issue-1996-04-16•Federal Register proposed rules — 1996-04-16
Federal Register proposed rules — 1996-04-16
issue-1996-04-16Federal Register proposed rules — 1996-04-16Proposed Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 96-9371 Proposed Realignment of Jet Route J-522
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16622-16623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9371]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 71
[Airspace Docket No. 95-AGL-16]
Proposed Realignment of Jet Route J-522
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would alter Jet Route J-522 by extending
the route from Green Bay, WI, to Brainerd, MN. This proposed action is
necessary to provide a means for aircraft to transition from an en
route environment to the standard terminal arrival route (STAR) serving
the Minneapolis-St. Paul International Airport.
DATES: Comments must be received on or before May 30, 1996.
ADDRESSES: Send comments on the proposal in triplicate to: Manager, Air
Traffic Division, AGL-500, Docket No. 95-AGL-16, Federal Aviation
Administration, O'Hare Lake Office Center, 2300 East Devon Avenue, Des
Plaines, IL 60018.
The official docket may be examined in the Rules Docket, Office of
the Chief Counsel, Room 916, 800 Independence Avenue, SW., Washington,
DC, weekdays, except Federal holidays, between 8:30 a.m. and 5:00 p.m.
An informal docket may also be examined during normal business
hours at the office of the Regional Air Traffic Division.
FOR FURTHER INFORMATION CONTACT: Patricia P. Crawford, Airspace and
Rules Division (ATA-400), Office of Airspace Management, Federal
Aviation Administration, 800 Independence Avenue, SW., Washington, DC
20591; telephone: (202) 267-3075.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested parties are invited to participate in this proposed
rulemaking by submitting such written data, views, or arguments as they
may desire. Comments that provide the factual basis supporting the
views and suggestions presented are particularly helpful in developing
reasoned regulatory decisions on the proposal. Comments are
specifically invited on the overall regulatory, aeronautical, economic,
environmental, and energy-related aspects of the proposal.
Communications should identify the airspace docket number and be
submitted in triplicate to the address listed above. Commenters wishing
the FAA to acknowledge receipt of their comments on this notice must
submit with those comments a self-addressed, stamped postcard on which
the following statement is made: ``Comments to Airspace Docket No. 95-
AGL-16.'' The postcard will be date/time stamped and returned to the
commenter. All communications received on or before the specified
closing date for comments will be considered before taking action on
the proposed rule. The proposal contained in this notice may be changed
in light of comments received. All comments submitted will be available
for examination in the Rules Docket both before and after the closing
date for comments. A report summarizing each substantive public contact
with FAA personnel concerned with this rulemaking will be filed in the
docket.
Availability of NPRM's
Any person may obtain a copy of this Notice of Proposed Rulemaking
(NPRM) by submitting a request to the Federal Aviation Administration,
Office of Airspace Management, Attention: Airspace and Rules Division,
ATA-400, 800 Independence Avenue, SW., Washington, DC 20591, or by
calling (202) 267-3075. Communications must identify the notice number
of this NPRM. Persons interested in being placed on a mailing list for
future NPRM's should call the FAA's Office of Rulemaking, (202) 267-
9677 for a copy of Advisory Circular No. 11-2A, which describes the
application procedure.
The Proposal
The FAA is proposing an amendment to part 71 of the Federal
Aviation Regulations (14 CFR part 71) to alter Jet Route J-522 by
extending the route from Green Bay, WI, to Brainerd, MN. A new STAR was
developed to serve the Minneapolis-St. Paul International Airport.
Extending J-522 would provide a published route for aircraft to
transition from an en route environment to a terminal arrival route.
Jet routes are published in paragraph 2004 of FAA Order 7400.9C dated
August 17, 1995, and effective September 16, 1995, which is
incorporated by reference in 14 CFR 71.1. The jet route listed in this
document would be published subsequently in the Order.
The FAA has determined that this proposed regulation only involves
an established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore--(1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation as the
anticipated impact is so minimal. Since this is a routine matter that
will only affect air traffic procedures and air navigation, it is
certified that this rule, when promulgated, will not have a significant
economic impact on a substantial number of small entities under the
criteria of the Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
The Proposed Amendment
In consideration of the foregoing, the Federal Aviation
Administration proposes to amend 14 CFR part 71 as follows:
PART 71--[AMENDED]
1. The authority citation for part 71 is revised to read as
follows:
Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9C, Airspace Designations and
Reporting Points, dated August 17, 1995, and effective September 16,
1995, is amended as follows:
Paragraph 2004--Jet Routes
* * * * *
J-522 [Revised]
From Brainerd, MN; Green Bay, WI; Traverse City, MI; Au Sable,
MI; Toronto,
[[Page 16623]]
ON, Canada; INT Toronto 099 deg. and Hancock, NY, 302 deg. radials;
Hancock; to Kingston, NY. The airspace within Canada is excluded.
* * * * *
Issued in Washington, DC, on April 9, 1996.
Harold W. Becker,
Acting Program Director for Air Traffic Airspace Management.
[FR Doc. 96-9371 Filed 4-15-96; 8:45 am]
BILLING CODE 4910-13-P
Complete official Federal Register PDF
FR Doc. 96-9370 Proposed Establishment of Class E Airspace; Chiefland, FL
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16621-16622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9370]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 61, No. 74 / Tuesday, April 16, 1996 /
Proposed Rules
[[Page 16621]]
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Airspace Docket No. 96-ASO-3]
Proposed Establishment of Class E Airspace; Chiefland, FL
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This notice proposes to establish Class E airspace at
Chiefland, FL. White Farms Airport at Chiefland, FL has a VOR/DME-A
Standard Instrument Approach Procedures (SIAP). Controlled airspace
extending upward from 700 feet above the surface (AGL) is needed to
accommodate this SIAP and for instrument flight rules (IFR) operations
at White Farms Airport. The operating status of the airport will change
from VFR to include IFR operations concurrent with publication of this
SIAP.
DATES: Comments must be received on or before May 27, 1996.
ADDRESSES: Send comments on the proposal in triplicate to: Federal
Aviation Administration, Docket No. 96-ASO-3, Manager, System
Management Branch, ASO-530, P.O. Box 20636, Atlanta, Georgia 30320.
The official docket may be examined in the Office of the Assistant
Chief Counsel for Southern Region, Room 550, 1701 Columbia Avenue,
College Park, Georgia 30337, telephone (404) 305-5586.
FOR FURTHER INFORMATION CONTACT:
Benny L. McGlamery, System Management Branch, Air Traffic Division,
Federal Aviation Administration, P.O. Box 20636, Atlanta, Georgia
30320; telephone (404) 305-5570.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested parties are invited to participate in this proposed
rulemaking by submitting such written data, views or arguments as they
may desire. Comments that provide the factual basis supporting the
views and suggestions presented are particularly helpful in developing
reasoned regulatory decisions on the proposal. Comments are
specifically invited on the overall regulatory, aeronautical, economic,
environmental, and energy-related aspects of the proposal.
Communications should identify the airspace docket and be submitted in
triplicate to the address listed above. Commenters wishing the FAA to
acknowledge receipt of their comments on this notice must submit with
those comments a self-addressed, stamped postcard on which the
following statement is made: ``Comments to Airspace Docket No. 96-ASO-
3.'' The postcard will be date/time stamped and returned to the
commenter. All communications received before the specified closing
date for comments will be considered before taking action on the
proposed rule. The proposal contained in this notice may be changed in
light of the comments received. All comments submitted will be
available for examination in the Office of the Assistant Chief Counsel
for Southern Region, Room 550, 1701 Columbia Avenue, College Park,
Georgia 30337, both before and after the closing date for comments. A
report summarizing each substantive public contact with FAA personnel
concerned with this rulemaking will be filed in the docket.
Availability of NPRMs
Any person may obtain a copy of this Notice of Proposed Rulemaking
(NPRM) by submitting a request to the Federal Aviation Administration,
Manager, System Management Branch, ASO-530, Air Traffic Division, P.O.
Box 20636, Atlanta, Georgia 30320. Communications must identify the
notice number of this NPRM. Persons interested in being placed on a
mailing list for future NPRMs should also request a copy of Advisory
Circular No. 11-2A which describes the application procedure.
The Proposal
The FAA is considering an amendment to part 71 of the Federal
Aviation Regulations (14 CFR part 71) to establish Class E airspace at
Chiefland, FL. White Farms Airport at Chiefland, FL has a VOR/DME-A
SIAP. Controlled airspace extending upward from 700 feet AGL is needed
to accommodate this SIAP and for IFR operations at White Farms Airport.
The operating status of the airport will change from VFR to include IFR
operations concurrent with publication of this SIAP. Class E airspace
designations for airspace areas extending upward from 700 feet or more
above the surface are published in Paragraph 6005 of FAA Order 7400.9C
dated August 17, 1995, and effective September 16, 1995, which is
incorporated by reference in 14 CFR 71.1. The Class E airspace
designation listed in this document would be published subsequently in
the Order.
The FAA has determined that this proposed regulation only involves
an established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore, (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation as the
anticipated impact is so minimal. Since this is a routine matter that
will only affect air traffic procedures and air navigation, it is
certified that this rule, when promulgated, will not have a significant
economic impact on a substantial number of small entities under the
criteria of the Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
The Proposed Amendment
In consideration of the foregoing, the Federal Aviation
Administration proposes to amend 14 CFR part 71 as follows:
PART 71--[AMENDED]
1. The authority citation for 14 CFR part 71 continues to read as
follows:
Authority: 49 U.S.C. 106(g); 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of Federal
Aviation Administration Order 7400.9C, Airspace
[[Page 16622]]
Designations and Reporting Points, dated August 17, 1995, and effective
September 16, 1995, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet above the surface of the earth.
* * * * *
ASO FLE5 Chiefland, FL [New]
Chiefland White Farms Airport, FL
(Lat. 29 deg.48'43''N, long. 82 deg.22'30''W)
That airspace extending upward from 700 feet above the surface
within a 6.3-mile radius of White Farms Airport, excluding that
airspace within the Cross City, FL, Class E airspace area.
* * * * *
Issued in College Park, Georgia, on March 29, 1996.
Wade T. Carpenter,
Acting Manager, Air Traffic Division, Southern Region.
[FR Doc. 96-9370 Filed 4-15-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-9294 Distance Learning and Telemedicine Grant Program
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16684-16697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9294]
[[Page 16683]]
_______________________________________________________________________
Part IV
Department of Agriculture
_______________________________________________________________________
Rural Utilities Service
_______________________________________________________________________
7 CFR Part 1703
Distance Learning and Telemedicine Grant Program; Proposed Rule
Federal Register / Vol. 61, No. 74, Tuesday, April 16, 1996 /
Proposed Rules
[[Page 16684]]
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
RIN 0572-AB22
7 CFR Part 1703
Distance Learning and Telemedicine Grant Program
AGENCY: Rural Utilities Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Utilities Service proposes to revise its regulations
on the distance learning and telemedicine grant program that would
provide grants for distance learning and telemedicine projects
benefiting rural areas. The regulation would revise RUS's method in
which applications will be reviewed by RUS and scored. This proposed
rule incorporates changes in the distance learning and telemedicine
grant program as revised by the Federal Agriculture Improvement and
Reform Act of 1996.
DATES: Written comments must be received by RUS or carry a postmark or
equivalent not later than May 16, 1996.
ADDRESSES: Submit written comments to Barbara L. Eddy, Deputy Assistant
Administrator, Telecommunications Program, Rural Utilities Service,
room 4056-S, AG Box 1590, U.S. Department of Agriculture, 14th and
Independence Avenue, SW., Washington, DC 20250. RUS requests an
original and three copies of all comments (7 CFR part 1700). All
comments received will be made available for public inspection at room
2234, South Building, U.S. Department of Agriculture, Washington, DC
20250 between 8:00 a.m. and 4:00 p.m. (7 CFR part 1.27(b)).
FOR FURTHER INFORMATION CONTACT: Barbara L. Eddy, Deputy Assistant
Administrator, Telecommunications Program, Rural Utilities Service,
room 4056-S, AG Box 1590, U.S. Department of Agriculture, Washington,
DC 20250, telephone number (202) 720-9549.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule has been determined to be significant and was
reviewed by the Office of Management and Budget (OMB) under Executive
Order 12866.
Executive Order 12778
This proposed rule has been reviewed under Executive Order 12778,
Civil Justice Reform. This proposed rule will not: (1) Preempt any
State or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule; (2) Have any retroactive
effect; and (3) Require administrative proceedings before parties may
file suit challenging the provisions of this rule.
Regulatory Flexibility Act Certification
RUS has determined that this proposed rule will not have a
significant economic impact on a substantial number of small entities,
as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Information Collection and Recordkeeping Requirements
The reporting and recordkeeping requirements contained in the
proposed rule have been submitted to OMB for approval in accordance
with the Paperwork Reduction Act of 1995 ( 44 U.S.C. Chapter 35, as
amended). A separate 60-day notice soliciting comments on the
information collection requirements was prepared and published at 60 FR
54332, October 23, 1995.
Send questions or comments regarding these requirements to Barbara
L. Eddy, Deputy Assistant Administrator, Telecommunications Program,
Rural Utilities Service, AG Box 1590, Washington, DC 20250.
National Environmental Policy Act Certification
The Administrator of RUS has determined that this proposed rule
will not significantly affect the quality of the human environment as
defined by the National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.). Therefore, this action does not require an environmental
impact statement or assessment.
Catalog of Federal Domestic Assistance
The program described by this proposed rule is listed in the
Catalog of Federal Domestic Assistance programs under number 10.855,
Distance Learning and Medical Link Grants. This catalog is available on
a subscription basis from the Superintendent of Documents, the United
States Government Printing Office, Washington, DC 20402.
Executive Order 12372
This program is subject to the provisions of Executive Order 12372
that requires intergovernmental consultation with State and local
officials.
Background
Subpart D of 7 CFR 1703 was originally published in the Federal
Register on February 26, 1993, and became effective on March 29, 1993.
RUS has awarded grants in each of the last 3 years at a single specific
time in each of those years. The program has been extraordinarily
popular with distance learning and telemedicine providers. This
popularity, and the corresponding large number of applications for a
very limited amount of grant funds, has caused the agency to review its
existing policies and procedures with the intent of simplifying them.
The proposed regulation is issued to carry out the Distance Learning
and Medical Link Grant Program under the Rural Economic Development Act
of 1990, subtitle D, section 2331-35 (7 U.S.C. 950aaa through 950aaa-
4). This proposed regulation, while based in part on the existing one,
is largely rewritten, and therefore is being published in whole rather
than just noting where changes were made. Nearly all the changes
concern obtaining a grant, rather than in requirements that apply after
a grant is awarded.
The major change is the method in which applicants will be reviewed
by RUS and scored. There will be six major criteria for scoring
applications: (1) The financial need of the community and the project;
(2) the financial composition of the project; (3) the comparative
rurality of the proposed project service area; (4) the documented need
for services; (5) connectivity with outside networks, and (6) the cost
effectiveness of the design. Additionally, several sections of the
regulation were moved or restructured to make it more understandable.
Primarily, the changes in the regulation should make it easier to
apply for a grant. Furthermore, with a clearer scoring method, the
approval process should be sped up.
RUS has determined that unless a 30 day comment period is used it
is unlikely that much if any of the Fiscal Year 1996 authorization for
the Distance Learning and Telemedicine Grant Program will be available
for use by grantees before the authorization lapses.
RUS has incorporated into this proposed regulation changes in the
Distance Learning and Telemedicine grant program as a result of the
Federal Agriculture Improvement and Reform Act of 1996; however, this
regulation does not address the new loan program inasmuch as funding is
not available for a Distance Learning and Telemedicine loan program for
fiscal year 1996. It is expected that RUS will publish proposed
regulations for the loan program within 180 days. In addition, the
appeal procedures outlined in Section 1703.118 are for the purposes of
fiscal year 1996 funding. We anticipate two types of rejections of loan
and grant
[[Page 16685]]
applications; namely, (1) The rejection by RUS of an application
because it is incomplete or proposes facilities or equipment that are
not allowable under this program; or (2) nonselection of a loan and/or
grant application because of insufficient grant or loan funding.
Comments and suggestions are solicited on the best methodology to
employ for the appeals procedure so as to assure timely loan and grant
approvals.
List of Subjects in 7 CFR Part 1703
Community development, Grant programs-education, Grant programs-
health care, Grant programs-housing and community development,
Reporting and recordkeeping requirements, Rural areas.
For the reasons set forth in the preamble, chapter XVII of title 7
of the Code of Federal Regulations is proposed to be amended as
follows:
PART 1703--RURAL DEVELOPMENT
1. The authority citation for 7 CFR 1703 continues to read as
follows:
Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.; Pub. L. 103-
354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).
2. Subpart D of part 1703 is revised to read as follows:
Subpart D--Distance Learning and Telemedicine Grant Program
Sec.
1703.100 Purpose.
1703.101 Policy.
1703.102 Definitions.
1703.103 Applicant eligibility.
1703.104 Allowable grant funding percentage, grant purposes, and
in-kind matching provisions.
1703.105 Ineligible grant purposes.
1703.106 Maximum and minimum sizes of a grant.
1703.107 The grant application
1703.108 Conflict of interest.
1708.109 Determining what is rural.
1703.110-1703.112 [Reserved]
1703.113 Application filing dates, location, processing, and public
notification.
1703.114-1703.116 [Reserved]
1703.117 Criteria for scoring applications.
1703.118 Other application selection and appeal provisions.
1703.119-1703.121 [Reserved]
1703.122 Further processing of selected applications.
1703.123-1703.125 [Reserved]
1703.126 Disbursement of grant funds.
1703.127 Reporting and oversight requirements.
1703.128 Audit requirements.
1703.129-1703.134 [Reserved]
1703.135 Grant administration.
1703.136 Changes in project objectives or scope
1703.137 Grant termination provisions.
1703.138-1703.139 [Reserved]
1703.140 Expedited telecommunications loans.
Appendix A to Subpart D of Part 1703--ERS Rural--Urban Continuum
Scale.
Appendix B to Subpart D of Part 1703--Rurality Calculation Table.
Appendix C to Subpart D of Part 1703--Environmental Questionnaire.
Subpart D--Distance Learning and Telemedicine Grant Program
Sec. 1703.100 Purpose.
The grants provided under this subpart D are to encourage, improve,
and make affordable the use of advanced telecommunications, computer
networks, and related advanced technologies to provide educational and
medical benefits through distance learning and telemedicine projects to
people living in rural areas and to improve rural opportunities.
Sec. 1703.101 Policy.
(a) RUS recognizes that the transmission of communications and
information is a vital component of the infrastructure of rural areas
and is necessary to promote rural development. Enhancing communication
and information transmission by making affordable advanced
telecommunications, computer networks, and related advanced
technologies more widely available in rural areas will improve rural
opportunities, promote rural economic growth, and enhance the quality
of life of rural residents. To further this objective, RUS will award
grants under this subpart to distance learning and telemedicine
projects that will improve the access of people residing in rural areas
to improved educational, training, and medical services, and to
opportunities that rely on advanced communication and information
technologies to provide such services.
(b) In providing assistance under this subpart, RUS will give
priority to rural areas that it believes have the greatest need of
enhanced communications. RUS believes that generally the need is
greatest: in the most sparsely populated rural areas; and in rural
areas that are experiencing economic hardship. RUS will take into
consideration the community's involvement in the project and the
applicant's ability to leverage grant funds based on its access to
capital.
(c) RUS believes that the residents of rural areas and their local
institutions which serve them can best determine what are the most
appropriate communications or information systems for use in their
respective communities. Therefore, in administering this subpart, RUS
will not favor or mandate the use of one particular technology over
another. RUS does believe that it is generally desirable to use
technology that would incidentally allow other providers or developers
to purchase the elemental functions or access so other users, in
addition to educational and medical users, may benefit from any
transmission facilities receiving funding under this subpart. In
addition, RUS believes it is generally desirable for the project to use
products and technologies that are considered open systems. Further,
RUS believes that it is desirable to use products and technologies that
employ or adhere to nationally recognized standards that will permit
equipment from various companies to be connected to the system, and
permit the system to be connected to other systems or networks.
(d) Applicants, if they are to be successful in obtaining grant
funds must:
(1) Explain the problem that the applicant is intending to solve
using grant funds;
(2) Explain how the applicant will use the grant as well as other
funds to solve the problem and why this is the best solution;
(3) Explain why RUS grant funds are needed for the project to be
successful;
(4) Explain how the grant will be leveraged using funds from the
applicant, and local and non-Federal sources;
(5) Show that rural areas are the primary beneficiaries; and,
(6) Show that the project will be sustainable without additional
grant funds.
(e) RUS electric and telecommunications borrowers are encouraged to
cooperate with each other and with applicants and end users in
promoting the program being implemented under this subpart.
(f) RUS staff will make diligent efforts to inform potential
applicants in rural areas of the program being implemented under this
subpart.
(g) The applicant must check with the Rural Development State
Director, U.S. Department of Agriculture, before submitting the
application to RUS in order to explore any funding sources that may be
available at the state or local level. Evidence of this consultation is
a requirement of the grant application.
Sec. 1703.102 Definitions.
Act means Title XXIII, subtitle D, chapter 1, of the Rural Economic
Development Act of 1990 (7 U.S.C. 950aaa through 950aaa-4).
[[Page 16686]]
Administrator means the Administrator of the Rural Utilities
Service or his or her designee.
Applicant means an eligible organization which applies for a grant
under this subpart.
Approved purpose means a purpose that RUS has specifically approved
in the letter of agreement and scope of work covering the use of RUS
grant funds provided to the grantee.
Borrower means any organization which has an outstanding loan made
by RUS or RTB, or guaranteed by RUS, or which is seeking such
financing.
Communication satellite ground station complex means transmitters,
receivers, and communications antennas at the earth station site
together with the interconnecting terrestrial transmission facilities
(cables, line, or microwave facilities) and modulating and demodulating
equipment necessary for processing traffic received from the
terrestrial distribution system prior to transmission via satellite and
the traffic received from the satellite prior to transfer to
terrestrial distribution systems.
Comprehensive rural telecommunications plan means the plan
submitted by an applicant in accordance with Sec. 1703.107(a).
Computer networks means computer hardware and software, terminals,
signal conversion equipment including both modulators and demodulators,
or related devices, used to communicate with other computers to process
and exchange data through a telecommunication network in which signals
are generated, modified, or prepared for transmission, or received, via
telecommunications terminal equipment and telecommunications
transmission facilities.
Consortium means a combination or group of eligible entities formed
to undertake the purposes of which the distance learning and
telemedicine grant is provided. Each consortium shall be composed of
the following:
(1) A tertiary care facility, rural referral center, medical
teaching institution, or educational institution accredited by the
State;
(2) Any number of institutions that provide health care services or
educational services; and,
(3) Not less than three rural hospitals, clinics, community health
centers, migrant health centers, local health departments, or similar
facilities, or not less than three educational institutions accredited
by the State.
Data terminal equipment means equipment that converts user
information into data signals for transmission, or reconverts the
received data signals into user information, and is normally found on
the terminal of a circuit and on the premises of the end user.
Distance learning means a telecommunications link to an end user
through the use of eligible equipment to:
(1) Provide educational programs, instruction, or information
originating in nonrural areas to students and teachers who are located
in rural areas; or
(2) Connect teachers and/or students, located in one rural area
with teachers and/or students that are located in a different rural
area.
Eligible equipment means a communication satellite ground station
complex, computer networks, data terminal equipment, fiber-optic cable,
interactive video equipment, microwave transmission equipment,
telecommunications transmission facilities, and telecommunications
terminal equipment.
Eligible organization means an incorporated entity that meets the
requirements of Sec. 1703.103.
End user means either or both of the following:
(1) Rural elementary or secondary schools or other educational
institutions, such as institutions of higher education, county
extension services, vocational and adult training and education
centers, and teacher training centers, and students, teachers and
instructors using such rural educational facilities, that participate
in a rural distance learning telecommunications program through a
project funded under this subpart;
(2) Rural hospitals, primary care centers or facilities, such as
medical centers and clinics, and physicians and staff using such rural
medical facilities, that participate in a telemedicine
telecommunications program through a project funded under this subpart.
End user site means a facility located in a rural area that is part
of a network or telecommunications system that is utilized by end
users.
ERS means the Economic Research Service, an agency of the United
States Department of Agriculture.
Grantee means a recipient of a grant from RUS to carry out the
purposes of this subpart.
Hub means originating source of a network or telecommunications
system.
Instructional programming means educational programming, including
computer software, which would be used for tutorial purposes in
connection with eligible equipment.
Interactive video equipment means equipment used to produce and
prepare for transmission audio and visual signals from at least two
distant locations such that individuals at such locations can verbally
and visually communicate with each other. Such equipment includes
monitors, other display devices, cameras or other recording devices,
audio pickup devices, and other related equipment.
Letter of agreement means a legal document executed by RUS and the
grantee that contains specific terms, conditions, requirements, and
understandings applicable to a particular grant.
Local exchange carrier means a commercial, cooperative or mutual-
type association, or public body that provides telecommunications
service, through a local central switching office, to the subscribers
within its designated service area, and between the local subscribers
and the toll network.
Project means an undertaking to provide or improve distance
learning or telemedicine by using financial assistance from RUS under
this subpart.
Project service area means the area in which at least 90 percent of
the persons to be served by the project are likely to reside.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
REA means the Rural Electrification Administration, formerly an
agency of the United States Department of Agriculture, and predecessor
agency to RUS with respect to administering certain electric and
telecommunications loan programs.
Rural means any area of the country that meets the determining
criteria in Sec. 1703.109.
Rural community facilities mean facilities such as schools,
libraries, hospitals, medical centers, or similar facilities, located
in rural areas, or primarily used by residents of rural areas, that
will use a telecommunications, computer network, or related advanced
technology system to provide educational and/or medical benefits
primarily to residents of rural areas.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub.L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and
telecommunications programs. See 7 CFR 1700.1.
Scope of work means a detailed plan of work that has been approved
by the Administrator and that will be
[[Page 16687]]
performed by the applicant using funds provided under the grant.
Technical assistance means:
(1) Assistance in learning to operate equipment or systems; and
(2) Studies, analyses, designs, reports, manuals, guides,
literature, or other forms of creating, acquiring, and/or disseminating
information.
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 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.
Telecommunications transmission facilities means facilities that
transmit, receive, or carry data between the telecommunications
terminal equipment at each end of the telecommunications circuit or
path. Such facilities include microwave antennae, relay stations and
towers, other telecommunications antennae, fiber-optic cables and
repeaters, coaxial cables, communication satellite ground station
complexes, copper cable electronic equipment associated with
telecommunications transmissions, and similar items.
Telemedicine means a telecommunications link to an end user through
the use of eligible equipment which electronically links medical
professionals at separate sites in order to exchange medical
information in audio, video, graphic, or other format for the purpose
of providing improved health care services primarily to residents of
rural areas.
Sec. 1703.103 Applicant eligibility.
(a) To be eligible to receive a grant under this subpart, the
applicant must be organized in one of the following corporate
structures:
(1) An incorporated organization, partnership, or other legal
entity which operates, or will operate, a school, college, vocational
training facility, or other educational institution, including a
regional educational laboratory, library, hospital, medical center,
medical clinic or other rural community facility. A state government,
other than a state government entity that operates a rural community
facility, is not considered an eligible applicant. The applicant may be
a private or municipal corporation organized on a for-profit or not-
for-profit basis, or
(2) A consortium, as defined in Sec. 1703.102. A consortium which
includes a state government entity is only eligible if the state
government entity operates a rural community facility, or
(3) An incorporated organization, partnership, or other legal
entity which is providing or proposes to provide telemedicine service
or distance learning service to other legal entities or consortia at
rates calculated to ensure that the economic value and other benefits
of the distance learning or telemedicine grant is passed through to
such other legal entities or consortia.
(b) At least one of the entities of a partnership or consortium
must be eligible individually, and the partnership or consortium must
provide written evidence of its legal capacity to contract with RUS. If
a partnership or consortium lacks the capacity to contract, each
individual entity must contract with RUS on its own behalf.
Sec. 1703.104 Allowable grant funding percentage, grant purposes, and
in-kind matching provisions.
(a) Grants may be used by eligible organizations for distance
learning and telemedicine projects to finance up to 70 percent of the
cost of allowable grant purposes outlined in paragraph (b) of this
section. The applicant will, therefore, provide matching funding in an
amount no less than 42.85 percent of the RUS grant. (If the grant
covers 70 percent of total project costs, the applicant provides the
other 30 percent of the project costs. Thirty percent of the project
costs is 42.85 percent of the 70 percent, i.e., the minimum amount of
the match.)
(b) Grants for purposes outlined in paragraphs (b)(2) through
(b)(6) of this paragraph shall be limited to costs associated with
initial capital expenses for establishing the project. The following
are allowable grant purposes:
(1) Acquiring, by lease or purchase, eligible equipment as defined
in Sec. 1703.102;
(2) Acquiring, by lease or purchase, software to operate eligible
equipment, including any related software;
(3) Acquiring or developing instructional programming;
(4) Providing technical assistance and instruction for using
eligible equipment, including any related software;
(5) Engineering or environmental studies relating to the
establishment or expansion of the phase of the project that is being
financed with the RUS grant; and
(6) Facilities, equipment, or activities and non-recurring service
charges that are described in a comprehensive rural telecommunications
plan which has been approved by the Administrator.
(c) In kind matching--the applicant's minimum 30 percent funding
contribution for allowable grant purposes, i.e., 42.85 percent matching
of the RUS grant, generally is required in the form of cash. However,
certain in-kind contributions may be substituted for cash as follows:
(1) Equipment, activities and facilities as set forth in
Sec. 1703.104(b);
(2) Improvements made to real property necessary to accommodate
eligible equipment;
(3) Facilities constructed to accommodate eligible equipment, such
as buildings in which terminal equipment and/or transmission facilities
would be located;
(4) Real property purchased or acquired for the sole purpose of
accommodating distance learning and telemedicine facilities; or
(5) The present value of long term leases of eligible equipment,
with duration according to recognized industry standards and compatible
with the type of equipment leased.
(d) In kind items furnished in paragraph (c)(1) of this section
must be non-depreciated or new assets with established monetary value
by industry standards. The value of improvements or construction in
paragraphs (c)(2) and (c)(3) of this section must be established by a
qualified independent real property appraiser based on the actual cost
of those improvements. The value of land in paragraph (c)(4) of this
section must be established by a qualified independent real property
appraiser based on a market value appraisal.
(e) In kind contributions can be an integral component of an
approved comprehensive rural telecommunications plan as set forth in
Sec. 1703.107(a).
(f) In kind contributions shall not consist of eligible equipment
which has been subject to depreciation, or for equipment, services and
labor not eligible for grant funding as set forth in Sec. 1703.105.
(g) Funding may be provided for end user sites. Funding may also be
provided for hubs located in rural and non-rural areas, if they are
necessary to provide distance learning and/or telemedicine services to
rural residents at end user sites. However, funding will not be
provided for sites proposed as hubs if it is not demonstrated that they
are an integral part of the proposed
[[Page 16688]]
network and are necessary to transmit distance learning and/or
telemedicine services to end users.
Sec. 1703.105 Ineligible grant purposes.
(a) Grants must not be used:
(1) To fund more than 70 percent of the eligible costs of a project
under this subpart;
(2) To cover the costs of installing or constructing
telecommunications transmission facilities, except as provided in
paragraph (c) of this section;
(3) To pay for medical equipment except medical equipment primarily
used for encoding and decoding data, such as images, for transmission
over a telecommunications or computer network;
(4) To pay salaries, wages, or employee benefits to medical or
educational personnel;
(5) To pay for the salaries or administrative expenses of the
applicant;
(6) To purchase equipment that will be owned by the local exchange
carrier or another telecommunications service provider;
(7) To duplicate services in place on the date the completed
application is received by RUS, or to reimburse the applicant or others
for costs incurred prior to RUS's receipt of the completed application;
(8) To pay costs of preparing the application package for funding
under this program;
(9) To refinance indebtedness incurred prior to receipt of the
completed application by RUS;
(10) For projects whose sole objective is to provide links between
teachers and students or medical professionals who are located at the
same facility;
(11) For site development, the destruction or alteration of
buildings, or other activities that might adversely affect the
environment or limit the choice of reasonable alternatives unless and
until the requirements of Sec. 1703.107(j) have been satisfied;
(12) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 et seq.); or
(13) For any purpose that the Administrator has not specifically
approved.
(b) Except as otherwise provided in Sec. 1703.140, funds shall not
be used to finance a project in part when success of the project is
dependent upon the receipt of additional funding under this subpart D
or is dependent upon the receipt of other funding that is not assured.
(c) Grants must not be used to cover the costs of
telecommunications transmission facilities if the local exchange
carrier for the project area will install such facilities through the
use of the expedited telecommunications loans made under the RE Act or
through other financing procedures within a reasonable time period and
at a cost that does not destroy the feasibility of the project, as
determined by the Administrator.
(d) Except for leases provided in Sec. 1703.104 (b)(1) and (2),
grants must not be used to pay the cost of recurring or operating
expenses for the project.
Sec. 1703.106 Maximum and minimum sizes of a grant.
Applications for grants to be considered under this subpart will be
subject to limitations on the proposed amount of funding. The maximum
grant amount that will be awarded for any one project in any given
fiscal year will not exceed 10 percent of the appropriated funds
available for all grants during the fiscal year in which the
application for such project is selected. The Administrator may publish
notice of the annual maximum grant amount in the Federal Register. An
applicant submitting an application which exceeds the maximum will be
notified to that effect by RUS and given the opportunity to revise the
application. The minimum size of a grant is $50,000.
Sec. 1703.107 The grant application.
The following items comprise the required material that must be
submitted to RUS in support of the grant request:
(a) Comprehensive Rural Telecommunications Plan. A Comprehensive
Rural Telecommunications Plan, consisting of the following is required
only when the applicant is requesting grant funds for
telecommunications transmission facilities:
(1) A detailed explanation of the proposed rural telecommunications
system, how such system is to be funded, and a description of the
intended uses for a grant received under this subpart.
(2) The capabilities of the telecommunications transmission
facilities, including bandwidth, networking topology, switching,
multiplexing, standards and protocols for intra-networking and open
systems architecture (the ability to effectively communicate with other
networks). In addition, the applicant must explain the manner in which
the transmission facilities will deliver the proposed services. For
example, for medical diagnostics, the applicant might indicate whether
or not a guest or other diagnosticians can join the network from
locations off the network. For educational services, indicate whether
or not all hub and end-user sites are able to simultaneously hear in
real-time and see each other or the instructional material in real-
time. The applicant must include detailed cost estimates for operating
and maintaining the network, and include evidence that alternative
delivery methods and systems were evaluated.
Note: if a local exchange carrier is providing the transmission
facilities, the requirements of this paragraph may be omitted from
the Comprehensive Rural Telecommunications Plan.
(3) The capabilities of the telecommunications terminal equipment,
including a description of the specific equipment which will be used to
deliver the proposed service. The applicant must document discussions
with various technical sources which could include consultants,
engineers, product vendors, or internal technical experts, provide
detailed cost estimates for operating and maintaining the end user
equipment and provide evidence that alternative equipment and
technologies were evaluated.
(4) A listing of the proposed purchases or leases of
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 telecommunications system designed to further the
purposes of this subpart, that the applicant intends to build or fund
using the grant funds.
(5) An explanation of the special financial or other needs of the
affected rural communities and of the applicant for such grant
assistance.
(6) An analysis of the relative costs and benefits of proposals for
leasing or purchasing of facilities, equipment, components, hardware
and software, or other items.
(7) A description of the consultations with the appropriate local
exchange carrier or carriers and with a wide variety of additional
telecommunications service providers (including other interexchange
carriers, cable television operators, enhanced service providers,
providers of satellite services and telecommunications equipment
manufacturers and
[[Page 16689]]
distributors) and the anticipated role of such providers in the
proposed telecommunications system.
(b) Proposed scope of work of the project. The proposed scope of
work of the project which includes, at a minimum:
(1) the specific activities to be performed under the project;
(2) who will carry out the activities;
(3) the time-frames for accomplishing the project objectives and
activities;
(4) a budget for capital expenditures reflecting the line item
costs for both the grant funds and other sources of funds for the
project;
(5) information indicating the ability of the applicant to reduce
the size or scope of the project in the event RUS funding, or other
projected sources of funding, were reduced or delayed. The applicant
must indicate the respective components of the project that would
receive the highest priority of funding; and
(6) Information about the potential of the proposed network to
expand its size or scope if additional funding was available.
(c) Executive summary for the project. The applicant must provide
RUS a general project overview, verification of compliance with the
general requirements of this subpart, and documentation of eligibility.
The executive summary should not exceed eight one-sided double spaced
pages, size 8.5'' x 11'', with a minimum font size of 12 points. The
executive summary shall contain the following 10 categories:
(1) A description of the applicant, documenting eligibility with
Sec. 1703.103.
(2) An explanation of:
(i) the problem the applicant is intending to solve;
(ii) how the applicant will use the grant funds to solve the
problem;
(iii) the amount of RUS grant funds required and why such grant
funds are needed; and
(iv) how the RUS grant funds will be leveraged, including both
amount and source of these additional funds.
(3) A brief economic and demographic description of the proposed
service area, the types of educational and/or medical services to be
offered by the project, and the benefits to the rural residents.
(4) A physical description of the project service area. The
applicant should include information regarding topography and available
transportation and telecommunications infrastructure.
(5) A description of the project as distance learning or
telemedicine facility as defined in Sec. 1703.102. If the project
provides both distance learning and telemedicine services, the
applicant must identify the predominant use of the system.
(6) A list of expected outcomes, benefits or services to be
provided by the project. Some examples include, but are not limited to:
(i) Improved education opportunities for a specified number of
students;
(ii) Travel time and money saved by telemedicine diagnosis;
(iii) Number of doctors retained in rural areas;
(iv) Number of additional students electing to attend higher
education institutions;
(v) Lives saved due to prompt medical diagnosis and treatment;
(vi) New education courses offered, including college level
courses; and
(vii) Expanded use of educational facilities such as night
training.
(7) A general overview of the telecommunications system to be
developed, including the types of equipment, technologies, and
facilities used.
(8) A description of the participating hubs and end user sites and
the number of rural residents which will be served by the proposed
project at each end user site.
(9) A brief narrative describing the project service area to allow
a determination of rural eligibility in accordance with Sec. 1703.109.
The applicant must list all counties located in the proposed service
area, and the Economic Research Service's Rural-Urban Continuum
Category for each county. These categories may be obtained from RUS,
any USDA Rural Development state office or from State Land Grant
University Cooperative Extension Offices.
(10) The applicant must indicate whether or not it is willing to
have its grant application forwarded to other agencies within USDA for
consideration in the event the application is not selected for funding
under this subpart.
(d) A section on compliance with scoring criteria. The applicant
must provide a justification for the number of points the proposed
project will obtain for each of the criteria for scoring applications
set forth in Sec. 1703.117.
(e) Financial information. The applicant must provide financial
information to support the need for the grant funds for the project,
show its financial capacity to carry out the proposed work, and show
project feasibility. The financial information must include the
following:
(1) A current balance sheet from the applicant reflecting its
financial condition. When the applicant is a partnership, company,
corporation or other entity, current balance sheets are needed from
each of the entities that has at least a 20 percent interest in such
partnership, company, corporation or other entity. When the applicant
is a consortium, a current balance sheet is needed from each member of
the consortium and from each of the entities that has at least a 20
percent interest in such member of the consortium. While not required,
an audit report is preferable and must be for a period which ended no
earlier than 12 months preceding the date of the application; and
(2) A pro-forma income and expense statement for each participating
hub and end user site for the project covered by the application. The
pro-forma statements must cover a minimum of 5 years after completion
of the project and reflect that the project is feasible and sustainable
in order to be considered for grant funds. The income and expense
statements must reflect sufficient income to pay cash operating
expenses including telecommunications access and/or toll charges,
system maintenance, salaries, training, and any other general operating
expenses; and provide for replacement of depreciable items.
Depreciation shall be based on Internal Revenue Service depreciation
rules, or other recognized telecommunications industry guidelines. The
applicant shall provide sufficient documentation to substantiate any
depreciation projections.
(3) For each hub and end user site, the applicant must identify and
provide reasonable evidence of each source of revenue. If the
projection relies on cost sharing arrangements among hub and end user
sites, the applicant must provide evidence of agreements made among
project participants.
(4) For applicants eligible under Sec. 1703.103(a)(3), an
explanation of the economic analysis justifying the rate structure to
ensure that the benefit of the financial assistance is passed through
to the other persons receiving telemedicine or distance learning
services.
(f) A statement of experience. The applicant must provide a written
narrative (not exceeding three single spaced pages) describing its
demonstrated capability and experience, if any, in operating an
educational or health care endeavor and any project similar to the
proposed project. Experience in a similar project is desirable but not
required.
(g) Funding commitment from other sources. The applicant must
provide evidence of the commitment of funds for the project in addition
to the funds requested under this subpart. Evidence should be from an
authorized
[[Page 16690]]
representative of the source organization that the funds are available
and will be used for the proposed project.
(h) Proposed evaluation methodology. The applicant must provide a
proposed method of evaluating the success of the project in meeting the
objectives of the program as set forth in Secs. 1703.100 and 1703.101
and the proposed scope of work.
(i) Compliance with other Federal statutes and regulations. The
applicant is required to submit evidence that it is in compliance with
other Federal statutes and regulations, as detailed in Sec. 1703.33 as
follows:
(1) Equal opportunity and nondiscrimination requirements;
(2) Architectural barriers;
(3) Flood hazard area precautions;
(4) Uniform Relocation Assistance and Real Property Acquisition for
Federal and Federally Assisted Programs;
(5) Drug-free workplace;
(6) Certification Regarding Debarment, Suspension and Other
Responsibility Matters--Primary Covered Transaction (See 7 CFR
3017.510);
(7) Intergovernmental review of Federal programs; and
(8) Restrictions on lobbying. For an application for a grant in
excess of $100,000, a certification statement, ``Certification
Regarding Lobbying:'' is required. If the applicant is engaged in
lobbying activities, the applicant must submit a completed disclosure
form, ``Disclosure of Lobbying Activities'' (see 7 CFR part 3018).
(j) Environmental impact and historic preservation. The applicant
must provide details of the project's impact on the environment and
historic preservation. Grants made under this part are subject to Part
1794 of this chapter which contains the policies and procedures of RUS
for implementing a variety of Federal statues, regulations and
executive orders generally pertaining to protection of the quality of
the human environment that are listed in Sec. 1794.1 of this chapter.
The application shall contain a separate section entitled
``Environmental Impact of the Project.''
(1) Environmental information. An ``Environmental Questionnaire,''
Appendix C to this subpart, may be used by applicants to assist in
complying with the requirements of this section. Copies of the
Environmental Questionnaire are available from RUS.
(2) Grants for technical assistance projects. For a proposal to
fund a technical assistance project, the only environmental information
normally required is whether or not the proposed project being studied
or analyzed will be located within an area protected under the Coastal
Barrier Resources Act (16 U.S.C. 3501 et seq.). Generally, the use of
Federal funds to promote development on coastal barriers is strictly
limited by the Coastal Barrier Resources Act.
(3) Grants for all other projects. Applications for a grant to fund
a project that is not subject to paragraph (j)(2) of this section must
be accompanied by the information described in this paragraph. The
Administrator will review supporting materials in the application and
initiate an environmental review process pursuant to part 1794 of this
chapter. This process will focus on any environmental concerns or
problems that are associated with the project. The level and scope of
the environmental review will be determined in accordance with the
National Environmental Policy Act of 1969 (NEPA), as amended, (42
U.S.C. 4321 et seq.), the Council on Environmental Policy for
Implementing the Procedural Provisions of NEPA (40 CFR parts 1500-
1508), RUS's Environmental Policies and Procedures (part 1794 of this
chapter) and other relevant Federal environmental laws, regulations and
Executive orders. Activity related to the project that may adversely
affect the environment or limit the choice of reasonable alternatives
shall not be undertaken prior to completion of RUS's environmental
review process.
(4) For a proposed project that only involves internal
modifications or equipment additions to buildings or other structures
(for example, relocating interior walls or adding computer facilities)
and/or external changes or additions to existing buildings, structures
or facilities requiring physical disturbance of less than 0.4 hectare
(0.99 acre) the environmental information normally required is:
(i) A description of the internal modifications or equipment
additions, and the external changes or additions to existing buildings,
structures or facilities being proposed, the size of the site in
hectares, and the general nature of the proposed use of the facilities
once the project is completed, including any hazardous materials to be
used, created or discharged, any substantial amount of air emissions,
wastewater discharge, or solid waste that will be generated.
(k) A completed Standard Form 424, ``Application for Federal
Assistance,'' along with a board of directors resolution authorizing
the grant request.
(l) Evidence of the applicant's legal existence and authority to
enter into a grant agreement with RUS and perform activities proposed
under the grant application.
(m) Evidence that the applicant is not delinquent on any obligation
owed to the Federal government (7 CFR 3015 and 3016).
(n) Evidence that the applicant has consulted with the state
director, RECD, concerning the availability of other sources of funding
available at the state or local level.
(o) Supplemental information. The applicant should provide any
additional information it considers relevant to the project and likely
to be helpful in determining the extent to which the proposed project
would further the purposes of this subpart. This includes RUS Form 479-
A, ``Distance Learning and Telemedicine Technical Questionnaire.''
(p) Additional information requested by RUS. The applicant must
provide any additional information the Administrator may consider
relevant to the application and necessary to adequately evaluate the
application and make grant decisions. The Administrator may also
request modifications or changes, including changes in the amount of
funds requested, in any proposal described in a grant application
submitted under this part.
Sec. 1703.108 Conflict of interest.
At any time prior to the disbursement of a grant awarded under this
subpart, the Administrator may disqualify an otherwise eligible project
whenever, in the judgment of the Administrator, the project would
create a conflict of interest or the appearance of a conflict of
interest. The Administrator will notify the applicant in writing of
his/her intention to disqualify the project under this section and set
forth the basis for his/her determination that a conflict of interest
or appearance exists. Thereafter, the applicant will have 30 days from
the date of such notice to file a written response with the
Administrator. If the Administrator receives the applicant's response
within the 30-day period, the Administrator will consider the
information contained therein before making a final determination
whether to disqualify the project. The Administrator will promptly
notify the applicant of the final determination whether a conflict of
interest or appearance of a conflict exists. If the determination is
affirmative, the notice will also advise the applicant whether the
project is disqualified or conditionally disqualified. If the project
is conditionally disqualified, the notice will state under what
circumstances the project may continue to be eligible for
[[Page 16691]]
assistance under this subpart. The Administrator's decision under this
section will be final.
Sec. 1703.109 Determining what is rural.
The RUS Administrator shall determine whether a project service
area possesses sufficient characteristics to be considered a rural area
for purposes of this subpart. The Administrator shall make such
determination on the following basis:
(a) The project service area is located within nonmetropolitan
counties included in one of the lowest four categories (6-9) of the ERS
Rural-Urban Continuum Scale (rural-urban continuum) as set forth in
Appendix A to this subpart. Those categories are as follows:
(1) Aggregate urban population (sum of cities, towns, villages or
other incorporated communities of 2,500 or more) of less than 20,000,
adjacent to a metropolitan area (category 6);
(2) Urban population of less than 20,000, not adjacent to a
metropolitan area (category 7);
(3) Completely rural (no cities, towns, villages or other
incorporated areas of 2,500 or greater) adjacent to a metropolitan area
(category 8);
(4) Completely rural, not adjacent to a metropolitan area (category
9).
(b) In the case of project service areas not categorized as rural
areas under paragraph (a) of this section, consideration will be given
to the degree of rurality the area possesses taking into account such
factors as:
(1) Whether the project service area is located within the
boundaries of an incorporated community of 2,500 persons or more as
determined by the U.S. Census Bureau;
(2) Where the county or counties in which the project service area
is located rank on the rural-urban continuum;
(3) Whether natural geographic barriers or an absence of roads may
impede access from the project service area to metropolitan areas;
(4) Whether the county is a spatially large county and the project
service area is not within the commuting area of an urbanized area; and
(5) Whether the economy of the project service area centers on
natural resource-based activities such as farming, ranching, mining, or
timber production, or is highly specialized.
(c) In the case of a project that will serve end users located in
more than one county, at least one of which is not categorized as rural
under paragraph (a) of this section, RUS will determine the rurality of
the project service area case-by-case using factors such as those
identified in paragraph (b) of this section. To the extent practicable,
in the case of a project that is expected to benefit residents of urban
areas as well as residents of rural areas, instead of rejecting an
application because it benefits areas that are not rural, RUS may
allocate the grant accordingly to assure that grant funds primarily
benefit only residents of rural areas.
(d) If a determination made under this section results in the
denial of an application, the applicant may appeal such determination
to the Administrator in writing setting forth the reasons why it
disagrees. Thereafter, the Administrator will review the determination
and decide in writing whether to sustain, reverse or modify the
original determination. The Administrator's determination will be
final. A copy of the Administrator's decision will be furnished
promptly to the applicant.
Secs. 1703.110-1703.112 [Reserved]
Sec. 1703.113 Application filing dates, location, processing, and
public notification.
(a) Applications for funding under this subpart shall be submitted
to the Administrator, Rural Utilities Service, U.S. Department of
Agriculture, 14th and Independence Avenue, SW., Washington, DC 20250-
1500. Applications should be marked ``Attention: Assistant
Administrator, Telecommunications Program''.
(b) Applications will be reviewed for eligibility and considered
for funding on a quarterly or annual basis. The Administrator will
publish a notice in the Federal Register indicating the deadline(s) for
application submissions and the amount of available grant funds.
(c) RUS will review each application for completeness in accordance
with Secs. 1703.107 and 1703.114, and notify the applicant, within 15
working days of the receipt of the application, of the results of this
review, citing any information which is incomplete. To be considered,
the applicant must submit the remaining information postmarked no later
than the application filing deadline set forth in paragraph (b) of this
section, or 15 working days from the receipt of RUS's letter, whichever
is the later date. If the applicant fails to submit such information to
complete the application in accordance with Sec. 1703.107, the
application shall be denied and returned to the applicant.
(d) After receipt of all completed applications, the Administrator
will publish notice in the Federal Register of all completed
applications received for funding under this subpart. The Administrator
will also make those applications available for public inspection at
the U.S. Department of Agriculture, 14th and Independence Avenue, SW.,
Washington, DC. For purposes of this paragraph, applications include
any information not protected by the Privacy Act of 1974, 5 U.S.C.
552a, and any other information that has not been designated as
proprietary information by the applicant.
(e) For instances where multiple applicants are necessary to carry
out a project due to project feasibility or applicant authorities,
multiple applications may be submitted jointly by the applicants. The
applicants must clearly mark or otherwise identify any information in
the application it deems proprietary.
(f) The applicant must submit an original and three copies of a
completed application. The applicant must also submit a copy of the
application to the State government point of contact at the same time
it submits an application to RUS. All applications must include the
information described in Sec. 1703.107.
Secs. 1703.114-1703.116 [Reserved]
Sec. 1703.117 Criteria for scoring applications.
(a) Criteria. The criteria in this section will be used by the
Administrator to score applications that have been determined to be in
compliance with the requirements of this subpart. There are six major
criteria for scoring applications:
(1) the financial need of the community and the project;
(2) the financial composition of the project;
(3) the comparative rurality of the proposed project service area;
(4) the documented need for services;
(5) connectivity with outside networks; and
(6) the cost effectiveness of the design.
(b) Selection. Applications will be selected for funding based on
scores, availability of funds, and the provisions of Sec. 1703.118. The
Administrator will make determinations regarding the reasonableness of
all numbers; dollar levels; rates; the nature of the project; cost;
location; and other characteristics of the application and the proposed
project to determine the number of points assigned to an application
for all selection criteria. Joint applications submitted by multiple
applicants as set forth in Sec. 1703.114 will be rated as a single
application.
(c) Financial need of community and project. A comparison of the
per capita personal income in the county or counties where the project
or the beneficiaries are located to the national
[[Page 16692]]
per capita personal income levels--up to 80 points.
(1) If the per capita personal income level in the county where the
grant beneficiaries will be located:
(i) Is less than or equal to 80 percent of the national per capita
personal income level, 80 points, the maximum number of points;
(ii) Is greater than 80 percent and less than or equal to 90
percent of the national per capita personal income level--60 points;
(iii) Is greater than 90 percent and less than or equal to 100
percent of the national per capita personal income level--30 points;
(iv) Is greater than 100 percent and less than or equal to 110
percent of the national per capita personal income level--5 points;
(v) Exceeds the national per capita personal income level by 110
percent--0 points.
(2) If the project will serve grant beneficiaries in several
counties, the Administrator will use an unweighted mean of the counties
for the comparison.
(3) RUS will use the most recent annual per capita personal income
levels it has obtained from the Bureau of Economic Analysis, U. S.
Department of Commerce, or other government sources and processed into
a suitable format.
(d) Financial composition of project. A comparison of the ability
of the applicant to contribute financially to the project, and to
secure other non-Federal sources of funding. Criteria include:
(1) Evidence of additional financial support for the project from
non-Federal sources above the applicant's required 42.85 percent
matching of the RUS grant as set forth in Sec. 1703.104; the applicant
must include evidence from authorized representatives of the sources
that the funds are available and will be used for the proposed
project--up to 60 points.
(i) Matching for allowable grant purposes less than or equal to 50
percent of the RUS grant--0 points;
(ii) Matching for allowable grant purposes greater than 50 percent,
but less than or equal to 100 percent of the RUS grant--10 points;
(iii) Matching for allowable grant purposes greater than 100
percent, but less than or equal to 150 percent of the RUS grant--20
points;
(iv) Matching for allowable grant purposes greater than 150
percent, but less than or equal to 200 percent of the RUS grant--30
points;
(v) Matching for allowable grant purposes greater than 200 percent,
but less than or equal to 250 percent of the RUS grant--40 points;
(vi) Matching for allowable grant purposes greater than 250
percent, but less than or equal to 300 percent of the RUS grant--50
points;
(vii) Matching for allowable grant purposes greater than 300
percent of the RUS grant--60 points;
(2) Bonus Points For Community Involvement. In addition to the
points allocated under Sec. 1703.117(d)(1), bonus points will be scored
for funding supplied by local sources. Criteria include:
(i) Proportion of non-Federal sources of funding supplied by local
sources above the applicant's required 42.85 percent matching of the
RUS grant. For purposes of this paragraph, local funding sources shall
constitute any for-profit or non-profit entity or entities which derive
income from the area to be served by the proposed project, and any
village, town, county, regional, or other local governmental or public
entity whose jurisdiction includes at least part of the proposed
project service area. A local funding source shall not include a state
or Federal governmental entity. The applicant shall provide evidence
from authorized local representatives that the funds are available and
will be used for the proposed project--up to 20 points.
(A) Less than or equal to 50 percent of the RUS grant supplied by
local funding sources--0 points;
(B) Greater than 50 percent, but less than or equal to 100 percent
of the RUS grant supplied by local funding sources--5 points;
(C) Greater than 100 percent, but less than or equal to 150 percent
of the RUS grant supplied by local funding sources--10 points;
(D) Greater than 150 percent, but less than or equal to 200 percent
of the RUS grant supplied by local funding sources--15 points;
(E) Greater than 200 percent of the RUS grant supplied by local
funding sources--20 points, the maximum number of points;
(e) The Comparative Rurality of the Proposed Project Service Area.
(1) This criterion is used after a project service area has been
determined eligible in accordance with Sec. 1703.109. The methodology
contained in this section is used to evaluate the relative rurality
(i.e., population and isolation) of service areas for various projects.
Under this system, the end user sites and hubs (as defined in
Sec. 1703.102) contained within the proposed project service area are
identified. Then, that service area is given a score according to the
characteristics of the county(ies) in which the end user sites are
located. Evaluation is based on the population of the county or
counties, and the location of the county or counties relative to
metropolitan statistical areas. This system incorporates a framework
based on the classification of nonmetropolitan counties by urbanization
and proximity to metropolitan areas, developed by analysts and
demographers at the USDA Economic Research Service (ERS), as set forth
in Appendix A to this subpart.
(2) The following definitions are used in the evaluation of
rurality:
(i) Metropolitan statistical area (MSA)--as defined by the Office
of Management and Budget (OMB), an MSA includes core counties
containing a city of 50,000 or greater population or containing several
smaller cities totaling 50,000 or greater population in an urbanized
area and a total population of at least 100,000. Additional contiguous
counties are included in the MSA if they are economically and socially
integrated with the core county.
(ii) Metropolitan County--as defined by OMB, a metropolitan county
is part of an MSA and contains a place, or two adjoining places,
totaling at least 50,000 in population, and has residents who are
economically and socially integrated with a metropolitan core.
(iii) Adjacency to Metropolitan area--the proximity of a county to
an MSA measured by a shared boundary with an MSA, and having at least 2
percent of employed county residents commuting to MSA's for employment.
(3) If the end user site(s) for the project are located in a
nonmetropolitan county or counties (ERS Rural--Urban Continuum Scale
categories 4-9 as set forth in Appendix A to this subpart), the
applicant will receive points as follows:
(i) With an ERS category of 9--60 points, the maximum number of
points;
(ii) With an ERS category of 8--55 points;
(iii) With an ERS category of 7--40 points;
(iv) With an ERS category of 6--35 points;
(v) With an ERS category of 5--20 points;
(vi) With an ERS category of 4--15 points; or
(vii) With an ERS category of 0 through 3 (metropolitan counties)--
0 points.
(4) If all the end user sites in a proposed network or system are
located in a single county or in multiple counties which have the same
characteristics, a score will be assigned directly from one of the
categories set forth in Sec. 1703.117(e).
(5) If end user sites are located in multiple counties with
different characteristics, a weighted average will
[[Page 16693]]
be calculated using the methodology set forth in Appendix B to this
subpart.
(6) The applicant shall use the ``Rurality Calculation Table,'' a
facsimile of which is attached as Appendix B to this subpart. Copies of
the Rurality Calculation Table may be obtained from the Assistant
Administrator, Telecommunications Program, RUS, in Washington, DC, or
at the RECD state office. The ERS Rural--Urban Continuum Scale is
available on the Internet; see the address in Appendix B to this
subpart.
(f) Documented need for services. (1) This criterion will be used
by the Administrator to score applications based on the documentation
submitted in the support of the grant application that reflects the
need for the services proposed by the project. The applicant should
indicate whether or not the proposed services could be provided if RUS
grant funds were not available. Up to 60 points can be assigned to this
criterion.
(2) The Administrator will consider the extent to which the need
for improved educational or medical services in the proposed rural area
compares to other regions. RUS will also consider any support by
recognized experts in the related educational or medical field, and
documentation substantiating the educationally and/or medically
underserved nature of the applicant's proposed service area. The
Administrator will consider the extent of the applicant's documentation
showing:
(i) the justification for specific educational and/or medical
services which are needed and will provide direct benefits to rural
residents;
(ii) that rural residents, and other beneficiaries, desire the
educational and/or medical services to be provided by the project (a
strong indication of need is the willingness of local end users or
institutions to pay, to the extent possible, for proposed services);
(iii) the applicant's inability to pay for the proposed project
without grant funds, given the financial strength of the applicant, its
partners, or subsidiaries, as described in Sec. 1703.107(e)(1);
(iv) the projected outcomes as set forth in the Executive Summary
detailed in Sec. 1703.107; and
(v) the project's development and support based on input from the
local residents and institutions.
(vi) the extent to which the application is consistent with the
State strategic plan prepared by the Rural Development State Director
of the United States Department of Agriculture.
(3) Examples of the need for medical services could include rural
physicians and medical professionals inability to access support
functions, such as consulting with others on a diagnosis or access to
the latest recommendations in treatment procedures and techniques, up-
to-date health-care research, or continuing medical studies. Other
medical needs could be to retain more patients at the local hospital or
medical facility in order to prevent the closure of the rural hospital
or medical facility.
(g) Connectivity with outside networks. (1) This criterion will be
used by the Administrator to score applications based on the
documentation submitted in support of the grant application that
reflects the connectivity of the proposed projects with other
educational and/or medical networks. Up to 25 points can be assigned to
this criterion.
(2) Consideration will be given to the extent that the proposed
project will interconnect with other existing networks at the regional,
statewide or national levels. RUS believes that to the extent possible,
educational and medical networks should be designed to connect to the
widest practicable number of other networks that expand the
capabilities of the proposed project, thereby affording rural residents
opportunities that may not be available at the local level.
(3) Consideration will also be given to facilities constructed with
federal financial assistance, particularly financial assistance under
this Chapter provided to entities other than the applicant, will be
utilized to extend or enhance the benefits of the proposed project.
(h) Cost effective design. (1) This criterion will be used by the
Administrator to score applications based on the documentation
submitted in the support of the grant application that reflects the
cost efficiency of the project design. Up to 15 points can be assigned
to this criterion.
(2) Consideration will be given to the extent that the proposed
technology or technologies for delivering the proposed educational and/
or medical services for the project service area are the most cost
effective for the type of project proposed. The Administrator will
consider the applicant's documentation comparing various systems and
technologies, and the choice of the applicant's system as being the
most cost-effective system. The Administrator will also consider the
applicant's documentation relating to buying or leasing options for
specific equipment. The application must contain information necessary
for the Administrator to use accepted analytical and financial
methodologies to determine whether the applicant is proposing the most
cost-effective option.
Sec. 1703.118 Other application selection and appeal provisions.
(a) Regardless of the number of points an application receives in
accordance with Sec. 1703.117, the Administrator may, based on his/her
review of the applications in accordance with the requirements of this
part:
(1) Limit the number of applications selected for projects located
in any one state during a fiscal year;
(2) Limit the number of selected applications for a particular
project; and
(3) Select an application receiving fewer points than another
higher scoring application if there are insufficient funds during a
particular funding period to select the higher scoring application;
provided, however, the Administrator may ask the applicant of the
higher scoring application if it desires to reduce the amount of its
application to the amount of funds available if, notwithstanding the
lower grant amount, the Administrator determines the project is
financially feasible in accordance with Sec. 1703.107(h) at the lower
amount.
(b) The Administrator will not approve a grant application if he/
she determines that:
(1) The applicant's proposal does not indicate financial
feasibility or is not sustainable in accordance with the requirements
of Sec. 1703.107(e)(1) and (2);
(2) The applicant's proposal indicates technical flaws, which, in
the opinion of the Administrator, would prevent successful
implementation, operation, or sustainability of the proposed project;
or
(3) Any other aspects of the applicant's proposal fails to
adequately address any requirements of this subpart or contains
inadequacies which would, in the opinion of the Administrator,
undermine the ability of the project to meet the general purpose of
this part or comply with policies of the Distance Learning and
Telemedicine Grant Program set forth in Sec. 1703.101.
(c) The Administrator may reduce the amount of the applicant's
grant award based on insufficient program funding for the fiscal year
in which the project is reviewed if the Administrator determines that,
notwithstanding a lower grant award, the project will show financial
feasibility in accordance with Sec. 1703.107(e), and the program
purposes set forth in Sec. 1703.100 can be met. RUS will discuss its
findings informally with the applicant and make every effort to
[[Page 16694]]
reach a mutually acceptable agreement with the applicant. Any
discussions with the applicant and agreements made with regard to a
reduced grant amount will be confirmed in writing, and these actions
shall be deemed to have met the notification requirements set forth in
paragraph (d) of this section.
(d) The Administrator will provide the applicant an explanation of
any determinations made with regard to paragraphs (b)(1) through (b)(3)
of this section prior to making final project funding selections for
the year. The applicant will be provided 15 days from the date of the
Administrator's letter to respond, provide clarification, or make any
adjustments or corrections to the project. If, in the opinion of the
Administrator, the applicant fails to adequately respond to any
determinations or other findings made by the Administrator, the project
will not be funded, and the applicant will be notified of this
determination.
(e) For Fiscal Year 1996 grant applications, RUS will notify all
grant applicants of the numerical scoring each complete grant
application received and the cutoff points needed to receive funding
for Fiscal Year 1996. If the grant application numerical scoring is
below the score necessary to obtain funding, the applicant may appeal
the numerical scoring to the Secretary in writing not later than 10
days after the applicant is notified of the scoring level. The
applicant must state the reason it is appealing the numerical scoring
and submit the reasons the application should be reconsidered. RUS will
allow 14 days after the close of the appeal period to make the final
grant selections for Fiscal Year 1996
FR Doc. 96-9294 Distance Learning and Telemedicine Grant Program
.
(f) RUS reserves the right to use other data it considers most
appropriate if ``county'' data is unavailable for a particular area. In
those cases, the Administrator will use data compiled on a basis of the
equivalent of a county in the state, such as a parish, or on another
basis that most approximates ``county'' level data.
Secs. 1703.119-1703.121 [Reserved]
Sec. 1703.122 Further processing of selected applications.
(a) During the period between the selection of the application and
the execution of implementing documents, the applicant must inform the
Administrator if the project is no longer viable or the applicant no
longer desires a grant for the project. If the applicant so informs the
Administrator, the selection will be rescinded and written notice to
that effect shall be sent promptly to the applicant.
(b) If an application has been selected and the nature of the
project changes, the applicant may be required to submit a new
application to the Administrator for consideration depending on the
degree of change. A new application will be subject to review in
accordance with this subpart. The selection may not be transferred to
another project.
(c) If state or local governments raise objections to a proposed
project under the intergovernmental review process that are not
resolved within 3 months of the Administrator's selection of the
application, the Administrator may rescind the selection and written
notice to that effect will be sent promptly to the applicant.
(d) After an applicant has submitted such additional information,
if any, the Administrator determines is necessary for completing the
grant documents, the Administrator will send the documents to the
applicant to execute and return to RUS.
(1) The grant documents will include a letter of agreement and any
other legal documents the Administrator deems appropriate, including
suggested forms of certifications and legal opinions.
(2) The letter of agreement will, among other things, constitute
the Administrator's approval of funds for the project subject to
certain terms and conditions and include at a minimum, a project
description, approved purposes of the grant, the maximum amount of the
grant, supplemental funds to be provided to the project and certain
agreements or commitments the applicant may have proposed in its
application.
(e) Until the letter of agreement has been executed and delivered
by RUS and by the applicant, the Administrator reserves the right to
require any changes in the project or legal documents covering the
project to protect the integrity of the program and the interests of
the United States Government.
(f) If the applicant fails to submit, within 120 calendar days from
the date of the Administrator's selection of an application, all of the
information that the Administrator determines to be necessary to
prepare legal documents and satisfy other requirements of this subpart,
the Administrator may rescind the selection of the application and
written notice to that effect will be sent promptly to the applicant.
Secs. 1703.123-1703.125 [Reserved]
Sec. 1703.126 Disbursement of grant funds.
(a) For grants of $100,000 or greater, prior to the disbursement of
funds, the grantee, if it is not a unit of government, will provide
evidence of fidelity bond coverage as required by Sec. 3015.17 of this
title.
(b) Grant funds will be disbursed to grantees on a reimbursement
basis, or with unpaid invoices for the eligible purposes set forth in
this subpart, by the following process:
(1) An SF 270, ``Request for Advance or Reimbursement,'' will be
completed by the applicant and submitted to RUS not more frequently
than once a month; and
(2) After receipt of a properly completed SF 270, payment will
ordinarily be made within 30 days.
(c) The grantee's share in the cost of the project will be
disbursed in advance of grant funds, or if the grantee agrees, on a pro
rata distribution basis with grant funds during the disbursement
period. Grantee will not be permitted to provide its contribution at
the end of the project.
Sec. 1703.127 Reporting and oversight requirements.
(a) A project performance activity report will be required of all
grantees on a semi-annual basis.
(b) A final project performance report will be required. 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 semi-
annual report.
(c) RUS will monitor grant recipients as necessary to assure that
projects are completed in accordance with the approved scope of work
and that funds are expended for approved purposes. Grants made under
this part will be administered under, and are subject to parts 3015
through 3018 of this title.
(d) Grantees shall diligently monitor performance to ensure that
time schedules are being met, projected work by time periods is being
accomplished, and other performance objectives are being achieved.
Grantees are to submit an original and one copy of each report to RUS.
The project performance reports shall include, but not be limited to,
the following:
(1) A comparison of actual accomplishments to the objectives
established for that period;
(2) Reasons why established objectives were not met;
(3) 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
[[Page 16695]]
statement of the action taken or planned to resolve the situation; and
(4) Objectives and timetable established for the next reporting
period.
Sec. 1703.128 Audit requirements.
The grantee will provide an audit report in accordance with part
3015, subpart I, of this title. The audit requirements only apply to
the year(s) in which grant funds are received. Audits must be prepared
in accordance with generally accepted government auditing standards
(GAGAS) using publication, ``Standards for Audit of Governmental
Organization, Programs, Activities and Functions.''
Secs. 1703.129-1703.134 [Reserved]
Sec. 1703.135 Grant administration.
(a) The Administrator will review grantees, as necessary, to
determine whether funds were expended for approved purposes. The
grantee is responsible for ensuring that the project complies with all
applicable regulations, and that the grant funds are expended only for
approved purposes. The grantee is responsible for ensuring that
disbursements and expenditures of funds are properly supported by
invoices, contracts, bills of sale, canceled checks, or other
appropriate forms of evidence, and that such supporting material is
provided to the Administrator, upon request, and is otherwise made
available, at the grantee's premises, for review by the RUS
representatives, grantee's certified public accountant, the office of
Inspector General, U.S. Department of Agriculture, the General
Accounting Office and any other officials conducting an audit of the
grantee's financial statements or records, and program performance
under the grant awarded under this subpart. Grantees will be required
to permit RUS to inspect and copy any records and documents that
pertain to the project.
(b) Grants provided under this program will be administered under,
and are subject to parts 3015 and 3016 of this title, as appropriate.
Parts 3015 and 3016 of this title subject grantees to a number of
requirements which cover, among other things, financial reporting,
accounting records, budget controls, record retention and audits,
bonding and insurance, cash depositories for grant funds, grant related
income, use and disposition of real property and/or equipment purchased
with grant funds, procurement standards, allowable costs for grant
related activities, and grant close-out procedures.
Sec. 1703.136 Changes in project objectives or scope.
The grantee will obtain prior approval for any material change to
the scope or objectives of the approved project, including changes to
the scope of work or budget. Failure to obtain prior approval of
changes can result in suspension or termination of grant funds.
Sec. 1703.137 Grant termination provisions.
(a) Termination for cause. The Administrator may terminate any
grant in whole, or in part, at any time before the date of completion
of grant disbursement, whenever it is determined that the grantee has
failed to comply with the conditions of the grant. The Administrator
will promptly notify the grantee in writing of the determination and
the reasons for the termination, together with the effective date.
(b) Termination for convenience. The Administrator or the grantee
may terminate a grant in whole, or in part, when both parties agree
that the continuation of the project would not produce beneficial
results commensurate with further expenditure of funds. The two parties
will agree upon termination conditions, including the effective date,
and in the case of partial terminations, the portion to be terminated.
The grantee will not incur new obligations for the terminated portion
after the effective date, and will cancel as many outstanding
obligations as possible. The Administrator will allow full credit to
the grantee for the Federal share of the noncancelable obligations,
properly incurred by the grantee prior to termination.
Secs. 1703.138-1703.139 [Reserved]
Sec. 1703.140 Expedited telecommunications loans.
(a) General. (1) The Administrator will afford expedited
consideration and determination to an application for a loan or a
request for advance of funds submitted by a local exchange carrier
pursuant to section 2334(h) of the Act (7 U.S.C. 950aaa et seq.).
(2) Funds obtained through the expedited procedures established by
this section must be used primarily to provide advanced
telecommunications services in rural areas using a telecommunications
project that the Administrator has approved under this subpart.
(3) Only those elements of a telecommunications project that have
not been funded in whole, or in part, with a grant made under this
subpart are eligible for expedited consideration or determination under
this section.
(b) Expedited loan applications. (1) In order to qualify for
expedited consideration or determination under paragraph (a)(1) of this
section, the loan application must:
(i) Be from a local exchange carrier that will use the requested
funds for the purpose set forth in paragraph (a)(2) of this section;
(ii) Be a completed one that complies with the requirements of part
1737, subpart C, of this chapter; and
(iii) Be received concurrently with the related grant application
or within 14 days of the date notice of such application is published
in the Federal Register as set forth in Sec. 1703.113(d).113.
(2) Expedited consideration and determination of a qualifying
application for a loan under this section means that within 45 days of
receipt or 45 days of selection of the related grant application,
whichever occurs later, the Administrator will:
(i) Issue a characteristics letter, as set forth in part 1737,
subpart I, of this chapter, to the loan applicant; or
(ii) Inform the loan applicant that its application for a loan has
been denied.
(c) Expedited advances. (1) In order to qualify for expedited
consideration or determination under paragraph (a)(1) of this section,
the request for advance of funds must:
(i) Be from a local exchange carrier that will use the funds for
the purpose set forth in paragraph (a)(2) of this section;
(ii) Be for all or part of a loan which has received release
approval pursuant to part 1737, subpart K, of this chapter; and
(iii) Be in compliance with the requirements of part 1744 of this
chapter.
(2) Expedited consideration and determination of a qualifying
request for advance of loan funds under this section means that the
Administrator will advance funds to the borrower within 45 days of
receiving a request which complies with the provision of this section.
Appendix A to Subpart D of Part 1703--ERS Rural--Urban Continuum Scale
ERS Rural--Urban Continuum Codes:
Metropolitan Counties
0--Central counties of metropolitan areas of 1 million
population or more.
1--Fringe counties of metropolitan areas of 1 million population
or more.
2--Counties in metropolitan areas of 250 thousand to 1 million
population.
3--Counties in metropolitan areas of less than 250 thousand
population.
[[Page 16696]]
Nonmetropolitan Counties:
4--Aggregate urban population (sum of cities, towns, villages or
other incorporated communities of 2,500 or more) of 20,000 or more,
adjacent to metropolitan area.
5--Aggregate urban population of 20,000 or more, not adjacent to
a metropolitan area.
6--Aggregate urban population of 2,500 to 19,999, adjacent to a
metropolitan area.
7--Aggregate urban population of 2,500 to 19,999, not adjacent
to a metropolitan area.
8--Completely rural (no cities, towns, villages or other
incorporated areas of 2,500 or greater) adjacent to a metropolitan
area.
9--Completely rural, not adjacent to a metropolitan area.
Notes: Metropolitan status is that announced by the Office of
Management and Budget in June 1993, when the current population
criteria were first applied to results of the 1990 Census. Adjacency
was determined by physical boundary adjacency and a finding that at
least 2 percent of the employed labor force in the nonmetropolitan
county commuted to metropolitan central counties.
Codes prepared in Rural Economy Division, Economic Research
Service, USDA. A listing of counties and corresponding codes are
available from ERS at the following address: Room 337, 1301 New York
Avenue, NW., Washington, DC 20005-4788, Phone: (202) 219-0534, or
through the Internet via the ERS Home Page or directly at the
following Internet address: gopher://usda.mannlib.cornell.edu:70/11/
data-sets/rural/89021
Appendix B to Subpart D of Part 1703--Rurality Calculation Table
Use the following table or similar worksheet to calculate
rurality if end user sites are located in multiple counties with
different characteristics. If more space is needed, use a separate
sheet of paper and attach it to this worksheet. For complete
instructions see Sec. 1703.117(e).
Abbreviations used in this Appendix:
RUCS=Rural--Urban Continuum Scale, as described in Sec. 1703.109 and
Appendix A of this subpart
EUS = End user site
1. List the specific location (city, village, township, etc.) of
each end user site to be funded using the RUS grant. List sites
separately even if sites are located in the same county. (A hub that
serves as an end user site is considered an end user site for
purposes of this rurality calculation. Only under that circumstance
will a hub be counted in the weighted average.)
2. Show the total number of residents to be served by the
project for each of the end user sites indicated above.
3. Divide the number of rural residents served at each end user
site by the total number of rural residents to be served by the
project. Show the result, rounded to the nearest two decimal places.
4. Enter the name of the county in which each end user site is
located.
5. Enter the RUCS code for each end user site. Note: RUCS codes
may be obtained from a variety of sources, including RUS, ERS, the
state office of RECD, the cooperative extension service at the land
grant university in your state, or through the Internet via the ERS
Home Page or directly at the following Internet address: gopher://
usda.mannlib.cornell.edu:70/11/data-sets/rural/89021.
6. Enter the number of points for each RUCS code: RUCS code 9=60
points, 8=55,7=40, 6=35, 5=20, 4=15, 3=0, 2=0, 1=0, 0=0.
7. Multiply the number calculated in step 3 by the points from
step 6. Enter this new number on the worksheet. Show the result,
rounded to the nearest two decimal places.
8. Total the results on line 7 across the end user site columns.
(I.e., add the amounts on line 7 for EUS 1, EUS 2, EUS 3, etc.).
This is the project's weighted average comparative rurality score.
----------------------------------------------------------------------------------------------------------------
EUS 1 EUS 2 EUS 3 EUS 4 EUS 5 EUS 6
----------------------------------------------------------------------------------------------------------------
1. Location of each end user site, listed
separately even if sites are located in the
same county.................................. ......... ......... ......... ......... ......... .........
2. Total number of residents to be served by
the project for each end user site........... ......... ......... ......... ......... ......... .........
3. Number of residents at end user site
divided by total number of residents served
by the project; rounded to nearest two
decimal places............................... ......... ......... ......... ......... ......... .........
4. County in which end user site is located... ......... ......... ......... ......... ......... .........
5. RUCS code for end user site................ ......... ......... ......... ......... ......... .........
6. Points for each RUCS code: 9=60, 8=55,
7=40, 6=35, 5=20, 4=15, 3=0, 2=0 1=O, 0=0.... ......... ......... ......... ......... ......... .........
7. Multiply line 3 by line 6 for each end user
site; rounded to nearest two decimal places.. ......... ......... ......... ......... ......... .........
----------------------------------------------------------------------------------------------------------------
8. Total the results on line 7 across the end user site columns. This is the project's weighted average
comparative rurality score.
Example of Rurality Calculation:
Greenbriar Valley Development Authority has submitted an
application for an interactive classroom network which includes a
hub in a metropolitan area and 3 end user sites, located in 3 rural
counties. The hub is located in a large city and is not utilized as
an end user site, so the hub will not be considered in the
calculation. The project serves a total of 9,000 residents at the 3
end user sites.
The first end user site is located in the town of Midway, in
Greenbriar County, which has an aggregate urban population of less
than 20,000, adjacent to a metropolitan area. Thus, it has a
category of 6 on the ERS Rural--Urban Continuum Scale. This site
serves 1,000 residents.
The second end user site is in Lewistown, in Lewis County, which
has an aggregate urban population of less than 20,000, not adjacent
to a metropolitan area. Thus, it has a category of 7 on the ERS
Rural--Urban Continuum Scale. This site serves 3,000 residents.
The third end user site is in the town of Rocky Creek, in
Fayette County, which has an aggregate urban population of 20,000 or
more, but not adjacent to a metropolitan area. Thus, it has a
category of 5 on the ERS Rural--Urban Continuum Scale. This site
serves 5,000 residents.
Step (1). Calculate the weighted average for each end user site.
Site 1 (Midway site), 1,000/9,000=``.11''; site 2 (Lewistown site),
3,000/9000=``.33''; and site 3 (Rocky Creek site), 5,000/
9,000=``.56'' (rounded to the nearest two decimal places).
Step (2). The counties identified are Greenbriar, Lewis and
Fayette.
Step (3). Greenbriar County, ERS Rural--Urban Continuum Scale
category 6=35 points; Lewis County, ERS Rural--Urban Continuum Scale
category 7=40 points; Fayette County, ERS Rural--Urban Continuum
Scale category 5=20 points.
Step (4). Midway site (Greenbriar County): 35 points x .11=3.85
points. Lewistown site (Lewis County): 40 points x .33=13.20 points.
Rocky Creek (Fayette County) site: 20 points x .56=11.20 points.
Step (5). 3.85+13.20+11.20=28.25 total weighted average score.
Appendix C to Subpart D of Part 1703--Environmental Questionnaire
Note: It is extremely important to respond to all questions
completely to ensure expeditious processing of the Distance Learning
and Telemedicine grant. The information herein is required by
Federal law.
Important: Any activity related to the project that may
adversely affect the environment or limit the choice of reasonable
development alternatives shall not be undertaken prior to the
completion of Rural Utilities Service's environmental review
process.
[[Page 16697]]
Legal Name of Applicant ______________________________-----------------
Signature
(Type/Sign/Date) ______________________________------------------------
The applicant's representative certifies, to the best of his/her
knowledge and belief, that the information contained herein is
accurate. Any false information may result in disqualification for
consideration of the grant or rescission of the grant.
I. Project Description--Detailing construction, including, but
not limited to, internal or external modifications of existing
structures, new building construction, and/or installation of
telecommunications transmission facilities (defined in 7 CFR
1703.102), including satellite uplinks or downlinks, microwave
transmission towers, and cabling.
1. Describe the portion of the project, and site locations
(including legal ownership of real property), involving internal
modifications, or equipment additions to buildings or other
structures (e.g., relocating interior walls or adding computer
facilities) for each site.
2. Describe the portion of the project, and site locations
(including legal ownership or real property) involving external
changes or additions to existing buildings, structures or facilities
requiring physical disturbance of less than .99 acres. List the size
of each individual site in acres and attach a diagram showing the
general layout of the proposed facilities for each site.
3. Describe the portion of the project, and site locations
(including legal ownership or real property), involving construction
of transmission facilities, including cabling, microwave towers,
satellite dishes; or, new construction of buildings; or, disturbance
of property of .99 acres or greater for each project site.
4. Describe the nature of the proposed use of the facilities,
and whether any hazardous materials, air emissions, wastewater
discharge or solid waste will result.
5. State whether or not any project site(s) contain or are near
properties listed or eligible for listing in the National Register
of Historic Places, and identify any historic properties (The
grantee must supply evidence that the State Historic Preservation
Officer (SHPO) has cleared development regarding any historical
properties).
6. Provide information whether or not any facility(ies) or
site(s) are located in a 100-year floodplain. A National Flood
Insurance Map should be included reflecting the location of the
project site(s).
II. For projects which involve construction of transmission
facilities, including cabling, microwave towers, satellite dishes,
new construction of buildings, or physical disturbance of real
property of .99 acres or greater, the following information must be
submitted (7 CFR 1703.138(b)(2)).
1. A map (preferably a U.S. Geological Survey map) of the area
for each site affected by construction (include as an attachment).
2. A description of the amount of property to be cleared,
excavated, fenced or otherwise disturbed by the project and a
description of the current land use and zoning and any vegetation
for each project site affected by construction.
3. A description of buildings or other structures (i.e.,
transmission facilities), including dimensions, to be constructed or
modified.
4. A description of the presence of wetlands or existing
agricultural operations and/or threatened or endangered species or
critical habitats on or near the project site(s) affected by
construction.
5. Describe any actions taken to mitigate any environmental
impacts resulting from the proposed project (use attachment if
necessary).
Note: The applicant may submit a copy of any environmental
review, study, assessment, report or other document that has been
prepared in connection with obtaining permits, approvals or other
financing for the proposed project from State, local or other
Federal bodies. Such material, to the extent relevant, may be used
to meet the requirements herein.
Dated: March 29, 1996.
Inga Smulkstys,
Acting Under Secretary, Rural Economic and Community Development.
[FR Doc. 96-9294 Filed 4-15-96; 8:45 am]
BILLING CODE 3410-15-P
Complete official Federal Register PDF
FR Doc. 96-9253 Passenger Facility Charges
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16678-16681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9253]
[[Page 16677]]
_______________________________________________________________________
Part III
Department of Transportation
_______________________________________________________________________
Federal Aviation Administration
_______________________________________________________________________
14 CFR Part 158
Passenger Facility Charges; Proposed Rule
Federal Register / Vol. 61, No. 74 / Tuesday, April 16, 1996 /
Proposed Rules
[[Page 16678]]
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 158
[Docket No. 27791; Notice No. 96-3]
RIN 2120-AF69
Passenger Facility Charges
AGENCY: Federal Aviation Administration, DOT.
ACTION: Advance notice of proposed rulemaking (ANPRM).
-----------------------------------------------------------------------
SUMMARY: This document seeks public comment on changes to several
sections of Title 14, Code of Federal Regulations, Part 158, Passenger
Facility Charges (PFC's), that deal with the collection, handling, and
remittance of PFC's. The notice specifies the quantity and quality of
airline cost data necessary for the Federal Aviation Administration
(FAA) to determine an adequate rate of airline compensation. In
addition, the notice includes several proposed modifications to part
158 that would allow air carriers to be compensated based on PFC's
collected; implement the statutory prohibition (FAA Authorization Act
of 1994) on collection of PFC's from passengers traveling on frequent
flyer awards; and clarify various terms. Finally, the notice requests
comments on several proposals dealing with ways to safeguard PFC
revenue in the event of carrier bankruptcy.
DATES: Comments must be received on or before May 16, 1996.
ADDRESSES: Comments on this notice should be mailed, in triplicate, to:
Federal Aviation Administration, Office of the Chief Counsel, Attn:
Rules Docket (AGC-200), Docket No. 27791, 800 Independence Avenue, SW.,
Washington, DC 20591. Comments delivered must be marked Docket No.
27791. Comments may be examined in Room 915G on weekdays, except
Federal holidays, between 8:30 a.m. and 5:00 p.m.
FOR FURTHER INFORMATION CONTACT:
Sheryl Scarborough, Passenger Facility Charge Branch (APP-530),
Airports Financial Assistance Division, Office of Airports Planning and
Programming, Federal Aviation Administration, 800 Independence Avenue,
SW., Washington, DC 20591; telephone (202) 267-8825.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested persons are invited to participate in this advance
notice of proposed rulemaking by submitting such written data, views,
or arguments as they may desire. Comments relating to the
environmental, energy, federalism, or economic impact that might result
from considering the options in this advance notice are also invited.
Substantive comments should be accompanied by cost estimates. Comments
should identify the regulatory docket or notice number and should be
submitted in triplicate to the Rules Docket address specified above.
All comments received on or before the closing date for comments
specified will be considered by the Administrator before taking action
on this proposed rulemaking. The proposals contained in this notice may
be changed in light of comments received. All comments received will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report
summarizing each substantive public contact with Federal Aviation
Administration (FAA) personnel concerning this rulemaking will be filed
in the docket. Commenters wishing the FAA to acknowledge receipt of
their comments submitted in response to this notice must include a
preaddressed, stamped postcard on which the following statement is
made: ``Comments to Docket No. 27791.'' The postcard will be date
stamped and mailed to the commenter.
Availability of ANPRM
An electronic copy of this document may be downloaded using a modem
and suitable communications software from the FAA regulations section
of the Fedworld electronic bulletin board service (telephone: 703-321-
3339) the Federal Register's electronic bulletin board service
(telephone: 202-512-1661), or the FAA's Aviation Rulemaking Advisory
Committee Bulletin Board service (telephone: 202-267-5948).
Internet users may reach the FAA's web page at http://www.faa.gov
or the Federal Register's webpage at http://www.access.gpo.gov/
su____docs for access to recently published rulemaking documents.
Any person may obtain a copy of this ANPRM by submitting a request
to the Federal Aviation Administration, Office of Rulemaking, ARM-1,
800 Independence Avenue, SW., Washington, DC 20591, or by calling (202)
267-9680. Communications must identify the notice number or docket
number of this ANPRM.
Persons interested in being placed on the mailing list for future
NPRM's should request from the above office a copy of Advisory Circular
No. 11-2A, Notice of Proposed Rulemaking Distribution System, that
describes the application procedure.
Background
Current Regulation
In the late 1980's, the traditional sources of airport revenue for
capital improvements began to appear inadequate to meet these demands.
Congress responded to these needs by enacting 49 U.S.C., The
Aviation Safety and Capacity Expansion Act of 1990, which allows public
agencies controlling commercial service airports (those with regularly
scheduled service and enplaning 2,500 or more passengers per year) to
charge enplaning passengers using the airport a $1, $2, or $3 facility
charge. Public agencies wishing to impose these PFC's must apply to the
FAA for such authority and meet certain requirements spelled out in the
legislation and the implementing regulation (14 CFR part 158) issued by
the FAA in may 1991.
Upon receiving FAA approval to impose PFC's, the public agency
gives written notification to all carriers who are required to collect
PFC's. On the charge effective date, carriers and their agents begin
collecting the PFC's when the ticket is issued. PFC's are collected
until the charge expiration date, or upon further notification from the
public agency or the FAA. PFC's are collected based on the original
ticket issued. Carriers remit PFC revenue monthly to airports.
Section 158.53(a) provides, as compensation for collecting,
handling, and remitting the PFC revenue, that the collecting air
carrier was entitled to retain $0.12 of each PFC remitted on, or
before, June 28, 1994. Thereafter, air carriers are entitled to $0.08
of each PFC remitted.
Petition for Rulemaking and Public Comments
On May 27, 1994, Air Transport Association of America (ATA), on
behalf of its members, petitioned for a rule change to Sec. 158.53(a)
to extend the $0.12 handling fee for an additional 3 years, at which
time the petitioner would file comments as to whether or not the
airline industry, as a whole, had fully recovered the costs of
implementing, operating, and maintaining the PFC collection system.
Further, the petitioner requested that Sec. 158.53 be amended to allow
air carriers to retain a handling fee for a refunded PFC. As
justification for such changes, the petitioner asserted that the
economic health of the airline industry depends, in part, upon the full
cost
[[Page 16679]]
recovery of programs which the carriers implement. This includes the
PFC program, which the carriers are required, by law, to carry out on
behalf of airport operators. Further, the petitioner asserted that
service to passengers may ultimately be harmed if airlines are required
to cut costs elsewhere to compensate for unrecovered costs associated
with the PFC program.
Since the petition was submitted, the carrier compensation rate has
been decreased to $0.08 per PFC remitted in accordance with
Sec. 158.53(a). The FAA was unable to respond to the petitioner's
request for an immediate decision because the timing of that request
did not allow sufficient opportunity for public comment on a proposal
that would affect both carriers and public agencies.
A summary of the ATA's petition for rulemaking was published in the
Federal Register on June 24, 1994 (59 FR 32668). This summary included
a request for specific data to be provided to the FAA by air carriers
and public agencies. Twelve comments, from 11 commenters, were received
on the ATA's proposals.
Ten comments from air carriers were in favor of the proposals and
many of the comments included some of the types of data requested by
the FAA. The air carriers commenting included five major domestic
carriers, one of which submitted two separate comments, two
international carriers, a charter carrier, and a regional carrier. The
data provided by these carriers, in most cases, indicated that the
carriers had incurred as yet unrecovered start-up costs, even though
the start-up costs varied widely from carrier to carrier. Most of the
carriers also indicated that they did not expect to fully recover their
ongoing monthly costs if carrier compensation were lowered to $0.08 per
remitted PFC. Those carriers which addressed the issue of handling fees
for refunded PFC's argued that under the current rule, for refunded
tickets, the carrier is required to handle the PFC twice and yet is not
entitled to compensation for either transaction.
One dissenting comment from the City of Chicago argued against FAA
adoption of a modification to the rate of carrier compensation. The
City argued that, in the data provided with the petition for
rulemaking, the ATA had not made a persuasive case that air carriers
would incur losses if the compensation level were $0.08. The City also
stated its belief that any shortfall, if it exists, would be quickly
made up as PFC collections begin at more and more airports. The City
also stated that raising the compensation rate to $0.12 would result in
over $1 million per year in lost PFC revenue and that the City would be
required to defer implementation of PFC projects or tap into other
revenue sources to make up for this lost revenue.
Insofar as the handling fees for refunded PFC's, the City stated
that the ATA petition did not provide enough information to fully
analyze the impact on airports of the proposal. The City further stated
that it was willing to ``keep an open mind'' on this issue but that any
change should be coupled with the ability of airports to audit airline
collection and remittance practices, enabling the airports to ensure
that PFC's are properly remitted and to ``Safeguard against distortion
in the ordinary practices of refunding/rewriting tickets versus
honoring previously issued tickets.''
The FAA agrees that a change to the airline compensation level
could affect the length of time needed for a public agency to collect
its approved amount of PFC revenue. Public agencies take into account a
variety of factors when preparing PFC applications. However, these
factors are forecasted estimates based on available data present at any
one time. Procedures are already in place, and have been utilized, to
allow the public agency to make the necessary adjustments, either
upward or downward, to the duration of PFC revenue collection in the
event that actual collections differ from the amounts forecast in the
PFC application. In addition, the PFC regulation (Part 158) provides
procedures that have already been utilized for deleting projects from
approved applications.
The remaining dissenting comment was a joint submission of the
Airports Council International--North America (ACI-NA) and the American
Association of Airport Executives (AAAE). The ACI-NA and AAAE argued
that the data provided in the ATA's petition is seriously flawed and
that the airlines have not demonstrated, as is required by statute,
that the expenses for which they seek compensation are ``necessary and
reasonable.'' Insofar as the handling fee for refunded PFC's, the ACI-
NA and AAAE stated that they are not receptive to the proposed change
unless ``public agencies are provided with some mechanism to better
reconcile anticipated PFC collections with actual amounts remitted.''
The FAA acknowledges the airports' argument that additional
measures may be needed to allow public agencies to monitor air carriers
to ensure that PFC's are properly remitted. The FAA is currently
working with industry groups to prepare airline PFC auditing guidelines
which should address many of these concerns. Because this auditing
guidelines effort is ongoing, the FAA is not proposing changes to
airline auditing requirements at this time.
Request for Additional Information
Airline Compensation Issues
The FAA did not receive sufficient information as a result of its
request for data to permit a determination of adequate level of airline
compensation. Therefore, the ANPRM provides additional guidance about
the quantity and quality of data needed for the FAA to determine
adequate compensation.
The FAA has reviewed the petition and comments received and finds
that the carriers responding to the petition and request for comments
accounted for approximately 50 percent of the enplanements at approved
PFC locations, at the time of response. Some of the data provided by
the carriers included cost centers that were not fully explained. The
information received does not sufficiently justify a change to the rate
at which carriers are compensated for collection and remittance of
PFC's.
The data provided by the ATA and the carriers indicates the
possibility of a need to adjust the compensation rate in order to
reflect the average reasonable and necessary carrier costs associated
with collecting, handling, and remitting the PFC.
The FAA will consider an increase in the carrier compensation rate
above the current $0.08 level, if data provided by carriers accounting
for a sufficient portion of the enplanements at PFC approved locations
indicates a clear need for the compensation level to be modified. The
data provided by the carriers must be broken out by cost centers and
certified by the carrier's accountant, an independent accounting firm,
or by the officers of the company. Further, a description of each cost
center and its relationship to the PFC program is needed. To proceed on
the subject, the FAA must have detailed and persuasive data from
carriers that, in total, represent at least 75 percent of the
enplanements at PFC locations. In the FAA's judgment, the amount of 75
percent of the enplanements at PFC locations would give an adequate
view of current industry costs and this information would also provide
adequate cost data to determine if a change in the carrier compensation
rate is appropriate and necessary.
In addition, the FAA requests that public agencies imposing PFC's
provide
[[Page 16680]]
specific information on the effect a change in the current $0.08
compensation rate would have on their PFC revenue stream; and their
ability to implement projects within the PFC regulatory timeframe.
Passenger Facility Charge Collection and Remittance Issues
The FAA recently undertook a study of PFC collection and remittance
issues at the request of Congress. One issue being studied is the
problem of PFC revenues and airline bankruptcies.
Several comments by a number of parties have indicated that the
provision in Sec. 158.49(b), Handling of PFC's, may cause problems for
the public agency in the event of an airline bankruptcy. The provision
allows a collecting carrier to commingle PFC revenue with the carrier's
other sources of revenue, before the carrier remits the PFC revenue to
the public agency. A suggestion has been made that the FAA delete the
provision allowing the carrier to commingle PFC revenue with other
sources of revenue, and require that carriers place PFC revenues in
escrow accounts for the period between collection and remittance.
Therefore, the FAA is requesting comments on three possible
modifications to Sec. 158.49(b). The FAA specifically requests
comments, including estimates of costs and benefits, on each of the
following proposals relating to this issue.
1. Should the FAA prohibit commingling of PFC revenue with other
sources of revenue, and require that carriers establish a separate
trust account for PFC revenue collected?
2. Should the FAA require that carriers establish third-party
escrow accounts to hold PFC revenue between collection of the revenue
and remittance to the public agency?
3. Approximately 85 percent of domestic tickets issued in the
United States are written by travel agents who remit ticket revenues to
carriers through the Airline Reporting Corporation (ARC) clearinghouse.
Should the FAA require that, for travel agency-issued tickets, the ARC
remit PFC revenue directly to the public agency?
The FAA is concerned that costs to the carriers of any of these
possible modifications may outweigh any benefits the public agencies
may derive. The FAA is concerned that a cost-effective system of escrow
accounts may not provide much protection to the public agency.
Therefore, the FAA solicits comments on whether, for travel agent-
issued tickets, direct remittance to the public agency by the ARC might
provide as much, or more, protection to public agencies as an escrow
account.
In addition, the FAA requests that carriers collecting PFC's
provide information on an estimate of any interest revenue that might
be lost if the commingling provision is eliminated, and the estimated
cost of each suggested modification.
The FAA also requests that airports indicate their assessment of
whether the benefits of this proposal outweigh expected increases to
the PFC compensation rate resulting from implementation of this
proposal.
Lastly, the FAA requests that public agencies, carriers, and the
public provide any opinions to any of the possible modifications that
will help safeguard PFC revenues in the event of an airline bankruptcy.
Section-by-Section Discussion of the Proposals
This ANPRM contains proposals to amend several sections of part
158.
One of these proposals is intended to address a change sought by
the Air Transport Association in its petition for rulemaking which
would allow air carriers to be compensated based on PFC's
``collected,'' rather than ``remitted.''
Another proposal in this document is in response to a requirement,
contained in the FAA Authorization Act of 1994, to implement the
statutory prohibition on collection of PFC's from passengers traveling
on frequent flyer awards.
An additional proposal clarifies that an air carrier has remitted
the PFC's to the public agency when the public agency receives the PFC
payment.
Further proposals codify current industry practice by providing for
appropriate PFC adjustments when an itinerary change is initiated by
the passenger.
Sections 158.3, 158.45, and 158.47
In response to a legislative requirement to prohibit collection of
PFC's from holders of frequent flyer tickets, the FAA is proposing to
modify Secs. 158.3, 158.45(d), and 158.47.
Section 204 of the Federal Aviation Administration Authorization
Act of 1994, Pub. L. 103-305 (August 23, 1994) (49 U.S.C.
40117(e)(2)(D)), precludes collection of a PFC from a passenger
enplaning at an airport if the passenger did not pay for the air
transportation which resulted in such enplanement, including any case
in which the passenger obtained the ticket for air transportation with
a frequent flier award coupon without monetary payment.
This provision prohibits the collection of PFC's from passengers
who obtained their ticket with an award coupon issued under a frequent
flyer or similar bonus award program.
The FAA is proposing to add a definition of ``frequent flyer award
coupon'' to the definitions in Sec. 158.3.
In addition, Sec. 158.45(d) is being modified to include non-
revenue passengers, as defined by existing Department of Transportation
regulations, and frequent flyers to the list of passengers from whom
issuing carriers and their agents shall not collect PFC's.
Finally, a paragraph prohibiting collection of PFC's from non-
revenue passengers and frequent flyers is being proposed in
Sec. 158.47.
The FAA proposes a change to Secs. 158.45(a)(3) and 158.47(c)(4) to
delete a provision requested by air carriers in the original PFC rule
that is no longer applicable under current industry ticketing
practices.
The second sentence in each paragraph currently states--
Any changes in itinerary that are initiated by a passenger that
require an adjustment to the amount paid by the passenger are subject
to collection or refund of the PFC as appropriate.
However, current industry practice is to recalculate the applicable
PFC's whenever a passenger initiates a change in itinerary, whether or
not a fare change is applicable. Therefore, each sentence would be
modified to delete the phrase ``that require an adjustment to the
amount paid by the passenger.''
Section 158.51 Remittance of PFC's
The FAA proposes a change that would clarify Sec. 158.51 that
provides for PFC's collected by a carrier to be ``remitted'' to the
public agency on a monthly basis, no later than the last day of each
calendar month.
There has been some confusion as to whether this provision is
satisfied by the act of mailing the payment to the public agency by
that date, or whether receipt by the public agency is required. The
second sentence in the paragraph currently states--
PFC revenue recorded in the accounting system of the carrier, as
set forth in Sec. 158.49 of this part, shall be remitted to the public
agency no later than the last day of the following calendar month.
This sentence is being modified by replacing the words ``remitted
to'' with the words ``received by.'' This change would make it clear
that the public agency must receive the payment to satisfy the
regulation.
[[Page 16681]]
Section 158.53 Collection Compensation
The FAA proposes to amend Sec. 158.53(a) to change the basis for
which the air carrier is compensated for handling PFC's. This proposal
is a change sought by the ATA in its petition for rulemaking.
At the time part 158 was enacted, it was felt that there would be a
relatively small proportion of itinerary changes that would result in
PFC refunds.
However, actual practice has shown larger than expected refund
activity resulting in costs for which the carriers are not being
reimbursed.
Currently, carriers are entitled to compensation only when they
``remit'' the PFC to the public agency. If refunds occur, carriers do
not receive compensation for their handling of the PFC. Under the
proposal, air carriers would be entitled to receive compensation for
each PFC at the time the ticket is first issued, or ``collected.''
Thus, the carriers would receive some compensation for all PFC
collections. Air carriers would not, however, be entitled to additional
compensation even though additional transactions, such as refunds, may
take place.
Request for Comments
The FAA solicits comments and information from all segments of the
pubic interested in the PFC program. The primary focus of this advance
notice is carrier compensation for the collection, handling, and
remittance of PFC's. All comments received by the FAA at the address
and by the date listed above will be reviewed and utilized in any
development of proposed regulations. Comments received pursuant to this
ANPRM will be analyzed and discussed in the preamble to the Proposed
Rule. Any proposed rulemaking will also be made available for public
review and comment.
Regulatory Process Matters
Economic Impact
The FAA is unable to determine at this point the likely costs in
imposing the proposals or the annual effect on the economy. Following a
review of the comments submitted to this ANPRM, the FAA will determine
what regulatory requirements will be proposed, if any, and will review
the potential costs and benefits, as required by Executive Order 12866.
Significance
This anticipated rulemaking is ``a significant regulatory action''
as defined in Executive Order 12866 and the Department of
Transportation Regulatory Policies and Procedures.
Other Regulatory Matters
At this preliminary stage it is not yet possible to determine
whether there will be a significant economic impact on a number of
small entities or what the paperwork burden might be. These regulatory
matters will be addressed at the time of publication of any NPRM on
this subject.
List of Subjects in 14 CFR Part 158
Administrative practice and procedure, Air carriers, Airport, Air
transportation, Passenger facility charge, Reporting and recordkeeping
requirements.
The Proposed Amendment
In consideration of the foregoing, the Federal Aviation
Administration proposes to amend part 158 of the Federal Aviation
Regulations (14 CFR part 158) as follows:
PART 158--PASSENGER FACILITY CHARGES (PFC'S)
1. The authority citation for part 158 continues to read as
follows:
Authority: 49 U.S.C. Secs. 40117, 47114, 47106, 47524e, and
47526.
2. Section 158.3 is amended by adding the following definition in
alphabetical order:
Sec. 158.3 Definitions.
Frequent flyer award coupon means a zero-fare award of air
transportation that an air carrier, or foreign air carrier, provides to
a passenger in exchange for accumulated travel mileage or trip credits
in a customer loyalty program. The definition of frequent flyer award
coupon does not extend to redemption of accumulated credits for awards
of additional or upgraded service on trips for which the passenger has
paid a published fare. ``Two-for-the-price-of-one'' and similar
marketing programs are not included in this definition.
3. Section 158.45 is amended by revising the second sentence of
paragraph (a)(3), and revising paragraph (d) to read as follows:
Sec. 158.45 Collection of PFC's on tickets issued in the U.S.
(a) * * *
(3) * * * Any changes in itinery that are initiated by a passenger
are subject to collection or refund of the PFC as appropriate.
* * * * *
(d) Issuing carriers and their agents shall not collect PFC's
from--
(1) A passenger on any flight to an eligible point on an air
carrier that receives essential air service compensation of that route
under 49 U.S.C. Sec. 41733, as amended by Pub. L. 103-305 (August 23,
1994);
(2) Non-revenue passengers, as defined by existing Department of
Transportation regulations; and
(3) A passenger enplaning at an airport if the passenger did not
pay for the air transportation which resulted in such enplanement,
including any case in which the passenger obtained the ticket for the
air transportation with a frequent flyer award coupon without monetary
payment.
* * * * *
4. Section 158.47 is amended by revising the second sentence of
paragraph (c)(4), and adding paragraph (i) to read as follows:
Sec. 158.47 Collection of PFC's on tickets issued outside the U.S.
* * * * *
(c) * * *
(4) * * * Any changes in itinerary that are initiated by a
passenger are subject to collection or refund of the PFC as
appropriate.
* * * * *
(i) Issuing carriers and their agents shall not collect PFC's from
non-revenue passengers, as defined by existing Department of
Transportation regulations, and passengers traveling under ``frequent
flyer award coupons.''
5. Section 158.51 is amended by revising the second sentence to
read as follows:
Sec. 158.51 Remittance of PFC's.
* * * PFC revenue reported in the accounting system of the carrier,
as set forth in Sec. 158.49 of this part, shall be received by the
public agency no later than the last day of the following calendar
month (or if that date falls on a weekend or holiday, the first
business day thereafter).
6. Section 158.53 is amended by revising paragraph (a) to read as
follows:
Sec. 158.53 Collection compensation.
* * * * *
(a) Retain $0.12 of each PFC remitted on or before June 28, 1994.
Retain $0.08 of each PFC remitted from June 29, 1994, through [date of
enactment of rulemaking]. Thereafter, air carriers shall be entitled to
$0.08 of each PFC collected; and
* * * * *
Issued in Washington, DC, on April 8, 1996.
W. Robert Billingsley,
Acting Director, Office of Airport Planning and Programming, APP-1.
[FR Doc. 96-9253 Filed 4-15-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-9184 Proposed Amendments To Require Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments and Disclosure of Qualitative and Quantitative Information About Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16674-16675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9184]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 228, 229, 239, 240, and 249
[Release Nos. 33-7281; 34-37087; IC-21876; File No. S7-35-95]
RIN 3235-AG42
Proposed Amendments To Require Disclosure of Accounting Policies
for Derivative Financial Instruments and Derivative Commodity
Instruments and Disclosure of Qualitative and Quantitative Information
About Market Risk Inherent in Derivative Financial Instruments, Other
Financial Instruments, and Derivative Commodity Instruments
AGENCY: Securities and Exchange Commission.
ACTION: Extension of Comment Period.
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SUMMARY: The expiration date of the comment period for proposals
concerning derivative financial instruments, issued on December 28,
1995 in Release No. 33-7250 (61 FR 578) is extended from May 7, 1996
until May 20, 1996. This expiration date is extended to coincide with
the last day for comments on proposals to establish a safe harbor for
disclosure about derivative instrument market risk issued on April 9,
1996 in Release No. 33-7280.
DATES: Comments should be received on or before May 20, 1996.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. Comment letters should refer to File No.
S7-35-95. All comments received will be available for public inspection
and copying in the Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549.
FOR FURTHER INFORMATION CONTACT: Cathy J. Cole, Thomas J. Linsmeier,
Russell B. Mallett, III, or Stephen M. Swad, at (202) 942-4400, Office
of the Chief Accountant, Securities and Exchange Commission, 450 Fifth
Street, N.W., Mail Stop 11-3, Washington, D.C. 20549, or Kurt R. Hohl,
at (202) 942-2960, Division of Corporation Finance, Securities and
Exchange Commission,
[[Page 16675]]
450 Fifth Street, N.W., Mail Stop 3-13, Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: Release No. 33-7250 (61 FR 578) issued on
December 28, 1995 proposed, among other things, amendments to require
disclosure of qualitative and quantitative information about market
risk inherent in derivative financial instruments, other financial
instruments, and derivative commodity instruments. The release
indicated the Commission's intention that forward looking disclosures
made pursuant to the proposed requirements be made subject to an
appropriate safe harbor. The Commission issued Release No. 33-7280 on
April 9, 1996 to propose a safe harbor. The comment period for the safe
harbor proposing release ends on May 20, 1996. In order to provide
commenters additional time to consider the proposals set forth in
Release 33-7250 in view of the proposed safe harbor, the comment period
for that release is extended until May 20, 1996.
By the Commission.
Dated: April 9, 1996.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-9184 Filed 4-15-96; 8:45 am]
BILLING CODE 8010-01-P
Complete official Federal Register PDF
FR Doc. 96-9183 Safe Harbor for Disclosure of Qualitative and Quantitative Information About Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16672-16674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9183]
[[Page 16671]]
_______________________________________________________________________
Part II
Securities and Exchange Commission
_______________________________________________________________________
17 CFR Part 210, et al.
Market Risk Inherent in Derivative Financial Instruments, Other
Financial Instruments, and Derivative Commodity Instruments; Proposed
Rules
Federal Register / Vol. 61, No. 74 / Tuesday, April 16, 1996 /
Proposed Rules
[[Page 16672]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 228, 229 and 249
[Release Nos. 33-7280; 34-37086; File No. S7-10-96]
RIN 3235-AG77
Safe Harbor for Disclosure of Qualitative and Quantitative
Information About Market Risk Inherent in Derivative Financial
Instruments, Other Financial Instruments, and Derivative Commodity
Instruments
AGENCY: Securities and Exchange Commission.
ACTION: Rule Proposals.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission (``Commission'') today
is proposing amendments that would apply the safe harbor provisions
recently added to the Securities Act of 1933 and Securities Exchange
Act of 1934 by the Private Securities Litigation Reform Act of 1995 to
specified disclosures made pursuant to proposed Item 305 of Regulation
S-K or proposed Item 9A of Form 20-F.
DATES: Comments should be received on or before May 20, 1996.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. Comments also may be submitted
electronically at the following E-mail address: rule-comments @
sec.gov. All comment letters should refer to File No. S7-10-96; this
file number should be included in the subject line if E-mail is used.
Comment letters will be available for inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Electronically submitted comment letters will be posted on
the Commission's Internet Web Site (http://www.sec.gov).
FOR FURTHER INFORMATION CONTACT: Elizabeth M. Murphy, Special Counsel,
(202) 942-2910, Division of Corporation Finance, Securities and
Exchange Commission, 450 Fifth Street, N.W., Mail Stop 3-7, Washington,
D.C. 20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to
proposed Item 305 of Regulation S-K 1 and proposed Item 9A of Form
20-F,2 as well as to Item 10 of Regulation S-B.3
---------------------------------------------------------------------------
\1\ 17 CFR Part 229.
\2\ 17 CFR 249.220f.
\3\ 17 CFR 228.10.
---------------------------------------------------------------------------
I. EXECUTIVE SUMMARY AND BACKGROUND
On December 28, 1995, the Commission issued a release 4
proposing amendments that would, among other things, require
registrants to provide disclosure of qualitative and quantitative
information about market risk inherent in derivative financial
instruments, other financial instruments, and derivative commodity
instruments (``Derivatives Proposing Release''). This disclosure would
be required pursuant to proposed new Item 305 of Regulation S-K and
proposed new Item 9A of Form 20-F.
---------------------------------------------------------------------------
\4\ Release No. 33-7250 (December 28, 1995) [61 FR 578]. The
period for comment on the proposals issued in that release was
extended from May 7, 1996 to May 20, 1996 in Release No. 33-7281
issued on April 9, 1996.
---------------------------------------------------------------------------
The Derivatives Proposing Release indicated that it is the
Commission's intention that disclosures made pursuant to the proposed
new items be made subject to a safe harbor, and stated that a release
would be forthcoming to propose an appropriate safe harbor in light of
the recently enacted Securities Litigation Reform Act of 1995
(``Litigation Reform Act'').5 The Litigation Reform Act, among
other changes, added new Section 27A 6 to the Securities Act of
1933 (``Securities Act'') 7 and new Section 21E 8 to the
Securities Exchange Act of 1934 (``Exchange Act''),9 establishing
statutory safe harbors for forward-looking information. The purpose of
this release is to propose amendments that would explicitly extend the
statutory safe harbor protections to specified disclosures that would
be provided pursuant to proposed Item 305 of Regulation S-K and
proposed Item 9A of Form 20-F.
---------------------------------------------------------------------------
\5\ Pub. L. No. 104-67, 109 Stat. 737 (1995). See Section I and
III.B.3.e of the Derivatives Proposing Release.
\6\ 15 U.S.C. 77z-2.
\7\ 15 U.S.C. 77a et seq.
\8\ 15 U.S.C. 78u-5.
\9\ 15 U.S.C. 78a et seq.
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II. DISCUSSION OF PROPOSALS
The amendments being proposed today would add a safe harbor
provision to proposed Item 305 of Regulation S-K 10 and proposed
Item 9A of Form 20-F.11 The provision would state that the safe
harbor provided in Section 27A of the Securities Act and Section 21E of
the Exchange Act will apply to quantitative information about market
risk provided pursuant to Item 305(a) of Regulation S-K or Item 9A(a)
of Form 20-F, and information about market risk with respect to future
reporting periods provided pursuant to Item 305(b)(3) of Regulation S-K
or Item 9A(b)(3) of Form 20-F.
---------------------------------------------------------------------------
\10\ Proposed paragraph (c) to proposed Item 305 of Regulation
S-K.
\11\ Proposed paragraph (c) to proposed Item 9A of Form 20-F.
---------------------------------------------------------------------------
The Commission notes that, by its terms, the statutory safe harbor
may be available with respect to disclosure required by proposed Items
305 and 9A, to the extent that all of the conditions of the statutory
safe harbor are met. By invoking its rulemaking authority under
Sections 27A and 21E, the Commission seeks to ensure the application of
the statutory safe harbor to specified disclosures under Items 305 and
9A, and to broaden the application of the statutory safe harbor with
respect to those disclosures. The Commission believes that the proposed
safe harbor protection is consistent with the public interest and the
protection of investors.
Comment is solicited as to whether it is appropriate to include a
safe harbor provision in proposed Item 305 of Regulation S-K and
proposed Item 9A of Form 20-F, and if so, whether it is appropriate to
apply the new statutory safe harbor protection to the disclosure
required by these items, or whether a different safe harbor should be
established. The proposed safe harbor is limited to paragraphs (a) and
(b)(3) of Items 305 and 9A because these appear to be the provisions
pursuant to which forward-looking information may be required. Comment
is requested on whether the proposed safe harbor should be expanded to
apply to any or all of the information required by paragraphs (b)(1)
and (b)(2) of proposed Items 305 and 9A, especially in light of the
difficult nature of the required disclosure.
As proposed, the safe harbor would be available with respect to the
specified information regardless of whether the issuer providing it or
the type of transaction otherwise is excluded from the statutory safe
harbor.12 Thus, for
[[Page 16673]]
example, first-time Commission registrants and those making initial
public offerings would be covered by the safe harbor with respect to
this specific information if all other conditions are satisfied. As is
the case with the statutory safe harbor, the proposed safe harbor would
apply only to a forward-looking statement made by: (1) an issuer; (2) a
person acting on behalf of the issuer; (3) an outside reviewer retained
by the issuer making a statement on behalf of the issuer; or (4) an
underwriter, with respect to information provided by the issuer or
information derived from information provided by the issuer. Comment is
solicited on whether all or some of the types of issuers and
transactions excluded from the statutory safe harbor also should be
excluded from the proposed safe harbor provisions.
---------------------------------------------------------------------------
\12\ Paragraph (b) of Section 27A of the Securities Act and
Section 21E of the Exchange Act exclude from the statutory safe
harbor a forward-looking statement:
(1) that is made with respect to the business or operations of
an issuer that: (A) during the three-year period preceding the date
on which the statement was first made: (i) was convicted of a felony
or misdemeanor described in clauses (i) through (iv) of Exchange Act
Section 15(b)(4)(B) [15 U.S.C. 78o(b)(4)(B)]; or (ii) has been made
the subject of a judicial or administrative decree or order arising
out of a governmental action that prohibits future violations of the
antifraud provisions of the securities laws, requires that the
issuer cease and desist from violating the antifraud provisions of
the securities laws, or determines that the issuer violated the
antifraud provisions of the federal securities laws; (B) makes the
forward-looking statement in connection with an offering of
securities by a blank check company; (C) issues penny stock; (D)
makes the forward-looking statement in connection with a rollup
transaction; or (E) makes the forward-looking statement in
connection with a going private transaction; or
(2) that is: (A) included in a financial statement prepared in
accordance with generally accepted accounting principles; (B)
contained in a registration statement of, or otherwise issued by, an
investment company; (C) made in connection with a tender offer; (D)
made in connection with an initial public offering; (E) made in
connection with an offering by, or relating to the operations of, a
partnership, limited liability company, or a direct participation
investment program; or (F) made in a disclosure of beneficial
ownership in a report required to be filed with the Commission
pursuant to Exchange Act Section 13(d) [15 U.S.C. 78m(d)].
---------------------------------------------------------------------------
As proposed, the Item 305 and 9A disclosures may be provided in
footnotes to the financial statements,13 and the safe harbor
proposed today would also be available regardless of whether the
information is set forth in text or financial statement footnotes.
Comment is requested as to whether disclosure contained in a footnote
to the financial statements, which, in the absence of Commission
rulemaking, would be excluded from the statutory safe harbor, should be
covered by the proposed safe harbor provisions, as proposed.
---------------------------------------------------------------------------
\13\ See General Instruction 5 to paragraphs (a) and (b) of
proposed Item 305 of Regulation S-K and proposed Item 9A of Form 20-
F.
---------------------------------------------------------------------------
As proposed, Item 305 information would not be required of small
business issuers complying with Regulation S-B. The safe harbor
proposed today would be available to those small business issuers that
choose to provide this information.14 To the extent that this
disclosure is voluntarily provided, however, the proposed safe harbor
protection would be available for information within the scope of
proposed Item 305(a) only if all of the information that would be
required by 305(a) were provided, rather than just a portion of it.
Similarly, the safe harbor protection would be available for
information within the scope of Item 305(b)(3) only if all of the
information required by Item 305(b) were provided. Comment is requested
as to whether the proposed safe harbor should apply to voluntarily
provided disclosures. Additionally, comment is solicited as to whether
the proposed safe harbor's application to voluntarily reported
information should depend on providing all of the disclosure that would
be required by proposed Item 305, rather than permitting compliance
with either 305(a) or 305(b) separately. Conversely, should the
proposed safe harbor apply to voluntary disclosures even when only a
portion of the information required by paragraph (a) or paragraph (b)
is provided by a small business issuer?
---------------------------------------------------------------------------
\14\ Proposed Item 10(g) to Regulation S-B.
---------------------------------------------------------------------------
III. Request for Comment
Any interested person wishing to submit written comments on the
proposed amendments as well as other matters that might have an impact
on the proposed rules, is requested to do so. The Commission also
requests comment on whether the proposed amendments, if adopted, would
have an adverse impact on competition that is neither necessary nor
appropriate in furthering the purposes of the Exchange Act. Comments
responsive to this inquiry will be considered by the Commission in
complying with its responsibilities under Section 23(a) of the Exchange
Act.15
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78w(a).
---------------------------------------------------------------------------
IV. Cost-Benefit Analysis
To evaluate fully the costs and benefits associated with the
proposed rules, the Commission requests commenters to provide their
views and data as to the costs and benefits associated therewith. It is
expected that the proposed amendments would reduce the costs to
companies that provide disclosure pursuant to proposed Items 305 and 9A
by providing protection as set forth in the safe harbor.
V. Summary of Initial Regulatory Flexibility Analysis
An Initial Regulatory Flexibility Analysis has been prepared in
accordance with 6 U.S.C. 603 concerning the proposed amendments. The
analysis notes that the purpose of the amendments proposed is to extend
the applicability of the safe harbor provisions in Section 27A of the
Securities Act and Section 21E of the Exchange Act to quantitative
information about market risk included in Securities Act and Exchange
Act documents pursuant to paragraph (a) of proposed Item 305 of
Regulation S-K or proposed Item 9A of Form 20-F, and information about
market risk with respect to future reporting periods provided pursuant
to paragraph (b)(3) of those proposed items.
As discussed more fully in the analysis, the changes would affect
persons that are small entities, as defined by the Commission's rules,
by making the safe harbor available to those small entities that
voluntarily provide such disclosure.
The analysis discusses possible alternatives to the proposed
amendments including, among others, establishing different compliance
or reporting requirements or exempting small issuers from all or part
of the proposed amendments. Given the fact that the proposed amendments
would extend protection to all issuers, including small business
issuers, disclosing information to which the safe harbor protection
applies, the Commission does not believe that any of the alternatives
are preferable at this time.
Comments are encouraged on any aspect of this analysis. A copy of
the analysis may be obtained by contacting Elizabeth M. Murphy, Office
of Disclosure Policy, Division of Corporation Finance, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
VI. Statutory Basis
The amendments to Item 10 of Regulation S-B, and proposed Item 305
of Regulation S-K and Item 9A of Form 20-F are being proposed pursuant
to Section 27A of the Securities Act and Section 21E of the Exchange
Act.
List of Subjects in 17 CFR Parts 228, 229 and 249
Reporting and recordkeeping requirements, Securities.
Text of Proposed Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is proposed to be amended as follows:
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
1. The authority citation for Part 228 continues to read as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss,
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.
[[Page 16674]]
2. By amending Sec. 228.10 by adding paragraph (g) to read as
follows:
Sec. 228.10 (Item 10) General.
* * * * *
(g) Quantitative and qualitative disclosures about market risk. The
safe harbor provision included in paragraph (c) of Item 305 of
Regulation S-K (Sec. 229.305(c) of this chapter) shall apply to
information required by paragraph (a) of Item 305 of Regulation S-K
(Sec. 229.305(a) of this chapter) that is voluntarily provided by or on
behalf of a small business issuer complying with Regulation S-B, but
only if all of the information required by Item 305(a), and not just a
portion of it, is provided. The safe harbor provision also shall apply
to statements with respect to future reporting periods provided
pursuant to paragraph (b)(3) of Item 305 of Regulation S-K
(Sec. 229.305(b)(3) of this chapter) that are voluntarily provided by
or on behalf of a small business issuer complying with Regulation S-B,
but only if all of the information required by Item 305(b)
(Sec. 229.305(b) of this chapter), and not just a portion of it, is
provided.
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
3. The authority citation for Part 229 continues to read in part as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn,
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n,
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
* * * * *
4. By amending Sec. 229.305, as provided in the Federal Register
(61 FR 593, January 8, 1996), by adding paragraph (c) after the General
Instructions to paragraphs 305(a) and 305(b) to read as follows:
Sec. 229.305 (Item 305) Quantitative and qualitative disclosures about
market risk.
* * * * *
(c) Safe Harbor. The safe harbor provided in Section 27A of the
Securities Act of 1933 (15 U.S.C. 77z-2) and Section 21E of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-5) (``statutory safe
harbors'') shall apply, with respect to all types of issuers and
transactions, to information provided pursuant to paragraph (a) of this
Item (Sec. 229.305(a)), and any statements with respect to future
reporting periods provided pursuant to paragraph (b)(3) of this Item
(Sec. 229.305(b)(3)), whether located in text or notes to financial
statements, provided that the disclosure is made by an issuer; a person
acting on behalf of the issuer; an outside reviewer retained by the
issuer making a statement on behalf of the issuer; or an underwriter,
with respect to information provided by the issuer or information
derived from information provided by the issuer.
* * * * *
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
5. The authority citation for Part 249 continues to read in part as
follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
6. By amending Form 20-F (referenced in Sec. 249.220f) by adding
paragraph (c) to Item 9A in Part I after the General Instructions to
paragraphs 9A(a) and 9A(b) to read as follows:
Note: The text of Form 20-F does not, and this amendment will
not, appear in the Code of Federal Regulations.
Form 20-F--Registration Statement Pursuant to Section 12 (b) or (g) of
the Securities Exchange Act of 1934 or Annual Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 or
Transaction Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
* * * * *
Part I
* * * * *
Item 9A. Quantitative and qualitative disclosures about market risk.
* * * * *
(c) Safe Harbor. The safe harbor provided in Section 21E of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-5) (``statutory safe
harbor'') shall apply, with respect to all types of issuers and
transactions, to information provided pursuant to paragraph (a) of this
Item, and any statements with respect to future reporting periods
provided pursuant to paragraph (b)(3) of this Item, whether located in
text or notes to financial statements, provided that the disclosure is
made by an issuer; a person acting on behalf of the issuer; an outside
reviewer retained by the issuer making a statement on behalf of the
issuer; or an underwriter, with respect to information provided by the
issuer or information derived from information provided by the issuer.
* * * * *
By the Commission.
Dated: April 9, 1996.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-9183 Filed 4-15-96; 8:45 am]
BILLING CODE 8010-01-P
Complete official Federal Register PDF
FR Doc. 96-8240 Sale of Residence From Qualified Personal Residence Trust
[Federal Register Volume 61, Number 74 (Tuesday, April 16, 1996)]
[Proposed Rules]
[Pages 16623-16625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8240]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 25
[PS-4-96]
RIN 1545-AU12
Sale of Residence From Qualified Personal Residence Trust
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
-----------------------------------------------------------------------
SUMMARY: This document contains a proposed regulation permitting the
reformation of a personal residence trust or a qualified personal
residence trust in order to comply with the applicable requirements for
such trusts. The proposed regulation also clarifies that the governing
instruments of such trusts must prohibit the sale of a residence held
in the trust to the grantor of the trust, the grantor's spouse, or an
entity controlled by the grantor or the grantor's spouse. The proposed
regulation will affect trusts created after the proposed effective
date.
DATES: Written comments and outlines of oral comments to be presented
at the public hearing scheduled for July 24, 1996, must be received by
July 15, 1996.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (PS-4-96), room 5228,
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. In the alternative, submissions may be hand
delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (PS-
4-96), Courier's Desk Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC 20224. The public hearing will be held in
the IRS auditorium, Seventh Floor, 7400 Corridor, Internal Revenue
Building, 1111 Constitution Avenue NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Dale Carlton, (202) 622-3090; concerning submissions and the hearing,
Evangelista Lee, (202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507).
Comments on the collection of information should be sent to the
Office of Management and Budget, Attn: Desk Officer for the Department
of the Treasury, Office of Information and Regulatory Affairs,
Washington, DC 20503, with copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, T:FP, Washington, DC 20224.
Comments on the collection of information should be received by June
17, 1996.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
The collection of information is in Sec. 25.2702-5. This
information is required by the IRS to ensure compliance with the
regulatory requirements. The likely respondents are individuals or
households. Responses to the collection of information are required to
obtain favorable gift tax treatment.
Books or records relating to this collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Estimated total annual reporting/recordkeeping burden: 625 hours.
The estimated annual burden per respondent varies from 3 hours to 3.25
hours depending on individual circumstances with an estimated average
of 3.1 hours.
Estimated number of respondents: 200.
Estimated annual frequency of responses: 2.
Background
This document proposes to amend the Gift Tax Regulations (26 CFR
part 25) under section 2702 relating to ``personal residence trusts''
and ``qualified personal residence trusts.''
Section 2702(a) provides special valuation rules for determining
the value of a gift when a transfer is made in trust to or for the
benefit of a member of the donor's family and the donor retains an
interest in the trust. Under section 2702(a)(2)(A), the value of any
retained interest that is not a ``qualified interest'' is treated as
zero. Therefore, the value of the gift is equal to the full value of
the property at the time of the transfer. In contrast, the value of a
retained interest that is a qualified interest is determined under the
valuation tables prescribed pursuant to section 7520. Section 2702(b)
provides that a qualified interest means an annuity interest, a
unitrust interest, or a remainder interest after either an annuity or
unitrust interest.
Congress recognized that many people desire to maintain the family
ownership of their home and pass ownership on to future generations,
while retaining its use for a period of time. The annuity and unitrust
requirements are not, however, conducive to the transfer of a
residence. Accordingly, section 2702(a)(3)(A)(ii) provides an exception
to the annuity and unitrust requirements. Under this limited exception,
the grantor's retained interest need not be in one of these forms, but
rather can take the form of a right to the use and occupancy of the
residence. Because this is an exception to the general rule of section
2702, a grantor may take into account not only the value of the
retained interest, but also any contingent reversionary interest, in
determining the amount of the gift to the remainderman.
The requirements of section 2702(a)(3)(A)(ii) are satisfied by a
personal residence trust and a qualified personal residence trust as
set forth in the regulations. The governing instruments of these trusts
must prohibit the trust from holding, for the original duration of the
term interest, assets other than one residence to be used or held for
the use as a personal residence of the term holder. In addition, a
qualified personal residence trust can hold limited amounts of cash for
certain specified purposes such as the payment of operating expenses
and expenses for the improvement or replacement of the residence, and
the trustee is permitted to sell the residence during the original
duration of the term interest, if certain requirements are satisfied.
If the trust does not qualify as a personal residence trust or a
qualified personal residence trust, the grantor's retained interest is
valued at zero under section 2702. This is the result even where the
lack of compliance with the requirements in the regulations is the
result of error or poor advice. As most errors are discovered at the
time the gift tax return is prepared, the proposed regulation permits
reformation of the
[[Page 16624]]
trust to be commenced up to 90 days after the gift tax return is due. A
properly reformed trust will be treated as satisfying the regulatory
requirements.
Questions have arisen as to whether it is permissible for the
grantor to place a personal residence in trust, obtain all the tax
benefits of a qualified personal residence trust and then purchase the
residence from the trust. For example, in a transaction described by
one commentator as the ``bait and switch,'' the grantor places the
residence in trust with the intention of purchasing the residence from
the trust just prior to the expiration of the grantor's retained term
so that cash or other assets pass to the remaindermen in place of the
residence.
The Treasury Department and the IRS have previously stated the view
that Congress intended the personal residence trust exception to enable
transferors to pass the family home to younger members of the family.
Preamble to TD 8395, 1992-1 C.B. 316, at 319. Using the ``bait and
switch'' technique, however, the personal residence trust exception
could be used to facilitate the transfer of the grantor's other assets
to future generations. The residence would merely serve as a temporary
``stand-in'' to avoid the annuity and unitrust requirements of section
2702. The proposed regulations clarify that the sale of the residence
to the grantor by the trustee of the personal residence trust or
qualified personal residence trust is not consistent with Congress'
intent in enacting section 2702.
Explanation of Provisions
The proposed regulation provides that a trust that does not comply
with one or more of the regulatory requirements for qualification as a
personal residence trust or a qualified personal residence trust, will
be treated as satisfying those requirements if the trust is reformed by
judicial reformation (or nonjudicial reformation if effective under
state law) to comply with the requirements. The reformation must be
commenced within 90 days of the due date (including extensions) for
filing the gift tax return reporting the transfer of the residence, and
must be completed within a reasonable time after commencement. If the
reformation is not completed by the due date (including extensions) for
filing the gift tax return, the grantor or grantor's spouse must attach
a statement to the gift tax return stating that the reformation has
been commenced, or will be commenced within the 90-day period.
The proposed regulation also requires that, in order to qualify as
a personal residence trust or a qualified personal residence trust, the
trust's governing instrument must prohibit the trust from selling or
transferring the residence, directly or indirectly, to the grantor, the
grantor's spouse, or an entity controlled by the grantor or the
grantor's spouse. A sale or transfer to another grantor trust of the
grantor or the grantor's spouse is considered a sale or transfer to the
grantor or the grantor's spouse. For these purposes, the term grantor
trust is a trust treated as owned by the grantor or the grantor's
spouse within the meaning of sections 671-677. The term control is
defined in Sec. 25.2701-2(b)(5) (ii) and (iii).
Proposed Effective Date
The amendments to Secs. 25.2702-5(b) and (c) are proposed to be
effective for trusts created after May 16, 1996. Thus, a trust created
after this date will not satisfy the requirements of a personal
residence trust or a qualified personal residence trust if the trust
document does not comply with the regulations, as amended. Such a trust
would be eligible for reformation under the proposed regulation.
Notwithstanding the proposed effective date, if the IRS examines a
pre-effective date trust and finds it inconsistent with the purposes of
section 2702 or the regulations thereunder, the IRS, by using
established legal doctrines such as the substance over form doctrine,
may treat the trust as not qualifying under section 2702. Thus, for
example, if the grantor actually purchases the residence from the trust
pursuant to a right or option to purchase that is stated in the trust
instrument or a collateral document, the IRS may not treat the trust as
a qualified personal residence trust.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 12866. Therefore,
a regulatory assessment is not required. It has also been determined
that section 553(b) of the Administrative Procedures Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do
not apply to these regulations and, therefore, a Regulatory Flexibility
Analysis is not required. Pursuant to section 7805(f) of the Internal
Revenue Code, this notice of proposed rulemaking will be submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.
Comments and Public Hearing
Before this proposed regulation is adopted as a final regulation,
consideration will be given to any written comments (a signed original
and eight (8) copies) that are submitted timely to the IRS. All
comments will be available for public inspection and copying. A public
hearing has been scheduled for July 24, 1996, at 10 a.m. in the
auditorium, Internal Revenue Building, 1111 Constitution Avenue NW.,
Washington, DC. Because of access restrictions, visitors will not be
admitted beyond the building lobby more than 15 minutes before the
hearing starts.
The rules of 26 CFR 601.601(a)(3) apply to the hearing.
Persons that wish to present oral comments at the hearing must
submit written comments by July 15, 1996 and an outline of the topics
to be discussed and the time to be devoted to each topic. A period of
10 minutes will be allotted each person for making comments.
An agenda showing the scheduling of speakers will be prepared after
the deadline for receiving outlines has passed. Copies of the agenda
will be available free of charge at the hearing.
Drafting Information
The principal author of this regulation is Dale Carlton, Office of
the Assistant Chief Counsel (Passthroughs and Special Industries).
However, personnel from other offices of the IRS and Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 25
Gift taxes, Reporting and recordkeeping requirements.
Proposed Amendment to the Regulations
Accordingly, 26 CFR part 25 is proposed to be amended as follows:
PART 25--GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954
Paragraph 1. The authority citation for part 25 continues to read
in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 25.2702-5 is amended as follows:
1. Paragraph (a) is redesignated as paragraph (a)(1) and paragraph
(a)(2) is added.
2. In paragraph (b)(1), four new sentences are added after the
third sentence.
3. Paragraph (c)(5)(ii)(C) is revised.
4. Paragraph (c)(9) is added.
The additions and revisions read as follows:
[[Page 16625]]
Sec. 25.2702-5 Personal residence trusts.
(a)(1) In general. * * *
(2) Modification of trust. A trust that does not comply with one or
more of the regulatory requirements under paragraph (b) or (c) of this
section will, nonetheless, be treated as satisfying these requirements
if the trust is modified, by judicial reformation (or nonjudicial
reformation if effective under state law), to comply with the
requirements. The reformation must be commenced within 90 days after
the due date (including extensions) for the filing of the gift tax
return reporting the transfer of the residence under section 6075 and
must be completed within a reasonable time after commencement. If the
reformation is not completed by the due date (including extensions) for
filing the gift tax return, the grantor or grantor's spouse must attach
a statement to the gift tax return stating that the reformation has
been commenced or will be commenced within the 90-day period.
(b) * * * (1) * * * In addition, the trust does not meet the
requirements of this section unless the governing instrument prohibits
the trust from selling or transferring the residence, directly or
indirectly, to the grantor, the grantor's spouse, or an entity
controlled by the grantor or the grantor's spouse, at any time after
the original term interest during which the trust is a grantor trust.
For purposes of the preceding sentence, a sale or transfer to another
grantor trust of the grantor or the grantor's spouse is considered a
sale or transfer to the grantor or the grantor's spouse. For purposes
of this section, a grantor trust is a trust treated as owned by the
grantor or the grantor's spouse within the meaning of sections 671-677.
The term control is defined in Sec. 25.2701-2(b)(5) (ii) and (iii). * *
*
* * * * *
(c) * * *
(5) * * *
(ii) * * *
(C) Sale proceeds. The governing instrument may permit the sale of
the residence (except as set forth in paragraph (c)(9) of this section)
and may permit the trust to hold proceeds from the sale of the
residence, in a separate account.
* * * * *
(9) Sale of residence to grantor, grantor's spouse, or entity
controlled by grantor or grantor's spouse. The governing instrument
must prohibit the trust from selling or transferring the residence,
directly or indirectly, to the grantor, the grantor's spouse, or an
entity controlled by the grantor or the grantor's spouse during the
original term interest of the trust, or at any time after the original
term interest that the trust is a grantor trust. For purposes of the
preceding sentence, a sale or transfer to another grantor trust of the
grantor or the grantor's spouse is considered a sale or transfer to the
grantor or the grantor's spouse. For purposes of this section, a
grantor trust is a trust treated as owned by the grantor or the
grantor's spouse within the meaning of sections 671-677. The term
control is defined in Sec. 25.2701-2(b)(5) (ii) and (iii).
* * * * *
Par. 3. Section 25.2702-7 is amended as follows:
1. The first sentence of this section is revised; and
2. A new sentence is added at the end of the section, to read as
follows:
Sec. 25.2702-7 Effective dates.
Except as provided in this section, Secs. 25.2702-1 through
25.2702-6 are effective as of January 28, 1992. * * * The fourth
through seventh sentences of Sec. 25.2702-5(b)(1) and Sec. 25.2702-
5(c)(9) are effective with respect to trusts created after May 16,
1996.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 96-8240 Filed 4-15-96; 8:45 am]
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