hours TIS after the initial inspection and repetitively thereafter at intervals not to exceed 300 hours TIS until accumulating the hours TIS specified in paragraph (e)(4)(ix) Repetitive Replacement column of this AD Replace the pitch trim actuator with a Simmonds-Precision P/N DL5040M8, Barber-Coleman P/N 27-19008-006 or P/N 27-19008-007, or an FAA-approved equivalent pitch trim actuator before accumulating 9,900 hours TIS on the pitch trim actuator or within 30 days after September 7, 2007 (the effective date of this AD), whichever occurs later.
(x)For all affected airplanes with a Barber-Colman P/N 27-19008-006 or 27-19008-007 pitch trim actuator installed Overhaul following paragraph (e)(2)(iii) of this AD before accumulating 2,000 hours TIS on the pitch trim actuator Overhaul following paragraph (e)(2)(iii) of this AD before accumulating 2,000 hours TIS on the pitch trim actuator No replacement requirements.
(5)*For all airplane models except Models SA227-CC and SA227-DC:* As of September 7, 2007 (the effective date of this AD), do not install as a replacement any of the following pitch trim actuators or FAA-approved equivalent P/Ns:
(i)Barber-Colman P/N 27-19008-001;
(ii)Barber-Colman P/N 27-19008-002;
(iii)Barber-Colman P/N 27-19008-004;
(iv)Barber-Colman P/N 27-19008-005; or
(v)Simmonds-Precision P/N DL5040M5.
(6)*For all airplane Models SA227-CC and SA227-DC:* As of September 7, 2007 (the effective date of this AD), do not install as a replacement any of the following pitch trim actuators or FAA-approved equivalent P/Ns:
(i)Barber-Colman P/N 27-19008-001;
(ii)Barber-Colman P/N 27-19008-002;
(iii)Barber-Colman P/N 27-19008-004;
(iv)Barber-Colman P/N 27-19008-005;
(v)Simmonds-Precision P/N DL5040M5; or
(vi)Simmonds-Precision P/N DL5040M6. Alternative Methods of Compliance (AMOCs)
(f)The Manager, Fort Worth Airplane Certification Office (ACO), FAA, ATTN: Werner Koch, Aerospace Engineer, 2601 Meacham Blvd., Fort Worth, Texas 76137-4298, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector
(PI)in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO. Material Incorporated by Reference
(g)You must use the service information specified in table 2 of this AD to do the actions required by this AD, unless the AD specifies otherwise.
(1)On April 10, 2000 (65 FR 8037, February 17, 2000) the Director of the Federal Register approved the incorporation by reference of the service information listed in table 2 of this AD under 5 U.S.C. 552(a) and 1 CFR part 51.
(2)For service information identified in this AD, contact M7 Aerospace LP, 10823 N. E. Entrance, San Antonio, Texas 78216.
(3)You may review copies at the FAA, Central Region, Office of the Regional Counsel, 901 Locust, Kansas City, Missouri 64106; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: *http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html* . Table 2.—Material Incorporated by Reference Service Letter
(SL)Date Fairchild Aircraft SA226 Series SL 226-SL-005 Revised: August 3, 1999. Fairchild Aircraft SA227 Series SL 227-SL-011 Revised: August 3, 1999. Fairchild Aircraft SA227 Series SL CC7-SL-028 Issued: August 12, 1999. Fairchild Aircraft SA226 Series SL 226-SL-014 Revised: February 1, 1999. Fairchild Aircraft SA227 Series SL 227-SL-031 Revised: February 1, 1999. Fairchild Aircraft SA227 Series SL CC7-SL-021 Revised: February 1, 1999. Issued in Kansas City, Missouri, on July 27, 2007. James E. Jackson, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E7-15018 Filed 8-2-07; 8:45 am] BILLING CODE 4910-13-P DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 878 [Docket No. 2007N-0267] Medical Devices; General and Plastic Surgery Devices; Classification of Absorbable Poly(hydroxybutyrate) Surgical Suture Produced by Recombinant DNA Technology AGENCY: Food and Drug Administration, HHS. ACTION: Final rule. SUMMARY: The Food and Drug Administration
(FDA)is classifying the absorbable poly(hydroxybutyrate) surgical suture produced by recombinant deoxyribonucleic acid
(DNA)technology into class II (special controls). The special control that will apply to the device is the guidance document entitled “Class II Special Controls Guidance Document: Absorbable Poly(hydroxybutyrate) Surgical Suture Produced by Recombinant DNA Technology.” The agency is classifying these devices into class II (special controls) in order to provide a reasonable assurance of safety and effectiveness of these devices. Elsewhere in this issue of the **Federal Register** , FDA is announcing the availability of the guidance document that will serve as the special control for this device. DATES: This rule is effective September 4, 2007. The classification was effective February 8, 2007. FOR FURTHER INFORMATION CONTACT: Nada O. Hanafi, Center for Devices and Radiological Health (HFZ-410), Food and Drug Administration, 9200 Corporate Blvd., Rockville, MD 20850, 240-276-3555. SUPPLEMENTARY INFORMATION: I. What is the Background of this Rulemaking? In accordance with section 513(f)(1) of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 360c(f)(1)), devices that were not in commercial distribution before May 28, 1976, the date of enactment of the Medical Device Amendments of 1976 (the amendments), generally referred to as postamendments devices, are classified automatically by statute into class III without any FDA rulemaking process. These devices remain in class III and require premarket approval, unless the device is classified or reclassified into class I or class II, or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the act, to a predicate device that does not require premarket approval. The agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807) of FDA's regulations. Section 513(f)(2) of the act provides that any person who submits a premarket notification under section 510(k) of the act for a device that has not previously been classified may, within 30 days after receiving an order classifying the device in class III under section 513(f)(1) of the act, request FDA to classify the device under the criteria set forth in section 513(a)(1) of the act. FDA shall, within 60 days of receiving such a request, classify the device by written order. This classification shall be the initial classification of the device type. Within 30 days after the issuance of an order classifying the device, FDA will publish a notice in the **Federal Register** announcing such classification (section 513(f)(2) of the act). In accordance with section 513(f)(1) of the act, FDA issued an order on November 7, 2005, classifying the absorbable poly(hydroxybutyrate) surgical suture produced by recombinant DNA technology in class III because it was not substantially equivalent to a device that was introduced or delivered for introduction into interstate commerce for commercial distribution before May 28, 1976, or a device that was subsequently reclassified into class I or class II. On May 12, 2006, after Tepha, Inc., had received CDRH's response to an April 7, 2006, appeal from the company, Tepha, Inc., submitted a petition under section 513(f)(2) of the act requesting classification of the device. The manufacturer recommended that the device be classified into class II (Ref. 1). In accordance with section 513(f)(2) of the act, FDA reviewed the petition in order to classify the device under the criteria for classification set forth in 513(a)(1) of the act. Devices are to be classified into class II if general controls, by themselves, are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls to provide reasonable assurance of the safety and effectiveness of the device for its intended use. After review of the information submitted in the petition, FDA determined that the device type, absorbable poly(hydroxybutyrate) surgical suture produced by recombinant DNA technology, can be classified into class II because special controls, in addition to general controls, are adequate to provide reasonable assurance of the safety and effectiveness of the device and that there is sufficient information to establish special controls to provide such assurance. The device type is assigned the generic name, “absorbable poly(hydroxybutyrate) surgical suture produced by recombinant DNA technology,” and is identified as an absorbable surgical suture made of material isolated from prokaryotic cells produced by recombinant DNA technology. The device is intended for use in general soft tissue approximation and ligation. FDA has identified the risks to health associated with this type of device as: Improper selection and use, suture breakage, adverse tissue reaction, and infection. The special control FDA is establishing is a special controls guidance document that FDA believes will aid in mitigating the potential risks to health, as described in table 1 of this document. **Table 1.—Risks to Health and Mitigation Measures** Identified Risk Mitigation Measures Improper selection and use Physical and performance characteristics Biocompatibility Labeling Suture breakage Physical and performance characteristics Expiration dating Adverse tissue reaction (i.e., irritation, inflammation, immune response) Biocompatibility Infection Sterility FDA believes that special controls, in addition to general controls, address the risks to health identified above and provide reasonable assurances of the safety and effectiveness of the device type. Thus, on February 8, 2007, FDA issued an order to the petitioner classifying the device into class II. FDA is codifying this classification at 21 CFR 878.4494. Following the effective date of the final classification rule, manufacturers will need to address the issues covered in the special controls guidance. However, the manufacturer need only show that its device meets the recommendations of the guidance or in some other way provides equivalent assurance of safety and effectiveness. Section 510(m) of the act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k) of the act, if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. For this type of device, however, FDA has determined that premarket review of the requirements as outlined in § 807.87 will provide reasonable assurance of the safety and effectiveness of the device. Thus, persons who intend to market this type of device must submit to FDA a premarket notification, prior to marketing the device, which contains information about the device they intend to market. II. What is the Environmental Impact of This Rule? The agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Thus, neither an environmental assessment nor an environmental impact statement is required. III. What is the Economic Impact of This Rule? FDA has examined the impacts of the final rule under Executive Order 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The agency believes that this final rule is not a significant regulatory action under the Executive order. The Regulatory Flexibility Act requires agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because classification of this device into class II will relieve manufacturers of the cost of complying with the premarket approval requirements of section 515 of the act (21 U.S.C. 360e), and may permit small potential competitors to enter the marketplace by lowering their costs, the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities. Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $122 million, using the most current
(2005)Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this final rule to result in any 1-year expenditure that would meet or exceed this amount. IV. Does This Final Rule Have Federalism Implications? FDA has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the rule does not contain policies that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the agency has concluded that the rule does not contain policies that have federalism implications as defined in the Executive order and, consequently, a federalism summary impact statement is not required. V. How Does This Rule Comply with the Paperwork Reduction Act of 1995? This final rule contains no collections of information. Therefore, clearance by the Office of Management and Budget
(OMB)under the Paperwork Reduction Act of 1995 is not required. The guidance for this final rule references previously approved collections of information found in FDA regulations. These collections of information are subject to review by the OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). VI. What References Are on Display? The following reference has been placed on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday. 1. Petition from Tepha, Inc., on May 12, 2006. List of Subjects in 21 CFR Part 878 Medical devices. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 878 is amended as follows: PART 878—GENERAL AND PLASTIC SURGERY DEVICES 1. The authority citation for 21 CFR part 878 continues to read as follows: Authority: 21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371. 2. Section 878.4494 is added to subpart E to read as follows: § 878.4494 Absorbable poly(hydroxybutyrate) surgical suture produced by recombinant DNA technology.
(a)*Identification* . An absorbable poly(hydroxybutyrate) surgical suture is an absorbable surgical suture made of material isolated from prokaryotic cells produced by recombinant deoxyribonucleic acid
(DNA)technology. The device is intended for use in general soft tissue approximation and ligation.
(b)*Classification* . Class II (special controls). The special control for this device is the FDA guidance document entitled “Class II Special Controls Guidance Document: Absorbable Poly(hydroxybutyrate) Surgical Suture Produced by Recombinant DNA Technology.” For the availability of this guidance document see § 878.1(e). Dated: July 23, 2007. Linda S. Kahan, Deputy Director, Center for Devices and Radiological Health. [FR Doc. E7-15064 Filed 8-2-07; 8:45 am] BILLING CODE 4160-01-S DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 20, 25, 31, 53, 54, and 56 [TD 9350] RIN 1545-BE24 AJCA Modifications to the Section 6011 Regulations AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains final regulations under section 6011 of the Internal Revenue Code that modify the rules relating to the disclosure of reportable transactions under section 6011. These regulations affect taxpayers participating in reportable transactions under section 6011, material advisors responsible for disclosing reportable transactions under section 6111, and material advisors responsible for keeping lists under section 6112. DATES: *Effective Date:* These regulations are effective August 3, 2007. FOR FURTHER INFORMATION CONTACT: Charles D. Wien, Michael H. Beker, or Tolsun N. Waddle, 202-622-3070 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains final regulations that amend 26 CFR part 1 by modifying and clarifying the rules relating to the disclosure of reportable transactions under section 6011. This document also contains final regulations that amend 26 CFR parts 20, 25, 31, 53, 54, and 56 by modifying the rules for purposes of estate, gift, employment, and pension and exempt organizations excise taxes that require the disclosure of listed transactions by certain taxpayers on their Federal tax returns under section 6011. The American Jobs Creation Act of 2004, Public Law 108-357, (118 Stat. 1418),
(AJCA)was enacted on October 22, 2004. The AJCA revised sections 6111 and 6112, thereby necessitating changes to the rules under section 6011. On November 1, 2006, the IRS and Treasury Department issued a notice of proposed rulemaking and temporary and final regulations under sections 6011, 6111, and 6112 (REG-103038-05, REG-103039-05, REG-103043-05, TD 9295) (the November 2006 regulations). The November 2006 regulations were published in the **Federal Register** (71 FR 64488, 71 FR 64496, 71 FR 64501, 71 FR 64458) on November 2, 2006. The IRS and Treasury Department received written public comments responding to the proposed regulations and held a public hearing regarding the proposed rules on March 20, 2007. After consideration of the comments received and the comments made at the hearing, the proposed regulations are adopted as revised by this Treasury decision. These final regulations generally retain the provisions of the proposed regulations but include some modifications based on the recommendations made in the public comments. Summary of Comments and Explanation of Provisions Nine written comments were received in response to the NPRM. All comments were considered and are available for public inspection upon request. Transactions of Interest The proposed regulations identified transactions of interest as a new reportable transaction category. As stated in the preamble to the proposed regulations, a transaction of interest is a transaction that the IRS and Treasury Department believe has a potential for tax avoidance or evasion, but for which the IRS and Treasury Department lack enough information to determine whether the transaction should be identified specifically as a tax avoidance transaction. These final regulations adopt the language in the proposed regulations regarding transactions of interest without modification. This language provides that a transaction of interest is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. These final regulations also retain the language in the proposed regulations that provide that a taxpayer's participation in a transaction of interest will be determined in the published guidance which identifies the transaction of interest. Several commentators requested more specificity and guidance on the definition of what constitutes a transaction of interest. Specifically, the commentators recommended that the term “participation,” for purposes of determining whether a taxpayer participated in a transaction of interest, be defined in the regulations rather than in the published guidance identifying the transaction of interest. The commentators also requested that the published guidance describing a transaction of interest be crafted in a clear and specific manner, thereby enabling taxpayers to determine whether they participated in a transaction of interest. One commentator also recommended providing a list of factors in the regulations that the IRS would consider when identifying a transaction of interest. Further, several commentators requested that the IRS and Treasury Department provide notice to taxpayers that the IRS and Treasury Department are considering designating a particular transaction as a transaction of interest and requesting comments prior to publishing guidance identifying a transaction as a transaction of interest. The IRS and Treasury Department believe that providing a specific definition for the transactions of interest category in the regulations would unduly limit the IRS and Treasury Department's ability to identify transactions that have the potential for tax avoidance or evasion. In order to maintain flexibility in identifying a transaction of interest, the description of a transaction of interest will be provided in the published guidance that identifies the transaction of interest. The published guidance identifying a transaction of interest will provide taxpayers with the information necessary to determine whether a particular transaction is the same as or substantially similar to the transaction described in the published guidance and to determine who participated in the transaction. The IRS and Treasury Department do not believe that the regulations should be amended to include language requiring the IRS and Treasury Department to provide advance notice for transactions of interest as suggested by the commentators. However, the IRS and Treasury Department may choose to publish advance notice and request comments in certain circumstances. The determination of whether to provide advance notice and a request for comments will be made on a transaction by transaction basis. The proposed regulations also provide that upon publication of the final regulations, the transactions of interest category of reportable transaction will apply to transactions entered into on or after November 2, 2006. These final regulations adopt the effective date stated in the proposed regulations. The preamble to the proposed regulations provides that when the IRS and Treasury Department have gathered enough information to make an informed decision as to whether a particular transaction of interest is a tax avoidance type of transaction, the IRS and Treasury Department may take one or more actions, including removing the transaction from the transaction of interest category in published guidance, designating the transaction as a listed transaction, or providing a new category of reportable transaction. Several commentators recommended that the period during which a transaction may be considered a transaction of interest be limited to twenty-four months, unless the IRS and Treasury Department affirmatively act to extend the designation for an additional twenty-four months with no limit on the number of permissible extensions. One commentator suggested that the length of the period be limited to twenty-four months, with no extensions. The IRS and Treasury Department believe that limiting the length of time a transaction may be designated a transaction of interest would be contrary to the purpose of the transactions of interest category of reportable transaction and would hinder the ability of the IRS and Treasury Department to efficiently and effectively gather the necessary information to determine whether a particular transaction is a tax avoidance type of transaction. Accordingly, these final regulations do not adopt these suggestions. Disclosure of Reportable Transactions by Owners of a Pass-Through Entity I. Timing of Disclosures The proposed regulations provide that if a taxpayer who is a partner in a partnership, a shareholder in an S corporation, or a beneficiary of a trust receives a timely Schedule K-1 less than 10 calendar days before the due date of the taxpayer's return (including extensions) and, based on receipt of the timely Schedule K-1, the taxpayer determines that the taxpayer participated in a reportable transaction, the disclosure statement will not be considered late if the taxpayer discloses the reportable transaction by filing a disclosure statement with the Office of Tax Shelter Analysis
(OTSA)within 45 calendar days after the due date of the taxpayer's return (including extensions). Several commentators requested that the proposed regulations not limit relief to taxpayers who receive a timely Schedule K-1 before the due date of their return. Others believed the 45 day disclosure period was too short. One commentator recommended that the provision apply to late disclosures that were inadvertent or non-abusive. One commentator recommended that the 10 day period be extended to 30 days and the 45 day disclosure period be extended to 90 days. With respect to the date the disclosure period begins, two commentators commented that the disclosure period should begin on the date the taxpayer receives the timely Schedule K-1. The IRS and Treasury Department agree that the 45 day disclosure period should be extended. These final regulations extend the disclosure period to 60 calendar days. The IRS and Treasury Department believe that this additional period will provide taxpayers with ample time to review the entity's return and comply with any administrative and regulatory requirements before filing their disclosure statement. It should be noted that if a taxpayer receives a timely Schedule K-1 after the due date of the taxpayer's return (including extensions), the taxpayer will have received the timely Schedule K-1 less than 10 calendar days before the due date of the return and will have 60 calendar days after the due date of the taxpayer's return (including extensions) to file the disclosure statement. II. Pass-Through Owners Several commentators have suggested that the disclosure obligations of owners of a pass-through entity that participates in a reportable transaction be amended to provide that only certain owners of the pass-through entity are required to disclose their participation in the reportable transaction. One commentator suggested that an owner of a pass-through entity should be removed from this disclosure obligation when
(1)the owner did not know and should not have known that the pass-through entity engaged in the reportable transaction; and
(2)the pass-through entity failed to disclose timely its participation in the reportable transaction on its return to OTSA. The commentator also recommends that if the owner knew or reasonably should have known of the pass-through entity's participation in the reportable transaction, the owner should be required to file a disclosure statement even if the pass-through entity did not disclose the transaction to the owner. A different commentator suggested that an owner of a pass-through entity not be required to disclose the owner's participation in a reportable transaction, even if the owner knew or should have known of the pass-through entity's participation in the reportable transaction. Several commentators also suggested adopting a de minimis ownership rule exempting taxpayers owning less than a certain percentage of the pass-through entity from the disclosure requirements. One commentator suggested exempting owners of 5 percent or less of the outstanding interests in the pass-through entity that participates in a reportable transaction. The IRS and Treasury Department are aware that certain partners, shareholders, and beneficiaries may file income tax returns that reflect the tax consequences, tax benefits, or tax strategy of a reportable transaction even though the taxpayer is unaware that the pass-through entity engaged in the reportable transaction. The IRS and Treasury Department recognize the concerns of the commentators. In light of the potential monetary penalties for failing to disclose participation in a reportable transaction and in order to maintain flexibility in determining who should be subject to the disclosure requirements for a particular transaction, these final regulations amend the proposed regulations to add language providing flexibility to the IRS and Treasury Department to issue other provisions for disclosure under § 1.6011-4 in published guidance. Time Period for Disclosing Participation in a Listed Transaction and Transaction of Interest Under the proposed regulations if a transaction becomes a listed transaction or a transaction of interest after the filing of a taxpayer's tax return (including an amended return) reflecting the taxpayer's participation in the listed transaction or transaction of interest and before the end of the period of limitations for assessment of tax for any taxable year in which the taxpayer participated in the listed transaction or transaction of interest, then a disclosure statement must be filed, regardless of whether the taxpayer participated in the listed transaction or transaction of interest in the year the transaction became a listed transaction or a transaction of interest, with OTSA within 60 calendar days after the date on which the transaction became a listed transaction or a transaction of interest. The proposed regulations also provide that the Commissioner may determine the time for disclosure of listed transactions and transactions of interest in the published guidance identifying the transaction. Many commentators suggested that the current rule, which requires the disclosure of subsequently identified listed transactions on the taxpayer's next filed tax return be retained in light of the potential monetary penalties and potential administrative burden due to the shortened disclosure period. One commentator recommended that the taxpayer be required to file the disclosure statement by the later of the taxpayer's next filed tax return or within 60 calendar days after the date on which the transaction becomes a listed transaction or transaction of interest. A critical factor in the ability to analyze a particular transaction is the ability to have the necessary information available in a timely manner. Thus, requiring taxpayers to file a disclosure statement with OTSA in a timely manner is essential. Because the IRS and Treasury Department recognize that compliance within 60 calendar days may be burdensome in certain circumstances, the proposed regulations are amended to provide that taxpayers have 90 calendar days to disclose their participation in a subsequently identified listed transaction or transaction of interest. Brief Asset Holding Period Reportable Transaction Category Due to changes in section 901 and based on comments received, the IRS and Treasury Department have determined that the brief asset holding period reportable transaction category is no longer necessary. These final regulations therefore remove this category as a reportable transaction category. Form 8271 Before the enactment of the AJCA, section 6111 provided that tax shelter organizers were required to provide investors in tax shelters the registration number for the tax shelter. Section 301.6111-1T, Q&A 55, requires investors to report the registration number of the tax shelter to the IRS on Form 8271, “Investor Reporting of Tax Shelter Registration Number”, and attach the Form 8271 to any return on which any deduction, loss, credit, or other tax benefit attributable to the tax shelter is claimed. Because only a few investors must still file Form 8271 for pre-AJCA section 6111 tax shelters and because the IRS already is aware of these transactions, the IRS and Treasury Department have decided that investors are no longer required to file Forms 8271 otherwise due on or after August 3, 2007. The Form 8271 will be obsoleted. Taxpayers required to file Form 8886, “Reportable Transaction Disclosure Statement”, pursuant to § 1.6011-4(d), and Form 8271 with respect to the same transaction only need to report the registration number on Form 8886. Special Analyses It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 35) do not apply. The disclosure statement referenced in these regulations has been made available for public comment and any update to the disclosure statement will be made available for public comment in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35). Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Drafting Information The principal authors of these regulations are Charles D. Wien, Michael H. Beker, and Tolsun N. Waddle, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and Treasury Department participated in their development. List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 20 Estate taxes, Reporting and recordkeeping requirements. 26 CFR Part 25 Gift taxes, Reporting and recordkeeping requirements. 26 CFR Part 31 Employment taxes, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social security, Unemployment compensation. 26 CFR Part 53 Excise taxes, Foundations, Investments, Lobbying, Reporting and recordkeeping requirements. 26 CFR Part 54 Excise taxes, Pensions, Reporting and recordkeeping requirements. 26 CFR Part 56 Excise taxes, Lobbying, Nonprofit organizations, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1, 20, 25, 31, 53, 54, and 56 are amended as follows: PART 1—INCOME TAXES **Paragraph 1** . The authority citation for part 1 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 1.6011-4 is revised to read as follows: § 1.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . Every taxpayer that has participated, as described in paragraph (c)(3) of this section, in a reportable transaction within the meaning of paragraph
(b)of this section and who is required to file a tax return must file within the time prescribed in paragraph
(e)of this section a disclosure statement in the form prescribed by paragraph
(d)of this section. The fact that a transaction is a reportable transaction shall not affect the legal determination of whether the taxpayer's treatment of the transaction is proper.
(b)*Reportable transactions* —(1) *In general* . A reportable transaction is a transaction described in any of the paragraphs (b)(2) through
(7)of this section. The term transaction includes all of the factual elements relevant to the expected tax treatment of any investment, entity, plan, or arrangement, and includes any series of steps carried out as part of a plan.
(2)*Listed transactions* . A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service
(IRS)has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction.
(3)*Confidential transactions* —(i) *In general* . A confidential transaction is a transaction that is offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid an advisor a minimum fee.
(ii)*Conditions of confidentiality* . A transaction is considered to be offered to a taxpayer under conditions of confidentiality if the advisor who is paid the minimum fee places a limitation on disclosure by the taxpayer of the tax treatment or tax structure of the transaction and the limitation on disclosure protects the confidentiality of that advisor's tax strategies. A transaction is treated as confidential even if the conditions of confidentiality are not legally binding on the taxpayer. A claim that a transaction is proprietary or exclusive is not treated as a limitation on disclosure if the advisor confirms to the taxpayer that there is no limitation on disclosure of the tax treatment or tax structure of the transaction.
(iii)*Minimum fee* . For purposes of this paragraph (b)(3), the minimum fee is—
(A)$250,000 for a transaction if the taxpayer is a corporation;
(B)$50,000 for all other transactions unless the taxpayer is a partnership or trust, all of the owners or beneficiaries of which are corporations (looking through any partners or beneficiaries that are themselves partnerships or trusts), in which case the minimum fee is $250,000.
(iv)*Determination of minimum fee* . For purposes of this paragraph (b)(3), in determining the minimum fee, all fees for a tax strategy or for services for advice (whether or not tax advice) or for the implementation of a transaction are taken into account. Fees include consideration in whatever form paid, whether in cash or in kind, for services to analyze the transaction (whether or not related to the tax consequences of the transaction), for services to implement the transaction, for services to document the transaction, and for services to prepare tax returns to the extent return preparation fees are unreasonable in light of the facts and circumstances. For purposes of this paragraph (b)(3), a taxpayer also is treated as paying fees to an advisor if the taxpayer knows or should know that the amount it pays will be paid indirectly to the advisor, such as through a referral fee or fee-sharing arrangement. A fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. For example, a fee does not include reasonable charges for the use of capital or the sale or use of property. The IRS will scrutinize carefully all of the facts and circumstances in determining whether consideration received in connection with a confidential transaction constitutes fees.
(v)*Related parties* . For purposes of this paragraph (b)(3), persons who bear a relationship to each other as described in section 267(b) or 707(b) will be treated as the same person.
(4)*Transactions with contractual protection* —(i) *In general* . A transaction with contractual protection is a transaction for which the taxpayer or a related party (as described in section 267(b) or 707(b)) has the right to a full or partial refund of fees (as described in paragraph (b)(4)(ii) of this section) if all or part of the intended tax consequences from the transaction are not sustained. A transaction with contractual protection also is a transaction for which fees (as described in paragraph (b)(4)(ii) of this section) are contingent on the taxpayer's realization of tax benefits from the transaction. All the facts and circumstances relating to the transaction will be considered when determining whether a fee is refundable or contingent, including the right to reimbursements of amounts that the parties to the transaction have not designated as fees or any agreement to provide services without reasonable compensation.
(ii)*Fees* . Paragraph (b)(4)(i) of this section only applies with respect to fees paid by or on behalf of the taxpayer or a related party to any person who makes or provides a statement, oral or written, to the taxpayer or related party (or for whose benefit a statement is made or provided to the taxpayer or related party) as to the potential tax consequences that may result from the transaction.
(iii)*Exceptions* —(A) *Termination of transaction* . A transaction is not considered to have contractual protection solely because a party to the transaction has the right to terminate the transaction upon the happening of an event affecting the taxation of one or more parties to the transaction.
(B)*Previously reported transaction* . If a person makes or provides a statement to a taxpayer as to the potential tax consequences that may result from a transaction only after the taxpayer has entered into the transaction and reported the consequences of the transaction on a filed tax return, and the person has not previously received fees from the taxpayer relating to the transaction, then any refundable or contingent fees are not taken into account in determining whether the transaction has contractual protection. This paragraph (b)(4) does not provide any substantive rules regarding when a person may charge refundable or contingent fees with respect to a transaction. See Circular 230, 31 CFR part 10, for the regulations governing practice before the IRS.
(5)*Loss transactions* —(i) *In general* . A loss transaction is any transaction resulting in the taxpayer claiming a loss under section 165 of at least—
(A)$10 million in any single taxable year or $20 million in any combination of taxable years for corporations;
(B)$10 million in any single taxable year or $20 million in any combination of taxable years for partnerships that have only corporations as partners (looking through any partners that are themselves partnerships), whether or not any losses flow through to one or more partners; or
(C)$2 million in any single taxable year or $4 million in any combination of taxable years for all other partnerships, whether or not any losses flow through to one or more partners;
(D)$2 million in any single taxable year or $4 million in any combination of taxable years for individuals, S corporations, or trusts, whether or not any losses flow through to one or more shareholders or beneficiaries; or
(E)$50,000 in any single taxable year for individuals or trusts, whether or not the loss flows through from an S corporation or partnership, if the loss arises with respect to a section 988 transaction (as defined in section 988(c)(1) relating to foreign currency transactions).
(ii)*Cumulative losses.* In determining whether a transaction results in a taxpayer claiming a loss that meets the threshold amounts over a combination of taxable years as described in paragraph (b)(5)(i) of this section, only losses claimed in the taxable year that the transaction is entered into and the five succeeding taxable years are combined.
(iii)*Section 165 loss* —(A) For purposes of this section, in determining the thresholds in paragraph (b)(5)(i) of this section, the amount of a section 165 loss is adjusted for any salvage value and for any insurance or other compensation received. See § 1.165-1(c)(4). However, a section 165 loss does not take into account offsetting gains, or other income or limitations. For example, a section 165 loss does not take into account the limitation in section 165(d) (relating to wagering losses) or the limitations in sections 165(f), 1211, and 1212 (relating to capital losses). The full amount of a section 165 loss is taken into account for the year in which the loss is sustained, regardless of whether all or part of the loss enters into the computation of a net operating loss under section 172 or a net capital loss under section 1212 that is a carryback or carryover to another year. A section 165 loss does not include any portion of a loss, attributable to a capital loss carryback or carryover from another year, that is treated as a deemed capital loss under section 1212.
(B)For purposes of this section, a section 165 loss includes an amount deductible pursuant to a provision that treats a transaction as a sale or other disposition, or otherwise results in a deduction under section 165. A section 165 loss includes, for example, a loss resulting from a sale or exchange of a partnership interest under section 741 and a loss resulting from a section 988 transaction.
(6)*Transactions of interest.* A transaction of interest is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest.
(7)[ *Reserved* ].
(8)*Exceptions* —(i) *In general.* A transaction will not be considered a reportable transaction, or will be excluded from any individual category of reportable transaction under paragraphs (b)(3) through
(7)of this section, if the Commissioner makes a determination by published guidance that the transaction is not subject to the reporting requirements of this section. The Commissioner may make a determination by individual letter ruling under paragraph
(f)of this section that an individual letter ruling request on a specific transaction satisfies the reporting requirements of this section with regard to that transaction for the taxpayer who requests the individual letter ruling.
(ii)*Special rule for RICs.* For purposes of this section, a regulated investment company
(RIC)as defined in section 851 or an investment vehicle that is owned 95 percent or more by one or more RICs at all times during the course of the transaction is not required to disclose a transaction that is described in any of paragraphs (b)(3) through
(5)and (b)(7) of this section unless the transaction is also a listed transaction or a transaction of interest.
(c)*Definitions.* For purposes of this section, the following definitions apply:
(1)*Taxpayer* . The term *taxpayer* means any person described in section 7701(a)(1), including S corporations. Except as otherwise specifically provided in this section, the term *taxpayer* also includes an affiliated group of corporations that joins in the filing of a consolidated return under section 1501.
(2)*Corporation.* When used specifically in this section, the term *corporation* means an entity that is required to file a return for a taxable year on any 1120 series form, or successor form, excluding S corporations.
(3)*Participation* —(i) *In general* —(A) *Listed transactions* . A taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in the published guidance that lists the transaction under paragraph (b)(2) of this section. A taxpayer also has participated in a listed transaction if the taxpayer knows or has reason to know that the taxpayer's tax benefits are derived directly or indirectly from tax consequences or a tax strategy described in published guidance that lists a transaction under paragraph (b)(2) of this section. Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction. Published guidance also may identify types or classes of persons that will not be treated as participants in a listed transaction.
(B)*Confidential transactions.* A taxpayer has participated in a confidential transaction if the taxpayer's tax return reflects a tax benefit from the transaction and the taxpayer's disclosure of the tax treatment or tax structure of the transaction is limited in the manner described in paragraph (b)(3) of this section. If a partnership's, S corporation's or trust's disclosure is limited, and the partner's, shareholder's, or beneficiary's disclosure is not limited, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the confidential transaction.
(C)*Transactions with contractual protection.* A taxpayer has participated in a transaction with contractual protection if the taxpayer's tax return reflects a tax benefit from the transaction and, as described in paragraph (b)(4) of this section, the taxpayer has the right to the full or partial refund of fees or the fees are contingent. If a partnership, S corporation, or trust has the right to a full or partial refund of fees or has a contingent fee arrangement, and the partner, shareholder, or beneficiary does not individually have the right to the refund of fees or a contingent fee arrangement, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the transaction with contractual protection.
(D)*Loss transactions.* A taxpayer has participated in a loss transaction if the taxpayer's tax return reflects a section 165 loss and the amount of the section 165 loss equals or exceeds the threshold amount applicable to the taxpayer as described in paragraph (b)(5)(i) of this section. If a taxpayer is a partner in a partnership, shareholder in an S corporation, or beneficiary of a trust and a section 165 loss as described in paragraph (b)(5) of this section flows through the entity to the taxpayer (disregarding netting at the entity level), the taxpayer has participated in a loss transaction if the taxpayer's tax return reflects a section 165 loss and the amount of the section 165 loss that flows through to the taxpayer equals or exceeds the threshold amounts applicable to the taxpayer as described in paragraph (b)(5)(i) of this section. For this purpose, a tax return is deemed to reflect the full amount of a section 165 loss described in paragraph (b)(5) of this section allocable to the taxpayer under this paragraph (c)(3)(i)(D), regardless of whether all or part of the loss enters into the computation of a net operating loss under section 172 or net capital loss under section 1212 that the taxpayer may carry back or carry over to another year.
(E)*Transactions of interest.* A taxpayer has participated in a transaction of interest if the taxpayer is one of the types or classes of persons identified as participants in the transaction in the published guidance describing the transaction of interest.
(F)[ *Reserved* ].
(G)*Shareholders of foreign corporations* — *(1)* *In general.* A reporting shareholder of a foreign corporation participates in a transaction described in paragraphs (b)(2) through
(5)and (b)(7) of this section if the foreign corporation would be considered to participate in the transaction under the rules of this paragraph (c)(3) if it were a domestic corporation filing a tax return that reflects the items from the transaction. A reporting shareholder of a foreign corporation participates in a transaction described in paragraph (b)(6) of this section only if the published guidance identifying the transaction includes the reporting shareholder among the types or classes of persons identified as participants. A reporting shareholder (and any successor in interest) is considered to participate in a transaction under this paragraph (c)(3)(i)(G) only for its first taxable year with or within which ends the first taxable year of the foreign corporation in which the foreign corporation participates in the transaction, and for the reporting shareholder's five succeeding taxable years. *(2)* *Reporting shareholder.* The term *reporting shareholder* means a United States shareholder (as defined in section 951(b)) in a controlled foreign corporation (as defined in section 957) or a 10 percent shareholder (by vote or value) of a qualified electing fund (as defined in section 1295).
(ii)*Examples.* The following examples illustrate the provisions of paragraph (c)(3)(i) of this section: Example 1. Notice 2003-55 (2003-2 CB 395), which modified and superseded Notice 95-53 (1995-2 CB 334) (see § 601.601(d)(2) of this chapter), describes a lease stripping transaction in which one party (the transferor) assigns the right to receive future payments under a lease of tangible property and treats the amount realized from the assignment as its current income. The transferor later transfers the property subject to the lease in a transaction intended to qualify as a transferred basis transaction, for example, a transaction described in section 351. The transferee corporation claims the deductions associated with the high basis property subject to the lease. The transferor's and transferee corporation's tax returns reflect tax positions described in Notice 2003-55. Therefore, the transferor and transferee corporation have participated in the listed transaction. In the section 351 transaction, the transferor will have received stock with low value and high basis from the transferee corporation. If the transferor subsequently transfers the high basis/low value stock to a taxpayer in another transaction intended to qualify as a transferred basis transaction and the taxpayer uses the stock to generate a loss, and if the taxpayer knows or has reason to know that the tax loss claimed was derived indirectly from the lease stripping transaction, then the taxpayer has participated in the listed transaction. Accordingly, the taxpayer must disclose the transaction and the manner of the taxpayer's participation in the transaction under the rules of this section. For purposes of this example, if a bank lends money to the transferor, transferee corporation, or taxpayer for use in their transactions, the bank has not participated in the listed transaction because the bank's tax return does not reflect tax consequences or a tax strategy described in the listing notice (nor does the bank's tax return reflect a tax benefit derived from tax consequences or a tax strategy described in the listing notice) nor is the bank described as a participant in the listing notice. Example 2. XYZ is a limited liability company treated as a partnership for tax purposes. X, Y, and Z are members of XYZ. X is an individual, Y is an S corporation, and Z is a partnership. XYZ enters into a confidential transaction under paragraph (b)(3) of this section. XYZ and X are bound by the confidentiality agreement, but Y and Z are not bound by the agreement. As a result of the transaction, XYZ, X, Y, and Z all reflect a tax benefit on their tax returns. Because XYZ's and X's disclosure of the tax treatment and tax structure are limited in the manner described in paragraph (b)(3) of this section and their tax returns reflect a tax benefit from the transaction, both XYZ and X have participated in the confidential transaction. Neither Y nor Z has participated in the confidential transaction because they are not subject to the confidentiality agreement. Example 3. P, a corporation, has an 80% partnership interest in PS, and S, an individual, has a 20% partnership interest in PS. P, S, and PS are calendar year taxpayers. In 2006, PS enters into a transaction and incurs a section 165 loss (that does not meet any of the exceptions to a section 165 loss identified in published guidance) of $12 million and offsetting gain of $3 million. On PS' 2006 tax return, PS includes the section 165 loss and the corresponding gain. PS must disclose the transaction under this section because PS' section 165 loss of $12 million is equal to or greater than $2 million. P is allocated $9.6 million of the section 165 loss and $2.4 million of the offsetting gain. P does not have to disclose the transaction under this section because P's section 165 loss of $9.6 million is not equal to or greater than $10 million. S is allocated $2.4 million of the section 165 loss and $600,000 of the offsetting gain. S must disclose the transaction under this section because S's section 165 loss of $2.4 million is equal to or greater than $2 million.
(4)*Substantially similar.* The term *substantially similar* includes any transaction that is expected to obtain the same or similar types of tax consequences and that is either factually similar or based on the same or similar tax strategy. Receipt of an opinion regarding the tax consequences of the transaction is not relevant to the determination of whether the transaction is the same as or substantially similar to another transaction. Further, the term *substantially similar* must be broadly construed in favor of disclosure. For example, a transaction may be substantially similar to a listed transaction even though it involves different entities or uses different Internal Revenue Code provisions. (See for example, Notice 2003-54 (2003-2 CB 363), describing a transaction substantially similar to the transactions in Notice 2002-50 (2002-2 CB 98), and Notice 2002-65 (2002-2 CB 690).) The following examples illustrate situations where a transaction is the same as or substantially similar to a listed transaction under paragraph (b)(2) of this section. (Such transactions may also be reportable transactions under paragraphs (b)(3) through
(7)of this section.) See § 601.601(d)(2)(ii)( *b* ) of this chapter. The following examples illustrate the provisions of this paragraph (c)(4): Example 1. Notice 2000-44 (2000-2 CB 255) (see § 601.601(d)(2)(ii)( *b* ) of this chapter), sets forth a listed transaction involving offsetting options transferred to a partnership where the taxpayer claims basis in the partnership for the cost of the purchased options but does not adjust basis under section 752 as a result of the partnership's assumption of the taxpayer's obligation with respect to the options. Transactions using short sales, futures, derivatives or any other type of offsetting obligations to inflate basis in a partnership interest would be the same as or substantially similar to the transaction described in Notice 2000-44. Moreover, use of the inflated basis in the partnership interest to diminish gain that would otherwise be recognized on the transfer of a partnership asset would also be the same as or substantially similar to the transaction described in Notice 2000-44. See § 601.601(d)(2)(ii)( *b* ). Example 2. Notice 2001-16 (2001-1 CB 730) (see § 601.601(d)(2)(ii)( *b* ) of this chapter), sets forth a listed transaction involving a seller
(X)who desires to sell stock of a corporation (T), an intermediary corporation (M), and a buyer
(Y)who desires to purchase the assets (and not the stock) of T. M agrees to facilitate the sale to prevent the recognition of the gain that T would otherwise report. Notice 2001-16 describes M as a member of a consolidated group that has a loss within the group or as a party not subject to tax. Transactions utilizing different intermediaries to prevent the recognition of gain would be the same as or substantially similar to the transaction described in Notice 2001-16. An example is a transaction in which M is a corporation that does not file a consolidated return but which buys T stock, liquidates T, sells assets of T to Y, and offsets the gain on the sale of those assets with currently generated losses. See § 601.601(d)(2)(ii)( *b* ).
(5)*Tax.* The term *tax* means Federal income tax.
(6)*Tax benefit.* A tax benefit includes deductions, exclusions from gross income, nonrecognition of gain, tax credits, adjustments (or the absence of adjustments) to the basis of property, status as an entity exempt from Federal income taxation, and any other tax consequences that may reduce a taxpayer's Federal income tax liability by affecting the amount, timing, character, or source of any item of income, gain, expense, loss, or credit.
(7)*Tax return.* The term *tax return* means a Federal income tax return and a Federal information return.
(8)*Tax treatment.* The tax treatment of a transaction is the purported or claimed Federal income tax treatment of the transaction.
(9)*Tax structure.* The tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed Federal income tax treatment of the transaction.
(d)*Form and content of disclosure statement.* A taxpayer required to file a disclosure statement under this section must file a completed Form 8886, “Reportable Transaction Disclosure Statement” (or a successor form), in accordance with this paragraph
(d)and the instructions to the form. The Form 8886 (or a successor form) is the disclosure statement required under this section. The form must be attached to the appropriate tax return(s) as provided in paragraph
(e)of this section. If a copy of a disclosure statement is required to be sent to the Office of Tax Shelter Analysis
(OTSA)under paragraph
(e)of this section, it must be sent in accordance with the instructions to the form. To be considered complete, the information provided on the form must describe the expected tax treatment and all potential tax benefits expected to result from the transaction, describe any tax result protection (as defined in § 301.6111-3(c)(12) of this chapter) with respect to the transaction, and identify and describe the transaction in sufficient detail for the IRS to be able to understand the tax structure of the reportable transaction and the identity of all parties involved in the transaction. An incomplete Form 8886 (or a successor form) containing a statement that information will be provided upon request is not considered a complete disclosure statement. If the form is not completed in accordance with the provisions in this paragraph
(d)and the instructions to the form, the taxpayer will not be considered to have complied with the disclosure requirements of this section. If a taxpayer receives one or more reportable transaction numbers for a reportable transaction, the taxpayer must include the reportable transaction number(s) on the Form 8886 (or a successor form). See § 301.6111-3(d)(2) of this chapter.
(e)*Time of providing disclosure* —(1) *In general.* The disclosure statement for a reportable transaction must be attached to the taxpayer's tax return for each taxable year for which a taxpayer participates in a reportable transaction. In addition, a disclosure statement for a reportable transaction must be attached to each amended return that reflects a taxpayer's participation in a reportable transaction. A copy of the disclosure statement must be sent to OTSA at the same time that any disclosure statement is first filed by the taxpayer pertaining to a particular reportable transaction. If a reportable transaction results in a loss which is carried back to a prior year, the disclosure statement for the reportable transaction must be attached to the taxpayer's application for tentative refund or amended tax return for that prior year. In the case of a taxpayer that is a partner in a partnership, a shareholder in an S corporation, or a beneficiary of a trust, the disclosure statement for a reportable transaction must be attached to the partnership, S corporation, or trust's tax return for each taxable year in which the partnership, S corporation, or trust participates in the transaction under the rules of paragraph (c)(3)(i) of this section. If a taxpayer who is a partner in a partnership, a shareholder in an S corporation, or a beneficiary of a trust receives a timely Schedule K-1 less than 10 calendar days before the due date of the taxpayer's return (including extensions) and, based on receipt of the timely Schedule K-1, the taxpayer determines that the taxpayer participated in a reportable transaction within the meaning of paragraph (c)(3) of this section, the disclosure statement will not be considered late if the taxpayer discloses the reportable transaction by filing a disclosure statement with OTSA within 60 calendar days after the due date of the taxpayer's return (including extensions). The Commissioner in his discretion may issue in published guidance other provisions for disclosure under § 1.6011-4.
(2)*Special rules* —(i) *Listed transactions and transactions of interest.* In general, if a transaction becomes a listed transaction or a transaction of interest after the filing of a taxpayer's tax return (including an amended return) reflecting the taxpayer's participation in the listed transaction or transaction of interest and before the end of the period of limitations for assessment of tax for any taxable year in which the taxpayer participated in the listed transaction or transaction of interest, then a disclosure statement must be filed, regardless of whether the taxpayer participated in the transaction in the year the transaction became a listed transaction or a transaction of interest, with OTSA within 90 calendar days after the date on which the transaction became a listed transaction or a transaction of interest. The Commissioner also may determine the time for disclosure of listed transactions and transactions of interest in the published guidance identifying the transaction.
(ii)*Loss transactions.* If a transaction becomes a loss transaction because the losses equal or exceed the threshold amounts as described in paragraph (b)(5)(i) of this section, a disclosure statement must be filed as an attachment to the taxpayer's tax return for the first taxable year in which the threshold amount is reached and to any subsequent tax return that reflects any amount of section 165 loss from the transaction.
(3)*Multiple disclosures.* The taxpayer must disclose the transaction in the time and manner provided for under the provisions of this section regardless of whether the taxpayer also plans to disclose the transaction under other published guidance, for example, § 1.6662-3(c)(2).
(4)*Example.* The following example illustrates the application of this paragraph (e): Example. In January of 2008, F, a calendar year taxpayer, enters into a transaction that at the time is not a listed transaction and is not a transaction described in any of the paragraphs (b)(3) through
(7)of this section. All the tax benefits from the transaction are reported on F's 2008 tax return filed timely in April 2009. On May 2, 2011, the IRS publishes a notice identifying the transaction as a listed transaction described in paragraph (b)(2) of this section. Upon issuance of the May 2, 2011 notice, the transaction becomes a reportable transaction described in paragraph
(b)of this section. The period of limitations on assessment for F's 2008 taxable year is still open. F is required to file Form 8886 for the transaction with OTSA within 90 calendar days after May 2, 2011.
(f)*Rulings and protective disclosures* —(1) *Rulings.* If a taxpayer requests a ruling on the merits of a specific transaction on or before the date that disclosure would otherwise be required under this section, and receives a favorable ruling as to the transaction, the disclosure rules under this section will be deemed to have been satisfied by that taxpayer with regard to that transaction, so long as the request fully discloses all relevant facts relating to the transaction which would otherwise be required to be disclosed under this section. If a taxpayer requests a ruling as to whether a specific transaction is a reportable transaction on or before the date that disclosure would otherwise be required under this section, the Commissioner in his discretion may determine that the submission satisfies the disclosure rules under this section for the taxpayer requesting the ruling for that transaction if the request fully discloses all relevant facts relating to the transaction which would otherwise be required to be disclosed under this section. The potential obligation of the taxpayer to disclose the transaction under this section will not be suspended during the period that the ruling request is pending.
(2)*Protective disclosures.* If a taxpayer is uncertain whether a transaction must be disclosed under this section, the taxpayer may disclose the transaction in accordance with the requirements of this section and comply with all the provisions of this section, and indicate on the disclosure statement that the disclosure statement is being filed on a protective basis. The IRS will not treat disclosure statements filed on a protective basis any differently than other disclosure statements filed under this section. For a protective disclosure to be effective, the taxpayer must comply with these disclosure regulations by providing to the IRS all information requested by the IRS under this section.
(g)*Retention of documents* .
(1)In accordance with the instructions to Form 8886 (or a successor form), the taxpayer must retain a copy of all documents and other records related to a transaction subject to disclosure under this section that are material to an understanding of the tax treatment or tax structure of the transaction. The documents must be retained until the expiration of the statute of limitations applicable to the final taxable year for which disclosure of the transaction was required under this section. (This document retention requirement is in addition to any document retention requirements that section 6001 generally imposes on the taxpayer.) The documents may include the following:
(i)Marketing materials related to the transaction;
(ii)Written analyses used in decision-making related to the transaction;
(iii)Correspondence and agreements between the taxpayer and any advisor, lender, or other party to the reportable transaction that relate to the transaction;
(iv)Documents discussing, referring to, or demonstrating the purported or claimed tax benefits arising from the reportable transaction; and documents, if any, referring to the business purposes for the reportable transaction.
(2)A taxpayer is not required to retain earlier drafts of a document if the taxpayer retains a copy of the final document (or, if there is no final document, the most recent draft of the document) and the final document (or most recent draft) contains all the information in the earlier drafts of the document that is material to an understanding of the purported tax treatment or tax structure of the transaction.
(h)*Effective/applicability date* —(1) *In general* . This section applies to transactions entered into on or after August 3, 2007. However, this section applies to transactions of interest entered into on or after November 2, 2006. Paragraph (f)(1) of this section applies to ruling requests received on or after November 1, 2006. Otherwise, the rules that apply with respect to transactions entered into before August 3, 2007, are contained in § 1.6011-4 in effect prior to August 3, 2007 (see 26 CFR part 1 revised as of April 1, 2007).
(2)[ *Reserved* ]. § 1.6011-4T [Removed] **Par. 3.** Section 1.6011-4T is removed. PART 20—ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 **Par. 4.** The authority citation for part 20 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 5.** Section 20.6011-4 is revised to read as follows: § 20.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . If a transaction is identified as a *listed transaction* or a *transaction of interest* as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2)(ii)( *b* ) of this chapter), and the listed transaction or transaction of interest involves an estate tax under chapter 11 of subtitle B of the Internal Revenue Code, the transaction must be disclosed in the manner stated in such published guidance.
(b)*Effective/applicability date* . This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006. PART 25—GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954 **Par. 6.** The authority citation for part 25 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 7.** Section 25.6011-4 is revised to read as follows: § 25.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . If a transaction is identified as a *listed transaction* or a *transaction of interest* as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2)(ii)( *b* ) of this chapter), and the listed transaction or transaction of interest involves a gift tax under chapter 12 of subtitle B of the Internal Revenue Code, the transaction must be disclosed in the manner stated in such published guidance.
(b)*Effective/applicability date* . This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006. PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE SOURCE **Par. 8.** The authority citation for part 31 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 9.** Section 31.6011-4 is revised to read as follows: § 31.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . If a transaction is identified as a *listed transaction* or a *transaction of interest* as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2)(ii)( *b* ) of this chapter), and the listed transaction or transaction of interest involves an employment tax under chapters 21 through 25 of subtitle C of the Internal Revenue Code, the transaction must be disclosed in the manner stated in such published guidance.
(b)*Effective/applicability date* . This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006. PART 53—FOUNDATION AND SIMILAR EXCISE TAXES **Par. 10.** The authority citation for part 53 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 11.** Section 53.6011-4 is revised to read as follows: § 53.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . If a transaction is identified as a *listed transaction* or a *transaction of interest* as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2)(ii)( *b* ) of this chapter), and the listed transaction or transaction of interest involves an excise tax under chapter 42 of subtitle D of the Internal Revenue Code (relating to private foundations and certain other tax-exempt organizations), the transaction must be disclosed in the manner stated in such published guidance.
(b)*Effective/applicability date* . This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006. PART 54—PENSION EXCISE TAXES **Par. 12.** The authority citation for part 54 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 13.** Section 54.6011-4 is revised to read as follows: § 54.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . If a transaction is identified as a *listed transaction* or a *transaction of interest* as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2)(ii)( *b* ) of this chapter), and the listed transaction or transaction of interest involves an excise tax under chapter 43 of subtitle D of the Internal Revenue Code (relating to qualified pension, etc., plans) the transaction must be disclosed in the manner stated in such published guidance.
(b)*Effective/applicability date* . This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006. PART 56—PUBLIC CHARITY EXCISE TAXES **Par. 14.** The authority citation for part 56 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 15.** Section 56.6011-4 is revised to read as follows: § 56.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers.
(a)*In general* . If a transaction is identified as a *listed transaction* or a *transaction of interest* as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2) of this chapter), and the listed transaction or transaction of interest involves an excise tax under chapter 41 of subtitle D of the Internal Revenue Code (relating to public charities), the transaction must be disclosed in the manner stated in such published guidance.
(b)*Effective date* . This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006. Kevin M. Brown, Deputy Commissioner for Services and Enforcement. Approved: July 25, 2007. Eric Solomon, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 07-3786 Filed 7-31-07; 11:22 am]
Connectionstraces to 24
Traces to 24 documents
32 references not yet in our index
  • 7 CFR 1739
  • 7 CFR 3015
  • 7 CFR 1794
  • Pub. L. 108-199
  • 118 Stat. 3
  • 7 CFR 15
  • 7 CFR 3017
  • 7 CFR 3018
  • 7 CFR 3021
  • 7 CFR 1773
  • 7 CFR 3052
  • 14 CFR 23
  • 14 CFR 21
  • 14 CFR 39
  • 1 CFR 51
  • 21 CFR 878
  • 21 CFR 807
  • 5 USC 601-612
  • Pub. L. 104-4
  • 44 USC 3501-3520
  • T.D. 9350
  • 26 CFR 1
  • Pub. L. 108-357
  • 118 Stat. 1418
  • T.D. 9295
  • 26 CFR 20
  • 26 CFR 25
  • 26 CFR 31
  • 26 CFR 53
  • 26 CFR 54
  • 26 CFR 56
  • 31 CFR 10
Citation graph
cites case law
Unknown
Direct final rule
Fed. Reg.Notices
Fed. Reg.Notices
Fed. Reg.Notices
U.S.C.§ 6912
Fed. Reg.Proposed Rules
U.S.C.§ 553
U.S.C.§ 551
U.S.C.§ 601
U.S.C.§ 4321
Cite7 CFR 1739
Cite7 CFR 3015
Cite7 CFR 1794
Cites 56 · showing 12Cited by 0 across 0 sources
★   the supreme law of the land   ★
Don't Tread on Me
E Pluribus Unum — out of many, one

"If you don't know your rights, you don't have any."

Marginalia · a citizen's law index
A research desk, not legal advice. Always read the cited source before relying on a summary.
Questions or an issue? support@self-law.org
disclaimerMarginalia is a research index, not a law firm. Nothing on this site is legal, tax, or financial advice and no attorney–client relationship is formed by using it. Statutes, regulations, and case law change; summaries, search results, AI output, and member posts may be incomplete, out of date, or wrong. Any interpretation drawn from material on this site should be validated by a licensed attorney in your jurisdiction before you act on it.