Federal Register Vol. 80, No.182,

On December 19, 2014, the Office of Management and Budget published an interim final rule that provided comprehensive modifications to the principles and requirements for federal awards. 79 FR 75871. The uniform rules were published as 2 CFR part 200. As part of that rulemaking, IMLS adopted part 200, along with an agency-specific addendum in a new part 3187.

IMLS received no relevant comments in response to the rule. Therefore, 2 CFR part 3187, as described in the interim final rule, is adopted with no changes.

For the regulatory findings regarding this rulemaking, please refer to the analysis prepared by OIRA in the interim final rule, which is incorporated herein. 79 FR at 75876.

A. Substantive Discussion: Revocation of Departmental Component

The Director of OGE (Director) is authorized by 18 U.S.C. 207(h) to designate distinct and separate departmental or agency components in the executive branch for purposes of 18 U.S.C. 207(c). The representational bar of 18 U.S.C. 207(c) usually extends to the whole of any department or agency in which a former senior employee served in any capacity during the year prior to termination from a senior employee position. However, 18 U.S.C. 207(h) provides that whenever the Director determines that an agency or bureau within a department or agency in the executive branch exercises functions which are distinct and separate from the remaining functions of the department or agency and there exists no potential for use of undue influence or unfair advantage based on past Government service, the Director shall by rule designate such agency or bureau as a separate component of that department or agency. As a result, a former senior employee who served in a “parent” department or agency is not barred by 18 U.S.C. 207(c) from making communications to or appearances before any employees of any designated component of that parent, but is barred as to employees of that parent or of other components that have not been separately designated. Moreover, a former senior employee who served in a designated component of a parent department or agency is barred from communicating to or making an appearance before any employee of that component, but is not barred as to any employee of the parent, of another designated component, or of any other agency or bureau of the parent that has not been designated.

Under 18 U.S.C. 207(h)(2), component designations do not apply to persons employed at a rate of pay specified in or fixed according to subchapter II of 5 U.S.C. chapter 53 (the Executive Schedule). Component designations are listed in appendix B to 5 CFR part 2641.

The Director regularly reviews the component designations and determinations and, in consultation with the department or agency concerned, makes such additions and deletions as are necessary. Specifically, the Director “shall, by rule, make or revoke a component designation after considering the recommendation of the designated agency ethics official.” 5 CFR 2641.302(e)(3). Before designating an agency component as distinct and separate for purposes of 18 U.S.C. 207(c), the Director must find that there exists no potential for use of undue influence or unfair advantage based on past Government service, and that the component is an agency or bureau, within a parent agency, that exercises functions which are distinct and separate from the functions of the parent agency and from the functions of other components of that parent. 5 CFR 2641.302(c)(1).

Pursuant to the procedures prescribed in 5 CFR 2641.302(e), one department forwarded a written request to OGE to amend its listing in appendix B. After carefully reviewing the requested change in light of the criteria in 18 U.S.C. 207(h) as implemented in 5 CFR 2641.302(c), the Director has determined to grant this request and amend appendix B to 5 CFR part 2641 as explained below.

The Department of the Interior (DOI) has requested that OGE remove the Minerals Management Service (MMS) from its list of component designations. Pursuant to DOI Secretarial Order No. 3299 dated May 19, 2010, the Secretary of the Interior divided MMS into three independent entities and MMS ceased to exist, effective that same date. Because MMS no longer exists, the Director is granting the request of the Department of the Interior and is amending the Department of the Interior listing in appendix B to part 2641 to remove MMS from the component designation list.

As indicated in 5 CFR 2641.302(f), revocation is effective 90 days after the effective date of the rule that revokes the designation. Accordingly, the component designation revocation made in this rulemaking will take effect December 21, 2015. Revocations are not effective as to any individual terminating senior service prior to the expiration of the 90-day period.

As Director of OGE, I certify under the Regulatory Flexibility Act (5 U.S.C. chapter 6) that this final rule will not have a significant economic impact on a substantial number of small entities because it affects only Federal departments and agencies and current and former Federal employees.

The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply to this final rule because it does not contain information collection requirements that require the approval of the Office of Management and Budget.

For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. chapter 25, subchapter II), this final rule will not significantly or uniquely affect small governments and will not result in increased expenditures by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more (as adjusted for inflation) in any one year.

OGE has determined that this rulemaking involves a non-major rule under the Congressional Review Act (5 U.S.C. chapter 8) and will submit a report thereon to the U.S. Senate, House of Representatives and Government Accountability Office in accordance with that law at the same time this rulemaking document is sent to the Office of the Federal Register for publication in the Federal Register.

In promulgating this final rule, OGE has adhered to the regulatory philosophy and the applicable principles of regulation set forth in Executive Orders 12866 and 13563. This rule has not been reviewed by the Office of Management and Budget because it deals with agency organization, management, and personnel matters and is not “significant” for purposes of Executive Order 12866.

As Director of OGE, I have reviewed this final rule in light of section 3 of Executive Order 12988, Civil Justice Reform, and certify that it meets the applicable standards provided therein.

Accordingly, for the reasons set forth in the preamble, OGE is amending 5 CFR part 2641 as follows:

The U.S. Department of Energy (DOE) published a final rule in the Federal Register on July 21, 2015 (“the July 2015 final rule”) amending energy conservation standards for packaged terminal air conditioners and packaged terminal heat pumps 80 FR 43162. This correction addresses a table labeling error in the regulatory text of the July 2015 final rule. The instruction amending 10 CFR 431.97 in that rule revised paragraph (c) and incorrectly referenced the tables within as tables 4 and 5. This instruction put the table numbers in conflict with a previous amendment of July 17, 2015, which incorporated table 4 into paragraph (b). 80 FR 42614. The substance of the tables is correct, however, and is to be retained. In order to remedy this error, DOE is issuing a final rule correction to eliminate any table number conflicts, as set forth below.

This rule corrects in 10 CFR 431.97, paragraph (c) all references to Table 4 and Table 5 to read as Table 5 and Table 6, respectively. The effective date for this rule is September 21, 2015.

In FR Doc. 2015-16897, published in the issue of Tuesday, July 21, 2015 (80 FR 43162), on page 43212, in the second column, amendatory instruction 2 is corrected to read as follows:

The Bureau is amending the regulatory text and official interpretations for Regulation Z, which implements TILA, to update the dollar amounts of various thresholds that are adjusted annually based on the annual percentage change in the Consumer Price Index. The adjusted dollar amount for the penalty fees safe harbor in 2016 is $27 for a first late payment and $37 for each subsequent violation within the following six months. For HOEPA loans, the adjusted total loan amount threshold is $20,350, effective January 1, 2016. The adjusted statutory fee trigger for HOEPA loans is $1,017, effective January 1, 2016. Effective January 1, 2016, for the purpose of a creditor's determination of a consumer's ability to repay a transaction secured by a dwelling, a covered transaction is not a qualified mortgage unless the transaction's total points and fees do not exceed 3 percent of the total loan amount for a loan greater than or equal to $101,749; $3,052 for a loan amount greater than or equal to $61,050 but less than $101,749; 5 percent of the total loan amount for a loan greater than or equal to $20,350 but less than $61,050; $1,017 for a loan amount greater than or equal to $12,719 but less than $20,350; and 8 percent of the total loan amount for a loan amount less than $12,719.

In 2010, the Board of Governors of the Federal Reserve System (Board) published amendments to Regulation Z implementing the CARD Act, which amended TILA. Pub. L. 111-24, 123 Stat. 1734 (2009). Pursuant to the CARD Act, the Board's Regulation Z amendments established new requirements with respect to open-end consumer credit plans, including requirements for the disclosure of minimum interest charge amounts and the establishment of a safe harbor provision allowing card issuers to impose penalty fees for violating account terms without violating the restrictions on penalty fees established by the CARD Act. See 75 FR 7658, 7799 (Feb. 22, 2010) and 75 FR 37526, 37527 (June 29, 2010). The final rule issued by the Board required that these thresholds be calculated annually using the Consumer Price Index as published by the Bureau of Labor Statistics (BLS).1

Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) of the Bureau's Regulation Z provide that the minimum interest charge thresholds will be re-calculated annually using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that was in effect on the preceding June 1. When the cumulative change in the adjusted minimum value derived from applying the annual CPI-W level to the current amounts in §§ 1026.6(b)(2)(iii) and 1026.60(b)(3) has decreased by a whole dollar, the minimum interest charge amounts set forth in the regulation will be decreased by $1.00. This adjustment is based on the CPI-W index in effect on June 1, 2015, which was reported on May 22, 2015. The BLS publishes consumer-based indices monthly, but does not report a CPI change on June 1; adjustments are reported in the middle of the month. The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 28 percent of the U.S. population. The adjustment reflects a 0.8 percent decrease in the CPI-W from April 2014 to April 2015 and is rounded to the nearest $1 increment. This decrease in the CPI-W when applied to the current amounts in §§ 1026.6(b)(2)(iii) and 1026.60(b)(3) did not trigger a decrease in the minimum interest charge threshold of at least $1.00, and therefore the Bureau is not amending §§ 1026.6(b)(2)(iii) and 1026.60(b)(3).

The Bureau's Regulation Z provides that the safe harbor provision which establishes the permissible fee thresholds in § 1026.52(b)(1)(ii)(A) and (B) will be re-calculated annually using the CPI-W that was in effect on the preceding June 1. The BLS publishes consumer-based indices monthly, but does not report a CPI change on June 1; adjustments are reported in the middle of the month. This adjustment is based on the CPI-W index in effect on June 1, 2015, which was reported on May 22, 2015. The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 28 percent of the U.S. population. When the cumulative change in the adjusted minimum value derived from applying the annual CPI-W level to the current amounts in § 1026.52(b)(1)(ii)(A) and (B) has risen by a whole dollar, those amounts will be increased by $1.00. Similarly, when the cumulative change in the adjusted minimum value derived from applying the annual CPI-W level to the current amounts in § 1026.52(b)(1)(ii)(A) and (B) has decreased by a whole dollar, those amounts will be decreased by $1.00. See comment 52(b)(1)(ii)-2. The adjustment to the permissible fee thresholds being adopted here reflects a 0.8 percent decrease in the CPI-W from April 2014 to April 2015 and is rounded to the nearest $1 increment.

On January 10, 2013, the Bureau issued a final rule pursuant to, inter alia, section 1431 of the Dodd-Frank Act, which revised the loan amount threshold for HOEPA loans. 78 FR 6856 (Jan. 31, 2013) (2013 HOEPA Final Rule). The 2013 HOEPA Final Rule adjusted the dollar amount threshold used in connection with calculating whether a transaction meets the percentage point thresholds in the points and fees coverage test to $20,000. Specifically, under § 1026.32(a)(1)(ii)(A) and (B), when determining whether a transaction is a high cost mortgage, the determination of the applicable points and fees coverage test is based upon whether the total loan amount is for more or less than $20,000. The HOEPA 2013 Final Rule provides that this threshold amount be recalculated annually and the Bureau uses the Consumer Price Index for All Urban Consumers (CPI-U) index, as published by the BLS, as the index for adjusting the $20,000 figure. The CPI-U is based on all urban consumers and represents approximately 88 percent of the U.S. population. The BLS publishes consumer-based indices monthly, but does not report a CPI change on June 1; adjustments are reported in the middle of each month. The adjustment to the CPI-U index reported by BLS on May 22, 2015, was the CPI-U index in effect on June 1, and reflects the percentage change from April 2014 to April 2015. The adjustment to the $20,000 figure being adopted here reflects a 0.2 percent decrease in the CPI-U index for this period and is rounded to whole dollars for ease of compliance.

Pursuant to section 1431 of the Dodd-Frank Act and § 1026.32(a)(1)(ii)(B) as amended by the 2013 HOEPA Final Rule, implementation of the 2013 HOEPA Final Rule also changed the HOEPA fee trigger to $1,000. The HOEPA 2013 Final Rule provides that this threshold amount will be recalculated annually and the Bureau uses the CPI-U index, as published by the BLS, as the index for adjusting the $1,000 figure. The adjustment to the CPI-U index reported by BLS on May 22, 2015, was the CPI-U index in effect on June 1, and reflects the percentage change from April 2014 to April 2015. The adjustment to the $1,000 figure being adopted here reflects a 0.2 percent decrease in the CPI-U index for this period and is rounded to whole dollars for ease of compliance.

On January 10, 2013, the Bureau issued a final rule pursuant to, inter alia, sections 1411 and 1412 of the Dodd-Frank Act, which implemented laws requiring mortgage lenders to consider a consumer's ability to repay home loans before extending them credit. 78 FR 6407 (Jan. 31, 2013) (2013 ATR/QM Final Rule). The 2013 ATR/QM Final Rule established the points and fees limits that a loan must not exceed in order to satisfy the requirements for a qualified mortgage. Specifically, a covered transaction is not a qualified mortgage unless the transaction's points and fees do not exceed 3 percent of the total loan amount for a loan amount greater than or equal to $100,000; $3,000 for a loan amount greater than or equal to $60,000 but less than $100,000; 5 percent of the total loan amount for loans greater than or equal to $20,000 but less than $60,000; $1,000 for a loan amount greater than or equal to $12,500 but less than $20,000; and 8 percent of the total loan amount for loans less than $12,500. The 2013 ATR/QM Final Rule provides that the limits and loan amounts in 1026.43(e)(3)(i) be recalculated annually for inflation and the Bureau uses the Consumer Price Index for All Urban Consumers (CPI-U) index, as published by the BLS, as the index for adjusting the figures. The CPI-U is based on all urban consumers and represents approximately 88 percent of the U.S. population. The BLS publishes consumer-based indices monthly, but does not report a CPI change on June 1; adjustments are reported in the middle of each month. The adjustment to the CPI-U index reported by BLS on May 22, 2015, was the CPI-U index in effect on June 1, and reflects the percentage change from April 2014 to April 2015. The adjustment to the figures being adopted here reflects a 0.2 percent decrease in the CPI-U index for this period and is rounded to whole dollars for ease of compliance.

The minimum interest charge amounts for §§ 1026.6(b)(2)(iii) and 1026.60(b)(3) will remain unchanged for the year 2016. Accordingly, the Bureau is not amending these sections.

Effective January 1, 2016, the permissible fee threshold amounts are $27 for § 1026.52(b)(1)(ii)(A) and $37 for § 1026.52(b)(1)(ii)(B). The $27 amount provided for in § 1026.52(b)(1)(ii)(A) did not change based on the decrease in CPI-W, but the amount provided for in § 1026.52(b)(1)(ii)(B) did decrease by one dollar. Accordingly, the Bureau is revising § 1026.52(b)(1)(ii)(B) to state that the fee imposed for violating the terms or other requirements of an account shall not exceed $37. The Bureau is also amending comment 52(b)(1)(ii)-2.i to preserve a list of the historical thresholds for this provision.

Effective January 1, 2016, for purposes of determining the total loan amount threshold that determines whether a transaction is a high cost mortgage when the points and fees are either 5 percent or 8 percent 2 is $20,350. Comment 32(a)(1)(ii)-3, which lists the adjustments for each year, is amended to reflect the new dollar threshold amount for 2016.

Effective January 1, 2016, for purposes of determining whether a consumer credit transaction that is secured by a consumer's principal dwelling and is not otherwise exempt is covered by § 1026.32 (based on the total points and fees payable by the consumer at consummation), a loan is covered if the points and fees exceed $1,017 or 8 percent of the total loan amount, whichever is lower. Comment 32(a)(1)(ii)-1, which lists the adjustments for each year, is amended to reflect the new dollar threshold amount for 2016.

Effective January 1, 2016, for purposes of determining whether a covered transaction is a qualified mortgage, a covered transaction is not a qualified mortgage unless the transaction's total points and fees do not exceed 3 percent of the total loan amount for a loan amount greater than or equal to $101,749; $3,052 for a loan amount greater than or equal to $61,050 but less than $101,749; 5 percent of the total loan amount for loans greater than or equal to $20,350 but less than $61,050; $1,017 for a loan amount greater than or equal to $12,719 but less than $20,350, and 8 percent of the total loan amount for loans less than $12,719. Comment 43(e)(3)(ii)-1, which lists the adjustments for each year, is amended to reflect the new dollar threshold amounts for 2016.

Under the Administrative Procedure Act (APA), notice and opportunity for public comment are not required if the Bureau finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this final rule in Regulation Z, § 1026.52(b)(1)(ii)(B) in subpart E is amended and comments 32(a)(1)(ii)-3.ii, 43(e)(3)(ii)-1.ii, 52(b)(1)(ii)-2.i.C in supplement I are added to update the exemption thresholds. The amendments in this final rule are technical and non-discretionary, and they merely apply the method previously established in Regulation Z for determining adjustments to the thresholds. For these reasons, the Bureau has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are adopted in final form.

Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320), the Bureau reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule.

For the reasons set forth in the preamble, the Bureau amends Regulation Z, 12 CFR part 1026, as set forth below:

The United States maintains a comprehensive embargo on trade with Cuba. Pursuant to that embargo, all items that are subject to the Export Administration Regulations (EAR) require a license for export or reexport to Cuba unless authorized by a license exception. The Bureau of Industry and Security (BIS) administers export and reexport restrictions on Cuba consistent with U.S. policy and relevant law. Accordingly, BIS may issue specific or general authorizations in the form of licenses or license exceptions for transactions that support the goals of United States policy while the embargo remains in effect.

On December 17, 2014, the President announced that the United States is taking steps to chart a new course in bilateral relations with Cuba and to further engage and empower the Cuban people. The President explained that these steps build upon actions taken since 2009 that have been aimed at supporting the ability of the Cuban people to gain greater control over their own lives and determine their country's future. On January 16, 2015, the Commerce and Treasury Departments took coordinated actions to implement certain elements of this policy, including changes to licensing policy and license exceptions in the EAR that are consistent with U.S. support for the Cuban people (see 80 FR 2286 and 80 FR 2291). Additionally, BIS published a rule implementing the May 29, 2015 rescission of Cuba's State Sponsor of Terrorism designation on July 22, 2015 (see 80 FR 43314).

The Commerce and Treasury Departments are taking additional coordinated actions in support of the President's Cuba policy. This rule amends the terms of existing license exceptions that are available for Cuba, increases the number of license exception provisions that are available for Cuba, and creates a new licensing policy in the EAR to further promote private sector economic activity in Cuba, facilitate travel to Cuba for authorized purposes, and help ensure safety in civil aviation and safe operation of commercial passenger aircraft. This rule also makes the deemed export and deemed reexport license requirements for Cuba consistent with other sanctioned destinations.

This rule revises § 740.21(b) and (d)(1) of the EAR to remove a requirement that items must be sold or donated when exported or reexported to authorized end-users in Cuba under License Exception Support for the Cuban People (SCP). Paragraph (b) authorizes certain exports and reexports to improve living conditions and support independent economic activity in Cuba. Paragraph (d)(1) authorizes certain exports and reexports to improve the free flow of information to, from, and among the Cuban people. When License Exception SCP was created in January 2015, BIS included text regarding sales or donations in paragraphs (b) and (d)(1) to clarify that the provisions were not limited to exports and reexports of donated items. However, the construction of the sentences addressing sales or donations inadvertently precluded other types of exports and reexports intended to be covered under the license exception, such as those involving leased or loaned items. Consequently, BIS is removing the portions of paragraphs (b) and (d)(1) of License Exception SCP that refer to sales or donations of items to eliminate those unintended restrictions.

This rule revises paragraph (c)(2) of License Exception SCP to authorize certain temporary reexports to Cuba. Paragraph (c)(2) previously authorized certain temporary exports of items to Cuba from the United States for use in scientific, archeological, cultural, ecological, educational, historic preservation, or sporting activities, or in the traveler's professional research. This change authorizes travelers departing the United States or a foreign country to temporarily export or reexport authorized items to Cuba for eligible end-uses. Additionally, this rule adds professional meetings to the list of eligible end-uses in paragraph (c)(2). This rule also introduces a requirement that the items remain under the traveler's “effective control.” The existing EAR definition of effective control in § 772.1 applies to this use of the term. Eligible items continue to be limited to items subject to the EAR but not specified in any Export Control Classification Number (ECCN), i.e., EAR99) or controlled on the Commerce Control List (CCL) only for anti-terrorism reasons.

This rule adds a new paragraph (d)(4) to License Exception SCP to authorize exports and reexports of commodities and software to individuals and private sector entities in Cuba that will be used to develop software that will improve the free flow of information or that will support the private sector activities described in paragraph (b) of License Exception SCP. The Cuban Government, Cuban Communist Party and certain officials thereof are designated as ineligible end users for commodities and software exported under paragraph (d)(4). Existing text in paragraph (d) limits the commodities and software authorized for export or reexport under this new paragraph (d)(4) to those that are either EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL for anti-terrorism reasons only. For example, to qualify for export or reexport under new paragraph (d)(4), a general purpose software development kit must be either EAR99 or controlled in an ECCN where the only reason for control that applies to that kit is anti-terrorism and the kit's use in Cuba must be to develop software that will improve the free flow of communication and/or that will support the private sector activities described in paragraph (b) of License Exception SCP.

This rule adds a new paragraph (e) to License Exception SCP. Paragraph (e)(1) authorizes the export and reexport to Cuba of certain items for use by United States Persons (as defined in § 772.1 of the EAR) to establish, maintain, or operate a physical presence in Cuba. Any resulting payments associated with such a physical presence, such as lease payments, are permitted only to the extent authorized by § 515.573 of the Cuban Assets Control Regulations (31 CFR 515.573). To be eligible for the exception under paragraph (e)(1), the end-users must be (1) entities organizing or conducting educational activities in Cuba authorized by the Department of the Treasury, Office of Foreign Assets Control (OFAC) pursuant to 31 CFR 515.565(a); (2) entities providing mail or parcel transmission services authorized by OFAC pursuant to 31 CFR 515.542(a) or providing cargo transportation services in connection with trade involving Cuba authorized by OFAC or exempt from the prohibitions of 31 CFR part 515 as specified in 31 CFR 515.206; (3) religious organizations engaging in religious activities in Cuba authorized by OFAC pursuant to 31 CFR 515.566; (4) persons engaged in transactions authorized by OFAC pursuant to 31 CFR 515.559(b); (5) persons that export or reexport items to Cuba that are exempt from the prohibitions of 31 CFR part 515 as specified in 31 CFR 515.206; (6) providers of travel services or carrier services authorized by OFAC pursuant to 31 CFR 515.572; or (7) persons that export or reexport to Cuba pursuant to a license issued by BIS or a license exception authorized by § 746.2(a)(1) of the EAR.

Items eligible for export and reexport to Cuba pursuant to paragraph (e)(1) of License Exception SCP are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.

Paragraph (e)(2) of License Exception SCP authorizes the export and reexport to Cuba of certain items for use by certain additional eligible end-users to establish, maintain, and operate a physical presence in Cuba. Any resulting payments associated with such a physical presence, such as lease payments, are permitted only to the extent authorized by § 515.573 of the Cuban Assets Control Regulations (31 CFR 515.573). To be eligible for paragraph (e)(2), the end-users must be authorized by OFAC to provide telecommunications services and establish telecommunications facilities pursuant to 31 CFR 515.542(b)-(e) or to provide internet-based services pursuant to 31 CFR 515.578, including subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any entity or individual who is a national of Cuba. The items authorized pursuant to paragraph (e)(2) are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.

Paragraph (e)(3) of License Exception SCP authorizes the export and reexport to Cuba of certain items to be given away for free as gifts for promotional purposes, such as pens, notepads, hats, and t-shirts. Items eligible for export or reexport to Cuba pursuant to paragraph (e)(3) are limited to those items of a type normally given away for free as gifts for promotional purposes that are designated as EAR99.

BIS is creating paragraph (e) of License Exception SCP to facilitate engagement between the U.S. and Cuban people; the free flow of information to, from, and among the Cuban people; and independent economic activity in Cuba generated by Cuba's private sector.

This rule also creates new paragraph (f) to License Exception SCP to authorize certain temporary (not to exceed one year) exports and reexports to Cuba of EAR99 items and items controlled on the CCL only for anti-terrorism reasons. Paragraph (f) authorizes exports and reexports of the following:

• Commodities and software as tools of trade for use by the exporters or employees of the exporters to install, service or repair items that are subject to the EAR and that have been exported or reexported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;

• Technology as tools of trade for use by certain persons for the installation, servicing or repair of items that are subject to the EAR and that have been exported or reexported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;

• Kits of replacement parts or components for items that have been exported or reexported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;

• Commodities and software for exhibition or demonstration at trade shows or to parties eligible to receive items under License Exception SCP; and

• Containers that are necessary for shipment of commodities being exported or reexported to Cuba under a license or license exception; BIS is creating paragraph (f) of License Exception SCP to help support authorized travel and commerce.

This rule revises § 740.19(a) of the EAR to remove references to sales or donations of eligible items authorized under License Exception CCD. License Exception CCD authorizes certain exports and reexports to improve the free flow of information to, from, and among the Cuban and Sudanese people. When License Exception CCD was created in September 2009 to authorize certain exports and reexports to Cuba, the license exception included a donation requirement. BIS revised License Exception CCD in January 2015 to authorize sales, in addition to donations, and to update the list of eligible items. (Sudan was added as an authorized destination in February 2015.) Instead of merely removing the word “donated” from paragraph (a) of License Exception CCD, the January 2015 revision added the phrase “either sold or” to that paragraph. That phrasing inadvertently precluded other types of exports and reexports intended to be authorized by the license exception, such as those involving leased or loaned items. Consequently, this rule removes phrase “either sold or donated” from paragraph (a) to eliminate that unintended restriction.

This rule revises § 746.2(a)(1)(x) of the EAR to make paragraphs (b) and (d) of License Exception AVS available for Cuba. It also amends § 740.15(b) and (d) of the EAR to add to License Exception AVS paragraphs (b)(4) and (d)(6) described below that apply only to Cuba.

Paragraph (b) of License Exception AVS authorizes certain exports and reexports of equipment and spare parts for permanent use on vessels and aircraft departing the United States. The paragraph also authorizes certain exports of ship and plane stores for use on board vessels and aircraft departing the United States. Paragraph (d) of License Exception AVS authorizes certain exports and reexports of vessels on temporary sojourn. Paragraph (a) of License Exception AVS, which authorizes certain exports and reexports of aircraft on temporary sojourn, was, prior to publication of this rule, available for Cuba.

This rule adds a note to paragraph (a) prohibiting an aircraft exported or reexported to a country pursuant to that paragraph from remaining in that country for more than seven consecutive days before it departs for a country to which it may be exported without a license or the United States.

This rule also adds new paragraph (b)(4) to License Exception AVS to specify that the commodities eligible for export and reexport to Cuba pursuant to paragraph (b) are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.

Additionally, this rule adds new paragraph (d)(6) to License Exception AVS. Paragraph (d)(6) provides that only certain categories of vessels, when engaged in specified activities are eligible for the license exception when destined for Cuba. The types of vessels and activities eligible for temporary sojourn to Cuba are as follows.

(1) Cargo vessels for hire for use in the transportation of items.

(2) Passenger vessels for hire for use in the transportation of passengers and/or items. Vessels used to transport both passengers and items to Cuba may transport automobiles only if the export or reexport of the automobiles has been authorized by a separate license issued by BIS (i.e., not authorized by license exception). The export or reexport to Cuba of personally owned vehicles is not normally necessary to support authorized travel. However, if the need arises, the exporter or reexporter may submit a license application to BIS for review pursuant to the licensing policy in § 746.2 of the EAR.

(3) Recreational vessels destined for Cuba that that are used in connection with travel authorized by the Department of the Treasury, Office of Foreign Assets Control (OFAC).

Finally, this rule adds a note to paragraph (d) prohibiting a vessel exported or reexported to a country pursuant to that paragraph from remaining in that country for more than 14 consecutive days before it departs for a country to which it may be exported without a license or the United States.

BIS is making paragraphs (b) and (d) of License Exception AVS available for Cuba to help facilitate authorized travel and commerce. For clarity, BIS is adding notes to paragraphs (a) and (d) specifying the amount of time an aircraft or vessel exported or reexported to a country pursuant to the paragraphs may remain in that country. Previously, BIS interpreted paragraph (a) to authorize temporary sojourns consisting of only one overnight stay while in-country (see 57 FR 30899, July 13, 1992). BIS selected the time periods of seven days for aircraft and 14 days for vessels based on its experience in licensing aircraft and vessels for temporary sojourn to Cuba. The vast majority of such licenses were for stays of seven days or less for aircraft and 14 days or less for vessels.

This rule amends the licensing policy for Cuba in § 746.2 of the EAR to add a policy of case-by-case review of license applications for exports and reexports of items to ensure safety in civil aviation and safe operation of commercial passenger aircraft. Items that will be reviewed pursuant to this policy include aircraft parts and components related to safety of flight, weather observation stations, airport safety equipment, and commodities used for security screening of passengers. BIS is adding this licensing policy to support international aviation and passenger safety.

This rule amends the license requirements for Cuba in § 746.2 of the EAR to specify that a license is required for the release of technology or source code on the CCL to Cuban nationals in the United States or a third country, but not for the deemed export or deemed reexport of technology or source code designated as EAR99. As described in § 734.2(b), any release of technology or source code subject to the EAR is deemed to be an export to the home country or countries of the foreign national unless the foreign national is lawfully admitted for permanent residence in the United States or unless the foreign national is a protected individual under the Immigration and Nationality Act (8 U.S.C. 1324b(a)(3)). Additionally, any release of technology or source code subject to the EAR to a foreign national of another country is deemed to be a reexport to the home country or countries of the foreign national unless the foreign national is lawfully admitted for permanent residence. Prior to this amendment, a license was required for the deemed export or deemed reexport of any technology or source code subject to the EAR to a Cuban national. BIS is making this change for consistency with the current deemed export and deemed reexport license requirements for other sanctioned destinations.

On July 22, 2015, BIS published a rule implementing the rescission of Cuba's State Sponsor of Terrorism designation (80 FR 43314). Among other amendments, that rule removed Cuba from Country Group E:1 in Supplement No. 1 to part 740 of the EAR, which changed the general de minimis level for Cuba from 10 to 25 percent. Although the rule made certain technical and conforming changes to the EAR, BIS overlooked references to the former 10 percent de minimis level in paragraph (b)(3) of License Exception Agricultural Commodities (AGR) in § 740.18 of the EAR. Consequently, this rule corrects the de minimis percentages referenced in paragraph (b)(3) of License Exception AGR.

Paragraph (a) of the definition of U.S. Person in § 772.1 of the EAR identifies the EAR provisions to which the definition applies. This rule adds a reference to § 740.21(e)(1) to paragraph (a) of the definition. Paragraph (b) of the definition identifies EAR provisions that have definitions that are specific to those provisions. This rule adds a reference to § 740.21(f)(2) to paragraph (b) of the definition. Both changes are to make those paragraphs conform to changes that this rule makes to § 740.21.

Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 7, 2015, 80 FR 48233 (August 11, 2015), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222 as amended by Executive Order 13637.

1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget (OMB).

2. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that collection of information displays a currently valid OMB control number. This rule involves a collection of information approved under OMB control number 0694-0088—Simplified Network Application Processing+ System (SNAP+) and the Multipurpose Export License Application, which are the methods for submitting all license applications, commodity classification requests and similar requests to BIS. The estimated annual total burden of all of those submissions is 31,833 hours. BIS believes that this rule will slightly reduce that burden because additional transactions will be eligible for export or reexport to Cuba pursuant to license exception, thereby reducing the number of license applications submitted to BIS. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to Jasmeet K. Seehra, Office of Management and Budget, by email at [email protected] or by fax to (202) 395-7285 and to William Arvin at [email protected].

3. This rule does not contain policies with Federalism implications as that term is defined under Executive Order 13132.

4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date, are inapplicable because this regulation involves a military or foreign affairs function of the United States (See 5 U.S.C. 553(a)(1)). This rule is a part of a foreign policy initiative to change the nature of the relationship between Cuba and the United States announced by the President on December 17, 2014. Delay in implementing this rule to obtain public comment would undermine the foreign policy objectives that the rule is intended to implement. Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under 5 U.S.C. 553, or by any other law, the requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable.

For the reasons set forth in the preamble, the Export Administration Regulations (15 CFR parts 730 through 774) are amended as follows:

This Treasury decision contains final regulations (the Final Regulations) that amend 26 CFR part 1 under sections 367 and 368 of the Internal Revenue Code (Code). These Final Regulations provide guidance relating to the qualification of transactions as F reorganizations and the treatment of outbound F reorganizations.

In general, upon the exchange of property, gain or loss must be recognized if the new property differs materially, in kind or extent, from the old property. See § 1.1001-1(a); § 1.368-1(b). The purpose of the reorganization provisions of the Code is to except from the general rule of section 1001 certain specifically described exchanges that are required by business exigencies and effect only a readjustment of continuing interests in property under modified corporate forms. See § 1.368-1(b). These exchanges, described in sections 354, 356, and 361, must be made in pursuance of a plan of reorganization. See § 1.368-1(c).

Section 368(a)(1) describes several types of transactions that constitute reorganizations. One of these, described in section 368(a)(1)(F), is “a mere change in identity, form, or place of organization of one corporation, however effected” (a Mere Change). One court has described the F reorganization as follows:

Although the statutory description of an F reorganization is short, and courts have described F reorganizations as simple, questions have arisen regarding the requirements of F reorganizations. In particular, when a corporation changes its identity, form, or place of incorporation, questions have arisen as to what other changes (if any) may occur, either before, during, or after the Mere Change, without affecting the status of the Mere Change (that is, what other changes are compatible with the Mere Change). These questions can become more pronounced if the transaction intended to qualify as an F reorganization is composed of a series of steps occurring over a period of days or weeks. Moreover, changes in identity, form, or place of organization are often undertaken to facilitate other changes that are difficult to effect in the corporation's current form or place of organization.

On January 16, 1990, the Treasury Department and the IRS published temporary regulations (TD 8280) in the Federal Register (55 FR 1406) under sections 367(a), (b), and (e). A notice of proposed rulemaking (INTL-704-87) cross-referencing these temporary regulations was published the same day under RIN 1545-AL35 in the Federal Register (55 FR 1472) (1990 Proposed Regulations). No public hearing was requested or held. Prior to the publication of the 1990 Proposed Regulations, the Treasury Department and the IRS had issued two notices and a revenue ruling providing that, in an outbound F reorganization, the transferor corporation's taxable year closes, and clarifying that, in such F reorganizations, there is an actual or constructive transfer of assets and an exchange of stock. See Notice 88-50, 1988-1 CB 535; Notice 87-29, 1987-1 CB 474; Rev. Rul. 87-27, 1987-1 CB 134. The 1990 Proposed Regulations, in relevant part, proposed the rules described in Notice 88-50, Notice 87-29, and Rev. Rul. 87-27. No comments were received on this aspect of the 1990 Proposed Regulations. While this aspect of the 1990 Proposed Regulations has not yet been finalized, final regulations (TD 8834) regarding the primary subject of the 1990 Proposed Regulations—guidance under sections 367(e)(1) and 367(e)(2) regarding outbound distributions under sections 355 and 332—have since been issued. See, for example, TD 8834, 64 FR 43072 (Aug. 9, 1999). A new RIN (RIN 1545-BM78, REG-117141-15) has been issued under which the portion of the 1990 Proposed Regulations relating to outbound F reorganizations will be finalized.

On August 12, 2004, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-106889-04) (2004 Proposed Regulations) in the Federal Register (69 FR 49836) regarding the requirements for F reorganizations. The 2004 Proposed Regulations are discussed in more detail in section 3. of this Background section of this preamble. In the preamble to the 2004 Proposed Regulations, the Treasury Department and the IRS requested comments from the public. One written comment was received with respect to the 2004 Proposed Regulations. No public hearing was requested or held.

On February 25, 2005, the Treasury Department and the IRS published final regulations (TD 9182) (2005 Regulations) in the Federal Register (70 FR 9219) adopting a portion of the 2004 Proposed Regulations. The 2005 Regulations provide that the continuity of interest and continuity of business enterprise requirements applicable to reorganizations in general do not apply to reorganizations under section 368(a)(1)(E) or section 368(a)(1)(F). The preamble to the 2005 Regulations stated that the Treasury Department and the IRS would continue to study the other issues addressed in the 2004 Proposed Regulations and would welcome further comments from the public. One written comment was received with regard to the 2005 Regulations.

A corporation that continues to inhabit its corporate shell can change in many respects. Although these changes may have federal income tax consequences, they do not result in the corporation being treated for federal income tax purposes as a new corporation or as transferring its assets. Nor do these changes cause the corporation's taxable year to close. Unlike a partnership that might terminate for federal income tax purposes upon the transfer of a given percentage of the partnership interests, a corporation that continues to inhabit a single corporate shell continues to exist for federal tax purposes, independent of the identity of its shareholders or the composition of its assets.

The underlying premise of the 2004 Proposed Regulations was that, if a corporate enterprise changes its corporate shell while adhering to four proposed requirements for a Mere Change, the resulting corporation should be treated as the functional equivalent of the transferor corporation.

As noted in section 1. of this Background, questions have arisen as to whether other changes are compatible with a Mere Change. In addressing these questions, the 2004 Proposed Regulations embraced the principles derived from the language of section 368(a)(1)(F), the historic practice of the IRS and courts in applying that statutory definition, and functional differences between F reorganizations and other types of reorganizations.

Like other types of reorganizations, an F reorganization generally involves, in form, two corporations, one (a Transferor Corporation) that transfers (or is deemed to transfer) assets to the other (a Resulting Corporation). However, the statute describes an F reorganization as being with respect to “one corporation” and provides for treatment that differs from that accorded other types of reorganizations in which assets are transferred from one corporation to another (Asset Reorganizations). As noted in the preamble to the 2004 Proposed Regulations, “an F reorganization is treated for most purposes of the Code as if the reorganized corporation were the same entity as the corporation in existence before the reorganization.” Thus, the tax treatment accorded an F reorganization is more consistent with that of a single continuing corporation in that (1) the taxable year of the Transferor Corporation does not close and includes the operations of the Resulting Corporation for the remainder of the year, and (2) the Resulting Corporation's losses may be carried back to taxable years of the Transferor Corporation.

Because an F reorganization must involve “one corporation,” and continuation of the taxable year and loss carrybacks from the Resulting Corporation to the Transferor Corporation are allowed, the statute cannot accommodate transactions in which the Resulting Corporation has preexisting activities or tax attributes. See H. Rep. Conf. Rep't. 97-760, 97th Cong., 2d Sess., at pp. 540-41 (1982). Accordingly, the 2004 Proposed Regulations did not allow for more than de minimis activities or very limited assets or tax attributes in the Resulting Corporation from sources other than the Transferor Corporation. This is one of the principal distinctions between F reorganizations and Asset Reorganizations. The proposed rule was consistent with the historical interpretation of the statute in this regard.

Similarly, the requirement that there be “one corporation” means that the status of the Resulting Corporation as the successor to the Transferor Corporation must be unambiguous. Accordingly, and consistent with the historical interpretation of the statute, the 2004 Proposed Regulations required that, for a transaction to qualify as a Mere Change, the Transferor Corporation be liquidated for tax purposes.

In Helvering v. Southwest Consolidated Corp., 315 U.S. 194 (1942), the Supreme Court noted that “a transaction which shifts the ownership of the proprietary interest in a corporation is hardly a `mere change in identity, form, or place of incorporation' within the meaning of [the F reorganization provision].” The 2004 Proposed Regulations also adopted this principle by providing that an F reorganization could not be used as a vehicle to introduce new owners into the corporate enterprise.

Based on these principles, the 2004 Proposed Regulations would have imposed four requirements for an F reorganization, with limited exceptions. First, all the stock of the Resulting Corporation, including stock issued before the transfer, would have had to be issued in respect of stock of the Transferor Corporation. Second, a change in the ownership of the corporation in the transaction would not have been allowed, except a change that had no effect other than that of a redemption of less than all the shares of the corporation. Third, the Transferor Corporation would have had to completely liquidate in the transaction. Fourth, the Resulting Corporation would not have been allowed to hold any property or possess any tax attributes (including those specified in section 381(c)) immediately before the transfer.

As discussed in the preamble to the 2004 Proposed Regulations, the first two requirements reflected the Supreme Court's holding in Helvering v. Southwest Consolidated Corp., supra, that a transaction cannot be a Mere Change if it shifts the ownership of the proprietary interests in a corporation. These requirements would have prevented a transaction involving the introduction of a new shareholder or new equity capital into the corporation from qualifying as an F reorganization. Notwithstanding these requirements, the first requirement would have allowed the Resulting Corporation to issue a nominal amount of stock not in respect of stock of the Transferor Corporation to facilitate the organization of the Resulting Corporation.

Under the second requirement (no change in ownership), redemptions of less than all the shares of the corporation would have been allowed. The law was not completely clear as to the effect of redemptions on the qualification of a transaction as an F reorganization. Some authorities supported the proposition that changes in ownership resulting from redemptions were compatible with an F reorganization. See Reef Corp. v. U.S., 368 F.2d 125 (5th Cir. 1966) (holding that a redemption of 48 percent of the stock of a corporation that occurred during a change in place of incorporation did not cause the transaction to fail to qualify as an F reorganization, because the redemption was functionally separate from the F reorganization even if coincident in time); § 1.301-1(l) (relating in part to the treatment of a distribution with respect to stock that is in substance separate from a reincorporation); Rev. Rul. 66-284, 1966-2 CB 115 (concluding that a transaction could qualify as an F reorganization even though there was less than a one percent change in a corporation's shareholders as a result of stock held by dissenting shareholders being redeemed in the transaction); cf. Casco Products Corp. v. Commissioner, 49 T.C. 32 (1967) (reaching a comparable result without finding an F reorganization where a nine percent shareholder was redeemed in the transaction).

The third requirement and the fourth requirement implemented the statutory requirement that an F reorganization involve only one corporation. Although the third requirement was that the Transferor Corporation completely liquidate in the transaction, a legal dissolution was not required. This accommodation allowed the value of the Transferor Corporation's charter to be preserved. Further, the Proposed Regulations would have allowed the Transferor Corporation to retain a nominal amount of assets to preserve its legal existence.

The fourth requirement would have precluded the Resulting Corporation from holding any property or having any tax attributes immediately before the transfer. Nevertheless, the Proposed Regulations would have allowed the Resulting Corporation to hold or to have held a nominal amount of assets to facilitate its organization or preserve its existence, and to have tax attributes related to these assets. In addition, the Proposed Regulations provided that the fourth requirement would not be violated if, before the transfer, the Resulting Corporation held the proceeds of borrowings undertaken in connection with the transaction.

The Treasury Department and the IRS concluded that the words “however effected” in the statutory definition of F reorganization reflect a Congressional intent to treat as an F reorganization a series of transactions that together result in a Mere Change. The 2004 Proposed Regulations reflected this view by providing that a series of related transactions that together result in a Mere Change may qualify as an F reorganization. This view is consistent with the IRS's historical interpretation of the statute.

The Treasury Department and the IRS also recognized that an F reorganization may be a step in a larger transaction that effects more than a Mere Change. For example, in Situation 1 of Rev. Rul. 96-29, 1996-1 CB 50, the IRS ruled that a reincorporation qualified as an F reorganization even though it was a step in a transaction in which the reincorporated entity issued common stock in a public offering and redeemed preferred stock having a value of 40 percent of the aggregate value of its outstanding stock immediately prior to the offering. In Situation 2 of the same ruling, the IRS ruled that a reincorporation of a corporation in another state qualified as an F reorganization even though it was a step in a transaction in which the reincorporated entity acquired the business of another entity.

Consistent with Rev. Rul. 96-29, the 2004 Proposed Regulations provided that events occurring before or after a transaction or series of transactions that otherwise constitutes a Mere Change and related thereto would not cause the Mere Change to fail to qualify as an F reorganization (the Related Events Rule). The 2004 Proposed Regulations further provided that the qualification of the Mere Change as an F reorganization would not alter the treatment of the other events.

The Related Events Rule would have operated in tandem with the proposal, which was made a final rule in the 2005 Regulations, that the continuity of interest and continuity of business enterprise requirements of § 1.368-1(d) and (e) that are generally applicable to reorganizations under section 368 do not apply to F reorganizations. These rules, together, would have focused the F reorganization analysis on the discrete step or series of steps (to use the words of many observers, those steps occurring “in a bubble”) that may satisfy the four requirements for a Mere Change, even if these steps constitute part of a larger series of steps. In other words, these rules rejected the application of step transaction principles to integrate all the steps of the overall plan or agreement to accomplish the larger transaction and thereby potentially prevent the transaction from qualifying as an F reorganization. See Rev. Rul. 75-456, 1975-2 CB 128 (F reorganization of the acquiring corporation in a stock reorganization under section 368(a)(1)(B) did not prevent that provision's “solely for voting stock” requirement from being satisfied); see also Rev. Rul. 79-250, 1979-2 CB 156 (F reorganization of issuing corporation immediately after forward triangular merger did not prevent the transaction from satisfying requirements of section 368(a)(2)(D)).

Overall, the 2004 Proposed Regulations would have found certain changes occurring in connection with a change in identity, form, or place of organization to be compatible with the Mere Change requirement. Some changes could have been effected simultaneously with the transaction or series of transactions otherwise qualifying as an F reorganization because these changes would not have violated any of the four proposed requirements for a Mere Change. Thus, for example, a corporation could have bought, sold, or exchanged property, borrowed money, or repaid debt because the 2004 Proposed Regulations would not have required an identity of assets between the Transferor Corporation and the Resulting Corporation. Other changes could not have been effected simultaneously with the potential F reorganization, but could have occurred before or after the F reorganization “in a bubble,” for example, the issuance of new equity capital or the transfer of shares to new shareholders.

Prior to the issuance of the 2004 Proposed Regulations, much commentary had focused on whether distributions of money or other property in F reorganizations were distributions to which section 356 applied, or whether sections 301 and 302, and related provisions, governed the treatment of these distributions. The Treasury Department and the IRS believed it appropriate to treat these distributions as transactions separate from the F reorganization, even if they occurred immediately before or immediately after the F reorganization, after some of the transactions making up the F reorganization and before other transactions making up the F reorganization, or as part of the same plan as the F reorganization. See, for example, § 1.301-1(l). Accordingly, the 2004 Proposed Regulations provided that, if a shareholder received money or other property (including in exchange for its shares) from the Transferor Corporation or the Resulting Corporation in a transaction that constituted an F reorganization, the money or other property would be treated as distributed by the Transferor Corporation immediately before the transaction, and that section 356 would not apply.

After consideration of the comments received with respect to the 2004 Proposed Regulations and the 2005 Regulations, the Treasury Department and the IRS are publishing, in this Treasury decision, additional Final Regulations regarding F reorganizations. The Final Regulations generally adopt the provisions of the 2004 Proposed Regulations not previously adopted in the 2005 Regulations, with changes discussed in the remainder of this preamble, and several clarifying, non-substantive changes. The Final Regulations also include rules regarding outbound F reorganizations by adopting, without substantive change, the provisions of the 1990 Proposed Regulations relating to section 367(a) and making conforming revisions to other regulations.

Like the 2004 Proposed Regulations, the Final Regulations are based on the premise that it is appropriate to treat the Resulting Corporation in an F reorganization as the functional equivalent of the Transferor Corporation and to give its corporate enterprise roughly the same freedom of action as would be accorded a corporation that remains within its original corporate shell. The Final Regulations provide that a transaction that involves an actual or deemed transfer of property by a Transferor Corporation to a Resulting Corporation is a Mere Change that qualifies as an F reorganization if six requirements are satisfied (with certain exceptions). The Final Regulations provide that a transaction or a series of related transactions to be tested against the six requirements (a Potential F Reorganization) begins when the Transferor Corporation begins transferring (or is deemed to begin transferring) its assets to the Resulting Corporation, and ends when the Transferor Corporation has distributed (or is deemed to have distributed) the consideration it receives from the Resulting Corporation to its shareholders and has completely liquidated for federal income tax purposes. The concept of a Potential F Reorganization was added to the Final Regulations to aid in determining which steps in a multi-step transaction should be considered when applying the six requirements to a potential mere change (that is, which steps are “in the bubble”).

In the context of determining whether a Potential F Reorganization qualifies as a Mere Change, deemed asset transfers include, but are not limited to, those transfers treated as occurring as a result of an entity classification election under paragraph § 301.7701-3(c)(1)(i), as well as transfers resulting from the application of step transaction principles. One example of such a transfer would be the deemed asset transfer by the Transferor Corporation to the Resulting Corporation resulting from a so-called “liquidation-reincorporation” transaction. See, for example, Davant v. Commissioner, 366 F.2d 874 (5th Cir. 1966); § 1.331-1(c) (liquidation-reincorporation may be a tax-free reorganization). Another example of such a deemed asset transfer would include the deemed transfer of the Transferor Corporation's assets to the Resulting Corporation in a so-called “drop-and-check” transaction in which a newly formed Resulting Corporation acquires the stock of a Transferor Corporation from its shareholders and, as part of the plan, the Transferor Corporation liquidates into the Resulting Corporation. See, for example, steps (d) and (c) of Rev. Rul. 2015-10, 2015-21 IRB 973; Rev. Rul. 2004-83, 2004-2 CB 157; Rev. Rul. 67-274, 1967-2 CB 141.

Four of the six requirements are generally adopted from the 2004 Proposed Regulations, and the fifth and sixth requirements address comments received with respect to the Proposed Regulations regarding “overlap transactions” (for example, transactions involving the Transferor Corporation's transfer of its assets to a potential successor corporation other than the Resulting Corporation in a transaction that could also qualify for nonrecognition treatment under a different provision of the Code). Viewed together, these six requirements ensure that an F reorganization involves only one continuing corporation and is neither an acquisitive transaction nor a divisive transaction. Thus, an F reorganization does not include a transaction that involves a shift in ownership of the enterprise, an introduction of assets in exchange for equity (other than that raised by the Transferor Corporation prior to the F reorganization), or a division of assets or tax attributes of a Transferor Corporation between or among the Resulting Corporation and other acquiring corporations. An F reorganization also does not include a transaction that leads to multiple potential acquiring corporations having competing claims to the Transferor Corporation's tax attributes under section 381.

Certain exceptions, similar to those of the 2004 Proposed Regulations, apply to these six requirements. Three of these exceptions allow de minimis departures from the six requirements for purposes unrelated to federal income taxation.

As in the 2004 Proposed Regulations, the first and the second requirements of the Final Regulations reflect the Supreme Court's holding in Helvering v. Southwest Consolidated Corp, supra, that a transaction that shifts the ownership of the proprietary interests in a corporation cannot qualify as a Mere Change. Thus, the Final Regulations provide that a transaction that involves the introduction of a new shareholder or new equity capital into the corporation “in the bubble” does not qualify as an F reorganization.

Consistent with the 2004 Proposed Regulations, the first requirement in the Final Regulations is that immediately after the Potential F Reorganization, all the stock of the Resulting Corporation must have been distributed (or deemed distributed) in exchange for stock of the Transferor Corporation in the Potential F Reorganization. The 2004 Proposed Regulations focused on the issuance of the stock of the Resulting Corporation in respect of stock of the Transferor Corporation. The Treasury and the IRS believe, however, that a focus on the distribution of the stock of the Resulting Corporation better matches the transactions that occur (or are deemed to occur) in reorganizations.

Also consistent with the 2004 Proposed Regulations, the second requirement is that, subject to certain exceptions, the same person or persons own all the stock of the Transferor Corporation at the beginning of the Potential F Reorganization and all of the stock of the Resulting Corporation at the end of the Potential F Reorganization, in identical proportions.

Notwithstanding these requirements and also consistent with the Proposed Regulations, the Final Regulations allow the Resulting Corporation to issue a de minimis amount of stock not in respect of stock of the Transferor Corporation, to facilitate the organization or maintenance of the Resulting Corporation. This rule is designed to allow, for example, reincorporation in a jurisdiction that requires minimum capitalization, two or more shareholders, or ownership of shares by directors. It is also intended to allow a transfer of assets to certain pre-existing entities, for reasons explained further in section 2.B. of this Explanation of Revisions.

In addition, the Final Regulations allow changes of ownership that result from either (i) a holder of stock in the Transferor Corporation exchanging that stock for stock of equivalent value in the Resulting Corporation having terms different from those of the stock in the Transferor Corporation or (ii) receiving a distribution of money or other property from either the Transferor Corporation or the Resulting Corporation, whether or not in redemption of stock of the Transferor Corporation or the Resulting Corporation. In other words, the corporation involved in a Mere Change may also recapitalize, redeem its stock, or make distributions to its shareholders, without causing the Potential F Reorganization to fail to qualify as an F reorganization. These exceptions reflect the determination of the Treasury Department and the IRS that allowing certain transactions to occur contemporaneously with an F reorganization is appropriate so long as one corporation could effect the transaction without undergoing an F reorganization. These exceptions also reflect the case law, discussed in section 3.A. of the Background, holding that certain transactions qualify as F reorganizations even if some shares are redeemed in the transaction, and rulings by the IRS that a recapitalization may happen at the same time as an F reorganization. See, for example, Rev. Rul. 2003-19, 2003-1 CB 468, and Rev. Rul. 2003-48, 2003-1 CB 863 (both providing that certain demutualization transactions may involve both E reorganizations and F reorganizations).

As in the 2004 Proposed Regulations, the third requirement (limiting the assets and attributes of the Resulting Corporation immediately before the transaction) and the fourth requirement (requiring the liquidation of the Transferor Corporation) under the Final Regulations reflect the statutory mandate that an F reorganization involve only one corporation. Although the Final Regulations generally require the Resulting Corporation not to hold any property or have any tax attributes immediately before the Potential F Reorganization, as in the 2004 Proposed Regulations, the Resulting Corporation is allowed to hold a de minimis amount of assets to facilitate its organization or preserve its existence (and to have tax attributes related to these assets), and the Resulting Corporation is allowed to hold proceeds of borrowings undertaken in connection with the Potential F Reorganization.

A commenter responding to the 2004 Proposed Regulations stated that the Final Regulations should allow the Resulting Corporation to hold, in addition to the proceeds of borrowings, cash proceeds of stock issuances before the Mere Change. The Treasury Department and the IRS do not believe that the Resulting Corporation should be allowed to issue more than a de minimis amount of stock before a transaction constituting a Mere Change because that would allow a substantial investment of new capital and/or new shareholders, or an acquisition of assets from more than one corporation. This rule does not, however, preclude the Transferor Corporation from issuing new stock before a Potential F Reorganization constituting an F reorganization. Nor does it preclude the Resulting Corporation from issuing new stock after the Potential F Reorganization.

Under the fourth requirement in the Final Regulations, the Transferor Corporation must completely liquidate in the Potential F Reorganization for federal income tax purposes. Nevertheless, as in the 2004 Proposed Regulations, the Transferor Corporation is not required to legally dissolve and is allowed to retain a de minimis amount of assets for the sole purpose of preserving its legal existence.

The fifth requirement under the Final Regulations is that immediately after the Potential F Reorganization, no corporation other than the Resulting Corporation may hold property that was held by the Transferor Corporation immediately before the Potential F Reorganization, if such other corporation would, as a result, succeed to and take into account the items of the transferor corporation described in section 381(c). Thus, a transaction that divides the property or tax attributes of a Transferor Corporation between or among acquiring corporations, or that leads to potential competing claims to such tax attributes, will not qualify as a Mere Change.

The sixth requirement under the Final Regulations is that immediately after the Potential F Reorganization, the Resulting Corporation may not hold property acquired from a corporation other than the Transferor Corporation if the Resulting Corporation would, as a result, succeed to and take into account the items of such other corporation described in section 381(c). Thus, a transaction that involves simultaneous acquisitions of property and tax attributes from multiple transferor corporations (such as the transaction described in Rev. Rul. 58-422, 1958-2 CB 145) will not qualify as a Mere Change.

These requirements address a comment received with respect to the second requirement of the 2004 Proposed Regulations that there not be a change in the ownership of the corporation in the transaction, except a change that has no effect other than a redemption of less than all the shares of the corporation. The comment stated that allowing a corporation to distribute property in redemption of less than all of its shares could result in satisfying both the requirements for an F reorganization with respect to one transferee corporation and the requirements of another nonrecognition provision with respect to a different transferee corporation. The result would be uncertainty as to which corporation should succeed to the Transferor Corporation's tax attributes.

For example, assume that corporation P owns all of the stock of corporation T, and T operates two separate businesses, Business 1 (worth $297) and Business 2 (worth $3). Further assume that T merges into newly formed corporation R, and that, pursuant to the merger agreement, P receives Business 1 and all of R's stock in exchange for surrendering all of the T stock, and R receives Business 2. Under the 2004 Proposed Regulations, the transaction could have qualified as an F reorganization, with T as the Transferor Corporation and R as the Resulting Corporation, because the only change in ownership is a redemption of less than all of the T shares. However, because T transfers 99 percent of its historic business assets (Business 1) to P in exchange for all of T's stock, the transaction might also qualify as a complete liquidation under sections 332 and 337 or an upstream reorganization under section 368(a)(1)(C) of T into P. This overlap—with two potential acquiring corporations—would present unintended complexities. For example, as discussed above, there would be uncertainty as to which corporation should succeed to T's tax attributes.

Accordingly, notwithstanding the overall flexibility provided with respect to transactions occurring contemporaneously with a Mere Change, the Final Regulations provide that a Mere Change cannot accommodate transactions that occur at the same time as the Potential F Reorganization if those other transactions could result in a corporation other than the Resulting Corporation acquiring the tax attributes of the Transferor Corporation.

The same commenter requested clarification of the treatment of combinations of several corporations into a single, newly-created corporation. Consistent with the statutory language of section 368(a)(1)(F), the Treasury Department and the IRS believe that a Mere Change involves only one Transferor Corporation and one Resulting Corporation. Thus, the Final Regulations provide that only one Transferor Corporation can transfer property to the Resulting Corporation in the Potential F Reorganization. If more than one corporation transfers assets to the Resulting Corporation in a Potential F Reorganization, none of the transfers would constitute an F reorganization.

In some cases, business or legal considerations may require extra steps to complete a transaction that is intended to qualify as a Mere Change. As discussed in section 3.B.i. of the Background, the Treasury Department and the IRS concluded that the words “however effected” in the statutory definition of F reorganization reflect a Congressional intent to treat a series of transactions that together result in a Mere Change as an F reorganization, even if the transfer (or deemed transfer) of property from the Transferor Corporation to the Resulting Corporation occurs indirectly. The Final Regulations confirm this conclusion by providing that a Potential F Reorganization consisting of a series of related transactions that together result in a Mere Change may qualify as an F reorganization, whether or not certain steps in the series, viewed in isolation, might, for example, be treated as a redemption under section 304(a), as a complete liquidation under section 331 or section 332, or as a transfer of property under section 351. For example, the first step in an F reorganization of a corporation owned by individual shareholders could be a dissolution of the Transferor Corporation, so long as this step is followed by a transfer of all the assets of the Transferor Corporation to a Resulting Corporation. However, see § 1.368-2(k) for completed reorganizations that will not be recharacterized as a Mere Change as a result of one or more subsequent transfers of assets or stock, such as where a Transferor Corporation transfers all of its assets to its parent corporation in liquidation, followed by the parent corporation's retransfer of those assets to a new corporation. See also Rev. Rul. 69-617, 1969-2 CB 57 (an upstream merger followed by a contribution of all the target assets to a new subsidiary corporation is a reorganization under sections 368(a)(1)(A) and 368(a)(2)(C)).

As discussed in section 3.B.ii. of the Background, the Treasury Department and the IRS recognized that an F reorganization may be a step, or a series of steps, before, within, or after other transactions that effect more than a Mere Change, even if the Resulting Corporation has only a transitory existence following the Mere Change. In some cases an F reorganization sets the stage for later transactions by alleviating non-tax impediments to a transfer of assets. In other cases, prior transactions may tailor the assets and shareholders of the Transferor Corporation before the commencement of the F reorganization. Although an F reorganization may facilitate another transaction that is part of the same plan, the Treasury Department and the IRS have concluded that step transaction principles generally should not recharacterize F reorganizations because F reorganizations involve only one corporation and do not resemble sales of assets. From a federal income tax perspective, F reorganizations are generally neutral, involving no change in ownership or assets, no end to the taxable year, and inheritance of the tax attributes described in section 381(c) without a limitation on the carryback of losses. See, for example, Rev. Rul. 96-29 (discussed in section 3.B.ii. of the Background); § 1.381(b)-1(a)(2).

The Final Regulations adopt the Related Events Rule of the 2004 Proposed Regulations, which provided that related events preceding or following the Potential F Reorganization that constitutes a Mere Change generally would not cause that Potential F Reorganization to fail to qualify as an F reorganization. Notwithstanding the Related Events Rule, in the cross-border context, related events preceding or following an F reorganization may be relevant to the tax consequences under certain international provisions that apply to F reorganizations. For example, such events may be relevant for purposes of applying certain rules under section 7874 and for purposes of determining whether stock of the Resulting Corporation should be treated as stock of a controlled foreign corporation for purposes of section 367(b). See, for example, section 2.03(b)(iv), Example 2 in Notice 2014-52, 2014-52 IRB 712; Rev. Rul. 83-23, 1983-1 CB 82.

The Final Regulations also adopt the provision of the 2004 Proposed Regulations that the qualification of a Potential F Reorganization as an F reorganization would not alter the treatment of other related transactions. For example, if an F reorganization is part of a plan that includes a subsequent merger involving the Resulting Corporation, the qualification of a Potential F Reorganization as an F reorganization will not alter the tax consequences of the subsequent merger.

A comment to the Proposed Regulations stated that, in some cases, an asset transfer that would constitute a step in an F reorganization is also a necessary step for characterizing a larger transaction as a nonrecognition transaction that would not constitute an F reorganization. For example, assume that corporation P acquires all of the stock of unrelated corporation T in exchange for consideration consisting of $50 cash and P voting stock with $50 value (without making an election under section 338), and, immediately thereafter and as part of the same plan, T is merged into corporation S, a newly-formed corporation wholly owned by P. Viewed in isolation, the merger of T into S appears to constitute a Mere Change. Provided the requirements for Asset Reorganization treatment are otherwise satisfied, however, the step transaction doctrine is applied to integrate the steps and treat the transaction as a statutory merger of T into S in which S acquires T's assets in exchange for $50 cash, $50 of P voting stock and assumption of T's liabilities, and T distributes the cash and P stock to its shareholders. This merger qualifies as a reorganization under section 368(a)(1)(A) by reason of section 368(a)(2)(D), and P's momentary ownership of T stock is disregarded. See Situation 2 of Rev. Rul. 2001-46, 2001-2 CB 321 (same). The stock of S is not treated as issued for the assets of T; the historic shareholders of T are replaced by P as the shareholder of the resulting corporation (S); and the transaction is not a Mere Change.

To clarify this and similar situations, the Treasury Department and the IRS have determined that, if the Potential F Reorganization or a step thereof involving a transfer of property from the Transferor Corporation to the Resulting Corporation is also a reorganization or part of a reorganization in which a corporation in control (within the meaning of section 368(c)) of the Resulting Corporation is a party to the reorganization (within the meaning of section 368(b)), the Potential F Reorganization is not a Mere Change and does not qualify as an F reorganization. This rule will apply to transactions qualifying as reorganizations (i) under section 368(a)(1)(C) by reason of the parenthetical language therein, (ii) under section 368(a)(1)(A) by reason of section 368(a)(2)(D), and (iii) under sections 368(a)(1)(A) or (C) by reason of section 368(a)(2)(C).

The IRS has long taken the position that, if a Transferor Corporation's transfer of property qualifies as a step in both an F reorganization and another type of reorganization in which the Resulting Corporation is the acquiring corporation, the transaction qualifies for the benefits accorded to an F reorganization. See, for example, Rev. Rul. 57-276, 1957-1 CB 126 (section 381(b) applies such that the parts of the Transferor Corporation's taxable year before and after an F reorganization constitute a single taxable year of the Acquiring Corporation, notwithstanding that the transaction also qualifies as another type of reorganization under section 368(a)(1)); Rev. Rul. 79-289, 1979-2 CB 145 (section 357(c) does not apply to an F reorganization even if the transaction also qualifies as another type of reorganization to which section 357(c) applies); § 1.381(b-1(a)(2) (providing for rules applicable to F reorganizations, regardless of whether such reorganizations also qualify as another type of reorganization).

To avoid confusion in the application of the reorganization provisions, the Treasury Department and the IRS have decided that, except as provided earlier in this section 5. of the Explanation of Revisions, if a Potential F Reorganization qualifies as a reorganization under section 368(a)(1)(F) and would also qualify as a reorganization under section 368(a)(1)(A), 368(a)(1)(C), or 368(a)(1)(D), then for all federal income tax purposes the Potential F Reorganization qualifies only as a reorganization under section 368(a)(1)(F). This rule does not apply to a reorganization within the meaning of sections 368(a)(1)(E) (see Rev. Rul. 2003-19, 2003-1 CB 468, and Rev. Rul. 2003-48, 2003-1 CB 863 (providing that certain demutualization transactions may involve both E Reorganizations and F reorganizations)) or 368(a)(1)(G) (see section 368(a)(3)(C)).

As described in section 3.D. of the Background, the 2004 Proposed Regulations provided that, if a shareholder received money or other property (including in exchange for its shares) from the Transferor Corporation or the Resulting Corporation in a transaction that constituted an F reorganization, the money or other property would be treated as distributed by the Transferor Corporation immediately before the transaction, not as additional consideration under section 356(a). The preamble to the 2004 Proposed Regulations indicated that this treatment would also be appropriate for distributions of money or other property in E reorganizations.

Although the Treasury Department and the IRS considered whether a distribution occurring during a Potential F Reorganization should prevent it from qualifying as an F reorganization, the Treasury Department and the IRS determined to allow flexibility for such distributions. Nevertheless, unlike other types of reorganizations, which generally involve substantial changes in economic position, F reorganizations are mere changes in form. Accordingly, the Treasury Department and the IRS have concluded that any concurrent distribution should be treated as a transaction separate from the F reorganization. See § 1.301-1(l); see also Bazley v. Commissioner, 331 U.S. 737 (1947) (distribution in the context of a purported E reorganization treated as a dividend).

An F reorganization is a Mere Change involving only one continuing corporation and is neither an acquisitive transaction nor a divisive transaction. From a federal income tax perspective, F reorganizations generally are neutral, involving no change in ownership or assets, no end to the taxable year, and inheritance of the tax attributes described in section 381(c). A distribution that occurs at the same time as a Mere Change is, in substance, a distribution from one continuing corporation and is functionally separate from the Mere Change. The Treasury Department and the IRS believe that a distribution from one continuing corporation should not be treated the same as an exchange of money or other property for stock of a target corporation in an acquisitive reorganization. Instead, the distribution should be treated as a separate transaction occurring at the same time. Although the 2004 Proposed Regulations would have treated a distribution as occurring immediately before the transaction qualifying as an F reorganization, the Treasury Department and the IRS believe it is sufficient to treat the distribution as a separate transaction that occurs at the same time as the F reorganization.

As explained in this preamble, the first requirement of the Final Regulations is that all of the stock of the Resulting Corporation be distributed in exchange for stock of the Transferor Corporation. Certain entities may be treated as corporations for federal tax purposes even though they do not have owners that could be treated as shareholders for federal tax purposes to whom the profits of the corporation would inure (for example, some charitable organizations described in section 501(c)(3)). Nevertheless, these entities may be able to engage in corporate reorganizations. Thus, no inference should be drawn from the use of the terms “stock” or “shareholders” in these Final Regulations with respect to the ability of such entities to engage in reorganizations under section 368(a)(1)(F).

The Treasury Department and the IRS are studying how to assign (or reassign) employer identification numbers (EINs) to taxpayers following an F reorganization, including in cases in which the Transferor Corporation remains in existence as a disregarded entity, and comments on this issue are welcome.

These final regulations are effective for transactions occurring on or after September 21, 2015.

The following publications are obsolete as of September 21, 2015.

Rev. Rul. 57-276, 1957-1 CB 126; Rev. Rul. 58-422, 1958-2 CB 145; Rev. Rul. 66-284, 1966-2 CB 115; Rev. Rul. 79-250, 1979-2 CB 156; Rev. Rul. 79-289, 1979-2 CB 145; and Rev. Rul. 96-29, 1996-1 CB 50; are obsoleted. Rev. Rul. 87-27, 1987-1 CB 134; and Rev. Rul. 88-25, 1988-1 CB 116; are obsoleted in part (with respect to the determination of whether a transaction qualifies as a reorganization under section 368(a)(1)(F)).

Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the proposed regulations preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small businesses, and no comments were received.

The principal author of these final regulations is Douglas C. Bates of the Office of Associate Chief Counsel (Corporate). However, other personnel from the Treasury Department and the IRS participated in their development.

IRS revenue rulings, revenue procedures, and notices cited in this Treasury decision are made available by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

Accordingly, 26 CFR part 1 is amended as follows:

(i) Resulting corporation stock distributed in exchange for transferor corporation stock. Immediately after the potential F reorganization, all the stock of the resulting corporation, including any stock of the resulting corporation issued before the potential F reorganization, must have been distributed (or deemed distributed) in exchange for stock of the transferor corporation in the potential F reorganization. However, for purposes of this paragraph (m)(1)(i) and paragraph (m)(1)(ii) of this section, a de minimis amount of stock issued by the resulting corporation other than in respect of stock of the transferor corporation to facilitate the organization of the resulting corporation or maintain its legal existence is disregarded.

(ii) Identity of stock ownership. The same person or persons must own all of the stock of the transferor corporation, determined immediately before the potential F reorganization, and of the resulting corporation, determined immediately after the potential F reorganization, in identical proportions. However, this requirement is not violated if one or more holders of stock in the transferor corporation exchange stock in the transferor corporation for stock of equivalent value in the resulting corporation, but having different terms from those of the stock in the transferor corporation, or receive a distribution of money or other property from either the transferor corporation or the resulting corporation, whether or not in exchange for stock in the transferor corporation or the resulting corporation.

(iii) Prior assets or attributes of resulting corporation. The resulting corporation may not hold any property or have any tax attributes (including those specified in section 381(c)) immediately before the potential F reorganization. However, this requirement is not violated if the resulting corporation holds or has held a de minimis amount of assets to facilitate its organization or maintain its legal existence, and has tax attributes related to holding those assets, or holds the proceeds of borrowings undertaken in connection with the potential F reorganization.

(iv) Liquidation of transferor corporation. The transferor corporation must completely liquidate, for federal income tax purposes, in the potential F reorganization. However, the transferor corporation is not required to dissolve under applicable law and may retain a de minimis amount of assets for the sole purpose of preserving its legal existence.

(v) Resulting corporation is the only acquiring corporation. Immediately after the potential F reorganization, no corporation other than the resulting corporation may hold property that was held by the transferor corporation immediately before the potential F reorganization, if such other corporation would, as a result, succeed to and take into account the items of the transferor corporation described in section 381(c).

(vi) Transferor corporation is the only acquired corporation. Immediately after the potential F reorganization, the resulting corporation may not hold property acquired from a corporation other than the transferor corporation if the resulting corporation would, as a result, succeed to and take into account the items of such other corporation described in section 381(c).

(2) Non-application of continuity of interest and continuity of business enterprise requirements. A continuity of the business enterprise and a continuity of interest are not required for a potential F reorganization to qualify as a reorganization under section 368(a)(1)(F). See § 1.368-1(b).

(3) Related transactions—(i) Series of transactions. A potential F reorganization consisting of a series of related transactions that together result in a mere change of one corporation may qualify as a reorganization under section 368(a)(1)(F), whether or not certain steps in the series, viewed in isolation, could be subject to other Code provisions, such as sections 304(a), 331, 332, or 351. However, see paragraph (k) of this section for transactions that qualify as reorganizations under section 368(a) and will not be recharacterized as a mere change as a result of one or more subsequent transfers of assets or stock.

(ii) Mere change within a larger transaction. A potential F reorganization that qualifies as a reorganization under section 368(a)(1)(F) may occur before, within, or after other transactions that effect more than a mere change, even if the resulting corporation has only transitory existence. Related events that precede or follow the potential F reorganization generally will not cause that potential F reorganization to fail to qualify as a reorganization under section 368(a)(1)(F). Qualification of a potential F reorganization as a reorganization under section 368(a)(1)(F) will not alter the character of other transactions for federal income tax purposes, and step transaction principles may be applied to other transactions without regard to whether certain steps qualify as a reorganization or part of a reorganization under section 368(a)(1)(F).

(iii) Distributions treated as separate transactions. As provided in paragraph (m)(1)(ii) of this section, a potential F reorganization may qualify as a mere change even though a holder of stock in the transferor corporation receives a distribution of money or other property from either the transferor corporation or the resulting corporation. If a shareholder receives money or other property (including in exchange for its shares) from the transferor corporation or the resulting corporation in a potential F reorganization that qualifies as a reorganization under section 368(a)(1)(F), then the receipt of money or other property (including any exchanged for shares) is treated as an unrelated, separate transaction from the reorganization, whether or not connected in a formal sense. See § 1.301-1(l).

(iv) Transactions also qualifying under other provisions of section 368(a)(1). In certain cases, a potential F reorganization would (but for this paragraph (m)(3)(iv)) qualify both as a reorganization under section 368(a)(1)(F) and as a reorganization or part of a reorganization under another provision of section 368(a)(1). The following rules determine which of these overlapping qualifications applies.

(A) If the potential F reorganization or a step thereof qualifies as a reorganization or part of a reorganization under another provision of section 368(a)(1), and if a corporation in control (within the meaning of section 368(c)) of the resulting corporation is a party to such other reorganization (within the meaning of section 368(b)), the potential F reorganization will not qualify as a reorganization under section 368(a)(1)(F).

(B) Except as provided in paragraph (m)(3)(iv)(A) of this section, if, but for this paragraph (m)(3)(iv)(B), the potential F reorganization would qualify as a reorganization under both section 368(a)(1)(F) and one or more of sections 368(a)(1)(A), 368(a)(1)(C), or 368(a)(1)(D), then for all federal income tax purposes the potential F reorganization will qualify as a reorganization only under section 368(a)(1)(F).

(4) Examples. The following examples illustrate the application of this paragraph (m). Unless the facts otherwise indicate, A, B, and C are domestic individuals; P, S, T, X, Y, and Z (and similar designations) are domestic corporations; each transaction is entered into for a valid business purpose; all persons and transactions are unrelated; and all other relevant facts are set forth in the examples.

(5) Effective/Applicability Date. This paragraph (m) applies to transactions occurring on or after September 21, 2015.

This document and additional information concerning OFAC are available from OFAC's Web site (www.treasury.gov/ofac). Certain general information pertaining to OFAC's sanctions programs also is available via facsimile through a 24-hour fax-on-demand service, tel.: 202- 622-0077.

The Department of the Treasury issued the Cuban Assets Control Regulations, 31 CFR part 515 (the “Regulations”), on July 8, 1963, under the Trading With the Enemy Act (50 U.S.C. App. 5 et seq.). OFAC has amended the Regulations on numerous occasions.

Most recently, on January 16, 2015, OFAC amended the Regulations, in a coordinated action with the Department of Commerce, to implement certain policy measures announced by the President on December 17, 2014 to further engage and empower the Cuban people (the “January 2015 amendments”). OFAC's January 2015 amendments facilitated travel to Cuba for authorized purposes, facilitated the provision by travel agents and airlines of authorized travel and carrier services and the forwarding by certain entities of authorized remittances, raised the limit on certain categories of remittances to Cuba, allowed U.S. financial institutions to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, authorized certain transactions with Cuban nationals located outside of Cuba, and allowed a number of other activities related to, among other areas, telecommunications, financial services, trade, and shipping.

Today, OFAC and the Department of Commerce are taking additional coordinated actions in support of the President's Cuba policy. OFAC is amending the Regulations to further implement certain policy measures announced by the President on December 17, 2014 to engage and empower the Cuban people. Among other things, these amendments further facilitate travel to Cuba for authorized purposes (including authorizing by general license the provision of carrier services by vessel), expand the telecommunications and Internet-based services general licenses, authorize certain persons subject to U.S. jurisdiction to establish a physical presence in Cuba to facilitate authorized transactions, allow certain additional persons subject to U.S. jurisdiction to open and maintain bank accounts in Cuba to use for authorized purposes, allow certain additional financial transactions (including removing the limit on donative remittances to Cuba and unblocking certain previously blocked remittances and funds transfers), authorize all persons subject to U.S. jurisdiction to provide goods and services to Cuban national individuals located outside of Cuba, and allow a number of other activities related to, among other areas, legal services, imports of gifts sent to the United States, and educational activities. These amendments also implement certain technical and conforming changes.

Carrier service by vessel and certain lodging services. OFAC is amending section 515.572 to authorize persons subject to U.S. jurisdiction to provide carrier services by vessel, without the need for specific licenses from OFAC, and to add an authorization to provide certain lodging services aboard such vessels in connection with such transportation. OFAC also is adding a note to section 515.572 to clarify which categories of persons may be transported between Cuba and the United States.

Family visits. OFAC is amending section 515.561 to allow persons subject to U.S. jurisdiction and persons traveling with them who share a common dwelling as a family to visit a close relative located in Cuba or accompany a close relative traveling to Cuba pursuant to sections 515.562 (official government business), 515.563 (journalistic activity), 515.564(a) (professional research), 515.565(a)(1) through (4) and (6) (educational activities), 515.566 (religious activities), 515.575 (humanitarian projects), or 515.576 (activities of private foundations or research or educational institutes). OFAC is also removing a restriction requiring that the authorized traveler being visited or accompanied must be in Cuba for more than 60 days if that traveler is located in Cuba pursuant to section 515.565(a)(1)-(4).

Bank accounts for authorized travelers. OFAC is amending section 515.560 to allow all authorized travelers to open and maintain bank accounts in Cuba in order to access funds while located in Cuba for authorized transactions, and to close such accounts.

Subsidiaries, joint ventures, and other business relationships with Cuban individuals and entities. In order to further enhance the free flow of information to, from, and among the Cuban people and to better provide efficient and adequate telecommunications services between the United States and Cuba, OFAC is amending sections 515.542 and 515.578 to authorize persons subject to U.S. jurisdiction to establish and maintain a business presence in Cuba, including through subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity, to provide authorized telecommunications and internet-based services. OFAC is also authorizing persons subject to U.S. jurisdiction to enter into licensing agreements related to services authorized by section 515.542(b) through (d) and section 515.578(a), and to market such services. OFAC is amending section 515.505 to unblock any entity, office, or other sub-unit established pursuant to sections 515.542 and 515.578.

Mobile applications. To further enhance the free flow of information to, from, and among the Cuban people, OFAC is adding a provision in section 515.578 to authorize the importation into the United States of Cuban-origin mobile applications. In addition, OFAC is authorizing the employment of Cuban nationals by persons subject to U.S. jurisdiction to develop such mobile applications.

Additional internet-based services and services related to additional authorized exports. In the January 2015 amendments, OFAC authorized services beyond those authorized in section 515.533 related to items exported pursuant to the Commerce Department's License Exception Consumer Communications Devices (CCD), certain non-U.S.-origin items located outside the United States, and certain software not subject to the Export Administration Regulations (15 CFR part 730 et seq.). These services include software design, business consulting, information technology management, and other services to install, repair, and replace such items. OFAC is amending section 515.578 to expand the permitted services to include training related to the installation, repair, or replacement of such items. OFAC also is expanding the authorization to extend to services related to exports of consumer communications devices not eligible for License Exception CCD but authorized pursuant to an individual license from the Department of Commerce and to services related to exports authorized pursuant to the Commerce Department's License Exception Support for the Cuban People (SCP) of certain commodities and software that will be used by individuals or private sector entities to develop software that will improve the free flow of information or that will support certain private sector activities. OFAC also is amending section 515.578 to authorize persons subject to U.S. jurisdiction to provide services related to all such items that were exported to Cuba from a third country. OFAC is removing a restriction relating to organizations administered or controlled by the Government of Cuba or the Cuban Communist Party with respect to certain internet-based services (such as instant messaging, chat and email, and social networking) authorized pursuant to section 515.578(a)(1), while maintaining this restriction on provision of these services to prohibited officials of the Government of Cuba and prohibited members of the Cuban Communist Party.

Physical presence in Cuba for certain persons. OFAC is amending section 515.573 to authorize certain persons subject to U.S. jurisdiction to establish a physical presence, such as an office or other facility, in Cuba, to facilitate authorized transactions. This authorization covers the following: news bureaus; exporters of goods authorized for export pursuant to sections 515.533 or 515.559; providers of authorized mail and parcel transmission services and cargo transportation services; providers of telecommunications or internet-based services; entities organizing or conducting certain educational activities; religious organizations; and providers of travel and carrier services. In addition, OFAC is authorizing these individuals and entities to open and maintain bank accounts at financial institutions in Cuba for use for authorized transactions, and to close such accounts. The prior provisions in this section authorizing certain transactions by news organizations have been fully incorporated into the revised section. OFAC is also amending section 515.505 to unblock any entity, office, or other sub-unit established pursuant to section 515.573, as well as to unblock any individual authorized to establish domicile in Cuba pursuant to section 515.573(a)(4).

Remittances. OFAC is amending section 515.570(b) to remove the limitation on donative remittances to Cuban nationals who are not prohibited officials of the Government of Cuba or prohibited members of the Cuban Communist Party. OFAC also is amending section 515.560(c)(4)(i) to remove the limitation on certain authorized remittances that authorized travelers may carry to Cuba, and section 515.560(d)(2) to remove the limitation on the amount of remittances that a Cuban national permanently resident in Cuba who is departing the United States may carry to Cuba.

Unblocking of certain previously blocked remittances and funds transfers. Prior to the January 2015 amendments, banks were required to block remittances exceeding the then $500 per quarter limit on authorized periodic remittances to non-family members. Following the January 2015 amendments, banks were required to block remittances exceeding the revised $2,000 per quarter limit on authorized periodic remittances to non-family members. OFAC is issuing a new general license in section 515.570(h) authorizing the unblocking and return of such blocked remittances, provided they would be authorized under the current regulations. Similarly, OFAC is adding a new general license in section 515.584(e) authorizing the unblocking and return of previously blocked funds transfers that could have been rejected or processed pursuant to section 515.584(d)(1) or (d)(2) (certain wire transfers), section 515.562(b) (official business of the U.S. government, foreign governments, and certain intergovernmental organizations), or section 515.579(b) (funds transfers for third-country official missions and certain intergovernmental organizations), if those transfers could be rejected or processed under current regulations. Persons subject to U.S. jurisdiction unblocking funds transfers pursuant to these authorizations must provide a report to OFAC within 10 business days from the date such funds transfers are released.

Account access for Cuban nationals present in the United States. Section 515.571 previously authorized depository institutions to open and maintain accounts for a Cuban national who was present in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization, subject to the requirement that accounts not closed prior to the departure of the Cuban national from the United States be blocked. OFAC is amending section 515.571 to add an authorization for depository institutions to maintain these accounts while the Cuban-national account holder is located outside the United States, provided that the account holder may only access the account while lawfully present in the United States. In addition, prior to today's amendments, section 515.571 established a $250 cap on payments from blocked accounts held by Cuban nationals in the United States in a non-immigrant status to use for living expenses. OFAC is amending section 515.571 to remove this cap to more adequately allow Cuban nationals lawfully present in the United States to access sufficient funds for living expenses or other transactions ordinarily incident to their presence in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization issued by the U.S. government.

Remittances from Cuba to the United States. OFAC is adding a new general license in section 515.587 authorizing remittances from Cuba or from certain Cuban nationals located in third countries to the United States. OFAC is making a conforming change to section 515.572(a)(3) to authorize banking institutions, including U.S.-registered brokers and dealers in securities and U.S.-registered money transmitters, to provide services in connection with the receipt of such remittances.

Estate-related transactions. Prior to today's amendments, a specific license was required for certain estate-related transactions that were not generally licensed, including to unblock shares of a Cuban estate for a U.S. beneficiary and remit the estate of a person subject to U.S. jurisdiction to a Cuban national who is not a close relative. OFAC is now expanding a general license in section 515.523 related to administering decedents' estates and a general license in section 515.570(f) to allow the unblocking of, and remittances related to, estates in which a Cuban national has an interest. OFAC is removing section 515.522 and substantially revising section 515.524 because most transactions previously described in those sections are now authorized by general license. OFAC is also making conforming edits to sections 515.407 and 515.525.

Provision of goods and services to Cuban nationals located in a third country. OFAC is amending section 515.585 to expand the existing authorization to allow all persons subject to U.S. jurisdiction to provide goods and services to Cuban national individuals located in a third country. In addition, OFAC is adding an authorization to allow banking institutions to open, maintain, and close bank accounts for such Cuban nationals.

Legal services. OFAC is amending section 515.512 to generally authorize receipt of payment for the provision of authorized legal services to Cuba or a Cuban national other than prohibited officials of the Government of Cuba and prohibited members of the Cuban Communist Party. In addition, recent amendments to certain OFAC sanctions programs have included general licenses authorizing payments from funds outside the United States for legal services provided to blocked individuals, subject to certain conditions. OFAC is adding this general license in section 515.512(e) to authorize payments from outside the United States for the provision of authorized legal services to or on behalf of prohibited officials of the Government of Cuba and prohibited members of the Cuban Communist Party. OFAC also is adding a new authorization in section 515.588 to permit persons subject to U.S. jurisdiction to receive, and make payments for, certain legal services from Cuba or Cuban nationals, subject to certain conditions.

Gift imports sent to the United States. OFAC is amending section 515.544 to generally authorize the importation into the United States of merchandise from Cuba or Cuban-origin merchandise from a third country intended as gifts provided that the value of the merchandise is not more than $100, the merchandise is of a type and in quantities normally given as gifts between individuals, the merchandise is sent and not carried by a traveler, and the merchandise is not alcohol or tobacco products.

Educational activities. OFAC is expanding the general license in section 515.565 to allow additional educational activities that are authorized in other sanctions programs administered by OFAC, including the provision of standardized testing services and internet-based courses to Cuban nationals, as well as to authorize U.S. and Cuban universities to engage in academic exchanges and joint non-commercial academic research.

Ordinarily incident transactions. OFAC is issuing interpretive guidance in new section 515.421 to clarify that, with certain exceptions, transactions ordinarily incident to a licensed transaction and necessary to give effect thereto are also authorized. In response to public inquiries, OFAC is providing a specific example in this section to clarify that ordinarily incident transactions include payments made using online payment platforms for authorized transactions.

Air ambulances and emergency medical services. OFAC has had a favorable specific licensing policy and has authorized on a case-by-case and expedited basis air ambulances to travel to and from Cuba and to evacuate individuals requiring medical care. In such exigent circumstances, OFAC has allowed U.S. medical and other essential personnel to provide services to individual travelers in need of medical attention, regardless of nationality or the purpose of the individual's travel to Cuba. OFAC is amending section 515.548 to generally authorize such services. To clarify the availability of nonscheduled emergency medical services in the United States, OFAC also is adding a new general license in section 515.589.

Humanitarian projects. OFAC is amending section 515.575 to explicitly include disaster relief and historical preservation as authorized humanitarian projects.

Cuban official missions. OFAC is amending section 515.586 to authorize funds transfers on behalf of official missions of the Government of Cuba in the United States.

Technical and Conforming Amendments. OFAC also is making a number of technical and conforming amendments. Among other things, OFAC is amending sections 515.533(d) and 515.559(d) to make explicit that those authorizations extend to such additional transactions as are directly incident to the installation in Cuba of items consistent with the export or reexport licensing policy of the Department of Commerce, and amending section 515.533(d) by removing the reference to “sales” to clarify that the authorization applies to transactions related to donated exports. OFAC is amending section 515.550 to waive vessel restrictions for vessels engaging in authorized trade in imports, including those from Cuban entrepreneurs, and carrying persons engaging in authorized travel between the United States and Cuba, and making a conforming change to the Note to section 515.207.

Because the amendments of the Regulations involve a foreign affairs function, Executive Order 12866 and the provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date are inapplicable. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-612) does not apply.

The collections of information related to the Regulations are contained in 31 CFR part 501 (the “Reporting, Procedures and Penalties Regulations”) and section 515.572 of this part. Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), those collections of information will be covered by the Office of Management and Budget under control numbers 1505-0164, 1505-0167, and 1505-0168. 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.

For the reasons set forth in the preamble, the Department of the Treasury's Office of Foreign Assets Control amends 31 CFR part 515 as set forth below:

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the final details for Pope Francis' arrival and departure were not known until August 4, 2015. This late notification precludes the Coast Guard from publishing a NPRM while meeting the security zone's objectives of protecting Pope Francis and accompanying high-ranking government officials, and protect against sabotage or terrorist attacks to human life, vessels, mariners, and waterfront facilities at or near this event.

For similar reasons, under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this temporary rule effective less than 30 days after publication in the Federal Register.

The legal basis and authorities for this rule are found in 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-1, 6.04-6 and 160.5; and Department of Homeland Security Delegation No. 0170.1., which collectively authorize the Coast Guard to establish security zones.

These temporary security zones are necessary to provide for the security of Pope Francis and accompanying high-ranking government officials, and protect against sabotage or terrorist attacks to human life, vessels, mariners, and waterfront facilities at or near this event.

On September 26, 2015, Pope Francis and accompanying high-ranking government officials will be arriving in Philadelphia, PA. The Coast Guard is establishing several security zones in portions of the Delaware River and Schuylkill River in Philadelphia, PA.

The first security zone will be enforced from September 26, 2015, at 6:00 a.m. until September 28, 2015, at 12:00 p.m. and includes all the waters of the Delaware River from the New Jersey shore line, to the Pennsylvania shore line, beginning at the east end of Little Tinicum Island extending in a Northeasterly direction and ending at the mouth of the Schuylkill River;

The second security zone will be enforced from September 25, 2015, at 6:00 a.m. until September 28, 2015, at 12:00 p.m. and includes all the waters of the Schuylkill River inside a boundary described as originating from the South 34th street Bridge north and ending at the West Girard Avenue Bridge.

The third security zone will be enforced from September 25, 2015, at 6:00 a.m. until September 28, 2015, at 12:00 p.m. and includes all the waters of the Schuylkill River inside a boundary described as originating from the mouth of the Schuylkill River and ending 500 yards north of the George C. Platt Memorial Bridge.

The fourth security zone will be enforced from September 26, 2015, at 6:00 a.m. until September 28, 2015, at 12:00 p.m. and includes all waters of the Delaware River adjacent to the Ben Franklin Bridge bounded in the East by the New Jersey shoreline, bounded in the West by the Pennsylvania shoreline, bounded in the South by Latitude 39°56′31″ N., and bounded in the North by Latitude 39°57′23″ N.

The fifth security zone will be enforced on September 27, 2015, from 9:00 a.m. until 2:00 p.m. and includes all water of the Delaware River adjacent to Curran-Fromhold Correctional Facility, in North-East Philadelphia, PA, bounded from shoreline to shoreline, bounded on the south by a line running east to west from points along the shoreline at latitude 40°00′54″ N., longitude 075°01′00″ W.; thence to latitude 40°01′15″ N., longitude 075°01′19″ W., and bounded on the North by a line running east to west from points along the shoreline at latitude 40°01′58″ N., longitude 074°59′24″ W.; thence to latitude 40°02′15″ N., longitude 074°59′55″ W.

Access to these security zones will be restricted during the specified date and time period. Only vessels or people specifically authorized by the Captain of the Port, Delaware Bay or his designated representative may enter or remain in the regulated area.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes and executive orders.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders.

Although this regulation will restrict access to the security zones, the effect of this rule will not be significant because: this rule will only be enforced for a limited duration; vessels may be granted permission to transit through the zone on a case-by-case basis; and the Coast Guard will make notifications via maritime advisories so mariners can adjust their plans accordingly.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. These security zones will not have a significant economic impact on a substantial number of small entities for the reasons stated under paragraph D.1., Regulatory Planning and Review.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of a security zone and is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are not required.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

This final rule amends the DFARS as follows—

1. Removes the phrase “and contracts” in two places in the prescription at DFARS 204.7304(a);

2. Revises cross references cited in DFARS 212.301, 217.770, and 225.370(d);

3. Revises the heading for DFARS subpart 213.5 to align with the Federal Acquisition Regulation (FAR) subpart 13.5 heading;

4. Updates a hyperlink at DFARS 215.404-71-3(b)(7);

5. Updates an address at DFARS 216.504(c)(1)(ii)(D)(ii);

6. Directs contracting officers to additional DFARS Procedures, Guidance, and Information (PGI) by adding a reference at DFARS 219.201;

7. Updates a reference to a DoD Directive at DFARS 239.7102-1;

8. Updates a hyperlink in DFARS clause 252.204-7012 and makes minor editorial revisions; and

9. Corrects a cross reference in DFARS clause 252.239-7009.

Therefore, 48 CFR parts 204, 212, 213, 215, 216, 217, 219, 225, 239, and 252 are amended as follows:

NMFS manages the reef fish fishery of the Gulf, which includes greater amberjack, under the Fishery Management Plan for the Reef Fish Resources of the Gulf (FMP). The Gulf of Mexico Fishery Management Council (Council) prepared the FMP and NMFS implements the FMP under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) by regulations at 50 CFR part 622. All greater amberjack weights discussed in this temporary rule are in round weight.

The 2015 recreational annual catch limit (ACL) for Gulf greater amberjack is 1,299,000 lb (589,216 kg) and the recreational ACT (recreational quota) is 1,130,000 lb (512,559 kg) as specified in 50 CFR 622.41(a)(2)(iii) and 622.39(a)(2)(ii), respectively.

Under 50 CFR 622.41(a)(2)(i), NMFS is required to close the recreational sector for greater amberjack when the recreational ACT is reached, or is projected to be reached, by filing a notification to that effect with the Office of the Federal Register. NMFS has determined the 2015 recreational ACT will be reached by September 27, 2015. Accordingly, NMFS closes the recreational sector for Gulf greater amberjack effective 12:01 a.m., local time, September 28, 2015, until 12:01 a.m., local time, January 1, 2016, the start of the next fishing year.

During the recreational closure, the bag and possession limits for greater amberjack in or from the Gulf EEZ are zero. The prohibition on possession in the Gulf on board a vessel for which a valid Federal charter vessel/headboat permit for Gulf reef fish has been issued applies regardless of whether greater amberjack were harvested in state or Federal waters.

The recreational sector for greater amberjack will reopen on January 1, 2016, the beginning of the 2016 recreational fishing season.

The Regional Administrator, Southeast Region, NMFS, has determined this temporary rule is necessary for the conservation and management of Gulf greater amberjack and is consistent with the Magnuson-Stevens Act and other applicable laws.

This action is taken under 50 CFR 622.41(a)(2)(i) and is exempt from review under Executive Order 12866.

These measures are exempt from the procedures of the Regulatory Flexibility Act because the temporary rule is issued without opportunity for prior notice and comment.

This action responds to the best scientific information available. The Assistant Administrator for Fisheries, NOAA (AA), finds that the need to immediately implement this action to close the recreational sector for greater amberjack constitutes good cause to waive the requirements to provide prior notice and opportunity for public comment on this temporary rule pursuant to the authority set forth in 5 U.S.C. 553(b)(B), because such procedures are unnecessary and contrary to the public interest. Such procedures are unnecessary because the rule establishing the closure provisions was subject to notice and comment, and all that remains is to notify the public of the closure. Such procedures are contrary to the public interest because of the need to immediately implement this action to protect greater amberjack. Prior notice and opportunity for public comment would require time and would potentially allow the recreational sector to exceed the recreational ACL.

For the aforementioned reasons, the AA also finds good cause to waive the 30-day delay in the effectiveness of this action under 5 U.S.C. 553(d)(3).

The snapper-grouper fishery of the South Atlantic includes vermilion snapper and is managed under the Fishery Management Plan for the Snapper-Grouper Fishery of the South Atlantic Region (FMP). The FMP was prepared by the South Atlantic Fishery Management Council and is implemented by NMFS under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) by regulations at 50 CFR part 622.

The commercial quota for vermilion snapper in the South Atlantic is divided into separate quotas for two 6-month time periods each year, January through June and July through December. For the July through December 2015 period, the commercial quota is 394,829 lb (179,091 kg), gutted weight (438,260 lb (198,791 kg), round weight), as specified in 50 CFR 622.190(a)(4)(ii)(C).

On September 4, 2015 (80 FR 53473), NMFS published a temporary rule in the Federal Register to reduce the commercial trip limit for vermilion snapper in or from the EEZ of the South Atlantic to 500 lb (227 kg), gutted weight, effective 12:01 a.m., local time, September 10, 2015, until January 1, 2016, or until the quota is reached and the commercial sector closes, whichever occurs first.

In accordance with regulations at 50 CFR 622.193(f)(1), NMFS is required to close the commercial sector for vermilion snapper when the commercial quota for that 6-month portion of the fishing year has been reached, or is projected to be reached, by filing a notification to that effect with the Office of the Federal Register. NMFS has determined that the commercial quota for South Atlantic vermilion snapper for the July through December 2015 period will have been reached by September 22, 2015. Accordingly, the commercial sector for South Atlantic vermilion snapper is closed effective 12:01 a.m., local time, September 22, 2015, until 12:01 a.m., local time, January 1, 2016. The commercial quota for vermilion snapper in the South Atlantic is 388,703 lb (176,313 kg), gutted weight (431,460 lb (195,707 kg), round weight), for the January 1 through June 30, 2016 period as specified in 50 CFR 622.190(a)(4)(i)(D).

The operator of a vessel with a valid commercial vessel permit for South Atlantic snapper-grouper having vermilion snapper onboard must have landed and bartered, traded, or sold such vermilion snapper prior to 12:01 a.m., local time, September 22, 2015. During the closure, the bag limit specified in 50 CFR 622.187(b)(5) and the possession limits specified in 50 CFR 622.187(c)(1), apply to all harvest or possession of vermilion snapper in or from the South Atlantic EEZ. During the closure, the sale or purchase of vermilion snapper taken from the EEZ is prohibited. As specified in 50 CFR 622.190(c)(1)(i), the prohibition on sale or purchase does not apply to the sale or purchase of vermilion snapper that were harvested, landed ashore, and sold prior to 12:01 a.m., local time, September 22, 2015, and were held in cold storage by a dealer or processor. For a person on board a vessel for which a Federal commercial or charter vessel/headboat permit for the South Atlantic snapper-grouper fishery has been issued, the bag and possession limits and the prohibition on sale and purchase apply regardless of whether the fish are harvested in state or Federal waters, as specified in 50 CFR 622.190(c)(1)(ii).

The Regional Administrator, Southeast Region, NMFS, has determined this temporary rule is necessary for the conservation and management of South Atlantic vermilion snapper and is consistent with the Magnuson-Stevens Act and other applicable laws.

This action is taken under 50 CFR 622.193(f)(1) and is exempt from review under Executive Order 12866.

This action responds to the best scientific information available. The Assistant Administrator for Fisheries, NOAA (AA), finds that the need to immediately implement this action to close the commercial sector for vermilion snapper constitutes good cause to waive the requirements to provide prior notice and opportunity for public comment pursuant to the authority set forth in 5 U.S.C. 553(b)(B), as such procedures are unnecessary and contrary to the public interest. Such procedures are unnecessary because the rule itself has been subject to notice and comment, and all that remains is to notify the public of the closure. Allowing prior notice and opportunity for public comment is contrary to the public interest because of the need to immediately implement this action to protect vermilion snapper since the capacity of the fishing fleet allows for rapid harvest of the commercial quota. Prior notice and opportunity for public comment could result in a harvest well in excess of the established commercial quota.

For the aforementioned reasons, the AA also finds good cause to waive the 30-day delay in the effectiveness of this action under 5 U.S.C. 553(d)(3).

The snapper-grouper fishery of the South Atlantic includes snowy grouper and is managed under the Fishery Management Plan for the Snapper-Grouper Fishery of the South Atlantic Region (FMP). The FMP was prepared by the South Atlantic Fishery Management Council and is implemented by NMFS under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) by regulations at 50 CFR part 622.

The final rule implementing Regulatory Amendment 20 to the FMP recently revised the commercial quota (equivalent to the commercial ACL) for snowy grouper in the South Atlantic to 115,451 lb (52,368 kg), gutted weight; 136,233 lb (61,794 kg), round weight, for the remainder of the current fishing year, ending December 31, 2015, as specified in 50 CFR 622.190(a)(1) (80 FR 43033, July 21, 2015).

Under 50 CFR 622.193(b)(1), NMFS is required to close the commercial sector for snowy grouper when the commercial quota (commercial ACL) is reached, or is projected to be reached, by filing a notification to that effect with the Office of the Federal Register. NMFS projects that commercial landings of South Atlantic snowy grouper will reach the commercial ACL by September 22, 2015. Accordingly, the commercial sector for South Atlantic snowy grouper is closed effective 12:01 a.m., local time, September 22, 2015, until 12:01 a.m., local time, January 1, 2016.

The operator of a vessel with a valid commercial vessel permit for South Atlantic snapper-grouper with snowy grouper on board must have landed and bartered, traded, or sold such snowy grouper prior to 12:01 a.m., local time, September 22, 2015. During the commercial closure, harvest and possession of snowy grouper in or from the South Atlantic EEZ is limited to the bag and possession limits, as specified in § 622.187(b)(2)(ii) and (c)(1). Also during the commercial closure, the sale or purchase of snowy grouper taken from the South Atlantic EEZ is prohibited. The prohibition on sale or purchase does not apply to the sale or purchase of snowy grouper that were harvested, landed ashore, and sold prior to 12:01 a.m., local time, September 22, 2015, and were held in cold storage by a dealer or processor.

For a person on board a vessel for which a Federal commercial or charter vessel/headboat permit for the South Atlantic snapper-grouper fishery has been issued, the bag and possession limits and the sale and purchase provisions of the commercial closure for snowy grouper would apply regardless of whether the fish are harvested in state or Federal waters, as specified in 50 CFR 622.190(c)(1)(ii).

The Regional Administrator, Southeast Region, NMFS, has determined this temporary rule is necessary for the conservation and management of snowy grouper and the South Atlantic snapper-grouper fishery and is consistent with the Magnuson-Stevens Act and other applicable laws.

This action is taken under 50 CFR 622.193(b)(1) and is exempt from review under Executive Order 12866.

These measures are exempt from the procedures of the Regulatory Flexibility Act, because the temporary rule is issued without opportunity for prior notice and comment.

This action responds to the best scientific information available. The Assistant Administrator for Fisheries, NOAA (AA), finds that the need to immediately implement this action to close the commercial sector for snowy grouper constitutes good cause to waive the requirements to provide prior notice and opportunity for public comment pursuant to the authority set forth in 5 U.S.C. 553(b)(B), as such procedures would be unnecessary and contrary to the public interest. Such procedures are unnecessary because the rule itself has been subject to notice and comment, and all that remains is to notify the public of the closure. Such procedures are contrary to the public interest because of the need to immediately implement this action to protect snowy grouper since the capacity of the fishing fleet allows for rapid harvest of the commercial ACL (commercial quota). Prior notice and opportunity for public comment would require time and would potentially result in a harvest well in excess of the established commercial ACL (commercial quota).

For the aforementioned reasons, the AA also finds good cause to waive the 30-day delay in the effectiveness of this action under 5 U.S.C. 553(d)(3).

Regulations governing the bluefish fishery and summer flounder fishery are found at 50 CFR part 648. The bluefish regulations require annual specification of a commercial quota that is apportioned on a percentage basis among the coastal states from Florida through Maine, while the summer flounder regulations require annual specification of commercial quota that is apportioned based on a percentage basis among coastal states from North Carolina through Maine. The processes to set the annual commercial quotas and the percent allocated to each state are described in § 648.162 and § 648.102 for bluefish and summer flounder, respectively.

The initial coastwide commercial quota for bluefish for the 2015 fishing year is 5,241,202 lb (2,377,371 kg) (80 FR 46848, August 6, 2015). The percent allocated to vessels landing bluefish in Massachusetts is 6.7167 percent, resulting in an initial commercial quota of 352,036 lb (159,681 kg). The 2015 allocation was adjusted to 602,036 lb (273,079 kg) to reflect quota transfers from other states.

The initial coastwide commercial quota for summer flounder for the 2015 fishing year was set at 11,069,410 lb (5,021,000 kg) (79 FR 78311, December 30, 2014). The percent allocated to vessels landing summer flounder in Massachusetts is 6.82046 percent, resulting in an initial commercial quota of 754,985 lb (340,165 kg). The 2015 allocation was adjusted to 760,785 lb (345,086 kg) to reflect quota overages from 2014 and quota transfers from other states.

The Administrator, Greater Atlantic Region, NMFS (Regional Administrator), monitors the state commercial quotas and determines when a state's commercial quota has been harvested. NMFS is required to publish a notice in the Federal Register alerting Federal commercial vessel and dealer permit holders that, effective upon a specific date, the state's commercial quota has been harvested and no commercial quota is available to land bluefish or summer flounder in that state. The Regional Administrator has determined, based upon dealer reports and other available information, that Massachusetts has harvested its quota for 2015.

Section 648.4(b) provides that Federal permit holders agree, as a condition of the permit, not to land bluefish or summer flounder in any state that the Regional Administrator has determined no longer has commercial quota available. Therefore, vessels holding Federal commercial permits are prohibited from landing summer flounder, effective 0001 hours, September 17, 2015 and/or bluefish, effective 0001 hours, September 19, 2015 for the remainder of the 2015 calendar year, unless additional quota becomes available through a transfer and is announced in the Federal Register. Federally permitted dealers are also notified that they may not purchase summer flounder, effective 0001 hours, September 17, 2015 and/or bluefish, effective 0001 hours, September 19, 2015 from federally permitted vessels that land in Massachusetts for the remainder of the calendar year, or until additional quota becomes available through a transfer from another state.

This action is required by 50 CFR part 648 and is exempt from review under Executive Order 12866.

The Assistant Administrator for Fisheries, NOAA (AA), finds good cause pursuant to 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment because it would be contrary to the public interest. This action closes the bluefish fishery and summer flounder fishery for Massachusetts until January 1, 2016, under current regulations. The regulations at § 648.103(b) require such action to ensure that vessels do not exceed state quotas. If implementation of this closure was delayed to solicit prior public comment, the quota for this fishing year would be exceeded, thereby undermining the conservation objectives of the Atlantic Bluefish Fishery Management Plan and the Summer Flounder Fishery Management Plan. The AA further finds, pursuant to 5 U.S.C. 553(d)(3), good cause to waive the thirty (30) day delayed effectiveness period for the reason stated above.

NMFS published a final rule in the Federal Register on November 3, 2003 (68 FR 62250), implementing a process to roll over unused Winter I commercial scup quota (January 1 through April 30) to be added to the Winter II period quota (November 1 through December 31). This framework also allows adjustment of the commercial possession limit for the Winter II period dependent on the amount of quota rolled over from the Winter I period.

For 2015, the initial Winter II quota is 3,384,470 lb (1,535 mt), and the best available landings information indicates that 2,084,256 lb (945 mt) of the Winter I quota remains unused. The 2015 Winter I quota was 9,578,008 lb (4,344 mt). Consistent with the intent of Framework 3, the full amount of unused 2015 Winter I quota is transferred to Winter II, resulting in a revised 2015 Winter II quota of 5,468,726 lb (2,481 mt). Because the amount transferred is greater than 2,000,000 lb (907 mt), the per trip possession limit will increase from 12,000 lb (5,443 kg) to 18,000 lb (8,165 kg) during the Winter II quota period, consistent with the final rule that increased the Winter II trip limit, published on May 22, 2014 (79 FR 29371).

This action is required by 50 CFR part 648 and is exempt from review under Executive Order 12866.

The Assistant Administrator for Fisheries, NOAA (AA), has determined good cause exists pursuant to 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment on this in-season adjustment because it is impracticable and contrary to the public interest. The landings data upon which this action is based are not available on a real-time basis and, consequently, were compiled only a short time before the determination was made that this action is warranted. If implementation of this in-season action is delayed to solicit prior public comment, the objective of the fishery management plan to achieve the optimum yield from the fishery could be compromised; deteriorating weather conditions during the latter part of the fishing year will reduce fishing effort and could prevent the annual quota from being fully harvested. This would conflict with the agency's legal obligation under the Magnuson-Stevens Fishery Conservation and Management Act to achieve the optimum yield from a fishery on a continuing basis, resulting in a negative economic impact on vessels permitted to fish in this fishery.