Unknown. Final rule

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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-2008-06-24.xml --- 73 122 Tuesday, June 24, 2008 Contents Agency Agency for Healthcare Research and Quality NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35692-35693 E8-14052 Agriculture Agriculture Department See Farm Service Agency See Forest Service See Natural Resources Conservation Service Arctic Arctic Research Commission NOTICES Meetings, 35634 E8-14048 Army Army Department See Engineers Corps NOTICES Non-Exclusive, Exclusive License or Partially Exclusive Licensing of U.S.

Patent Concerning Stove Apparatus; Availability, 35670-35671 E8-14236 Census Census Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35636-35637 E8-14241 Centers Centers for Disease Control and Prevention NOTICES Meetings: Disease, Disability, and Injury Prevention and Control Special Emphasis Panel, 35693 E8-14136 Children Children and Families Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35693-35694 E8-14046 Coast Guard Coast Guard RULES Regulated Navigation Area:

Chesapeake and Delaware Canal, Chesapeake City Anchorage Basin, MD, 35588-35590 E8-14387 Commerce Commerce Department See Census Bureau See International Trade Administration See National Oceanic and Atmospheric Administration See Patent and Trademark Office NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35634-35636 E8-14242 E8-14243 E8-14244 E8-14245 E8-14246 Comptroller Comptroller of the Currency NOTICES Agency Information Collection Activities;

Proposals, Submissions, and Approvals, 35722-35723 E8-14169 Defense Defense Department See Army Department See Engineers Corps See Navy Department NOTICES 36(b)(1) Arms Sales Notification, 35665-35668 E8-14007 Base Closure and Realignment, 35669 E8-14208 Higher Initial Maximum Uniform Allowance Rate; Uniform Allowance, 35669 E8-14197 Privacy Act; Systems of Records, 35669-35670 E8-14206 Education Education Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35672-35673 E8-14173 Applications for New Awards for Fiscal Year (FY 2008):

Personnel Development to Improve Services and Results for Children With Disabilities, etc., 35673-35679 E8-14273 Meetings: National Advisory Council on Indian Education, 35679-35680 E8-14269 Energy Energy Department See Federal Energy Regulatory Commission NOTICES Bright Tomorrow Lighting Competition; (L Prize), 35680 E8-14202 Engineers Engineers Corps NOTICES Ecosystem Restoration Feasibility Study: Spring Bayou, Louisiana, 35671 E8-14240 Intent to Prepare a Draft Environmental Impact Statement;

Clear Creek General Reevaluation Study: Brazoria, Fort Bend, Galveston and Harris Counties, TX., 35671-35672 E8-14239 EPA Environmental Protection Agency RULES Control of Emissions from new and In-use nonroad compression-ignition engines; CFR correction, 35591 E8-14279 Standards of Performance for Petroleum Refineries, 35838-35881 E8-13498 NOTICES Determination: Massachusetts Marine Sanitation Device Standard, 35684-35686 E8-14251 Draft Toxicological Review of Carbon Tetrachloride:

In Support of the Summary Information in the Integrated Risk Information System (IRIS), 35686-35687 E8-14226 Scientific Peer Review Teleconference: Draft Human and Ecological Risk Assessment of Coal Combustion Wastes, 35687 E8-14234 Farm Farm Credit Administration NOTICES Meetings; Sunshine Act, 35687-35688 08-1386 Farm Farm Service Agency NOTICES Meetings: Advisory Committee on Beginning Farmers and Ranchers, 35632 E8-14229 FAA Federal Aviation Administration PROPOSED RULES Airworthiness Directives:

Airbus Model A318, A319, A320, and A321 Series Airplanes, 35601-35603 E8-14184 Airbus Model A330-200, A330-300, and A340 300 Series Airplanes, 35595-35596, 35603-35606 E8-14186 E8-14192 Boeing Model 737 300, 400, and 500 Series Airplanes, 35598-35601 E8-14183 Boeing Model 737 600, 700, and 800 Series Airplanes, 35593-35594 E8-14185 Empresa Brasileira de Aeronautica S.A. (EMBRAER) Model ERJ 190 Airplanes, 35597-35598 E8-14187 FDIC Federal Deposit Insurance Corporation NOTICES Meetings:

Advisory Committee on Economic Inclusion, 35688 E8-14198 Federal Energy Federal Energy Regulatory Commission NOTICES Combined Notice of Filings, 35680-35684 E8-14175 E8-14176 E8-14177 Federal Mine Federal Mine Safety and Health Review Commission NOTICES Meetings; Sunshine Act, 35714 E8-14207 Federal Reserve Federal Reserve System NOTICES Meetings; Sunshine Act, 35688-35689 08-1382 FTC Federal Trade Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35689-35690 E8-14148 Fish Fish and Wildlife Service RULES Subsistence Taking of Wildlife Regulations:

Subsistence Management Regulations for Public Lands in Alaska (2008-09 and 2009-10), 35726-35776 E8-13585 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35703-35706 E8-14223 E8-14225 E8-14228 Draft comprehensive conservation plan and environmental assessment; availability: Pathfinder National Wildlife Refuge, Alcova, WY; Correction, 35706 E8-14270 Marine Mammals and Endangered Species: National Marine Fisheries Service File (No. 10074);

U.S. Fish and Wildlife Service File (No. PRT-165304), 35661 E8-14260 Receipt of Applications for Permit, 35706-35708 E8-14200 E8-14201 Food Food and Drug Administration RULES Oral Dosage Form New Animal Drugs; Sulfachlorpyridazine Powder, 35579 E8-14291 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35694-35700 E8-14248 E8-14258 Forest Forest Service RULES Subsistence Taking of Wildlife Regulations: Subsistence Management Regulations for Public Lands in Alaska (2008-09 and 2009-10), 35726-35776 E8-13585 NOTICES Revision of Land Management Plan for the George Washington National Forest, Virginia and West Virginia, 35632-35633 E8-14292 GSA General Services Administration PROPOSED RULES General Services Acquisition Regulation:

GSAR Case 2008-G512; Rewrite of GSAR Part 542; Contract Administration and Audit Services, 35614-35615 E8-14224 Rewrite of Part 543; Contract Modifications, 35615-35617 E8-14253 NOTICES Privacy Act; Systems of Records, 35690-35692 E8-14199 Health Health and Human Services Department See Agency for Healthcare Research and Quality See Centers for Disease Control and Prevention See Children and Families Administration See Food and Drug Administration See National Institutes of Health Homeland Homeland Security Department See Coast Guard Indian Indian Affairs Bureau RULES Gaming on Trust Lands Acquired After October 17, 1988;

Correction, 35579-35580 E8-14211 Interior Interior Department See Fish and Wildlife Service See Indian Affairs Bureau See Land Management Bureau See National Park Service See Surface Mining Reclamation and Enforcement Office IRS Internal Revenue Service RULES Guidance for Determining the Basis of Property Acquired in Certain Nonrecognition Transactions, 35580-35583 E8-14171 Guidance Under Section 664 Regarding the Effect of Unrelated Business Taxable Income on Charitable Remainder Trusts, 35583-35585 08-1380 PROPOSED RULES Guidance for Determining the Basis of Property Acquired in Certain Nonrecognition Transactions, 35606-35607 E8-14170 International International Trade Administration NOTICES Export Trade Certificate of Review, 35637-35639 E8-14210 E8-14233 Extension of Time Limit for the Final Results, etc.:

Stainless Steel Bar from India, 35639 E8-14271 Final Affirmative Countervailing Duty Determination and Final Affirmative Determination: Laminated Woven Sacks From the People's Republic of China, 35639-35642 E8-14256 Final Affirmative Countervailing Duty Investigation Determination: Light-Walled Rectangular Pipe and Tube From People's Republic of China, 35642-35645 E8-14250 Final Determination of Sales at Less Than Fair Value, etc.: Laminated Woven Sacks from the People's Republic of China, 35646-35649 E8-14266 Light-Walled Rectangular Pipe and Tube from Mexico, 35649-35652 E8-14249 Light-Walled Rectangular Pipe and Tube from the Republic of Korea, 35652-35657 E8-14252 E8-14255 Partial Rescission of Antidumping Duty Administrative Review:

Stainless Steel Bar from India, 35657-35658 E8-14268 Postponement of Preliminary Determination in the Antidumping Duty Investigation: Circular Welded Austenitic Stainless Pressure Pipe from the People's Republic of China, 35658 E8-14254 International International Trade Commission NOTICES Investigations: Certain Foam Footwear, 35710-35711 E8-14179 Justice Justice Department See Justice Programs Office NOTICES Consent Decree: Centex Homes, a Nevada General Partnership, 35711 E8-14095 KB Home, 35711-35712 E8-14099 M.D.C.

Holdings, Inc., et al., 35712 E8-14098 Pulte Homes, Inc., 35712 E8-14097 Justice Justice Programs Office NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35712-35714 E8-14272 Land Land Management Bureau RULES Oil and Gas Leasing; Geothermal Resources Leasing; Coal Management; Management of Solid Minerals Other Than Coal; Mineral Materials Disposal; and Mining Claims, 35591-35592 E8-14215 PROPOSED RULES Leasing of Solid Minerals Other than Coal and Oil Shale, 35609-35614 E8-14214 NOTICES Meetings:

Central California Resource Advisory Council Off-Highway Vehicle Subcommittee, 35708 E8-14235 Public Land Order No. 7710; Extension of Public Land Order No. 3708: Modified by Public Land Order No. 6709; Alaska, 35708 E8-14216 Mine Mine Safety and Health Federal Review Commission See Federal Mine Safety and Health Review Commission National Highway National Highway Traffic Safety Administration PROPOSED RULES Petition for Approval of Alternate Odometer Disclosure Requirements, 35617-35623 E8-13592 NIH National Institutes of Health NOTICES Government-Owned Inventions;

Availability for Licensing, 35700-35701 E8-14257 Meetings: Center For Scientific Review, 35701-35702 E8-14043 National Institute of Mental Health, 35702-35703 E8-14265 National Institute on Aging, 35702 E8-14044 NOAA National Oceanic and Atmospheric Administration RULES Atlantic Highly Migratory Species (HMS); Atlantic Shark Management Measures, 35778-35833 E8-13961 PROPOSED RULES Taking of Marine Mammals Incidental to Commercial Fishing Operations: Atlantic Pelagic Longline Take Reduction Plan, 35623-35631 E8-14274 NOTICES Atlantic Highly Migratory Species (HMS);

Atlantic Shark Management Measures; Research Fishery, 35834-35835 E8-13960 Endangered and Threatened Species; Take of Anadromous Fish, 35658-35659 E8-14259 Fisheries of the Exclusive Economic Zone Off Alaska: Prohibited Species Donation Program, 35659-35661 E8-14275 Marine Mammals and Endangered Species: National Marine Fisheries Service File (No. 10074); U.S. Fish and Wildlife Service File (No. PRT-165304), 35661 E8-14260 National Park National Park Service NOTICES Intent to Prepare an Environmental Assessment and Scoping, 35708-35709 E8-14213 Inventory Completion:

Slater Museum of Natural History, University of Puget Sound, Tacoma, WA, 35709-35710 E8-14230 University of Hawaii at Hilo, Department of Anthropology, Hilo, HI, 35710 E8-14227 NRCS Natural Resources Conservation Service NOTICES Finding of No Significant Impact: TE-34 Penchant Basin Natural Resources Plan, Terrebonne Parish, LA, 35633-35634 E8-14232 Navy Navy Department RULES Certifications and Exemptions under the International Regulations for Preventing Collisions at Sea (1972), 35585-35588 E8-14195 E8-14196 Nuclear Nuclear Regulatory Commission NOTICES Establishment of Atomic Safety and Licensing Board, 35714-35715 E8-14204 Meetings;

Sunshine Act, 35715 08-1384 Patent Patent and Trademark Office NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 35661-35665 E8-14193 E8-14194 SEC Securities and Exchange Commission NOTICES Meetings: Advisory Committee on Improvements to Financial Reporting, 35715-35716 E8-14217 Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC, 35716-35718 E8-14178 Surface Surface Mining Reclamation and Enforcement Office PROPOSED RULES Utah Regulatory Program, 35607-35609 E8-14267 Surface Surface Transportation Board NOTICES Union Pacific Railroad Company—Abandonment Exemption-in Saline County, MO, 35721-35722 E8-14102 TVA Tennessee Valley Authority NOTICES Final Environmental Impact Statement:

Rutherford-Williamson-Davidson Power Supply Improvement Project, 35718-35721 E8-14146 Thrift Thrift Supervision Office NOTICES Meetings; Sunshine Act, 35723 08-1383 Transportation Transportation Department See Federal Aviation Administration See National Highway Traffic Safety Administration See Surface Transportation Board Treasury Treasury Department See Comptroller of the Currency See Internal Revenue Service See Thrift Supervision Office Veterans Veterans Affairs Department NOTICES Meetings:

Health Services Research and Development Service Merit Review Board, 35723 E8-14009 Summary of a Precedent Opinion of the General Counsel, 35724 E8-14209 Separate Parts In This Issue Part II Agriculture Department, Forest Service; Interior Department, Fish and Wildlife Service, 35726-35776 E8-13585 Part III Commerce Department, National Oceanic and Atmospheric Administration, 35778-35835 E8-13960 E8-13961 Part IV Environmental Protection Agency, 35838-35881 E8-13498 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. 73 122 Tuesday, June 24, 2008 Rules and Regulations DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 520 Oral Dosage Form New Animal Drugs; Sulfachlorpyridazine Powder AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule. SUMMARY: The Food and Drug Administration

(FDA)is amending the animal drug regulations to reflect approval of a supplemental new animal drug application

(NADA)filed by Fort Dodge Animal Health, A Division of Wyeth Holdings Corp. The supplemental NADA provides for a revised food safety warning statement for oral use of sulfachlorpyridazine in the milk or milk replacer of ruminating calves. DATES: This rule is effective June 24, 2008. FOR FURTHER INFORMATION CONTACT: Cindy L. Burnsteel, Center for Veterinary Medicine (HFV-130), Food and Drug Administration, 7500 Standish Pl., Rockville, MD 20855, 240-276-8341, e-mail: *cindy.burnsteel@fda.hhs.gov* . SUPPLEMENTARY INFORMATION: Fort Dodge Animal Health, A Division of Wyeth Holdings Corp., P.O. Box 1339, Fort Dodge, IA 50501, filed a supplement to NADA 33-373 for VETISULID (sulfachlorpyridazine sodium) Powder, approved for oral use in calves and swine for the treatment of diarrhea caused or complicated by *Escherichia* *coli* (colibacillosis). The supplemental NADA provides for a revised food safety warning statement for oral use of sulfachlorpyridazine in the milk or milk replacer of ruminating calves. The supplemental application is approved as of May 19, 2008, and the regulations are amended in 21 CFR 520.2200b to reflect the approval and a current format. Approval of this supplemental NADA did not require review of additional safety or effectiveness data or information. Therefore, a freedom of information summary is not required. The agency has determined under 21 CFR 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required. This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808. List of Subjects in 21 CFR Part 520 Animal drugs. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Center for Veterinary Medicine, 21 CFR part 520 is amended as follows: PART 520—ORAL DOSAGE FORM NEW ANIMAL DRUGS 1. The authority citation for 21 CFR part 520 continues to read as follows: Authority: 21 U.S.C. 360b. 2. Revise § 520.2200b to read as follows: § 520.2200b Sulfachlorpyridazine powder.

(a)*Specifications* . Sodium sulfachlorpyridazine powder.

(b)*Sponsor* . See No. 053501 in § 510.600(c) of this chapter.

(c)*Related tolerances* . See § 556.630 of this chapter.

(d)*Conditions of use* . It is used as follows:

(1)*Calves* —(i) *Amount* . Administer 30 to 45 milligrams per pound (mg/lb) body weight per day in milk or milk replacer for 1 to 5 days in 2 divided doses twice daily.

(ii)*Indications for use* . For the treatment of diarrhea caused or complicated by *E* . *coli* (colibacillosis).

(iii)*Limitations* . Treated, ruminating calves must not be slaughtered for food during treatment or for 7 days after the last treatment. A withdrawal period has not been established for this product in preruminating calves. Do not use in calves to be processed for veal.

(2)*Swine* —(i) *Amount* . Administer 20 to 35 mg/lb body weight per day for 1 to 5 days in 2 divided doses twice daily:

(A)In drinking water; or

(B)For individual treatment, in an oral suspension containing approximately 42 mg sulfachlorpyridazine per milliliter in divided doses twice daily.

(ii)*Indications for use* . For the treatment of diarrhea caused or complicated by *E* . *coli* (colibacillosis).

(iii)*Limitations* . Treated swine must not be slaughtered for food during treatment or for 4 days after the last treatment. Dated: June 9, 2008. Bernadette Dunham, Director, Center for Veterinary Medicine. [FR Doc. E8-14291 Filed 6-23-08; 8:45 am] BILLING CODE 4160-01-S DEPARTMENT OF THE INTERIOR Bureau of Indian Affairs 25 CFR Part 292 RIN 1076-AE81 Gaming on Trust Lands Acquired After October 17, 1988; Correction AGENCY: Bureau of Indian Affairs, Interior. ACTION: Final rule; correction and stay of effective date. SUMMARY: This document contains a correction to a final rule that was published May 20, 2008 (73 FR 29354). The regulation relates to gaming on trust lands acquired after October 17, 1988. DATES: The effective date of this correction is June 24, 2008. In rule FR Document E8-11086 published on May 20, 2008 (73 FR 29353), the effective date of the rule is stayed until August 25, 2008. FOR FURTHER INFORMATION CONTACT: Paula Hart, Acting Director, Office of Indian Gaming,

(202)219-4066. SUPPLEMENTARY INFORMATION: The Bureau of Indian Affairs published on May 20, 2008, a final rule relating to gaming on trust lands acquired after October 17, 1988. The preamble to this rule contained an incorrect effective date, contained an error in the Small Business Regulatory Enforcement and Fairness Act statement in the SUPPLEMENTARY INFORMATION section, and omitted a sentence. In rule FR Document E8-11086 published on May 20, 2008 (73 FR 29353), make the following corrections: 1. On page 29354, in the first column, the effective date is listed as June 19, 2008. This is stayed until August 25, 2008. 2. On page 29358, in the second column, under the heading “Section 292.3 When can a tribe conduct gaming activities on trust lands?” a sentence was omitted after the sentence that ends, “concerns whether a specific area of land is a reservation.” A new sentence should be added in this location to read, “Regardless of where the tribe sends its request for an Indian lands opinion, the Department will coordinate the completion of the request by the appropriate offices.” 3. On page 29374, in the third column, under the heading “Small Business Regulatory Enforcement and Fairness Act (SBREFA),” the first sentence reads, “This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement and Fairness Act.” This sentence should be corrected to read, “This rule is a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement and Fairness Act.” In this same location, paragraph

(a)incorrectly states that this rule, “Does not have an annual effect on the economy of $100 million or more.” This should be corrected to read, “Has an annual effect on the economy of $100 million or more.” Dated: June 19, 2008. George Skibine, Acting Deputy Assistant Secretary for Policy and Economic Development—Indian Affairs. [FR Doc. E8-14211 Filed 6-23-08; 8:45 am] BILLING CODE 4310-4N-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9402] RIN 1545-BH58 Guidance Under Section 956 for Determining the Basis of Property Acquired in Certain Nonrecognition Transactions AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations. SUMMARY: This document contains final and temporary regulations under section 956 of the Internal Revenue Code

(Code)regarding the determination of basis in certain United States property (within the meaning of section 956(c) of the Code) acquired by a controlled foreign corporation in certain nonrecognition transactions that are intended to repatriate earnings and profits of the controlled foreign corporation without United States income taxation. The final regulation adds a cross reference to the temporary regulations. These regulations affect United States shareholders of a controlled foreign corporation that acquires United States property in certain nonrecognition transactions. The text of the temporary regulations serves as the text of the proposed regulations (REG-102122-08) set forth in the notice of proposed rulemaking published in the Proposed Rules section in this issue of the **Federal Register** . DATES: *Effective Date:* These regulations are effective on June 24, 2008. *Applicability Date:* These regulations apply to property acquired in exchanges occurring on or after June 24, 2008. FOR FURTHER INFORMATION CONTACT: John H. Seibert at

(202)622-3860 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains amendments to 26 CFR part 1 under section 956, which was added to the Code by the Revenue Act of 1962, Public Law 87-834 (76 Stat. 960 (1962)). The temporary regulations in this document are issued under the authority of sections 367(b) and 956(e). Section 367(b) was added to the Code by section 1042(a) of the Tax Reform Act of 1976, Public Law 94-455 (90 Stat. 1520 (1976)). Section 956(e) was added to the Code by section 13232(b) of the Omnibus Budget Reconciliation Act of 1993, Public Law 103-66, (107 Stat 312 (1993)). The temporary regulations in this document apply to determine the basis of certain United States property (as defined in section 956(c) of the Code) acquired by a controlled foreign corporation in certain nonrecognition transactions that are intended to repatriate earnings and profits of the controlled foreign corporation without an income inclusion by the United States shareholders of the controlled foreign corporation under section 951(a)(1)(B). Explanation of Provisions A. Transactions at Issue The IRS and the Treasury Department are aware that certain taxpayers are engaging in certain nonrecognition transactions in which a controlled foreign corporation

(CFC)acquires certain United States property (within the meaning of section 956(c)) without resulting in an income inclusion to the United States shareholders of the CFC under section 951(a)(1)(B). In one such transaction, for example, USP, a domestic corporation and the common parent of an affiliated group that files a consolidated tax return, owns 100-percent of the outstanding stock of US1 and US2, both domestic corporations that join USP in the filing of a consolidated tax return. US1 owns 100 percent of the stock of CFC, a controlled foreign corporation. US2 issues $100x of its stock to CFC in exchange for $10x of CFC stock and $90x cash. USP takes the position that:

(i)US2's transfer of its stock to CFC in exchange for $10x of CFC stock and $90x cash is an exchange to which section 351 applies;

(ii)US2 recognizes no gain on the receipt of $10x of CFC stock and $90x cash in exchange for its stock pursuant to section 1032(a);

(iii)CFC recognizes no gain on the issuance of its stock to US2 under section 1032(a);

(iv)CFC's basis in the US2 stock is zero pursuant to section 362(a); and

(v)US1 and US2 do not and will not have an income inclusion under section 951(a)(1)(B) as a result of CFC holding the US2 stock (which constitutes United States property under section 956(c)). The IRS and the Treasury Department believe these transactions raise significant policy concerns because the transactions may have the effect of repatriating earnings and profits of a CFC without a corresponding dividend inclusion, or an income inclusion under section 951(a)(1)(B) by reason of the CFC's investment in United States property. B. Section 956—In General Section 956 was enacted to require an income inclusion by United States shareholders of a CFC that invests certain earnings and profits in United States property “on the grounds that [the investment] is substantially the equivalent of a dividend being paid to them.” S. Rep. No. 87-1881, 1962-3 CB 703, 794 (1962). (See § 601.601(d)(2)(ii)( *b* )). Under Section 951(a)(1)(B) each United States shareholder (as defined in section 951(b)) of a CFC (as defined in section 957(a)) must include in its gross income for its taxable year in which or with which the taxable year of the CFC ends, the amount determined under section 956 with respect to such shareholder for such year (but only to the extent not excluded from gross income under section 959(a)(2)). The amount determined under section 956 with respect to a United States shareholder of a CFC for any taxable year is the lesser of:

(1)The excess, if any, of the shareholder's pro rata share of the average amounts of United States property held (directly or indirectly) by the CFC as of the close of each quarter of such taxable year, over the amount of earnings and profits of the CFC described in section 959(c)(1)(A) with respect to such shareholder; or

(2)the shareholder's pro rata share of the applicable earnings of the CFC. In general, the amount taken into account with respect to any United States property for this purpose is the adjusted basis of such property as determined for purposes of computing earnings and profits, reduced by any liability to which the property is subject. Earnings and profits described in section 959(c)(1)(A) are attributable to amounts previously included in gross income by the United States shareholder under section 951(a)(1)(B) (or which would have been included except for section 959(a)(2)). Section 956(c)(1) defines United States property to generally include stock of a domestic corporation and an obligation of a United States person. However, section 956(c)(2) excludes from the definition of United States property, the stock or obligations of a domestic corporation which is neither a United States shareholder of the CFC, nor a domestic corporation 25 percent or more of the total combined voting power of which, immediately after the CFC's acquisition of stock in such domestic corporation, is owned (or is considered as being owned) by the United States shareholders of the CFC in the aggregate. Section 956(e) grants the Secretary authority to prescribe such regulations as may be necessary to carry out the purposes of section 956, including regulations to prevent the avoidance of section 956 through reorganizations or otherwise. C. Section 367(b)—In General Section 367(b)(1) provides that in the case of any exchange described in section 332, 351, 354, 355, 356 or 361, in connection with which there is no transfer of property described in section 367(a)(1), a foreign corporation shall be considered to be a corporation except to the extent provided in regulations prescribed by the Secretary which are necessary or appropriate to prevent the avoidance of Federal income taxes. Section 367(b)(2) provides that the regulations prescribed pursuant to section 367(b)(1) shall include (but shall not be limited to) regulations dealing with the sale or exchange of stock or securities in a foreign corporation by a United States person, including regulations providing the circumstances under which gain is recognized, amounts are included in gross income as a dividend, adjustments are made to earnings and profits, or adjustments are made to basis of stock or securities, and basis of assets. Section 367(b) was enacted to ensure that international tax considerations are adequately addressed when the provisions of subchapter C of the Code apply to certain nonrecognition exchanges involving foreign corporations. In adopting section 367(b), Congress noted that “it is essential to protect against tax avoidance * * * upon the repatriation of previously untaxed foreign earnings.” H.R. Rep. No. 658, 94th Cong., 1st Sess. 241 (1975). D. Determination of Basis in Certain Nonrecognition Exchanges Section 358(a)(1) generally provides that the basis of property received pursuant to an exchange to which section 351, 354, 355, 356, or 361 applies is the same as that of the property exchanged, decreased by the fair market value of any other property (except money) received by the taxpayer, the amount of any money received by the taxpayer, and the amount of loss to the taxpayer which was recognized on such exchange, and increased by the amount which was treated as a dividend, and the amount of gain to the taxpayer which was recognized on such exchange (not including any portion of such gain which was treated as a dividend). Section 362(a) provides that if property is acquired by a corporation in connection with a transaction to which section 351 applies, or as paid-in surplus or as a contribution to capital, then the basis of such property shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer. Section 1032(a) provides that no gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for stock (including treasury stock) of such corporation. E. Determination of Basis for Purposes of Section 956 These temporary regulations apply when a CFC acquires stock or obligations of a domestic issuing corporation, that constitute United States property under section 956(c), from such corporation pursuant to an exchange in which the controlled foreign corporation's basis in such property is determined under section 362(a). If these temporary regulations apply to such an exchange, then, solely for purposes of section 956, the CFC's basis in such United States property shall be no less than the fair market value of the property transferred by the controlled foreign corporation in exchange for such property. For purposes of the temporary regulations, the term property has the meaning set forth in section 317(a), but includes any liability assumed by the CFC in connection with the exchange notwithstanding section 357(a). These temporary regulations also apply if United States property, the basis of which is determined under these temporary regulations, is transferred to a related person (related person transferee), or by a related person transferee to another related person, pursuant to an exchange in which the related person transferee's basis in such property is determined, in whole or in part, by reference to the transferor's basis in such property. This rule is intended to prevent taxpayers from attempting to avoid the general rule of the temporary regulations by subsequently transferring the United States property to a related person in another nonrecognition transaction. The basis of United States property determined under the temporary regulations shall apply only for purposes of determining the amount of United States property acquired or held by a CFC under section 956, and accordingly the amount of a United States shareholder's income inclusion under section 951(a)(1)(B) with respect to such CFC. The temporary regulations apply only to determine the basis of United States property acquired by a CFC pursuant to an exchange that is within the scope of these temporary regulations. All other basis determinations are made under the rules provided under section 956(a) and § 1.956-1(e)(1)(4). Effective/Applicability Dates These regulations apply to United States property acquired in exchanges occurring on or after June 24, 2008. No inference is intended as to the basis of United States property acquired by a controlled foreign corporation pursuant to a transaction described herein under current law, and the IRS may, where appropriate, challenge such transactions under applicable provisions or judicial doctrines. Special Analyses These temporary and final regulations are necessary to prevent abusive transactions of the type described in the explanation of provisions in this preamble. Accordingly, good cause is found for dispensing with notice and public procedure pursuant to 5 U.S.C. 553(b) of the Administrative Procedures Act and for dispensing with a delayed effective date pursuant to 5 U.S.C. 553(d)(1) and

(3)of such Act. For applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), please refer to the notice of proposed rulemaking published in the Proposed Rules section of this issue of the **Federal Register** . Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small entities. Drafting Information The principal author of these regulations is John H. Seibert, Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805. * * * **Par. 2.** Section 1.956-1 is amended by adding a sentence to the end of paragraph (e)(1) and adding new paragraphs (e)(5), (e)(6) and

(f)to read as follows: § 1.956-1 Shareholder's pro rata share of a controlled foreign corporation's increase in earnings invested in United States property.

(e)* * *

(1)* * * See § 1.956-1T(e)(6) for a special rule for determining amounts attributable to United States property acquired as the result of certain nonrecognition transactions. (e)(5) and (e)(6) [Reserved]. For further guidance, see § 1.956-1T(e)(5) and (e)(6).

(f)*Effective/applicability dates* .

(1)Paragraph (e)(5) of this section is effective June 14, 1988, with respect to investments made on or after June 14, 1988. Paragraph (e)(6) of this section applies to nonrecognition property acquired in exchanges occurring on or after June 24, 2008. **Par. 3.** Section 1.956-1T is amended by: 1. Redesignating paragraph (e)(5)(i) as paragraph (e)(5) and revising the paragraph heading for the newly-designated paragraph (e)(5). 2. Adding paragraph (e)(6). 3. Redesignating paragraph (e)(5)(ii) as paragraph

(f)and revising newly-designated paragraph (f). The revisions and additions read as follows: § 1.956-1T Shareholder's pro rata share of a controlled foreign corporation's increase in earnings invested in United States property (temporary). (e)(5) *Exclusion for certain recourse obligations* . * * *

(6)*Adjusted basis of property acquired in certain nonrecognition transactions* —(i) *Scope and purpose.* This paragraph (e)(6) provides rules for determining, solely for purposes of section 956, the basis of certain United States property acquired by a controlled foreign corporation pursuant to an exchange in which the controlled foreign corporation's basis in such United States property is determined under section 362(a). This paragraph (e)(6) also applies if United States property, the basis in which has been determined under these temporary regulations, is transferred (in one or more subsequent exchanges) to a related person (within the meaning of section 954(d)(3)), pursuant to an exchange in which the related person's basis in such property is determined, in whole or in part, by reference to the transferor's basis in such property. The purpose of this paragraph (e)(6) is to prevent the effective repatriation of earnings and profits of a controlled foreign corporation that acquires United States property in connection with an exchange to which this paragraph (e)(6) applies without a corresponding income inclusion under section 951(a)(1)(B) by claiming a basis in the United States property less than the amount of earnings and profits effectively repatriated.

(ii)*Definition of United States property* . For purposes of this paragraph (e)(6), *United States property* is stock of a domestic corporation described in section 956(c)(1)(B) or an obligation of a domestic corporation described in 956(c)(1)(C) that is acquired by a controlled foreign corporation from the domestic issuing corporation. The exceptions provided under section 956(c)(2) shall apply for this purpose.

(iii)*Basis of United States property* . Solely for purposes of section 956, the basis of United States property acquired by a controlled foreign corporation in connection with an exchange to which this paragraph (e)(6) applies shall be no less than the fair market value of the property transferred by the controlled foreign corporation in exchange for such United States property. For purposes of this paragraph (e)(6), the term property has the meaning set forth in section 317(a), but also includes any liability assumed by the controlled foreign corporation in connection with the exchange notwithstanding the application of section 357(a). The fair market value of the property transferred by the controlled foreign corporation in exchange for the United States property shall be determined at the time of the exchange.

(iv)*Timing* . For purposes of § 1.956-2(d)(1)(i)(a), a controlled foreign corporation that acquires United States property in an exchange to which this paragraph (e)(6) applies acquires an adjusted basis in such property at the time of the controlled foreign corporation's exchange of property for such United States property.

(v)*Transfers to related persons* . If a controlled foreign corporation transfers United States property, the basis in which has been determined under this paragraph (e)(6), to a related person (within the meaning of section 954(d)(3)) (related person transferee) in an exchange pursuant to which the related person transferee's basis in such United States property is determined, in whole or in part, by reference to the controlled foreign corporation's basis in such United States property, then, solely for purposes of section 956, the related person transferee's basis in such United States property shall be no less than the basis of such United States property in the hands of the controlled foreign corporation immediately before the exchange as determined under paragraph (e)(6)(iii) of this section. This paragraph (e)(6)(v) shall also apply in the case of one or more successive transfers of the United States property by a related person transferee to one or more persons related to the controlled foreign corporation (within the meaning of section 954(d)(3)). This paragraph (e)(6)(v) shall apply regardless of whether a subsequent transfer was part of a plan (or series of related transactions) that includes the controlled foreign corporation's acquisition of the United States property.

(vi)*Examples.* The rules of this paragraph (e)(6) are illustrated by the following examples: *Example 1.*

(i)*Facts.* USP, a domestic corporation, is the common parent of an affiliated group that joins in the filing of a consolidated return. USP owns 100 percent of the stock of US1 and US2, both domestic corporations and members of the USP consolidated group. US1 owns 100 percent of the stock of CFC, a controlled foreign corporation. US2 issues $100x of its stock to CFC in exchange for $10x of CFC stock and $90x cash. US2's transfer of its stock to CFC is described in section 351, US2 recognizes no gain in the exchange under section 1032(a), and CFC's basis in the US2 stock acquired in the exchange is determined under section 362(a).

(ii)*Analysis.* The US2 stock acquired by CFC in the exchange constitutes United States property under paragraph (e)(6)(ii) of this section because CFC acquires the US2 stock from US2, the issuing corporation. Therefore, because CFC's basis in the US2 stock is determined under section 362(a), then for purposes of section 956, CFC's basis in the US2 stock shall, under paragraph (e)(6)(iii) of this section, be no less than $90x, the fair market value of the property exchanged by CFC for the US2 stock (the $10x of CFC stock issued in the exchange does not constitute property for purposes of paragraph (e)(6)(iii) of this section). Pursuant to paragraph (e)(6)(iv) of this section, for purposes of § 1.956-2(d)(1)(i)(a) CFC shall be treated as acquiring its basis of no less than $90x in the US2 stock at the time of its transfer of property to US2 in exchange for the US2 stock. The result would be the same if, instead of CFC transferring $90x of cash to US2 in the exchange, CFC assumes a $90x liability of US2. *Example 2.*

(i)*Facts.* USP, a domestic corporation owns 100 percent of the stock of USS, a domestic corporation. USP also owns 100 percent of the stock of CFC, a controlled foreign corporation. USP's basis in its USS stock equals the fair market value of the USS stock, or $100x. USP transfers its USS stock to CFC in exchange for $100x of CFC stock. USP's transfer of its USS stock to CFC is described in section 351, USP recognizes no gain in the exchange under section 351(a), and CFC's basis in the USS stock acquired in the exchange, determined under section 362(a), equals $100x.

(ii)*Analysis.* The USS stock acquired by CFC in the exchange does not constitute United States property under paragraph (e)(6)(ii) of this section because CFC acquires the USS stock from USP. Therefore, CFC's basis in the US2 stock, for purposes of section 956, is not determined under this paragraph (e)(6). Instead, CFC's basis in the USS stock is determined under the general rule of section 956(a) and under § 1.956-1(e)(1)-(4). As determined under section 362(a), CFC's basis in the USS stock is $100x. *Example 3.*

(i)*Facts.* USP, a domestic corporation, owns 100 percent of the stock of CFC1, a controlled foreign corporation. CFC1 holds United States property (within the meaning of paragraph (e)(6)(ii) of this section) with a basis of $30x for purposes of section 956 that was determined under paragraph (e)(6)(iii) of this section. CFC1 owns 100 percent of the stock of CFC2, a controlled foreign corporation. CFC1 transfers the United States property to CFC2 in an exchange described in section 351. CFC2's basis in the United States property is determined under section 362(a).

(ii)*Analysis.* In the section 351 exchange, CFC1 transferred United States property to CFC2 with a basis that was determined under paragraph (e)(6)(iii) of this section. Further, CFC2's basis in the United States property is determined under section 362(a) by reference, in whole or in part, to CFC's basis in such property. Therefore, for purposes of section 956, pursuant to paragraph (e)(6)(v) of this section CFC2's basis in the United States property shall be no less than $30x. Paragraph (e)(6)(v) of this section would also apply if CFC2 subsequently transfers the United States property to another person related to CFC1 (within the meaning of section 954(d)(3)) if such related person's basis in the United States property is determined by reference, in whole or in part, to CFC2's basis in such property.

(f)*Effective/applicability date.*

(2)The applicability of paragraph (e)(6) of this section will expire on June 23, 2011. Steven T. Miller, Acting Deputy Commissioner for Services and Enforcement. Approved: June 6, 2008. Eric Solomon, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. E8-14171 Filed 6-23-08; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602 [TD 9403] RIN 1545-BH02 Guidance Under Section 664 Regarding the Effect of Unrelated Business Taxable Income on Charitable Remainder Trusts AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains final regulations that provide guidance under Internal Revenue Code

(Code)section 664 on the tax effect of unrelated business taxable income

(UBTI)on charitable remainder trusts. The regulations reflect the changes made to section 664(c) by section 424(a) and

(b)of the Tax Relief and Health Care Act of 2006. The regulations affect charitable remainder trusts that have UBTI in taxable years beginning after December 31, 2006. DATES: *Effective Date:* The regulations are effective on June 24, 2008. *Applicability Date:* For dates of applicability, see § 1.664-1(c)(3). FOR FURTHER INFORMATION CONTACT: Cynthia Morton at

(202)622-3060 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collections of information contained in these final regulations have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-2101. The collection of information in these final regulations is in § 1.664-1(c)(1). This information is required to enable a charitable remainder trust to report and pay the excise tax due on any UBTI of the trust. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection information displays a valid control number. Books or records relating to a collection of information must be retained as long as their contents might become material in the administration of any internal revenue law. Generally, tax returns and tax information are confidential, as required by 26 U.S.C. 6103. Background and Explanation of Provisions This document contains amendments to 26 CFR part 1 under section 664 of the Code. On March 7, 2008, proposed regulations (REG-127391-07) relating to the tax effect of UBTI on charitable remainder trusts were published in the **Federal Register** (73 FR 12313). Although two comments were received in response to the proposed regulations, no request to speak was submitted, so no public hearing was held (see 73 FR 18729). After consideration of the comments, the proposed regulations are adopted by this Treasury decision without substantive change. For taxable years beginning before January 1, 2007, section 664(c) provided that a charitable remainder trust (whether a charitable remainder annuity trust or a charitable remainder unitrust) would not be exempt from income tax for any year in which the trust had any UBTI (within the meaning of section 512). Instead, such trust was taxed for each such year under subchapter J as though it were a nonexempt, complex trust. The final regulations reflect the changes to section 664(c) made by section 424 of the Tax Relief and Health Care Act of 2006 (Act), Public Law 109-432, 120 Stat. 2922. Section 424(a) of the Act, which applies to taxable years beginning after December 31, 2006, provides that charitable remainder trusts that have UBTI remain exempt from Federal income tax, but imposes a 100-percent excise tax on their UBTI. The regulations confirm that, for purposes of determining the character of the distribution made to the beneficiary, the charitable remainder trust income that is UBTI is considered income of the trust. Specifically, income of the charitable remainder trust is allocated among the trust income categories in Treasury Regulation § 1.664-1(d)(1) without regard to whether any part of that income constitutes UBTI under section 512. The regulations also confirm that, consistent with § 1.664-1(d)(2), the excise tax imposed upon a charitable remainder trust with UBTI is treated as paid from corpus. Summary of Comments Comments Relating to Transitional Relief The two commentators requested transitional relief to allow time for charitable remainder trusts with investments producing significant UBTI to restructure these investments. The commentators noted that the Tax Relief and Health Care Act of 2006 revising section 664(c) was signed into law on December 20, 2006, and became effective for tax years beginning after December 31, 2006. Consequently, charitable remainder trusts had 11 days to make changes in their investments in response to the legislation. The Treasury Department and the IRS have carefully considered the concerns of the commentators and the request for transitional relief, but have not adopted this comment. The primary objective of adopting the tax on UBTI was to eliminate a source of unfair competition by placing the unrelated business activities of certain exempt organizations on the same tax basis as the nonexempt businesses with which they compete. See § 1.513-1(b). The provision denying the income tax exemption for charitable remainder trusts in years in which the trust has UBTI was enacted because Congress did “not believe that it is appropriate to allow the unrelated business income tax to be avoided by the use of a charitable remainder trust rather than a tax-exempt organization”. See Public Law 91-172, Senate Report 91-552 (H.R. 13270), CB 1969-3, P. 481-2. The sanction imposed under prior law on a charitable remainder trust investing in UBTI-producing asset(s), specifically the loss of tax-exempt status, was generally viewed as particularly onerous. Section 424 of the Act changed the sanction to alleviate its severity, but did not reflect any change in the long-standing policy to sanction and thus to discourage such investment by charitable remainder trusts. 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 has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This reporting burden flows directly from the statute implemented by these regulations. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6)

(RFA)is not required. Pursuant to section 7805(f) of the 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 author of the regulations is Cynthia Morton, Office of the Associate Chief Counsel (Passthroughs and Special Industries). List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 602 Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1 and 602 are amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805. * * * **Par. 2.** Section 1.664-1 is amended as follows: 1. In paragraph (a)(1)(i), the last sentence is revised and two sentences are added to the end of the paragraph. 2. Paragraph

(c)is revised. 3. In paragraph (d)(2), the fourth sentence is revised. The revisions and addition read as follows: § 1.664-1 Charitable remainder trusts.

(a)* * *

(1)* * *

(i)* * * A trust created after July 31, 1969, which is a charitable remainder trust, is exempt from all of the taxes imposed by subtitle A of the Code for any taxable year of the trust, except for a taxable year beginning before January 1, 2007, in which it has unrelated business taxable income. For taxable years beginning after December 31, 2006, an excise tax, treated as imposed by chapter 42, is imposed on charitable remainder trusts that have unrelated business taxable income. See paragraph

(c)of this section.

(c)*Excise tax on charitable remainder trusts* —(1) *In general* . For each taxable year beginning after December 31, 2006, in which a charitable remainder annuity trust or a charitable remainder unitrust has any unrelated business taxable income, an excise tax is imposed on that trust in an amount equal to the amount of such unrelated business taxable income. For this purpose, unrelated business taxable income is as defined in section 512, determined as if part III, subchapter F, chapter 1, subtitle A of the Internal Revenue Code applied to such trust. Such excise tax is treated as imposed by chapter 42 (other than subchapter E) and is reported and payable in accordance with the appropriate forms and instructions. Such excise tax shall be allocated to corpus and, therefore, is not deductible in determining taxable income distributed to a beneficiary. (See paragraph (d)(2) of this section.) The charitable remainder trust income that is unrelated business taxable income constitutes income of the trust for purposes of determining the character of the distribution made to the beneficiary. Income of the charitable remainder trust is allocated among the charitable remainder trust income categories in paragraph (d)(1) of this section without regard to whether any part of that income constitutes unrelated business taxable income under section 512.

(2)*Examples* . The application of the rules in this paragraph

(c)may be illustrated by the following examples: Example 1. For 2007, a charitable remainder annuity trust with a taxable year beginning on January 1, 2007, has $60,000 of ordinary income, including $10,000 of gross income from a partnership that constitutes unrelated business taxable income to the trust. The trust has no deductions that are directly connected with that income. For that same year, the trust has administration expenses (deductible in computing taxable income) of $16,000, resulting in net ordinary income of $44,000. The amount of unrelated business taxable income is computed by taking gross income from an unrelated trade or business and deducting expenses directly connected with carrying on the trade or business, both computed with modifications under section 512(b). Section 512(b)(12) provides a specific deduction of $1,000 in computing the amount of unrelated business taxable income. Under the facts presented in this example, there are no other modifications under section 512(b). The trust, therefore, has unrelated business taxable income of $9,000 ($10,000 minus the $1,000 deduction under section 512(b)(12)). Undistributed ordinary income from prior years is $12,000 and undistributed capital gains from prior years are $50,000. Under the terms of the trust agreement, the trust is required to pay an annuity of $100,000 for year 2007 to the noncharitable beneficiary. Because the trust has unrelated business taxable income of $9,000, the excise tax imposed under section 664(c) is equal to the amount of such unrelated business taxable income, $9,000. The character of the $100,000 distribution to the noncharitable beneficiary is as follows: $56,000 of ordinary income ($44,000 from current year plus $12,000 from prior years), and $44,000 of capital gains. The $9,000 excise tax is allocated to corpus, and does not reduce the amount in any of the categories of income under paragraph (d)(1) of this section. At the beginning of year 2008, the amount of undistributed capital gains is $6,000, and there is no undistributed ordinary income. Example 2. During 2007, a charitable remainder annuity trust with a taxable year beginning on January 1, 2007, sells real estate generating gain of $40,000. Because the trust had obtained a loan to finance part of the purchase price of the asset, some of the income from the sale is treated as debt-financed income under section 514 and thus constitutes unrelated business taxable income under section 512. The unrelated debt-financed income computed under section 514 is $30,000. Assuming the trust receives no other income in 2007, the trust will have unrelated business taxable income under section 512 of $29,000 ($30,000 minus the $1,000 deduction under section 512(b)(12)). Except for section 512(b)(12), no other exceptions or modifications under sections 512-514 apply when calculating unrelated business taxable income based on the facts presented in this example. Because the trust has unrelated business taxable income of $29,000, the excise tax imposed under section 664(c) is equal to the amount of such unrelated business taxable income, $29,000. The $29,000 excise tax is allocated to corpus, and does not reduce the amount in any of the categories of income under paragraph (d)(1) of this section. Regardless of how the trust's income might be treated under sections 511-514, the entire $40,000 is capital gain for purposes of section 664 and is allocated accordingly to and within the second of the categories of income under paragraph (d)(1) of this section.

(3)*Effective/applicability date* . This paragraph

(c)is applicable for taxable years beginning after December 31, 2006. The rules that apply with respect to taxable years beginning before January 1, 2007, are contained in § 1.664-1(c) as in effect prior to June 24, 2008. (See 26 CFR part 1, § 1.664-1(c)(1) revised as of April 1, 2007.)

(d)* * *

(2)* * * All taxes imposed by chapter 42 of the Code (including without limitation taxes treated under section 664(c)(2) as imposed by chapter 42) and, for taxable years beginning prior to January 1, 2007, all taxes imposed by subtitle A of the Code for which the trust is liable because it has unrelated business taxable income, shall be allocated to corpus. * * * PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT **Par. 3.** The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805. **Par. 4.** In § 602.101, paragraph

(b)is amended by adding the following entry in numerical order to the table as follows: § 602.101 OMB Control numbers.

(b)* * * CFR part of section where identified and described Current OMB control No. * * * * * 1.664-1(c) 1545-2101 * * * * * Linda E. Stiff, Deputy Commissioner for Services and Enforcement. Approved: June 18, 2008. Eric Solomon, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 08-1380 Filed 6-19-08; 1:29 pm]

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