Federal Register Vol. 81, No.131,

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2012-18-12, Amendment 39-17189 (77 FR 57003, September 17, 2012) (“AD 2012-18-12”). AD 2012-18-12 applied to certain Airbus Model A318, A319, and A320 series airplanes. The NPRM published in the Federal Register on October 23, 2015 (80 FR 64375) (“the NPRM”). The NPRM was prompted by reports that additional OWS part numbers have been affected. The NPRM proposed to retain the requirements of AD 2012-18-12, and to expand the applicability to all Airbus Model A318, A319, and A320 series airplanes. We are issuing this AD to prevent off-wing exits on the LH and RH sides of the fuselage from becoming inoperative. During an emergency, inoperative off-wing exits could impair the safe evacuation of occupants, possibly resulting in personal injuries.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2014-0025R1, dated May 26, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition on all Airbus Model A318, A319, and A320 series airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-4202.

We gave the public the opportunity to participate in developing this AD. The following presents the comment received on the NPRM and the FAA's response to the comment.

United Airlines (United) asked for clarification of the language in paragraph (k) of the proposed AD, which would prohibit the installation of OWS part numbers (P/Ns) including D31865-109, D31865-110, D31865-209, and D31865-210, as identified in paragraph (h)(2) of the proposed AD, but also specifies accomplishing the modification required by paragraph (g) of the proposed AD. United stated that the modification converts those part numbers into D31865-309, D31865-311, D31865-310, and D31865-312, respectively. Therefore, United suggested we remove any language allowing installation of P/Ns D31865-109, D31865-110, D31865-209, and D31865-210 from the proposed AD.

We agree that clarification is necessary. We have moved the language in paragraph (h)(1) of the proposed AD into paragraph (h) of this AD and removed paragraph (h)(2) from this AD. We have also removed the language in paragraph (k) of the proposed AD which specified “except as required by paragraph (h)(2) of this AD for the OWS enclosures identified in paragraph (h) of this AD.” And where paragraph (l)(2) of the proposed AD referred to “paragraph (h)(2),” we have changed this reference to paragraph (h) of this AD.

We reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this AD with the changes described previously, and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

Airbus has issued the following service information.

• Airbus Service Bulletin A320-25-1156, Revision 03, dated December 5, 2001. This service information describes procedures for modifying OWS enclosures having P/Ns D31865-101, D31865-102, D31865-103, D31865-104, D31865-105, D31865-106, D31865-107, or D31865-108 of certain Airbus Model A319 and A320 series airplanes.

• Airbus Service Bulletin A320-25-1649, dated February 16, 2010. This service information describes procedures for modifying and installing OWS enclosures having P/Ns D31865-109, D31865-110, D31865-209, or D31865-210, on the LH and RH sides of the fuselage on certain Airbus Model A318, A319, and A320 series airplanes.

Air Cruisers has issued Service Bulletin A320 004-25-84, Revision 4, dated November 9, 2012. This service information describes procedures for modifying the LH and RH OWS.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We estimate that this AD affects 851 airplanes of U.S. registry.

The actions required by AD 2012-18-12 and retained in this AD take about 14 work-hours per product, at an average labor rate of $85 per work-hour. Required parts will cost $0 per product. Based on these figures, the estimated cost of the actions that are required by AD 2012-18-12 is $1,190 per product.

We also estimate that it takes about 48 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts will cost $0 per product. Based on these figures, we estimate the cost of this AD on U.S. operators to be $3,472,080, or $4,080 per product.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);

3. Will not affect intrastate aviation in Alaska; and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Pacific Aerospace Limited Model 750XL (type certificate previously held by Pacific Aerospace Corporation Ltd.) airplanes. That NPRM was published in the Federal Register on April 12, 2016 (81 FR 21489), and proposed to supersede AD 2006-13-05, Amendment 39-14658 (71 FR 35509, June 21, 2006) (“AD 2006-13-05”).

Since we issued AD 2006-13-05, additional airplanes have been identified that need to be added to the applicability of the AD.

The Civil Aviation Authority (CAA), which is the aviation authority for New Zealand, has issued AD No. DCA/750XL/7B, dated February 25, 2016 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (81 FR 21489, April 12, 2016) or on the determination of the cost to the public.

We reviewed the relevant data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (81 FR 21489, April 12, 2016) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (81 FR 21489, April 12, 2016).

We reviewed Pacific Aerospace Limited Service Bulletin PACSB/XL/018, Issue 4, dated January 20, 2016. The service bulletin describes procedures for removing rivets (part number (P/N) MS20470 DD6) and installing bolts (P/N NAS 6203-7X or NAS 6203-6X), washers (P/N AN960-10), and nuts (P/N MS21044N3) in place of the rivets to restore airplane to full take-off weight of 7,500 pounds. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of the AD.

We estimate that this AD will affect 9 products of U.S. registry. We also estimate that it will take about 32 work-hours per product to comply with the replacement requirements of this AD. The average labor rate is $85 per work-hour. Required parts will cost about $519 per product.

Based on these figures, we estimate the cost of this AD on U.S. operators to be $29,151, or $3,239 per product.

AD 2006-13-05 affected 8 of the 9 U.S.-registered airplanes reflected in the above cost information. This AD will only increase the cost already required by AD 2006-13-05 by one additional airplane. The FAA has a report that the additional airplane is already in compliance, thus this AD will impose no additional cost impact on U.S. operators.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-5578; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone (800) 647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Beechcraft Corporation Model BAe.125 series 1000A and 1000B airplanes and Model Hawker 1000 airplanes. The NPRM published in the Federal Register on January 21, 2016 (81 FR 3348) (“the NPRM”). The NPRM was prompted by reports of inadvertent stowage of the thrust reversers, which can result in high forward engine thrust even though the throttle is commanding reverse thrust. The NPRM proposed to require installing kits that include relays, associated wiring, and a thrust reverser fail annunciator. We are issuing this AD to prevent inadvertent stowage of the thrust reversers, which could cause a runway overrun during a rejected takeoff or landing, and consequent structural failure and possible injury to occupants.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

Mr. Kevin Maher expressed support for the NPRM.

Mr. Kenneth Rittenhouse of Becker Aviation LLC requested that we not require installation of the service kits, but leave the installation decision up to the individual owner/operator. Mr. Rittenhouse stated that the NPRM mentions that there have not been any issues reported involving Model BAe.125 airplanes but does mention that those airplanes have a similar engine/thrust reverser system to airplanes on which the problem was reported. Mr. Rittenhouse explained that if you examine the Learjet Model 60 and the Model Hawker 1000 systems, the Hawker 1000 is much more robust with redundant capabilities. Mr. Rittenhouse stated that he does not believe the unsafe condition has ever been an issue with the Model Hawker 1000 airplanes, and that it is extremely unjust to force operators to comply with this modification that costs 15 percent of the total value of the airplane.

We do not agree with the commenter's request. We recognize that maintaining airplanes in an airworthy condition is vital, but sometimes expensive. Installation of the service kit corrects a potential unsafe condition that could cause a runway overrun during a rejected takeoff or landing, and consequent structural failure and possible injury to occupants. The service kit was designed and proposed by the airplane original equipment manufacturer as its best correction option. The root cause of the unsafe condition is incorrect software logic within the engine's electronic control unit. We acknowledge the commenter's statement indicating that “the Hawker 1000 is much more robust with redundant capabilities,” however, the commenter did not submit any substantiating data to support that statement. We have determined that this unsafe condition exists on the Model Hawker 1000 airplanes as well as Beechcraft Corporation Model BAe.125 Series 1000A and 1000B airplanes. We might approve requests to revise the applicability of this AD if the request includes data that justifies such a revision and provides an acceptable level of safety. We have not changed this AD in this regard.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD as proposed, except for minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

We reviewed Beechcraft Service Bulletin 78-4133, dated May 2015. The service information describes procedures for installing kits having part numbers 140-9005 and 140-9006, which include relays, associated wiring, and a thrust reverser fail annunciator. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We estimate that this AD affects 38 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Airbus Model A319, A320, and A321 series airplanes. The NPRM published in the Federal Register on July 30, 2015 (80 FR 45457) (“the NPRM”). The NPRM was intended to complete certain mandated programs intended to support the airplane reaching its LOV of the engineering data that support the established structural maintenance program. The NPRM proposed to require reinforcing the forward pressure bulkhead at a certain stringer on both the left-hand and right-hand sides, and doing related investigative and corrective actions if necessary. We are issuing this AD to prevent fatigue cracking of the forward pressure bulkhead, which could result in reduced structural integrity of the airplane.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2014-0209, dated September 19, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition on all Model A319, A320, and Model A321 series airplanes. The MCAI states:

The forward pressure bulkhead reinforcement includes related investigative actions of measuring the diameters of certain fastener holes, and if they are not oversized, doing a rotating probe inspection for cracking of the fastener holes.

Required corrective actions include cold expanding crack-free holes or repairing oversize or cracked holes by using a method approved by the FAA, EASA, or Airbus's EASA Design Organization Approval (DOA).

You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-2964-0002.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

American Airlines requested that we reference Revision 03 of Airbus Service Bulletin A320-53-1268, dated May 7, 2015, as the appropriate source of service information.

We agree with American Airlines' request. No additional work is specified by this revision for airplanes modified by any previous issue. We have revised paragraphs (g) and (h) of this AD to refer to Airbus Service Bulletin A320-53-1268, Revision 03, dated May 7, 2015; and revised paragraph (i) of this AD to also give credit for previous actions accomplished in accordance with Airbus Service Bulletin A320-53-1268, Revision 02, dated July 15, 2014.

United Airlines (UAL) stated that the effectivity of Airbus Service Bulletin A320-53-1268, Revision 02, dated July 15, 2014, does not match the NPRM applicability. UAL also stated that the NPRM applicability does not mention pre-modification 153832 airplanes, and that Airbus Service Bulletin A320-53-1268, Revision 02, dated July 15, 2014, is classified as Airbus Modification 153832.

UAL stated that several alternative methods of compliance (AMOCs) may be needed because Airbus will add to the effectivity of Airbus Service Bulletin A320-53-1268, Revision 02, dated July 15, 2014, after operators purchase an extended design service goal from Airbus.

We agree to clarify the applicability. The requirements of this AD apply to all airplanes identified in the applicability of the AD. If there is any conflict between the AD applicability and the service information effectivity, then the AD takes precedence. The applicability of this AD also matches the applicability of the corresponding MCAI AD.

If operators are planning to operate the airplane beyond the LOV of engineering data approved for the original type design, the actions specified in this AD must be done in order to address the identified unsafe condition. We acknowledge that AMOCs may be needed to allow the use of future revisions of the service information. Therefore, we encourage operators to coordinate with Airbus for effective planning and compliance with the AD requirements if they intend to operate their fleet beyond its LOV. We have not changed this final rule in this regard.

UAL questioned why there is no terminating action in the proposed AD. UAL stated that the reinforcement specified in this proposed AD is intended to prevent fatigue cracking of the forward pressure bulkhead but there is no reference to related inspection tasks or termination of existing Airworthiness Limitation Items (ALIs). UAL noted that, for example, ALI 533186 is applicable for pre-Mod 153832 (Airbus Service Bulletin A320-53-1268) airplanes. UAL stated this will cause confusion as to whether or not ALI inspections are required if there is no terminating action paragraph.

In regard to UAL's question on terminating action, ALI inspections must be accomplished on an airplane to be in compliance with the approved type design independent of the forward pressure bulkhead reinforcement required by this AD. Accomplishing the reinforcement does not preclude the need for ALI inspections.

However, when the effectivity of an ALI inspection identifies pre-modification airplanes, then it is not applicable to airplanes in a post-modification configuration. Thus, ALI inspections that are identified as pre-Mod 153832 (Airbus Service Bulletin A320-53-1268) do not affect airplanes on which the reinforcement specified in Airbus Service Bulletin A320-53-1268 has been done. We have not changed this AD in this regard.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

Airbus has issued Service Bulletin A320-53-1268, Revision 03, dated May 7, 2015. The service information describes procedures for reinforcing the forward pressure bulkhead at frame 35, stringer 30, on both the left-hand and right-hand sides; and for doing repairs. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section of this AD.

We estimate that this AD affects 48 airplanes of U.S. registry.

We also estimate that it will take about 21 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this AD on U.S. operators to be $85,680, or $1,785 per product.

According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);

3. Will not affect intrastate aviation in Alaska; and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain The Boeing Company Model 787-8 airplanes. The NPRM published in the Federal Register on November 19, 2015 (80 FR 72393), (“the NPRM”). The NPRM was prompted by reports of water leakage from the potable water system due to improperly installed waterline couplings, and water leaking into the EE bays from above the floor in the main cabin, resulting in water on the equipment in the EE bays. The NPRM proposed to require replacing the potable waterline couplings above the forward and aft EE bays with new, improved couplings. The NPRM also proposed to require sealing the main cabin floor areas above the aft EE bay, installing drip shields and foam blocks, and rerouting the wire bundles near the drip shields above the equipment in the aft EE bay. We are issuing this AD to prevent a water leak from an improperly installed potable water system coupling, or main cabin water source, which could cause the equipment in the EE bays to become wet, resulting in an electrical short and potential loss of system functions essential for safe flight.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

The Airline Pilots Association International stated that it concurs with the contents of the NPRM.

United Airlines (UAL) stated that it supports the compliance time of 60 months to accomplish the actions proposed by the NPRM.

Mr. Geoffrey Barrance requested that we revise the compliance times specified in the NPRM to before further flight. Mr. Barrance stated that, in view of the effect of common mode faults to nullify the safety design of critical avionic systems housed in the avionics bay, this matter needs to be treated with the greatest urgency and that the correction of the problem should be required with far greater urgency than the timescales proposed in the NPRM. Mr. Barrance stated an example of the automatic landing function of the automatic flight control system that does not and cannot take into account common mode faults such as water ingress into multiple line replaceable units (LRUs), which are present to provide functional redundancy and fault tolerance. Mr. Barrance stated that no probability can be assessed for unwanted behavior resulting from water ingress into multiple redundant LRUs.

UAL requested that we extend the proposed compliance time from 24 months to 30 months for accomplishing the actions specified in Boeing Alert Service Bulletin B787-81205-SB380009-00, Issue 001, dated March 26, 2015. UAL stated that if maintenance requires an unforeseen disassembly of the airplane for access or to correct a test failure, a 30-month period is required to schedule the clamp inspection and replacement in a heavy check.

We do not agree to revise the compliance times required by this AD. In developing appropriate compliance times for this AD, we considered not only the safety implications, including evaluation of the hazards associated with water ingress into multiple redundant LRUs, but the manufacturer's recommendations, the availability of required parts, and the practical aspect of accomplishing the required actions within an interval of time that corresponds to typical scheduled maintenance for affected operators. After considering all the available information, we have determined that the compliance times, as proposed, represent appropriate intervals of time in which the required actions can be performed in a timely manner within the affected fleet, while still maintaining an adequate level of safety. Operators are always permitted to accomplish the requirements of an AD at a time earlier than the specified compliance time. Operators wanting additional time to comply with the requirements of an AD may request adjustments to the compliance time under the provisions of paragraph (k) of this AD. We will consider requests for an adjustment of the compliance time if data are submitted to substantiate that such an adjustment would provide an acceptable level of safety. We have not changed this AD in this regard.

UAL requested that we approve the use of flame retardant (FR) moisture barrier tapes Nitto 11611-MB polyurethane tape or BMS8-346 Type II, Class 4 tape (3M 8657) as alternates to the BMS8-346 Type 1, Class 1 moisture barrier tape (Patco D9100) specified in Boeing Alert Service Bulletin B787 81205 SB530029-00, Issue 001, dated March 26, 2015. UAL stated that during a supplemental type certificate test for a Model 737 airplane, burn testing was performed on the Patco D9100 tape by Zodiac Northwest Aerospace Technologies, and it failed the 12-second vertical test. UAL stated that, therefore, the Patco D9100 tape could not be certified to meet the 14 CFR 25.853 flammability requirements.

We do not agree with UAL's request. We have contacted Boeing who provided evidence that BMS8-346 Type 1, Class 1 moisture barrier tape (Patco D9100) material passed the 12-second vertical burn test. UAL did not submit specific evidence to substantiate that Nitto 11611-MB polyurethane tape or BMS8-346 Type II, Class 4 tape (3M 8657) is compliant and that BMS8-346 Type 1, Class 1 moisture barrier tape (Patco D9100) material is non-compliant. Under the provisions of paragraph (k) of this AD, we will consider requests for approval of an alternative method of compliance (AMOC) if sufficient data are submitted to substantiate that alternative tapes are compliant. We have not changed this AD in this regard.

Boeing and UAL requested that we revise the NPRM to refer to Boeing Alert Service Bulletin B787-81205-SB380009-00, Issue 002, dated December 9, 2015; Boeing Alert Service Bulletin B787-81205-SB530029-00, Issue 002, dated January 26, 2016; and Boeing Alert Service Bulletin B787-81205-SB530031-00, Issue 002, dated March 16, 2016.

We agree with the commenters' requests to use the most current service information. We have revised this AD as described below.

• Boeing Alert Service Bulletin B787-81205-SB380009-00, Issue 002, dated December 9, 2015, adds notes, revises the waiting time in the leak test, and corrects typographical errors. We have revised paragraphs (c) and (g) of this AD to reference this service information.

• Boeing Alert Service Bulletin B787-81205-SB530029-00, Issue 002, dated January 26, 2016, extends the 24-month compliance time for sealing floor panels and seat tracks to 60 months; clarifies installation of components, revises tape requirements; revises sealant callouts; and corrects kit contents. We have revised paragraphs (c) and (h)(1) of this AD to reference this service information.

• Boeing Alert Service Bulletin B787-81205-SB530031-00, Issue 002, dated March 16, 2016, extends the 24-month compliance time for installing drip shields and foam blocks to 60 months. This service information also revises the airplane groups into configurations to account for airplanes on which the drip shield between the floor beams at station (STA) 1233 and STA 1257 was not installed due to interference with wire bundles over the P100 panel. This service information also clarifies certain instructions, revises certain task hour estimates, and removes one airplane from the effectivity. This service information erroneously specifies “Group 6, Configuration 1” airplanes where it should specify “Group 7, Configuration 1” airplanes for Task 29 in multiple places. We have revised paragraphs (c) and (h)(2) of this AD to reference Boeing Alert Service Bulletin B787-81205-SB530031-00, Issue 002, dated March 16, 2016. We have added new paragraph (i) to specify an exception for Boeing Alert Service Bulletin B787-81205-SB530031-00, Issue 002, dated March 16, 2016.

We have also added new paragraph (j) of this AD to provide credit for actions done prior to the effective date of this AD using Boeing Alert Service Bulletin B787-81205-SB380009-00, Issue 001, dated March 26, 2015; Boeing Alert Service Bulletin B787-81205-SB530029-00, Issue 001, dated March 26, 2015; and Boeing Alert Service Bulletin B787-81205-SB530031-00, Issue 001, dated March 26, 2015; as applicable. We have redesignated subsequent paragraphs accordingly.

Mr. Geoffrey Barrance requested that we conduct an internal review and a review with the manufacturer as to why the airplane equipment bay design was not reviewed and required to protect the avionics LRUs from water ingress at the time of certification. Mr. Barrance stated that this is not a new issue and must be a standard check item on design reviews and certification signoff. Mr. Barrance stated that this is a design and certification omission, not primarily a problem with the quality of work by the people doing the installation of the potable waterlines.

We partially agree with Mr. Barrance's request. We agree that this is a design issue that increased the likelihood of mis-installation, and not primarily a problem with the quality of work by personnel installing the potable waterlines. We asked the manufacturer to conduct a root-cause analysis to determine how it permitted design issues that created the unsafe condition. We are working with the manufacturer to determine if their company processes must be updated to better identify these hazards. The actions required by this AD address only the results of that analysis that directly relate to the identified design issues, and mandate changes to correct those issues.

We disagree that the EE bay design was not reviewed and required to protect the avionics LRUs from water ingress at the time of certification. A hazard analysis was completed for these systems, as part of the certification process, which required known hazards to be addressed. This event shows that despite the hazard analysis during the design and certification phase, further improvement is needed to remove the unsafe condition. Airplane manufacturers are responsible for the safety of their products and services, and must be in compliance with applicable safety requirements. As a component of our safety management system, we verify that the safety systems of the design approval holder meet applicable requirements. Working with approval holders during the design development process, we strive to avoid unsafe conditions in the first place. The design for this system was evaluated during the certification process and found at the time to be compliant. We also verify that the approval holders' processes, products, and services continue to maintain safety of their product during the operational phases of their service life. In this regard, we have evaluated the issues related to this system and acted on them.

We are continuously evaluating our certification system and procedures and improving them when problems are found. In addition, if the FAA is made aware of issues occurring on a certificated product, we conduct an investigation, evaluate the manufacturer's root-cause analysis, and make a determination whether or not an unsafe condition exists. We then take appropriate action to mitigate the unsafe condition. We have not changed this AD in this regard.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

We reviewed the following service information.

• Boeing Alert Service Bulletin B787-81205-SB380009-00, Issue 002, dated December 9, 2015.

• Boeing Alert Service Bulletin B787-81205-SB530029-00, Issue 002, dated January 26, 2016.

• Boeing Alert Service Bulletin B787-81205-SB530031-00, Issue 002, dated March 16, 2016.

This service information describes procedures for replacing the potable waterline couplings above the forward and aft EE bays with new, improved couplings; sealing the floors, seat tracks, and lavatories above the aft EE bay; installing drip shields and foam blocks; and rerouting the wire bundles adjacent to the drip shields above the aft EE bay. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We estimate that this AD affects 17 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all The Boeing Company Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes. The NPRM published in the Federal Register on November 30, 2015 (80 FR 74726) (“the NPRM”). The NPRM was prompted by reports of a manufacturing oversight, in which a supplier omitted the required protective finish on certain bushings installed in the rear spar upper chord on horizontal stabilizers, which could lead to galvanic corrosion and consequent cracking of the rear spar upper chord. The NPRM proposed to require an inspection or records check to determine if affected horizontal stabilizers are installed, related investigative actions, and for affected horizontal stabilizers, repetitive inspections for any crack of the horizontal stabilizer rear spar upper chord, and corrective action if necessary. We are issuing this AD to detect and correct cracking of the rear spar upper chord, which can result in the failure of the upper chord and consequent departure of the horizontal stabilizer from the airplane, which can lead to loss of control of the airplane.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

Air Line Pilots Association International (ALPA) stated that it supports the NPRM. Boeing stated that is concurs with the NPRM.

Aviation Partners Boeing stated that installation of winglets per Supplemental Type Certificate (STC) ST00830SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/184de9a71ec3fa5586257eae00707da6/$FILE/ST00830SE.pdf) does not affect the ability to accomplish the actions specified in the NPRM.

We concur with the commenter. We have redesignated paragraph (c) of the proposed AD as paragraph (c)(1) and added new paragraph (c)(2) to this AD to state that installation of STC ST00830SE (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgstc.nsf/0/184de9a71ec3fa5586257eae00707da6/$FILE/ST00830SE.pdf) does not affect the ability to accomplish the actions required by this final rule. Therefore, for airplanes on which STC ST00830SE is installed, a “change in product” alternative method of compliance (AMOC) approval request is not necessary to comply with the requirements of 14 CFR 39.17.

Airlines for America (A4A) requested that we revise the applicability of the proposed AD to state “This AD applies to all horizontal stabilizers with serial numbers identified in Boeing SB 737-55A1097.” A4A explained that the proposed AD is applicable to all Boeing Model 737-600, -700, -700C, -800, -900, and -900ER series airplanes; however, Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015, provides a list of affected horizontal stabilizers by serial number. A4A expressed that the physical plate inspections required by paragraph (g)(1)(ii) of the proposed AD are excessive and unneeded, as operators normally track serialized components without the need to physically inspect the airframe. A4A further reasoned that when paragraph (c) of the proposed AD is written against all Model 737 Next Generation airframes, the complexity of compliance reporting becomes more burdensome. The net result, stated A4A, is indefinite record keeping of AD compliance for airplanes that are not equipped with horizontal stabilizers affected by the manufacturing oversight.

We do not agree to revise the applicability of this AD as requested by the commenter. Paragraph (g)(1) of this AD gives operators the option of performing either a records check or an inspection. If the operator's records are sufficient to determine the serial number of the horizontal stabilizers on the affected airplane, then a physical inspection is not required. Furthermore, the affected horizontal stabilizers are rotable parts, so it is possible that an affected horizontal stabilizer could be installed on numerous airplanes during its service life, even on a new production airplane once it enters service. As specified in paragraph 2.B.(2) of Chapter 6 of the AD Manual, FAA-IR-M-8040.1C (http://rgl.faa.gov/Regulatory_and_Guidance_Library/rgOrders.nsf/0/66ddd8e1d2e95db3862577270062aabd/$FILE/FAA-IR-M-8040_1C.pdf), when the unsafe condition results from the installation of the appliance or part on an aircraft, the AD action is issued against the aircraft, not the appliance or part. Therefore, we have determined that it is appropriate for this AD to apply to all airplanes of the specified model types. We have made no changes to the applicability of this AD.

A4A requested that we revise paragraph (h)(2) of the proposed AD to allow removal of an affected horizontal stabilizer, and replacement with an unaffected or an affected horizontal stabilizer that is within the parameters of paragraph 1.E. “Compliance,” of Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015. A4A explained that paragraph (g)(2) of the proposed AD requires that the inspection specified in Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015, be accomplished on any horizontal stabilizer found to be within the effectivity of Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015, and the compliance times found in paragraph 1.E., “Compliance.” A4A expressed that if cracking is found, operators must repair in accordance with paragraph (h)(2) of the proposed AD; paragraph (h)(2) of the proposed AD requires repair in accordance with paragraph (j) of the proposed AD before further flight.

We agree. We have determined that removing a damaged horizontal stabilizer and replacing it with a serviceable horizontal stabilizer, as provided in paragraph (i) of this AD, addresses the identified unsafe condition. We have revised paragraph (h)(2) of this AD accordingly.

A4A requested that the FAA and Boeing review other non-destructive test (NDT) inspection options such as an ultrasound process to satisfy the proposed inspection requirements. A4A pointed out that paragraph (g)(2) of the proposed AD specifies a high frequency eddy current (HFEC) method for inspection of the rear spar upper chord. A4A explained that the FAA should be aware that other methods, specifically ultrasound inspection, may be better NDT diagnostic techniques, and that an ultrasound inspection, compared to the proposed HFEC process, may detect early crack development from the fitting holes versus cracking that has propagated up to and near the surface of the rear spar upper chord.

We partially agree. We agree with the commenter that other inspection methods may be better NDT diagnostic techniques and note that alternative methods of compliance (AMOCs) have been granted to ADs when updated service information containing improved procedures to address an unsafe condition becomes available.

We disagree to include other inspection options in this final rule, because the inspection technique required in this AD adequately addresses the unsafe condition and is accompanied by service information, which includes detectable crack lengths and inspection intervals. If additional service information that provides alternative NDT inspection methods becomes available, under the provisions of paragraph (j) of this AD, we will consider requests for approval of an AMOC if sufficient data are submitted to substantiate that the inspection method would provide an acceptable level of safety. We have made no changes to this AD in this regard.

A4A requested that we reword paragraphs (g) and (i) of the proposed AD to allow operators to maintain or install any affected horizontal stabilizer on any airplane, provided that the horizontal stabilizer is, or will be, inspected as specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015. A4A explained that paragraphs (i)(1) and (i)(2) of the proposed AD preclude installation of an affected horizontal stabilizer without accomplishing the required inspection. A4A explained further that other maintenance activity could cause a horizontal stabilizer to be removed and reinstalled prior to reaching the compliance times specified in Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015. With the potential interpretation of paragraph (g)(2) of the proposed AD being to inspect immediately, the initial inspection would be significantly accelerated, and the inspection schedule would be altered for the remaining life of the component.

All Nippon Airways (ANA) requested that we clarify the parts installation restrictions specified in paragraph (i) of the proposed AD to reduce the burden for operators. ANA explained that parts installation is restricted based on its serial number, and that paragraph (i)(2)(i) of the proposed AD requires initial inspection specified in paragraph (g)(2) of the proposed AD before further flight. ANA expressed that this requirement is applicable if the flight cycles and/or the date of issuance the original certificate of airworthiness, or the original export certificate of airworthiness for the horizontal stabilizer are unknown or have already exceeded the proposed compliance time specified in paragraph (g)(2) of the proposed AD. ANA reasoned that, if the flight cycles and the date of issuance of the original certificate of airworthiness or the original export certificate of airworthiness of the horizontal stabilizer are known, and the flight cycles and years on the horizontal stabilizer are less than the compliance times specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015, operators may conduct the inspection specified in paragraph (g)(2) of this AD at the time specified in paragraph (g)(2) of this AD.

We agree to clarify. An affected horizontal stabilizer that has not reached the inspection threshold or the next repeat interval is still in compliance with this AD at the time it is installed on the airplane. We have revised paragraph (i)(2)(i) of this AD to read “Initial and repetitive HFEC inspections specified in paragraph (g)(2) of this AD are completed within the compliance times specified in paragraph (g)(2) of this AD.” We also agree to clarify that the 10-year compliance time specified in paragraph 1.E. “Compliance,” of Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015, is measured using the airplane the affected horizontal stabilizer was delivered on.

A4A requested that repair instructions be provided either in a revision to the service information, or via the structural repair manual (SRM). A4A also requested that the proposed AD be revised to include a preventive, terminating action including the option to remove and replace the subject bushings in the upper chord fitting during a heavy check schedule. A4A expressed that the NPRM and Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015, provide neither specific repair methods nor a means to terminate the inspections. A4A reasoned that the NPRM requires corrective action for any crack that is discovered, and that such action is to be performed in accordance with paragraph (j) of the proposed AD, which is the AMOC section. A4A said that, although no known inspections have revealed cracking, we (the FAA) must believe that findings will occur, and that operators would benefit by having guidance from Boeing without the need for an AMOC request. Similarly, A4A expressed, without a repair plan, there should also be a means of terminating the inspections entirely. A4A pointed to a recent experience concerning seat track cracking that exposed the difficulties of embarking upon a required inspection plan without a defined recovery path. A4A referred to AD 2013-23-04, Amendment 39-17659 (78 FR 68693, November 15, 2013) (“AD 2013-23-04”), and stated that AD also directed operators to the AMOC process.

We do not agree. An AD is issued to address an identified unsafe condition, as required by 14 CFR part 39. The determination of the unsafe condition, mitigating action, and compliance times in this AD has all been coordinated with Boeing. This AD is being issued to address the lack of corrosion protection on a critical structural element. As a result, dissimilar metal corrosion may cause cracking of the horizontal stabilizer rear spar upper chord. With no service history of cracking yet reported, it is expected that any cracking will be limited and not result in a significant disruption to affected operators. The inspections required by this AD provide an acceptable level of safety for the affected airplanes. We have reviewed with Boeing the implementation issues associated with AD 2013-23-04 and expect that Boeing will provide us with approvable data for repair and terminating actions in a timely manner to address any cracking found.

For these reasons, we do not consider that delaying this action until after the possible release of revised service information is warranted, since sufficient technology and service information currently exist to accomplish the required actions within the compliance time. However, under the provisions of paragraph (j) of this AD, we will consider requests for approval of AMOCs for revised service information, repairs, or terminating actions if sufficient data are submitted to substantiate they would provide an acceptable level of safety. For these reasons, we have made no changes to this AD in this regard.

ANA stated that paragraph (g)(1)(i) of the proposed AD should refer to Part 1, and paragraph (g)(1)(ii) of the proposed AD should refer to Part 2 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015. ANA did not provide a reason for this request.

From these statements, we infer that ANA is requesting that we revise paragraphs (g)(1)(i) and (g)(1)(ii) of the proposed AD. We agree that the changes requested by ANA provide additional clarity. We have added “Part 1 of” to paragraph (g)(1)(i) and “Part 2 of” to paragraph (g)(1)(ii) of this AD.

A4A also requested that, prior to release of the AD, we assure that Boeing has sections of the rear spar available for the horizontal stabilizer including a typical splice repair plan for each affected 737-NG fleet. A4A also requested that Boeing also provide or have available, horizontal stabilizers that are service ready prior to the release of the AD.

We do not agree. We do not consider that delaying this action until Boeing has assured that replacement parts will be available is warranted. This AD is issued to address an identified unsafe condition, as required by 14 CFR part 39. The determination of the unsafe condition, mitigating action, and compliance times in this AD has all been coordinated with Boeing. This AD is being issued to address the lack of corrosion protection on a critical structural element. As a result, dissimilar metal corrosion may cause cracking of the horizontal stabilizer rear spar upper chord. With no service history of cracking yet reported, it is expected that any cracking will be limited and not be a significant disruption to affected operators. We understand that Boeing will make horizontal stabilizer parts and assemblies available as necessary for operators to address possible on-condition actions. However, since it is unknown how many repairs or replacements may be necessary and what parts would be necessary for each repair, we cannot estimate the type and number of parts needed. If parts availability becomes an issue, under the provisions of paragraph (j) of this AD, we may approve requests for adjustments to the compliance time for doing a repair or replacement if data are submitted to substantiate that such an adjustment would provide an acceptable level of safety. We have made no changes to this AD in this regard.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Αre consistent with the intent that was proposed in the NPRM for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

We reviewed Boeing Alert Service Bulletin 737-55A1097, dated July 1, 2015. The service information describes procedures for an inspection or records check to determine if affected horizontal stabilizers are installed, related investigative actions, HFEC inspections for any crack of the horizontal stabilizer rear spar upper chord, and corrective action if necessary. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We estimate that this AD affects 1,397 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

We estimate the following costs to do any necessary inspections that would be required based on the results of the inspection or records check. We have no way of determining the number of aircraft that might need these inspections:

According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

We have received no definitive data that would enable us to provide cost estimates for the on-condition repairs specified in this AD.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

This document contains amendments to 26 CFR part 1 (Income Tax Regulations) under sections 446 and 6045 of the Internal Revenue Code (Code). The regulations provide a method of accounting for gain or loss on shares in MMFs and are intended to simplify tax compliance for holders of shares in MMFs affected by SEC regulations that impose liquidity fees or change how certain MMF shares are priced. See Money Market Fund Reform; Amendments to Form PF, Securities Act Release No. 33-9616, Investment Advisers Act Release No. IA-3879, Investment Company Act Release No. IC-31166, Financial Reporting Codification No. FR-84 (August 14, 2014) (SEC MMF Reform Rules). The regulations also provide guidance regarding information reporting requirements for shares in MMFs.

An MMF is a type of investment company registered under the Investment Company Act of 1940 (1940 Act) and regulated as an MMF under Rule 2a-7 under the 1940 Act (17 CFR 270.2a-7). MMFs have historically sought to keep stable the prices at which their shares are distributed, redeemed, and repurchased. The securities that Rule 2a-7 permits an MMF to hold generally result in no more than minimal fluctuations in the MMF's net asset value per share (NAV).1

MMFs meeting the requirements of Rule 2a-7 have been permitted to value their assets based on the assets' cost, with certain adjustments (amortized cost method), and to price their shares by rounding the resulting NAV to the nearest 1 percent (penny rounding). These methods have enabled MMFs to maintain constant share prices in almost all circumstances. Because most MMFs target a $1.00 share price, an MMF that fails to maintain a constant share price is said to “break the buck.”

The SEC MMF Reform Rules generally bar the use of the amortized cost method and penny rounding for certain MMFs (floating-NAV MMFs) and require a floating-NAV MMF to value its assets using market factors and to round its price per share to the nearest basis point (the fourth decimal place, in the case of a fund with a $1.0000 share price). Certain government-security-focused MMFs (government MMFs) and certain MMFs the beneficial owners of which are limited to natural persons (retail MMFs) may continue to use the amortized cost method and penny rounding. (A government MMF or retail MMF that continues to use the amortized cost method and penny rounding is called a stable-NAV MMF.)

The SEC MMF Reform Rules also establish circumstances under which an MMF is permitted or required to impose a liquidity fee or is permitted to impose a redemption gate. When an MMF has a liquidity fee in effect, the liquidity fee reduces the proceeds received by all redeeming shareholders. A redemption gate is the temporary suspension of redemptions of shares in the MMF. Liquidity fees and redemption gates may be imposed by both floating-NAV MMFs and stable-NAV MMFs. An MMF other than a government MMF is required to impose a liquidity fee in certain circumstances, unless the fund's board of directors determines that such a fee is not in the best interests of the fund.

The Treasury Department and the IRS published a notice of proposed rulemaking and notice of public hearing (REG-107012-14) in the Federal Register on July 28, 2014 (79 FR 43694). The proposed regulations described a simplified method of accounting for gain or loss on shares in a floating-NAV MMF (the net asset value method, or NAV method). Under the NAV method, a taxpayer's gain or loss on shares in an MMF is based on the change in the aggregate value of the taxpayer's shares during a computation period selected by the taxpayer and on the net amount of the purchases and redemptions during the computation period. The proposed regulations also provided guidance regarding information reporting requirements for shares in MMFs.

A request for a public hearing was received, and the hearing was held on November 19, 2014. The IRS received written comments responding to the proposed regulations regarding the method of accounting for gains and losses on shares in MMFs. The written comments are available for public inspection at http://www.regulations.gov or upon request. After considering the comments, the Treasury Department and the IRS adopt the proposed regulations regarding the method of accounting as final regulations with the modifications described in this Treasury decision. No comments were received on the portion of the proposed regulations that would revise § 1.6045-1(c)(3)(vi) to clarify that the exceptions under sections 6045, 6045A, and 6045B continue to apply to all MMFs, including floating-NAV MMFs. The Treasury Department and the IRS adopt the proposed regulations revising § 1.6045-1(c)(3)(vi) as final regulations without substantive change.

Under the proposed regulations, the NAV method would apply only to floating-NAV MMF shares. In the preamble to the proposed regulations, the Treasury Department and the IRS requested comments regarding whether the NAV method should be a permissible method of accounting for stable-NAV MMF shares.

Although stable-NAV MMFs seek to maintain constant share prices, there are circumstances in which shares in a stable-NAV MMF will give rise to gain or loss. On rare occasions, shares in a stable-NAV MMF may be redeemed at a price other than the target price, such as when the MMF breaks the buck. In addition, a stable-NAV MMF may impose liquidity fees, which will generally result in the realization of a loss by a redeeming shareholder. If the acquisition of other shares causes such a redemption to be a wash sale under section 1091, section 1091(d) will generally cause the basis of the acquired shares to exceed the cost of the shares. Because the price of a stable-NAV MMF share rarely changes, any disposition of those acquired, higher-basis shares will likely result in another loss, which also may be deferred by the wash sale rules. Therefore, even if a liquidity fee is in effect for only one redemption by a shareholder and the share price of the MMF remains constant, that fee may cause a difference between the basis and value of the shareholder's MMF shares that persists indefinitely. Determining gain or loss and basis on each transaction in a stable-NAV MMF, taking into account the wash sale rules, would impose significant burdens on shareholders under these circumstances. To eliminate those burdens, a shareholder might need to terminate the shareholder's entire interest in the affected MMF (and not initiate a new position until after the end of the period described in section 1091(a)).

Commenters recommended that the NAV method be applicable not only to shares in floating-NAV MMFs but also to shares in stable-NAV MMFs. The commenters added that many shareholders of stable-NAV MMFs may be retail shareholders (generally, individuals) who are likely to rely upon the cost basis reporting provided by funds or brokers for their other mutual funds. Those individuals are unlikely to have the systems necessary to record gains and losses and to track wash sales and the resulting basis adjustments.

The NAV method would reduce the complexity, and any tax-based motivation to terminate investments in MMFs, that would result from the imposition of a liquidity fee by a stable-NAV MMF. Under the NAV method, any loss that resulted from the imposition of a liquidity fee by an MMF would be determined for a shareholder's entire interest in the MMF (or in an account) for the appropriate taxable year (or computation period) rather than for a single transaction. Therefore, the wash sale rules would not defer the loss. The NAV method also requires fewer and simpler computations than traditional accounting, even if there are no wash sales. For the years after an MMF breaks the buck or imposes a liquidity fee, the NAV method simplifies recordkeeping, because the gain or loss for each year is based on changes in the NAV during that year. Therefore, the final regulations permit taxpayers to apply the NAV method to shares in stable-NAV MMFs.

The proposed regulations would provide that if a taxpayer applies the NAV method to shares in any MMF for a taxable year, the taxpayer must apply the NAV method to its shares in all MMFs for which that method is permissible.

Commenters requested that the final regulations permit taxpayers to apply different methods to shares in different MMFs or to shares in a single MMF held in different accounts. Commenters said that some taxpayers may receive sufficient information about their shares in certain MMFs to compute gain or loss realized on each transaction and that those taxpayers should be permitted to compute gain or loss realized on each transaction for those MMFs.

Commenters also noted that taxpayers may hold shares in a single MMF through different kinds of accounts (for example, an account with a broker and an account with the MMF itself) and may receive different information for the different accounts. The commenters recommended that, because of that possibility, taxpayers should be permitted to use different accounting methods for shares held in different accounts. Commenters also noted that many MMF shareholders will be large institutional investors, which might hold shares in the same MMF through separate accounts controlled by different divisions.

In response to these comments, the final regulations permit MMF shareholders to use different methods of accounting for shares in different MMFs or for shares in a single MMF held in different accounts.

Under the NAV method, computation periods are the periods that a taxpayer selects for computing gain and loss for an MMF. The proposed regulations would provide that computation periods may be the taxpayer's taxable year or a shorter period, provided that (i) computation periods are of approximately equal duration, (ii) every day during the taxable year falls within one, and only one, computation period, and (iii) each computation period contains days from only one taxable year.

Most regulated investment companies (RICs) must pay an excise tax under section 4982 if they do not make the required distribution described in section 4982(b) for a calendar year. The required distribution is generally 98 percent of the RIC's ordinary income for the calendar year, plus 98.2 percent of the RIC's capital gain net income for the one-year period ending on October 31 of the calendar year. A commenter requested clarification that a RIC that holds MMF shares may use the NAV method for excise tax computations. That commenter also requested that the Treasury Department and the IRS confirm that a RIC that uses the NAV method is permitted to use the one-year period from November 1 to October 31 as its computation period for excise tax purposes. The commenter explained that RICs generally account for items that are marked to market using two different one-year periods for income tax and excise tax purposes. The commenter explained that, under section 4982(e)(2)(A), the term “capital gain net income” when used in section 4982 is determined by treating the one-year period ending on October 31 of any calendar year as the company's taxable year.

The Treasury Department and the IRS agree that the NAV method should be applicable for purposes of the computations required by section 4982 and that the taxable year for purposes of those computations should be the relevant period under section 4982(e). The final regulations adopt this change.

The final regulations, however, require a RIC to be consistent in applying the NAV method to MMF shares for income tax and excise tax purposes. For each MMF in each account, the final regulations generally require a RIC to use the NAV method either for both income tax and excise tax computations or for neither computation. The final regulations also clarify how a RIC may change to or from the NAV method.

The final regulations require a RIC to use the same computation periods for purposes of both excise tax and income tax computations. Therefore, under the final regulations, a RIC using the NAV method for its shares in an MMF generally treats the one-year period for which gain or loss from the MMF would be included in the amount determined under section 4982(e)(2) or (e)(6) (the section 4982 period) like a taxable year in applying the NAV method to determine the RIC's required distribution under section 4982(b).2 The RIC, however, may not use the section 4982 period as a computation period for excise tax purposes if the section 4982 period contains days from more than one income tax year.3 Instead, in this situation, the RIC must divide the section 4982 period into at least two computation periods so that each computation period contains days from only one income tax year. Similarly, the RIC may not use its full income tax year as a computation period for income tax purposes if the year contains days from more than one section 4982 period. These consistency requirements simplify and clarify the interaction of sections 852(b) and 4982.

The final regulations eliminate the requirement that computation periods be of approximately equal duration. The Treasury Department and the IRS do not believe that this requirement is essential to the operation of the NAV method, and eliminating the requirement will allow taxpayers more flexibility. In particular, permitting computation periods of unequal duration will reduce the burden on RICs of complying with the requirement of consistent computation periods for income and excise tax purposes. For example, a RIC that applies the NAV method to its shares in an MMF (held as a capital asset) and that has an income tax year ending on January 31 may meet the consistency requirements with two computation periods of unequal duration—one ending on January 31 and the other on October 31. The RIC also may use additional computation periods ending on other dates, such as December 31.

Under the proposed regulations, gain and loss under the NAV method would be determined by reference to the fair market value of MMF shares. Commenters requested that the Treasury Department and the IRS clarify that the fair market value of an MMF share for this purpose is the NAV reported by the MMF. One commenter suggested that the fair market value of a share in an MMF should be the published NAV as of the end of the relevant day (or the next trading day, if the day in question is not a trading day). A second commenter suggested that, because MMFs may strike several NAVs throughout the day, the fair market value should be the next published NAV after a transaction.

In response to these comments, the final regulations clarify that the fair market value of a share in an MMF at the time of a transaction is presumed to be the published NAV (or other published amount for which the MMF would redeem the share, determined without regard to any liquidity fees (other redemption amount)). For purposes of computing the ending value for a computation period, the presumption applies to the last published NAV (or other redemption amount) in that computation period. For purposes of determining the fair market value of MMF shares surrendered or received in a redemption or exchange, the presumption generally applies to the NAV (or other redemption amount) used to determine the consideration received in the transaction, or if the consideration is not based on a published NAV (or other redemption amount), the first NAV (or other redemption amount) published for the MMF shares after the transaction. If no NAV (or other redemption amount) is published, or if facts and circumstances indicate that the NAV (or other redemption amount) does not represent the fair market value of a share in the MMF, the fair market value is determined on the basis of all the facts and circumstances.

Under the proposed regulations, a taxpayer's net investment in an MMF for a computation period would equal the aggregate cost of shares in the MMF purchased during the computation period, minus the aggregate amount received during the computation period in redemption of shares in the MMF, subject to certain adjustments. A commenter suggested that the final regulations clarify that the aggregate amount received is based on: (i) If cash is received, the cash proceeds, (ii) if shares in another MMF are received, the published NAV of the shares received as of the end of the day on which the redemption or exchange occurs (or the next trading day, if the day in question is not a trading day), or (iii) if other non-cash property is received, the NAV of the redeemed or exchanged shares as of the end of the day on which the redemption or exchange occurs (or the next trading day if the day in question is not a trading day or, if the fund will not publish a NAV on or after the end of the day on which the redemption or exchange occurs, the fund's last published NAV).

The final regulations include provisions for determining the amount received for purposes of computing a taxpayer's net investment in an MMF for a computation period. If the consideration received in exchange for an MMF share consists only of cash, other MMF shares, or both, the amount received is the amount of any cash plus the fair market value of any MMF shares received. If the consideration includes any property other than cash or MMF shares, the amount received is determined by reference to the fair market value of the surrendered MMF shares.

The same commenter recommended that a phrase in § 1.446-7(b)(5)(i)(B) of the proposed regulations, “if the transaction is one in which gain or loss would be recognized,” be clarified to indicate that it refers to recognition of gain or loss other than pursuant to the NAV method. The final regulations make this clarification.

Under the proposed regulations, a taxpayer's net investment would increase if, during the computation period, the taxpayer acquired any shares in an MMF other than by purchase. In such cases, the net investment increases by the adjusted basis (for purposes of determining loss) of each such share immediately after its acquisition. The proposed regulations would also provide that if that adjusted basis would be determined by reference to the basis of one or more shares in an MMF that are being disposed of by the taxpayer in a transaction in which gain or loss is not recognized (exchanged basis), then the basis of each such disposed share is treated as being the fair market value of that share at the time of its disposition. A commenter noted that the proposed regulations do not address a situation in which the shareholder receives a transferred basis in MMF shares acquired from another person. The commenter suggested that, in that situation, if the person from whom the shareholder acquired the shares used the NAV method, then the adjusted basis of the acquired shares should be treated as the published NAV applicable to the acquisition date.

The final regulations clarify the effect on net investment of a share acquired from another person with a transferred basis. Similar to the commenter's suggestion, the final regulations provide that, if a shareholder receives a transferred basis in one or more acquired MMF shares and the person from whom the shareholder acquired the shares used the NAV method, then the adjusted basis of the acquired shares will be their fair market value at the time of the acquisition, which value is presumed to be the next NAV (or other redemption amount) published by the MMF.

The proposed regulations would provide that if a taxpayer uses the NAV method for shares in an MMF and each of those shares otherwise would give rise to capital gain or loss if sold or exchanged in a computation period, then the gain or loss from the shares in the MMF is treated as capital gain or loss under the NAV method. Likewise, if each of the shares otherwise would give rise to ordinary gain or loss if sold or exchanged in a computation period, then the gain or loss is treated as ordinary gain or loss. If, however, the sale of all of the shares in the MMF would give rise to a combination of ordinary gain or loss and capital gain or loss if sold or exchanged in a computation period, then all gain or loss from the shares in the MMF is treated as capital gain or loss.

A commenter noted that the proposed regulations do not explain why all gain or loss should be treated as capital in the case of an account containing MMF shares of mixed character. The commenter recommended that the character of gain or loss with respect to a mixed character account be bifurcated based on the portion of the shares that would generate gain or loss of each character.

The Treasury Department and the IRS believe that it is rare for a shareholder to hold shares of a single MMF the disposition of which would produce a mix of ordinary income and capital gain. Under that circumstance, a taxpayer may use different accounts to preserve the character of the shares that would produce ordinary income and capital gain. The purpose of the NAV method is to provide an alternative to traditional accounting for taxpayers seeking simplicity. The rationale for offering a method solely for MMFs is that the value of MMFs fluctuates so little that simplicity is more important than tracking each individual gain or loss. A rule that bifurcates gain or loss based on the value of the shares in a single account, when those values may change during a computation period, would make the NAV method more complex. That additional complexity is not warranted in light of the rarity of the circumstance the proposed bifurcation would address and the ability of shareholders to prevent the treatment of all gain or loss as capital by using separate accounts. Therefore, the final regulations retain the simplifying rule for mixed-character accounts.

Concurrently with the release of the proposed regulations, the Treasury Department and the IRS released Rev. Proc. 2014-45 (2014-34 IRB 388), which provides that the wash sale rules in section 1091 will not be applied to redemptions of shares in floating-NAV MMFs. Commenters requested that the wash sale exemption, which is limited to floating-NAV MMFs, be extended to stable-NAV MMFs that impose liquidity fees.

The final regulations permit shareholders of stable-NAV MMFs to use the NAV method. A shareholder who uses the NAV method would not require an exemption from the wash sale rules because under the NAV method, net gain or loss is determined for each computation period, and no gain or loss is determined for any particular redemption of a taxpayer's shares in an MMF. Without a determination of loss for a particular redemption, that redemption does not implicate the wash sale rules. Because taxpayers may use the NAV method to prevent wash sales, the Treasury Department and IRS are not extending the exemption in Rev. Proc. 2014-45 to stable-NAV MMFs.

A commenter requested that the Treasury Department and the IRS issue guidance regarding the tax treatment of an MMF's receipt of financial support from an investment adviser to raise the NAV of the MMF (determined without the amortized cost method or penny rounding) to $1.0000. In addition, the commenter requested guidance regarding the diversification requirements of section 817(h) for a segregated asset account that qualifies as, or invests in, a government MMF. On May 5, 2016, the Treasury Department and the IRS released guidance related to both of these requests. See Rev. Proc. 2016-31 (2016-21 IRB 988); Notice 2016-32 (2016-21 IRB 878).

The commenter also requested (and later withdrew its request) that the Treasury Department and the IRS issue guidance providing tax-free treatment for certain divisions of MMFs into retail and institutional MMFs. The Treasury Department and the IRS have determined that this guidance does not appear essential to an orderly separation of different types of shareholders into different MMFs.

The commenter also requested that the Treasury Department and the IRS issue guidance setting forth the proper tax treatment by an MMF of liquidity fees that the MMF imposes. In addition, the commenter requested guidance providing that, if an MMF imposes liquidity fees and subsequently distributes to shareholders amounts that correspond to amounts that the MMF retained as liquidity fees, the MMF will be deemed to have sufficient earnings and profits to treat the distribution as a dividend. These requests do not relate directly to the NAV method or to the information reporting provision in the proposed regulations and so are not addressed in these final regulations. The Treasury Department and the IRS may consider guidance on these questions in the future.

As under the proposed regulations, a taxpayer may adopt the NAV method for shares in a floating-NAV MMF by use of the method in the Federal income tax return for the first taxable year in which both (1) the taxpayer holds shares in that MMF and (2) that MMF is a floating-NAV MMF.

The final regulations provide that a taxpayer seeking to change to or from the NAV method must secure the consent of the Commissioner in accordance with § 1.446-1(e). Simultaneously with the publication of these regulations, the Treasury Department and the IRS are issuing Rev. Proc. 2016-39 (2016-30 IRB), which provides the procedures by which a taxpayer may obtain automatic consent to change to or from the NAV method for shares in an MMF.

In certain circumstances, Rev. Proc. 2016-39 permits taxpayers to change to the NAV method on a federal tax return without filing a Form 3115, “Application for Change in Accounting Method.” This simplified procedure applies to a taxpayer that holds shares in a stable-NAV MMF and wants to change to the NAV method for a taxable year if (1) the taxpayer has not used the NAV method for shares in the MMF for any taxable year prior to the year of change, and (2) prior to the beginning of the year of change, either (a) the taxpayer's basis in each share of the MMF has been at all times equal to the MMF's target share price, or (b) the taxpayer has not realized any gain or loss with respect to shares in the MMF.

For certain other changes, Rev. Proc. 2016-39 provides automatic consent procedures that require a short Form 3115. For example, these automatic consent procedures apply to a taxpayer that (1) has adopted a realization method for shares in a floating-NAV MMF and wants to change to the NAV method for shares in that MMF, or (2) has adopted the NAV method for shares in a floating-NAV MMF and wants to change to a permissible realization method for shares in that MMF.

The final regulations concerning the NAV method apply to taxable years ending on or after July 8, 2016. For taxable years ending on or after July 28, 2014, and beginning before July 8, 2016, however, shareholders of MMFs may rely either on the rules concerning the NAV method in the proposed regulations or on the final regulations.

The final regulations concerning information reporting apply to sales of shares in calendar years beginning on or after July 8, 2016. Taxpayers and brokers (as defined in § 1.6045-1(a)(1)), however, may rely on the rules in the regulations concerning information reporting for sales of shares in calendar years beginning before July 8, 2016.

IRS Revenue Procedures cited in this preamble are published in the Internal Revenue Bulletin and are available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS Web site at http://www.irs.gov.

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 the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, 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. No comments were received.

The principal author of the final regulations is Grace Cho, IRS Office of the Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

The Victims of Crime Act of 1984 (VOCA) authorizes the Office for Victims of Crime (OVC) to provide an annual formula grant from the Crime Victims Fund to each State and eligible territory for the purpose of providing assistance to victims of crime.1 These annual Victim Assistance Program formula grants are used by the States to provide financial support to eligible crime victim assistance programs. See 42 U.S.C. 10603. OVC promulgates this rule pursuant to the rulemaking authority granted to the OVC Director by 42 U.S.C. 10604(a). This rule codifies and updates the existing Program Guidelines to reflect changes in OVC policy, the needs of the crime victim services field, and VOCA itself.

Most provisions in this final rule are substantively the same as the corresponding provisions of the Guidelines. The final rule reorganizes the program rules into six major divisions: (1) General Provisions; (2) State Administering Agency (“SAA”) Program Requirements; (3) SAA Use of Funds for Administration and Training; (4) Sub-Recipient Program Requirements; (5) Sub-Recipient Project Requirements; and (6) Sub-Recipient Allowable/Unallowable Costs.

The rules in the General Provisions heading do not depart substantively from the Guidelines. OVC defines frequently-used terms, most of which are consistent with those in the Guidelines. OVC adds a new definition of the statutory term “victim of child abuse” to make clear OVC's existing flexible approach of allowing States to address a broad variety of harm to children. Additional technical changes were made in response to comments, and are described below.

The SAA Program Requirements heading sets forth general considerations for SAA use of VOCA funding under the VOCA Assistance Program at the State level, and sets forth the rules SAAs must follow in meeting the statutory eligibility and certification requirements. OVC clarifies that pass-through funding is permissible, and sets parameters for such funding arrangements. OVC explains how States must allocate VOCA funding among various types of victim service programs, but does not change the allocation percentages set out in the Guidelines. OVC adds a requirement that States maintain a documented methodology for selecting all sub-recipients. Finally, OVC maintains the default monitoring requirements of the Guidelines, but now permits States to seek a waiver from the OVC Director to use alternatives.

The revised State Administering Agency Use of Funds for Administration and Training heading updates the Guideline provisions regarding SAA use of funds for administration and training to make those consistent with statutory changes that occurred after the Guidelines were issued in 1997. The rule lists allowable administrative and training costs at the SAA level, all of which are consistent with those set out in the Guidelines.

The Sub-Recipient Program Requirements heading sets out the eligibility and organizational requirements for sub-recipients. These provisions mostly track the Guidelines, except that OVC adds a provision addressing non-disclosure of confidential or private information.

The Sub-Recipient Project Requirements heading sets out rules that VOCA-funded victim service projects must follow. These provisions generally are consistent with the Guidelines. OVC maintains the existing project match rules, requiring that sub-recipients provide a 20% project match, but excepting U.S. territories (not including Puerto Rico). OVC adds an exception to match for projects undertaken by American Indian and Alaskan Native tribes, and projects that operate on tribal lands, as these projects, like those operating in U.S. territories, often have difficulties accessing matching resources.

The Sub-Recipient Allowable/Unallowable Costs heading lists activities that sub-recipients may undertake using VOCA funding. The majority of the listed costs are the same as those listed in the existing Guidelines; but OVC makes some substantive changes. OVC now allows the States to provide a broader array of legal support services (outside of the emergency context permitted by the Guidelines) to victims, should States choose to do so. OVC removes the prohibition on providing services to incarcerated victims (e.g., victims of sexual assault in prison). Although VOCA funding may not support prison costs, such as prison guard salaries or administrative expenses, States are no longer prohibited from allowing VOCA-funded organizations to assist incarcerated victims. OVC also adds greater flexibility for States to support transitional housing and relocation expenses using VOCA funds. OVC adds greater flexibility for States to allow sub-recipients to use VOCA funds for coordination activities, which help leverage community resources to provide better and more cost-effective direct services. Finally, to better align the program rules with the government-wide grant rules at 2 CFR part 200, OVC makes allowable indirect organizational costs at the sub-recipient level, by removing the provision in the Guidelines that prohibited sub-recipients from charging these to VOCA funds.

As discussed in more detail under the Executive Orders 12866 and 13563 (in the Regulatory Review discussion below), the rule clarifies and updates existing Guidelines, but does not alter the existing program structure. Updating the existing Guidelines to clearly and accurately reflect the statutory parameters will facilitate State compliance with VOCA, and thus avoid potentially costly non-compliance findings. The rule makes only a few substantive changes to the existing Guidelines, and most of the changes expand State flexibility in the use of VOCA funding. Some changes, like allowing more flexibility to coordinate and leverage community resources, and adopt alternative monitoring strategies, impose no costs but allow States to use existing funding more efficiently. Other changes, which allow States to allocate funding to services not presently allowable under the Guidelines, could expand the types of victim service organizations funded with VOCA funds and the services provided by existing organizations. Such allocations of funding, however, are not mandated under the rule, and each State will continue to make the final decision about whether to change its funding allocations. This is not a change from the present discretion that States have to allocate funding according to their priorities. OVC anticipates that most States will continue to allocate the majority of VOCA funding to victim services for certain types of crimes (i.e., intimate partner violence, sexual assault, child abuse) at consistent levels and that any potential reallocations would be relatively minor (even when taken in aggregate across States) in comparison to the overall range of allowable victim services, and thus unlikely to create new costs or significant fund transfers. In any event, the real benefits of additional allowable services for currently underserved and unserved victims are significant.

This rule implements OVC's Victim Assistance Program, a formula grant program authorized by Section 1404 of the Victims of Crime Act of 1984, Public Law 98-473, codified at 42 U.S.C. 10603. This section of VOCA authorizes OVC to provide an annual grant from the Crime Victims Fund to each State for the financial support of services to victims of crime by eligible crime victim assistance programs. This rule supersedes the VOCA Guidelines (published at 62 FR 19607) that have been in effect since April 22, 1997, and reflects changes in OVC policy, the needs of the crime victim services' field, and VOCA itself, as well as the comments submitted in response to the Notice of Proposed Rulemaking.

OVC's Victim Assistance Program is funded from the Crime Victims Fund. The Fund receives Federal criminal fines, penalties, and assessments, as well as certain gifts and bequests, but does not receive any general tax revenue. The Crime Victims Fund is administered by OVC and amounts that may be obligated therefrom are allocated each year according to the VOCA formula at 42 U.S.C. 10601. The amount annually available for obligation through the VOCA formula allocations typically has been set by statute, through limits in the annual DOJ appropriation act, at less than the total amount available in the Fund. The VOCA formula specifies that (in most years) the first $20M available in the Fund for that year will go toward child abuse prevention and treatment programs, with a certain amount to be set-aside for programs to address child abuse in Indian Country. After that, such sums as may be necessary are available to the Federal Bureau of Investigation and the U.S. Attorneys Offices to improve services to victims of Federal crime, and to operate a victim notification system. The remaining balance is allocated as follows: 47.5% for OVC's Victim Compensation Program, 47.5% for OVC's Victim Assistance Program, and 5% for the OVC Director to distribute in discretionary awards in certain statutorily defined categories. Generally, under the distribution rules for the Victim Compensation Program, if a portion of the 47.5% available for Compensation is not needed for that purpose, it is (per the statutory formula) made available to augment the Victim Assistance Program. The Victim Assistance Program distributes funds to States as mandated by VOCA, at 42 U.S.C. 10603. The VOCA statutory distribution formula provides each State with a base amount (presently $500,000 for each State and the District of Columbia; $200,000 for each eligible territory), and distributes the remainder proportionately, based on population.

OVC published the Final Program Guidelines, Victims of Crime Act, FY1997 Victim Assistance Program on April 22, 1997 (62 FR 19607). Those Guidelines were based on OVC experience with the Victim Assistance Program, legal opinions rendered since the inception of the program in 1986, and comments from the field on the Proposed Program Guidelines, which were published in the Federal Register on February 18, 1997 (62 FR 7256).

On September 3, 2002, OVC published a notice of Proposed Program Guide at 67 FR 56444, seeking comments to refine the administration of the Victim Assistance Program further; thereafter, however, OVC chose not to issue final guidance to supersede the 1997 Guidelines. After receiving comments on the 2002 Proposed Program Guide, OVC instead decided to pursue the publication of codified program regulations rather than merely revise the guideline document. Throughout 2010, OVC sought preliminary input from the victim services field regarding improving victim services and potential modifications to the Victim Assistance Program rules that would facilitate such improvement.

OVC incorporated this input into a Notice of Proposed Rulemaking, which it published at 78 FR 52877 (Aug. 27, 2013), and OVC received 108 public comments over a 60 day period. OVC considered all comments submitted during the comment period in drafting this final rule.

The 1997 Guidelines have been outpaced by changes in VOCA, developments in the crime victim services field, technological advances, and new approaches to State administration of VOCA funding. This rule updates the program Guidelines to account for developments over the last decade and a half, and to reflect more accurately program parameters applicable to each participating entity. In so doing, OVC hopes to allow administering agencies and victim service providers fully to leverage the progress that the field has made over the last decade in knowledge of victim needs, victim service strategies, and efficient program administration, with the end goal of assisting crime victims more effectively. Many of the provisions in the existing Guidelines have been retained in substance, though the text has been reformatted in some cases. OVC describes below the main substantive changes to the program Guidelines, and the comments received.

The rule reorganizes the provisions of the Guidelines, primarily to accommodate the requirements for publication in the Code of Federal Regulations (CFR), but also to organize information more logically. The rule omits repetition of statutory language, except where needed for context and ease of use. OVC notes that the rule is drafted to be read in conjunction with VOCA (42 U.S.C. 10603). OVC also uses consistent terminology throughout the document.

Some commenters expressed concern that the proposed rule conflated provisions applicable to VOCA-funded projects in some cases with provisions relating to a VOCA-eligible program, and several endorsed the National Association of Victim Assistance Administrators' (NAVAA) suggestions for reorganizing it. In the final rule, OVC more clearly distinguishes between the two concepts, and adopts most of the NAVAA's helpful suggestions for reorganizing the rule.

In connection with reorganizing the provisions of the final rule for greater logical consistency and clarity, OVC has moved or renumbered many of the sections of the proposed rule. In order to assist readers, a derivation table is included listing the sections of the final rule and the corresponding section or sections of the proposed rule. The public comments on provisions of the proposed rule are discussed below according to where those provisions are codified in the final rule.

Many commenters expressed their desire that the Crime Victims Fund “cap” be raised substantially. As such a change requires legislative action, it is beyond the scope of OVC's authority to do so. However, we note that the Department of Justice Fiscal Years 2015 and 2016 Appropriation Acts did substantially increase—more than threefold—the cap for those years. See Department of Justice Appropriation Act, 2015, Public Law 113-235, Div. B, Title II, Sec. 510 (setting the obligation cap at $2.361B compared to $745M available to OVC in FY 2014); Department of Justice Appropriation Act, 2016, Public Law 114-113, Div. B, Title II, Sec. 510 (setting the cap at $3.042B, of which approximately $2.663B is available to OVC).

The general provisions of the final rule—including statement of purpose, future guidance, and construction and severability—are largely unchanged from the proposed rule. OVC added a paragraph describing the date on which SAAs must comply with the rule. The rule applies upon its effective date to all OVC grants made after that date, except for funding under such grants that was obligated before the effective date. Pre-award obligations are a standard practice of SAAs under the VOCA Assistance Program, as the annual appropriation cycle typically does not permit for awards to be made until late in the fiscal year. VOCA Assistance grants typically have an award period that extends retroactively to October 1st of the fiscal year of the award, thus there may be funds under grants made after the effective date that were obligated by the SAA prior to the effective date, and subsequently ratified by OVC's approval of the grant. The final rule does not apply retroactively, and thus it does not require that SAAs anticipate rules that are not in effect when making such obligations. However, OVC will permit SAAs to apply the provisions that expand SAA discretion in the use funds (e.g., the final rule permits SAAs to fund a greater range of transitional housing services than the Guidelines permit) to VOCA assistance funding under OVC grants made before the effective date of the rule that is obligated on or after the effective date. As most of the changes in this rule are of a permissive nature and expand SAA discretion, OVC does not anticipate that implementation of the rule will be burdensome, though some effort by SAAs to understand the changes and communicate these to applicants for sub-awards will be necessary.

The final rule contains several terms and definitions that are used throughout. These are set out in section 94.102 for ease of reference.

The definition of crime victim and victim of crime remains unchanged from the Guidelines, and is meant to be a broad definition, taking into account many kinds of harm resulting from criminal acts. States are encouraged to include those domiciled in their states who are victimized while working in their official capacities overseas as VOCA eligible victims.

Some commenters liked the proposed definition, but others wanted OVC to include more examples in the definition to illustrate coverage of a broader range of harms. OVC kept the more conceptual definition from the proposed rule, as it is substantively the same as the long-standing Guideline definition and because—as one commenter pointed out—this definition has been sufficiently broad to encompass the harm from various crimes on a wide and diverse range of individuals.

OVC has added a definition of the term spousal abuse that clarifies that the term includes domestic and intimate partner violence. Spousal abuse was the terminology used in the victim services field in the 1980s, and consequently in VOCA, but the term has since fallen out of use, as it is under-inclusive of the range of relationships in which this type of victimization frequently occurs. OVC retains the term in the final rule because it is a statutory term, but clarifies that OVC understands it to encompass domestic and intimate partner violence. This is consistent with longstanding OVC practice and the Guidelines, which use the term “domestic abuse” when describing the priority category of “spousal abuse.” Several commenters supported the proposed definition, but asked that OVC include the more commonly-used term “domestic violence” in the definition. OVC agrees, and has done this. OVC has also removed “dating violence,” as this concept is encompassed already by the more general concept of “intimate partner violence.” Some commenters asked that OVC clarify how this definition (which affects the priority category of “spousal abuse”) would affect LGBTQ survivors of domestic or intimate partner violence. OVC notes that States may serve (and count those services toward the priority category) all victims of domestic and intimate partner violence—encompassing violence or abuse by one person against another in a domestic context or intimate-partner context—as the OVC definition does not require legal recognition of any particular relationship, nor does it implicate State or territorial laws concerning marriage rights.

A commenter noted that OVC did not propose to define “sub-recipient” or “VOCA project,” and asked that OVC define these terms so as to differentiate between a VOCA-funded project, and the organization that is eligible to receive VOCA funds to undertake the project. OVC agrees and adds these definitions, and has made conforming changes throughout the rule.

The final rule adds a definition of the statutory term victim of child abuse, in order to clarify that the term covers a broad variety of harm to children. Child abuse victims are a statutorily-mandated priority category, and the clarification makes plain that VOCA-funded State victim assistance programs may support a broad variety of victim assistance projects that address the abuse of children.

OVC received many comments on the proposed definition of child abuse. Many commenters supported the proposed definition. Other commenters supported the proposed definition, but recommended changes or expressed concerns about certain parts of it. One commenter worried that the inclusion of the concept of children exposed to violence may lead states to view a non-offending parent who cannot leave an abusive household as a co-offender. OVC notes that the definition of child abuse in this rule does not control (or affect) how a state views or treats potential offenders. Nonetheless, it is OVC's express intent that the definition should not be misconstrued to mean that failure to leave an abusive relationship, in the absence of other action constituting abuse or neglect, is itself abuse or neglect. A commenter asked that the definition encompass sex and labor trafficking, and several others asked OVC to include slurs and family rejection as examples of the emotional abuse of children encompassed by the definition. OVC notes that the definition of child abuse is sufficiently broad to encompass these harms without listing specific abusive activities, if States consider them to be child abuse. Some commenters worried that the inclusion of exposure to violence would dilute available resources, and confuse States operating victim assistance programs.

OVC acknowledges resource limitations facing many States, but keeps the expanded definition in the final rule to allow States to prioritize within the category based on local capacity and needs. The Department's own Defending Childhood initiative demonstrated the importance of services for children exposed to violence, and the new definition will permit services addressing this. OVC, in response to several comments, has clarified in the definition that it encompasses harm to children, and is not meant to include adults who were victimized as children. This does not, however, preclude States from funding services to adults victimized as children; it merely means that States cannot count such services under the child-abuse priority category.

Section 94.103(a) sets forth the purpose of OVC's annual VOCA formula grants to the States. Several commenters asked that OVC re-draft the language to make it less confusing. OVC agrees and has done so. Commenters also asked that OVC add a statement about State discretion in determining sub-award recipients and amounts. OVC agrees and has added a sentence accordingly.

Section 94.103(b) sets forth the general rules for State eligibility certifications required by VOCA. OVC requires States to submit these certifications annually in their applications for funding. Reporting and technical requirements specific to a given fiscal year are set out in the annual program solicitation, or in supplemental OVC communications if time does not permit publication in the solicitation.

Section 94.103(c) clarifies that a SAA may award its VOCA funds to another organization to distribute—known as pass-through administration—and highlights SAA obligations with regard to use of administrative and training funds, monitoring, and reporting should this method be used. Several commenters supported pass-through administration, but advocated that pass-through entities should have specific expertise and experience related to the use of the funding (e.g., a pass through entity administering funds for sexual assault services would have experience/expertise related to sexual violence). OVC does not disagree with the commenters' views, but believes that States are in the best position to choose which entity should administer pass-through funding, and thus maintains the rule as proposed. A commenter asked for clarification regarding the proposed requirement that SAAs not use a pass-through mechanism to bypass the statutory limitation on use of administrative funds. OVC has rewritten this statement to be clearer.

A commenter was concerned that the proposed rule eliminated language in the guidelines about things that States should consider in strategic planning and asked that OVC add it back to the final rule. OVC agrees that the language is desirable and has added a new paragraph (d) with this language. Finally, several commenters expressed concern that OVC did not highlight the need for States to consider sustainability of services in strategic planning. OVC agrees that sustainability is an important consideration, and has added this to paragraph (d).

Section 94.103(g) sets forth that SAAs shall, upon request, and consistent with 2 CFR 200.336, permit OVC access to all records related to the use of VOCA funding. Access to SAAs' records is subject to the provision of the government-wide grant rules at 2 CFR 200.336, which permits access to the true names of crime victims only in extraordinary and rare circumstances, not for routine monitoring, and requires protection of sensitive information by all agencies involved if access is granted.

OVC moved the provisions of proposed section 94.104, Eligible crime victim assistance programs, to a new heading titled “Sub-recipient Program Requirements,” which includes sections 94.111 through 94.115 of the final rule. Comments on the proposed section 94.104 are addressed below in the discussion of sections 94.111 through 94.114.

In the final rule, section 94.104, Allocation of subawards (which was proposed as section 94.105), sets forth—pursuant to 42 U.S.C. 10603(a)(2)(A) (priority category), and (B) (underserved category)—how SAAs must allocate their subawards. The allocation amounts in the final rule are the same as those in the Guidelines and proposed rule. Some commenters noted that victims of a priority category might also be underserved victims in some circumstances (e.g., child victims of sex trafficking might be underserved in a particular jurisdiction, however, sex trafficking of a minor would also be child sexual abuse), and that this causes confusion in reporting allocation amounts to OVC. Moreover, some victims with certain demographics (e.g., LGBTQ, American Indian/Alaskan Native) may be underserved even in the priority categories (e.g., victims of sexual assault). In response, the final rule clarifies that SAAs may count funds allocated to such projects in either the priority or underserved category, but not both.

Section 94.104(c) sets out the criteria by which SAAs must identify (for allocation of funds, reporting, and compliance purposes) services that assist previously underserved populations of victims of violent crime. SAAs must identify such a service for underserved victims of violent crime by the type of crime they experience (e.g., victims of elder abuse) or the characteristics of the victim (e.g., LGBTQ victims), or both (e.g., victims of violent crime in high crime urban areas). Underserved victims may differ between jurisdictions, but some examples of victim populations often underserved at the time of this rulemaking may include, but are not limited to, DUI/DWI victims; survivors of homicide victims; American Indian/Alaskan Native victims in certain jurisdictions with insufficient victim service resources; victims of physical assault; adults molested as children; victims of elder abuse; victims of hate and bias crimes; victims of kidnapping; child victims and adult survivors of child pornography; child victims of sex trafficking; victims of violent crime in high crime areas; LGBTQ victims; victims of federal crimes, victims of robbery; and victims of gang violence. OVC has removed from the final rule the examples of possibly underserved victim populations, as such a list may change over time and is more appropriately set out in the preamble and supplementary OVC guidance, as necessary.

A commenter asked that OVC add economic crimes, such as identity theft, to the list of examples of underserved victims. OVC notes that, for the underserved victim category, VOCA requires funding be allocated to projects serving “previously underserved populations of victims of violent crime”, and identity theft is not a violent crime. OVC, therefore, declines to make the change, but does note that States may still fund services for victims of such crimes, but cannot count those services toward meeting the required allocation for the underserved victim category.

A commenter asked that OVC increase the percentage of funding required to be allocated to underserved populations. OVC has kept the mandated percentage at its present level, which balances the need for stability in state victim assistance funding with the need to ensure State victim assistance programs are responsive to emerging needs. The commenter also asked that OVC clarify that the exception allowing States to deviate from the underserved and priority percentages should be used sparingly. OVC notes that such requests are extremely rare (OVC has record of only one); thus, as a practical matter, an additional limitation of the exception is unnecessary. Other commenters asked OVC to require States to consult with sub-recipients prior to requesting approval to change allocations. As explained above, OVC anticipates such requests will be extremely rare, and declines to add such a requirement. The same commenter asked that OVC not tie exceptions for allocations for the sexual-assault priority category to overall crime rates, explaining that crime rates in a given time period are not necessarily reflective of victim service needs during the corresponding time period, as victims may not seek services immediately. OVC agrees, and the final rule allows other types of data to be used in supporting an exemption request.

A commenter asked that OVC require States to consult with rape crisis centers and sexual assault coalitions about the needs of sexual violence victims. OVC agrees that such consultation may be useful, but declines to include such a requirement in the rule, as OVC prefers to allow States to consult with a wide variety of stakeholders as appropriate.

Section 94.104(e) sets for the minimum requirements for SAAs sub-award process. It requires that SAAs have a documented methodology for selecting sub-recipients, follow DOJ grant rules regarding conflicts of interest, and encourages SAAs to fund eligible sub-recipients through a competitive process, which is described.

The proposed rule would have required competition of all sub-awards. Some commenters liked the proposed competition requirement, but others were opposed to it. Several commenters noted that requiring competition could increase administrative costs for SAAs, and could destabilize small victim assistance programs that would no longer be able to rely on consistent funding. Commenters noted that this may decrease the availability of services in rural areas where there are not many providers. A commenter from a SAA explained that it uses a conduit funding process in which it distributes funds to local victim witness units based on a formula, and these units then sub-award the funding to local non-profit victim service organizations in accordance with State and county procurement rules. The commenter expressed concern that a competition requirement may undermine this process. Other commenters expressed concern that the requirement might cause problems with State contract cycles, and could undermine some prosecutor-based victim-witness assistance programs. Commenters also questioned whether there is evidence that competition creates innovation.

OVC appreciates the thoughtful comments submitted in response to this proposal, and recognizes the importance of allowing States discretion in determining which organizations receive funds and in what amounts. Due to the potential administrative burden of requiring competition (particularly in jurisdictions with a limited number of SAA staff), OVC has not included such a requirement, though OVC does encourage SAAs to use a competitive process where feasible.

Many commenters expressed their opinion that VOCA funding should not be used as seed money for new organizations. OVC notes that any organization funded with VOCA Assistance funding—even through a competitive process—must meet the statutory program eligibility criteria, which requires either a record of effective victim services and financial support from non-VOCA funding, or substantial support from non-VOCA funding. One commenter asked that OVC require States to have a strategic state plan for allocating funding. The final rule encourages States to develop a funding strategy, and requires States to have a documented method of making funding decisions.

OVC renumbered this section from 94.106 in the proposed rule to 94.105 in the final rule. This section sets out SAA reporting requirements. The two key reports—subgrant award reports and performance reports—are the same reports required by the Guidelines, and the proposed rule. The rule does not specify time or manner in which these reports are to be submitted. The Government Performance and Results Modernization Act of 2010, Public Law 111-352 (Jan. 4, 2011), shifted many federal performance reporting requirements to a quarterly default, and OVC has changed the default performance reporting period in the rule accordingly. OVC will communicate the technical details of each year's reporting requirements to grantees via annual program solicitations and supplemental guidance.

A commenter noted that multiple budget revisions may occur during the grant period, and that the proposed requirement that SAAs update the subgrant award report within 30 days of such revisions would be burdensome. The commenter requested that OVC retain its current practice of allowing SAAs to submit a revised subgrant award report before project closeout. In response, OVC notes that the subgrant award report contains only minimal budget information, and the importance of having accurate and timely information on subawards outweighs the minimal additional burden of updating this report within the specified timeframe. Recent upgrades to OVC's performance reporting systems should reduce the burden on SAAs as subrecipients now have the ability to enter SAR data directly. The final rule keeps the thirty-day reporting requirement.

Another commenter suggested that OVC should require additional reporting, specifically on unmet needs of victims and the estimated costs of providing such services. OVC declines to add such a requirement to the rule. One commenter suggested that the final rule should allow flexibility for OVC to change the reporting period for the performance report; OVC agrees and has added this but keeps the Federal fiscal year as the default reporting period.

OVC renumbered this section from 94.107 in the proposed rule to 94.106 in the final. This section sets out the SAA's obligation to monitor its sub-awards. Many commenters complained that the proposed two-year on-site monitoring timeframe would be too burdensome and would be difficult for large jurisdictions to implement, and may lead to unintended consequences, such as SAAs' making fewer awards but of larger dollar amounts. Commenters pointed out that many states use risk assessment tools to determine priority for on-site monitoring, and some requested that OVC make the default rule three years instead of two years. Another commenter asked that OVC clarify that SAAs may request alternative monitoring plans as well as alternative monitoring frequency.

The final rule requires SAAs to develop and implement monitoring plans based on a default of regular desk monitoring, and biennial on-site monitoring, of all sub-awards. OVC also adds a requirement that such monitoring plans contain a risk assessment plan. The rule, consistent with 2 CFR 200.331(b), (d) and (e), continues to permit SAAs to develop and implement alternative monitoring plans (e.g., quarterly reports and desk audits instead or in addition to site visits), and further clarifies that SAAs may also implement alternative monitoring timeframes as well. OVC believes that biennial on-site monitoring is a reasonable timeframe that balances resource demands with effective oversight, but SAAs may propose alternative plans. OVC recognizes that certain sub-recipients may have a long established history of appropriately administering a sub-award and may therefore require less intensive scrutiny than a relatively new sub-recipient or an established sub-recipient providing new services.

OVC renumbered this section from 94.110 in the proposed rule to 94.107 in the final rule. This section is substantively unchanged from the proposed rule, except that OVC clarifies that SAAs must certify, pursuant to VOCA, at 42 U.S.C. 10604(h), in the notification of use of training/administrative funds, that they will not use VOCA funds to supplant State or local government funding. (The substantive rules regarding supplantation are set out in the next section, section 94.108.)

Overall, this section makes the program rules match the statutory provisions, which had changed after issuance of the Guidelines. VOCA limits administrative and training costs to five percent total for the combined costs of administration and training at the SAA level.

OVC renumbered this section from 94.111 in the proposed rule, to 94.108 in the final rule, and re-titled it to more accurately reflect what the section addresses. (Proposed section 94.108(a) is moved to section 94.121 in the final rule. Proposed section 94.108(b) through (e) is moved to section 94.112 in the final rule.) Section 94.108 sets out the rules for SAA use of VOCA funds for administrative costs and prohibits supplantation of State and local government funding with VOCA funding.

One commenter asked whether the baseline is to be established and documented on a one-time basis or each year of the grant. OVC currently requires SAAs to document a baseline each fiscal year, based on its expenditures for administrative costs during that fiscal year and the previous fiscal year. A commenter pointed out that OJP has a definition of supplanting in its Financial Guide that differs from that in the proposed rule, and suggested that OVC simply adopt the DOJ Grants Financial Guide definition of the term instead of setting forth a separate definition. OVC agrees and has revised this paragraph to reference the Financial Guide definition. OVC requires SAAs to certify that they are not supplanting State administrative support for the State crime victim assistance program with VOCA funding.

OVC renumbered this section from 94.112 in the proposed rule, to 94.109 in the final rule. (Proposed section 94.109 is moved to section 94.117 in the final rule.) Section 94.109 sets out allowable administrative costs.

Several commenters asked OVC to add a category for “activities that impact the delivery and quality of services to crime victims throughout the state,” including training managers of victim service agencies, State-wide victim notification systems, and support for victims' rights compliance programs. OVC has added these activities. (OVC notes that direct service funding also may be used to support victim notification systems as well.) Direct service provider manager training is allowed, but categorized as a training expense under section 94.110. Several commenters expressed concern that allowing program evaluation would divert funding from direct services. OVC notes that the provision does not require evaluation, but merely allows it; furthermore, the total amount of funding for administrative costs is already capped by VOCA.

OVC renumbered this section from 94.113 in the proposed rule, to 94.110 in the final rule. (Proposed section 94.110 is moved to section 94.107 in the final rule.) This section sets out allowable uses of training funds.

A commenter asked OVC to clarify that the allowable training costs are not limited by the two listed examples. In response, OVC edited the text to clearly state that such costs “generally include, but are not limited to” the two listed examples; these are merely examples and not limitations. Commenters also asked OVC to clarify that SAAs may use training funds to train managers and board members of victim service agencies, as is permitted under the current Guidelines. OVC has added this to the final rule. Several commenters asked OVC to raise the percentage limits on administrative and training costs; as these are statutory requirements, however, OVC has no authority to do so.

Sections 94.111 through 94.115 of the final rule set out the requirements that an entity must meet to be an “eligible crime victim assistance program.” (Sections 94.111 through 94.114 of the proposed rule are moved to section 94.108, 94.109, 94.110, and 94.116, respectively, of the final rule. Section 94.115(a) through (d) of the proposed rule is moved to section 94.112 of the final rule; and 94.115(e) of the proposed rule is moved to section 94.117 of the final rule. The responses to comments addressing those provisions of the proposed rule are found in the discussions of the corresponding sections as set forth in the final rule.)

Several commenters suggested that OVC reorganize the rule such that the requirements for eligibility as a sub-recipient entity versus the requirements for operating a sub-recipient project, are clearly delineated. OVC agrees, and has created a new heading “Sub-Recipient Program Requirements” and moved the requirements in the proposed rule section 94.104 Eligible crime victim assistance programs, to sections 94.111 through 94.115 of the final rule, under this heading. OVC also moved proposed 94.108(b) through (e) to section 94.112 of the final rule. Thus, sections 94.111 through 94.115 of this rule consolidate the eligibility requirements for the sub-recipient organization (i.e., program).

VOCA establishes the criteria for an “eligible crime victim assistance program,” and the final rule merely provides clarifying interpretation needed for practical implementation. Section 94.111 of the final rule sets out the basic principle that the SAA may fund only eligible programs, and contains a provision requiring compliance with additional SAA criteria and reporting requirements. Several commenters asked that OVC strengthen language (in proposed section 94.115(d)) requiring sub-recipients to follow reporting requirements of the SAA. OVC has done so in section 94.111.

This section sets out the general types of eligible entities, and special considerations for specific types of entities (moved from proposed section 94.108), as well as criteria for determining the organizational capacity of the entity's program.

In section 94.112(a)(3) of the final rule, OVC modifies the proposed provision (proposed section 94.108(e)) on victim assistance organizations located in an adjacent state to eliminate unnecessarily bureaucratic requirements in the Guidelines, while keeping the requirement to provide notice to the SAA where the organization is located, and encouraging co-ordination on various award oversight matters. Several commenters asked for clarification of the rules for SAA programs operating direct services projects with VOCA funds (proposed section 94.108(d)). In response, OVC has modified section 94.112(a)(4) of the final rule to clarify these points by eliminating confusing and redundant text that reiterated the statutory requirement that SAAs use no more than five percent of VOCA funds for administrative and training costs.

With regard to determining the organizational capacity of a sub-recipient, under section 94.112(b) of the final rule, the SAA determines what constitutes “a record of effective services to victims of crime,” and this may vary depending on the State, and community served, and the entity providing services. Though this provision is reworded slightly for clarity, OVC leaves unchanged in the final rule the non-exclusive list of considerations that SAAs may take into account when making this determination. The SAA should be able to articulate the basis for its determination, should OVC request it. SAAs may also consider additional factors, such as the type of victim the entity's services address, the type of services provided, best practices within that service field, and the characteristics of the entity (e.g. small, specialized service provider; larger, comprehensive service provider).

Commenters urged OVC to make it clear that the mandated use-of-volunteers provision, at section 94.115(a) of the proposed rule, applies as an eligibility requirement for sub-recipient organizations (programs), not as a requirement for individual projects. OVC agrees with the commenters that the use-of-volunteers provision applies to programs, not individual projects, and has thus placed the final rule provision addressing waiver of this statutory requirement in section 94.113(a) of the final rule.

Commenters asked that OVC clarify proposed section 94.115(c), to state that a sub-recipient may comply with the VOCA requirement to assist victims in applying for compensation by providing referrals. OVC agrees and has made this clarification in section 94.113(d) of the final rule.

A commenter asked that OVC add additional requirements to the VOCA mandate that sub-recipients assist victims in applying for victim compensation by requiring that sub-recipients also assist victims in understanding their State and federal rights, how to assert those rights, and what to do if their rights are not considered or denied. OVC has not added such a mandate, as these are not eligibility criteria mandated by VOCA, but OVC does encourage all victim assistance organizations to assist victims in understanding their rights, or providing referrals to organizations that can do so, where appropriate. A commenter asked that OVC clarify that victim assistance programs should also assist victims of federal crime in applying for compensation. OVC agrees, and has added language accordingly.

OVC received several comments on proposed section 94.104(h) (now section 94.114 of the final rule), which stated “The VOCA non-discrimination provisions specified at 42 U.S.C. 10604(e) shall be implemented in accordance with 28 CFR part 42, and guidance from the Office for Civil Rights within the Office of Justice Programs.” Several commenters advocated that OVC add explicit regulatory language prohibiting discrimination based on sexual orientation and gender identity to the final rule and offered several reasons why such a provision would benefit victims. OVC acknowledges that people who identify as lesbian, gay, bisexual, transgender, or questioning/queer (“LGBTQ”) suffer disproportionately from violence and its effects, and often do not have access to informed services to help them recover in the aftermath of a crime. However, because OVC did not include in the proposed rule a definition that discrimination based on sex includes discrimination based on sexual orientation, and because OVC anticipates that the law will continue to evolve on this issue, OVC declines to include such language at this time. OVC will continue to monitor legal developments in this area. With respect to gender identity, the Department of Justice has concluded that statutory prohibitions on discrimination on the basis of sex encompass discrimination based on gender identity in other contexts. See, e.g., Memorandum from Eric H. Holder, Attorney General, Re: Treatment of Transgender Employment Discrimination Claims Under Title VII of the Civil Rights Act of 1964 (Dec. 15, 2014). OVC is aware of no reason why the statutory phrase “on the ground of . . . sex” in 42 U.S.C. 10604(e) should receive a different construction.

Several commenters noted that OVC had not included a provision regarding confidentiality in the proposed rule, and suggested that OVC add such a provision. The commenters noted that the 2013 reauthorization of the Violence Against Women Act contained a provision, 42 U.S.C. 13935(b)(2), that many VOCA-funded organizations would have to comply with as a condition of their VAWA funding, and suggested that OVC model its provision on that. OVC agrees and has done this in section 94.115 of the final rule.

OVC renumbered section 94.114 of the proposed rule as section 94.116 of the final rule, under the heading “Sub-Recipient Project Requirements” instead of “Sub-Recipient Program Requirements.” (Section 94.116 of the proposed rule is moved to section 94.118 of the final rule.) This section sets forth a brief statement of the purpose of VOCA sub-awards. The proposed provision was confusing, and OVC has attempted to draft the statement more clearly in the final rule.

Additionally, the requirement in the Guidelines (sec. IV.B.11) that sub-recipients must provide services to victims of federal crimes on the same basis as to victims of crimes under State or local law is added to the final rule, as it was inadvertently omitted from the proposed rule but is a long-standing principle applicable to federal victim assistance funding. The final rule also sets forth OVC's policy clarification that victim eligibility for direct services under the VOCA Assistance Program is not dependent on the victim's immigration status. This principle derives from the nature of services provided by most VOCA-funded victim service providers in light of the Personal Responsibility Work Opportunity Reconciliation Act of 1996, and was communicated to all VOCA Assistance (and Compensation) SAAs in a June 28, 2010, OVC Director Memorandum.

This section sets forth the rules for VOCA-funded projects that will charge for victim services. (Section 94.117 of the proposed rule is moved to section 94.119 of the final rule.) OVC has long held that VOCA-funded victim services should be free of charge for victims where possible, although it recognizes that in some situations a service provider may be justified in charging for services or otherwise generating program income.

The provisions in section 94.117 of the final rule are adapted from sections 94.115(e) and 94.109 of the proposed rule. A commenter suggested that this section be moved to a new division setting out VOCA project requirements; OVC has done this. Commenters also suggested that OVC re-word the provision to be more direct. OVC has done this, as well. OVC also simplified the provision to state that program income must be used consistently with Federal grant rules and the DOJ Grants Financial Guide (available on the Office of Justice Programs' Web site, at www.ojp.gov), instead of reiterating those requirements here. This aligns the program income rules for this program with the recently issued government-wide grant rules, and this simplification will reduce the burden of compliance on SAAs and sub-recipients.

A commenter requested that OVC add a requirement that sub-recipients provide proof or certification of compliance with the program income requirements when seeking reimbursement from State compensation programs. OVC declines to add such a requirement to this rule, as this type of requirement is more appropriately created in the application requirements and collateral source verification procedures for victim compensation programs, or as an arrangement among State agencies.

This section is renumbered from 94.116 in the proposed rule to 94.118 in the final rule, and moved under the “Sub-recipient Project Requirements” heading, as commenters correctly pointed out that match is applicable to the VOCA project, not the program. (Section 94.118 of the proposed rule is moved to section 94.120 of the final rule.)

Some commenters suggested eliminating match all together, while others suggested various different levels for match. OVC has kept a match requirement, as it serves several purposes, including leveraging federal funding, indicating organizational capacity, and encouraging local investment and engagement in VOCA-funded projects.

Some commenters recommended that OVC consider allowing match at the State level, rather than on a sub-recipient by sub-recipient basis, as this would bring VOCA grant rules into harmony with match requirements under other programs (e.g., those in Family Violence Prevention and Services Act and Violence Against Women Act). OVC has declined to make this change, as it would be a major departure from the Guidelines, and as match required on the project level ensures that sub-recipients have a stake in, and are invested and engaged in, the VOCA-funded project. OVC does note, however, that an SAA is authorized to contribute to match using non-federal funds for any (or all) sub-recipient projects, which authorization, as a practical matter, permits SAAs to provide match at the State level.

A commenter asked that OVC modify the proposed requirement that match be used for the same uses and timing as the project's VOCA funding. OVC declines to do so, as this rule is long-standing and consistent with similar rules that apply to other OVC and federal awards. OVC does note, however, that non-cash contributions—for example, professional services—may be counted as match.

Commenters also questioned why Native American and Alaskan Native sub-recipients and projects on tribal lands, as well as projects in U.S. territories and possessions (excluding Puerto Rico), are not required to provide match. Some commenters asked OVC to keep the 5% match for tribes, while other commenters asked that OVC keep the rule as proposed. OVC has found that these communities often lack victim services, have great victim service needs, and are more often likely to have difficulty meeting match requirements. Match serves the purpose of encouraging collaboration among service providers, and creating a local stake in project outcomes, but it also can present a barrier to applying for VOCA assistance funding in tribal and territorial communities that have relatively few victim service organizations, and have not traditionally been supported by resources available to organizations operating in states. Not requiring match as a default for such communities is designed to streamline application requirements in these areas where, in OVC's experience, the benefits of a match requirement are outweighed by its burdens. OVC agrees that other areas of the country may face similar circumstances, and, therefore, the final rule provides that OVC will consider exceptions to match upon SAA request, and sets forth generally how OVC will evaluate such requests.

This section is renumbered from 94.117 in the proposed rule to 94.119 in the final rule. (Section 94.119 of the proposed rule is moved to section 94.121 of the final rule.) This section sets forth allowable direct service costs for VOCA projects. Most of these allowable costs (and the parameters under which the direct services may be provided) are essentially the same as those in the existing Guidelines and in the proposed rule, but there are some differences, which are discussed below.

General comments. Some general comments asked OVC to clarify that it is not encouraging States to significantly shift funding by allowing new activities. Nowhere in the proposed or this final rule does OVC state that it is encouraging States to significantly shift funding by allowing new activities. Rather, the changes to costs allowed under this program, described below, are important, but marginal, changes that should give States more flexibility when compared to the Guidelines to best serve victims in their communities, but does not require a significant reallocation of resources. Thus, no change is being made in section 94.119 of the final rule to address this comment.

The commenter also asked that OVC clarify that all services provided by VOCA-funded projects are voluntary and should not be contingent upon the client participating in certain support services. OVC is unclear what support services the commenter refers to and so declines to make a change to the rule based on this comment but notes that there are existing rules in place (see 28 CFR part 42) prohibiting services being contingent upon participation in religious activity.

Emergency medical/health care. A commenter expressed concern that proposed section 94.117(a)(1)(ix), which allowed for certain emergency costs for medical and health care, would have limited the amount of time that such services could be provided to 48 hours. OVC believes that the commenter misunderstood the proposed provision, which does not limit such costs, but merely requires that the service provider reasonably believe that an alternative source of payment will not be available within 48 hours. OVC has clarified, in final section 94.119(a)(9), that service providers may pay these costs when other resources are not expected to be available in time to meet emergency victim needs.

Facilitation of participation in criminal justice and other proceedings. A commenter suggested that OVC expand the proposed section 94.117(a)(5) to allow service providers to facilitate victim participation in any public proceeding (e.g., juvenile justice hearings; probation, parole, pardon proceedings; grievance procedures, and sexual predator civil commitment proceedings), not merely criminal justice proceedings. OVC agrees that victims often have an interest in participating as a victim in various fora, and has modified the provisions of section 94.119(e) of the final rule accordingly, to allow the facilitation of such participation.

Legal assistance. The final rule, section 94.119(a)(10), is substantively equivalent to the corresponding section of the proposed rule (which was substantively the same as the Guidelines) regarding use of VOCA funds for emergency legal assistance. In the proposed rule, section 94.117(a)(6) would have expanded allowable legal assistance for victims beyond the emergency context. OVC received many comments on this proposed paragraph, which is renumbered as section 94.119(f) in the final rule.

Many of the comments opined that the proposed provision on allowable legal assistance was either too broad or too narrow in what it allowed. One commenter asked that OVC state expressly that legal services for divorce, child support, criminal defense, and tort lawsuits are not appropriate uses of VOCA funding. Other commenters asked that OVC clarify that criminal defense services may be appropriate where it is directly related to intimate partner violence.

OVC has clarified the rule to state expressly which costs are unallowable—those for criminal defense and tort lawsuits. This clarification makes the program consistent with the OVW Legal Assistance for Victims program (many organizations receive both OVC and OVW funding), which also does not fund criminal defense or tort lawsuits, and also creates a bright-line rule that is more easily administered. OVC notes that some jurisdictions allow victims to file a motion to vacate and/or expunge certain convictions based on their status of being victims. OVC has clarified that such services are allowable with VOCA funds. The OVW program does support legal assistance with victim-related family law matters, and OVC has drafted the language of paragraph (f)(3) to be broad enough to include these and other non-tort legal services in a civil context that are reasonably necessary as a direct result of the victimization as allowable costs. Such non-tort, civil legal services include, but are not limited to, assistance in divorce, and child custody and support proceedings.

Many commenters wanted OVC to expand its examples of allowable legal assistance costs in the proposed rule to include specific examples relevant to the organization commenting. On the other hand, some commenters expressed concern that some organizations may misinterpret the examples in the proposed rule as limits. OVC has carefully considered these comments and, in the final rule, has opted to move most of the examples into the preamble of the rule. OVC will issue supplementary guidance as may be needed to further clarify the applicability of the rule in specific factual scenarios.

The following are examples (which are merely illustrative, and not meant to be a comprehensive listing) of some circumstances where civil legal services may be appropriate: Proceedings for protective/restraining orders or campus administrative protection/stay-away orders; family, custody, contract, housing, and dependency matters, particularly for victims of intimate partner violence, child abuse, sexual assault, elder abuse, and human trafficking; immigration assistance for victims of human trafficking, sexual assault, and domestic violence; intervention with creditors, law enforcement (e.g., to obtain police reports), and other entities on behalf of victims of identity theft and financial fraud; intervention with administrative agencies, schools/colleges, tribal entities, and other circumstances where legal advice or intervention would assist in addressing the consequences of a person's victimization. OVC recognizes that the available resources in each State differ, and, therefore, States retain broad discretion to set limits on the type and scope of legal services that it allows its sub-recipients to provide with VOCA funding.

Forensic medical evidence collection examinations. OVC received several generally supportive comments regarding proposed section 94.117(a)(7), which allowed forensic medical evidence collection examinations to the extent that other funding sources are insufficient, the examination meets State standards, and appropriate crisis counseling and/or other victim services are offered in conjunction with the examination. The final rule, renumbered as section 94.119(g), is unchanged from the proposed rule, except that the final rule does not require examinations to meet State standards, but rather encourages sub-recipients to use specially trained examiners such as Sexual Assault Nurse Examiners to perform these exams. The final rule, similarly, encourages, rather than mandates, that crisis counseling or other services be offered in conjunction with the examination, in order to allow sub-recipients to provide such services as may be appropriate in any given situation.

Forensic interviews. OVC received several comments on proposed section 94.117(a)(8), which allowed forensic interviews, and which is renumbered as section 94.119(h) in the final rule. Some commenters supported allowing VOCA funding for forensic interviews, while others expressed the opinion that VOCA funds should not fund investigative costs. Allowing States to support the costs of victim-centered forensic interviews, particularly those conducted in a multi-disciplinary setting, will help victims by reducing traumatization.

The final rule does not include the provision in proposed section 94.117(a)(8)(iv), which would have disallowed VOCA funding used to supplant other funding available for forensic interviews, including criminal justice funding. OVC believes that providing States additional flexibility to meet this important victim need (which, if unsupported, may lead to re-traumatization of the victim) outweighs potential concerns that victim service funding will supplant law enforcement funding for this activity.

A commenter cautioned that forensic interviews should be conducted by child advocacy center forensic interviewers who have training and adhere to the National Child Advocacy Center guidelines. OVC believes this comment is well intentioned, but notes that not all victims needing specialized forensic interviews are children—for example, some victims are adults with disabilities. Moreover, the Federal Bureau of Investigation and some States use alternative standards. Therefore, OVC defers to SAAs to determine what organizations appropriately may provide this service.

Services to incarcerated individuals. The existing Guidelines do not allow OVC Victim Assistance Program funds to be used for rehabilitative services or support services to incarcerated individuals (see Guidelines, section IV.E.3.b). OVC, in proposed section 94.120(b) would have modified the prohibition on perpetrator rehabilitation and counseling, to allow services to incarcerated victims in certain circumstances, and, in proposed section 94.117(a)(11), set out proposed rules describing such circumstances.

In this final rule, OVC simply removes the prohibition on perpetrator rehabilitation and counseling, as the prohibition unnecessarily prevents States and communities from fully leveraging all available resources to provide services to these victims, who have been shown to have a great need for such services. States and VOCA-funded sub-recipients may set eligibility criteria for their victim service projects, and thereby determine, in accordance with VOCA and this rule, whether and how such victims might be served by VOCA-funded projects. Correspondingly, OVC does not include any provision under allowable costs addressing services to incarcerated victims, as the costs permitted for direct services to incarcerated victims are the same as those permitted for such services to any crime victim.

OVC received a wide range of comments on this provision. Many were supportive of the removal of the prohibition on providing services to incarcerated victims. Some commenters wanted OVC to affirmatively encourage States to permit sub-grantees to use VOCA funding for such services. Some commenters expressed the sentiment that the prison system should be responsible for addressing victim services for incarcerated persons, in the same way that it provides medical care and other services. OVC agrees that the government agencies that oversee detention/correctional facilities have responsibilities for the care of victims within their custody, but believes that prohibiting VOCA-funded organizations from providing services to incarcerated victims deprives such victims of, and communities of, experienced victim service resources. Indeed, such organizations are often the only organizations able to provide such services in some communities.

A commenter noted that the restriction causes agencies routinely to deny services to incarcerated victims but provides the exact same services for the exact same crime to those assaulted just outside the facility. OVC recognizes that victim service resources are finite, but believes that States are best positioned to make resource allocation decisions. Removing the prohibition on serving incarcerated victims will allow States to serve all victims better and more efficiently leverage the expertise of victim service organizations.

Several commenters expressed concern that the proposed rule may trigger the Prison Rape Elimination Act (PREA) provision requiring a reduction or reallocation of federal funding available to a State for “prison purposes” if the State fails to certify compliance with the Department's National Standards to Prevent, Detect, and Respond to Prison Rape. See 42 U.S.C. 15607(e); 28 CFR part 115. The commenters suggested various ways to re-draft the proposed rule to make it clear that VOCA funds are not available for “prison purposes” and mandated reduction or reallocation under PREA. Some commenters expressed support for the proposed rule, but only if the Department clarified that the change would not bring VOCA funding under the PREA penalty. In response, OVC notes that VOCA funds are not available for “prison purposes,” but rather, are—by statute—specifically allocated for victim services.

The final rule, in response to these concerns, does not require that services to incarcerated victims must be provided, or how such services should be provided, but merely removes the express prohibition on such services that existed in the Guidelines. As noted in section 94.103 of the final rule, SAAs have sole discretion to determine what organizations will receive funds, and in what amounts, subject to the minimum requirements of this final rule and VOCA. Nothing in VOCA, or this final rule, allows VOCA funding to be diverted to “prison purposes;” rather, VOCA funding is expressly limited by statute to victim services and associated activities. A letter issued to State governors by OVC and OVW on February 11, 2014, did not list any VOCA programs as being available for prison purposes. See http://www.prearesourcecenter.org/sites/default/files/content/feb_11_2014_prea_letter_with_certification_and_assurance_forms.pdf. VOCA funding, therefore, is not subject to mandated reduction or reallocation for non-compliance under PREA.

Transitional housing. The final rule, at section 94.119(k), includes one noteworthy change from section 94.117(a)(12) of the proposed rule, in which OVC proposed to allow States more flexibility to allow VOCA-funded projects to support transitional housing. Specifically, the final rule provides examples of expenses typically associated with transitional housing to help illustrate allowable uses of this funding. OVC views transitional housing as a necessary victim expense for some victims. This is particularly true for victims of human trafficking, victims with disabilities abused by caretakers, domestic violence victims and their dependents, and sexual assault victims. Under the proposed rule, States may use VOCA funds for housing and shelter purposes to the extent that such is necessary as a consequence of the victimization and for the well-being of the victim.

For example, shelters for victims of domestic violence or human trafficking would be allowable uses of VOCA funds. Similarly, it would be allowable in the case of sexual assault, where a victim needs to move. To the extent SAAs choose to permit VOCA funds to be used for transitional housing purposes, OVC anticipates that these agencies would focus on those victims with the most need.

Some commenters liked the proposed rules on transitional housing and relocation, while others opposed them. A commenter noted that VOCA-funded programs may not have the experience or resources to monitor housing programs. OVC recognizes that some SAAs will not have such experience, but the rule merely allows States to fund this activity; it does not require it. OVC expects that States will exercise their discretion to fund only projects that they believe will be able to undertake the allowed activities successfully.

One commenter wanted OVC to clarify that state limits on types of victims eligible for transitional housing assistance must not violate VOCA non-discrimination provisions. OVC agrees that States may not violate the non-discrimination provision when prescribing limits on allowable costs for transitional housing. The commenter also requested that OVC define “dependent child” to include dependents of all LGBTQ survivors. OVC strongly agrees that dependents of LGBTQ victims should be eligible for such assistance to the same extent as dependents of non-LGBTQ victims, if such assistance is provided. The VOCA rule establishes the basic rules for State administration of VOCA funds, however, and prescribing detailed rules for eligibility for particular types of assistance projects, as the commenter suggests, is beyond the scope of the rule.

A commenter suggested that OVC add language setting out factors that States should consider when setting limits on transitional housing expenses. OVC declines to include these in the rule, but notes that States may choose to consider the factors mentioned, which include the availability of affordable alternative and rental housing; other sources of support and housing for the victim, such as Section 8 housing vouchers in the immediate locale of the victim; and waiting lists for Section 8 housing in the area.

A commenter suggested that OVC use OVW's transitional housing program as a model. OVC is not setting detailed parameters for transitional housing costs in this rule. To the extent they find the OVW model is useful, the final rule allows States to follow that model.

A commenter requested that OVC advise States to use their VOCA Compensation funds to meet transitional housing needs, before accessing VOCA Assistance funding for this purpose. OVC notes that it does not anticipate States using VOCA Assistance funding to create new programs for transitional housing, though this would be permissible. Instead, OVC anticipates that States may allow VOCA-funded service providers to expand the range of services offered to victims, and supported by the VOCA subaward, to include transitional housing. OVC further notes that each State Compensation program determines coverage of crimes and expenses for its jurisdiction. Therefore, some State Compensation programs may not cover transitional housing needs. OVC wishes to allow States the flexibility to access either VOCA Assistance or Compensation funding for transitional housing related needs, as would best serve victims and is permissible in their jurisdictions, and therefore declines to recommend that States access VOCA Compensation funds prior to accessing VOCA Assistance funds.

Relocation expenses. The final rule, at 94.119(l), generally remains substantially unchanged from the proposed rule, 94.117(a)(13), although the language in this paragraph is reorganized from the proposed rule. The final rule removes the emphasis on particular victims (i.e., domestic violence victims, victims of sexual assault, and victims of human trafficking) who may be in need of relocation assistance. This language is removed so as not to limit inadvertently those victims who are eligible for relocation expenses.

Additionally, the final rule omits the reference in the proposed rule to providing “mortgage assistance”, due to the complicated nature of administering such assistance. Thus, under the final rule, while relocation expenses are allowable, mortgage expenses are not allowable.

OVC renumbered this section from 94.118 in the proposed rule to 94.120 in the final rule, setting forth allowable activities that support direct services. (Section 94.120 of the proposed rule is moved to section 94.122 of the final rule.)

One commenter asked (with regard to co-ordination activities, automated systems and technology, and volunteer trainings) whether these are allowable as stand-alone projects that may be funded by a State, or whether they must be part of a direct service project. OVC intends that these may be funded by a State in either manner. If they are funded as stand-alone activities, however, they should be activities that leverage resources for direct victim services (e.g., a stand-alone project to train volunteers may make more volunteers available to provide direct services).

Coordination of activities. The final rule gives SAAs the latitude to allow sub-recipients to use VOCA funds for activities coordinating victim services. Many commenters supported this provision in the proposed rule. A few opposed, as they were concerned this would divert VOCA resources away from other activities. OVC notes that the final rule provides States with additional flexibility, but does not mandate that States reallocate any funding. Moreover, in the last decade it has become apparent that co-ordination and oversight activities are desirable and may in many cases improve the provision of direct victim services.

A commenter requested that OVC add coalitions to support and assist victims to the list of allowable activities, and OVC has done this.

Contracts for professional services. OVC proposed to allow sub-recipients to contract for professional services not available within the sub-recipient organization (in contrast to the Guidelines, which does not allow this). OVC has maintained this section as proposed, in section 94.120(d) of the final rule, but made the examples more concise and conceptual to improve readability. Some commenters suggested that the rule needed to reflect better how contract service providers charge overhead costs, suggesting that the rule be made consistent with that for volunteered services; i.e., the contract rate must be a reasonable market rate for the services provided. OVC agrees and has done this.

Automated systems and technology. The proposed rule at section 94.118(e) would have allowed the use of funds for automated systems and technology that support delivery of direct services to victims, and provided examples of such systems and technology, and provided that procurement of personnel, hardware, and other items, were allowable if permitted by the SAA. The final rule, at section 94.120(e), reorganizes the proposed paragraph to fit with the revised structure of the overall section. It also adds a provision indicating that the allowability of such systems and technology is subject to the DOJ Financial Guide and government-wide grant rules, which provide detailed rules relating to the acquisition, use, and disposition of technology equipment and supplies. See 2 CFR part 200. Certain criteria for SAAs to consider when permitting sub-recipients to use funding for automated systems and technology were set out in the Guidelines, but were omitted from the proposed rule. These are added back into the final rule as factors that may be useful for SAAs to consider when determining whether to permit funding to be used for this purpose.

Volunteer trainings. The proposed rule, at section 94.118(f) allowed the use of direct service funding in certain circumstances to train volunteer direct service providers, and OVC has kept this provision largely unchanged, at 94.120(6). The proposed rule focused on Court Appointed Special Advocate (CASA) volunteers, but commenters suggested that the final rule should be more general, so as not to limit such funding to the CASA context. OVC agrees and has made this edit. The use of direct service funds to support training and co-ordination of volunteer services in such circumstances is appropriate, as it typically allows funded organizations to cost-effectively leverage the available funds and volunteer efforts to provide more direct services for victims.

Restorative justice. The proposed rule inadvertently omitted reference to restorative justice efforts, which are permitted in the current Guidelines. OVC has added this back into this final rule at section 94.120(g). The final rule is substantially similar to the Guidelines, except that the paragraph is reorganized to fit stylistically within the final rule, and to provide examples of restorative justice efforts (e.g., tribal community-led meetings and peace-keeping activities). Also, where the Guidelines required such efforts to have “possible” beneficial or therapeutic value, the final rule requires that such efforts must have “reasonably anticipated” beneficial or therapeutic value. OVC believes that such a standard is better suited to meet victim needs.

The final rule provides that a victim's opportunity to withdraw must be inherent in any restorative justice effort supported by program funds, whereas the Guidelines had merely included this as one of several criteria that SAAs should consider when deciding whether to fund such efforts. Lastly, the Guidelines included as another criteria the benefit or therapeutic value to the victim, while the final rule requires that SAAs also consider the costs in relation to the benefit or therapeutic value to the victim, as restorative justice efforts can be expensive and those costs may not be justified under certain circumstances.

Section 94.121 of the final rule sets out allowable sub-recipient administrative costs. These are substantively the same as those in the existing Guidelines, and as in proposed section 94.119.

A commenter noted that there was a discrepancy in the proposed rule, in that training costs were allowed for non-VOCA-funded service providers, but travel costs to attend trainings were not allowed for such providers. OVC agrees that training and training-related travel for non-VOCA-funded service provider staff should be allowable, and has changed the final rule accordingly, at section 94.121(c). The commenter also asked that OVC include certain additional items (e.g., costs of Web sites, social media, mobile devices) in the examples of allowable administrative costs, and OVC has done this in section 94.121(f).

Several commenters suggested that evaluation costs in section 94.121(j) should be capped at a percentage of the grant. OVC believes that evaluation is an important part of improving victim services by developing data-driven improvements to programs and does not cap evaluation costs in the rule. OVC does note that the rule does not prevent SAAs from capping such costs (on a State-wide or project-by-project basis, as appropriate), or limiting such costs to amounts that are reasonable given State goals and funding constraints.

OVC has renumbered proposed 94.120 as section 94.122 of the final rule, setting forth expressly unallowable project costs. Most of these provisions are the same as those in the existing Guidelines, and the proposed rule, with the following exceptions:

Perpetrator rehabilitation and counseling. The rule prohibiting use of VOCA funds for perpetrator rehabilitation and counseling has been removed to allow VOCA-funded service providers to provide victim assistance services to victims who are incarcerated. This is more fully discussed above in the discussion of comments under section 94.115 of the final rule.

Victim attendance at conferences. OVC has removed this odd provision from the list of unallowable costs, but expects that sub-recipients will not use funds for this purpose.

Purchasing vehicles. Some commenters favored allowing the purchase of vehicles with VOCA funds, but others opposed it. OVC agrees with comments that pointed out that in some jurisdictions purchasing a vehicle may be more cost effective than leasing a vehicle for victim service work and has removed purchasing vehicles from the list of unallowable costs. States now have the discretion to allow sub-recipients to lease or purchase vehicles.

Indirect organizational costs. The government-wide grant requirements in 2 CFR part 200, as implemented in December 2014 by the Department of Justice at 2 CFR part 2800 (79 FR 76081, Dec. 19, 2014), state a policy that federal awards should bear their fair share of costs, including reasonable, allocable, and allowable direct and indirect costs. This contrasts with the VOCA Guidelines, which prohibit indirect organizational costs. Given the policy in the recently issued government-wide requirements, OVC has removed the provision that prohibited sub-recipients from using VOCA funds for certain organizational costs. Removing the prohibition should simplify administration of VOCA sub-awards, by aligning the requirements for VOCA-funded projects, with the government-wide grant requirements and cost principles, which allow federal funding to support sub-recipient indirect costs (see 2 CFR 200.331 and 200.414).

In the Guidelines, and the proposed rule at 94.120(f), liability insurance on buildings, and body guards (which OVC understands to mean security guards, as it is listed as a capital expense), were not allowable. OVC removes these from the list of unallowable costs in the final rule, as these costs may be allowable under the revised government-wide grant rules in 2 CFR part 200, if appropriately allocated to an award either directly or indirectly.

In accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), the Office for Victims of Crime has reviewed this regulation and, by approving it, certifies that it will not have a significant economic impact on a substantial number of small entities. The OVC Victim Assistance Program distributes funding to States pursuant to the VOCA formula, a statutory provision, which is not affected by this regulation. The VOCA formula sets out the allocation of grant funds among States, and designates the States that will receive grant funds—the regulation alters neither the allocation of Federal funding, nor the designation of which States will receive annual funding pursuant to that allocation. Moreover, VOCA affords substantial latitude to the States in determining where to allocate the formula funding within each jurisdiction. This rule, to the extent that it creates certain set asides and permissible areas of emphasis for State victim assistance programs, only applies to federally provided funding. As a rule governing a Federal grant program to States and major U.S. territories, the only economic impact on small entities is that of potential financial assistance, as the rule would not apply to any entity that was not a recipient of VOCA funding under this program. This regulation, therefore, will not have a significant economic impact on a substantial number of small entities.

This rule has been drafted and reviewed in accordance with Executive Order 12866, “Regulatory Planning and Review” section 1(b), Principles of Regulation, and in accordance with Executive Order 13563 “Improving Regulation and Regulatory Review” section 1(b), General Principles of Regulation.

The Office of Justice Programs has determined that this rule is a “significant regulatory action” under Executive Order 12866, section 3(f), Regulatory Planning and Review, and accordingly this rule has been reviewed by the Office of Management and Budget.

Executive Order 13563 directs agencies to propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; tailor the regulation to impose the least burden on society, consistent with obtaining the regulatory objectives; and, in choosing among alternative regulatory approaches, select those approaches that maximize net benefits. Executive Order 13563 recognizes that some benefits and costs are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitative values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.

The rule merely clarifies and updates the existing Guidelines, but does not alter the existing program structure at all. Updating the existing Guidelines to clearly and accurately reflect the statutory parameters will facilitate State compliance with VOCA requirements, and thus avoid potentially costly non-compliance findings. The rule makes some substantive changes to the existing Guidelines, but most of these would be of a permissive, not restrictive or mandatory, nature. Some changes, like allowing more flexibility to co-ordinate and leverage community resources, and adopt alternative monitoring strategies, would impose no costs but will potentially allow States to use existing funding more efficiently. Other changes that allow States to allocate funding to services not presently allowable could change the allocation of VOCA funding among victim services provided by sub-recipient organizations, and among victim service organizations. Such reallocations of funding, however, are not mandated and each State would make the ultimate decision with regard to whether to change its current funding allocations, if it chooses to do so at all. This is not a change from the present discretion that States have to allocate funding according to State priorities. Any potential reallocations would be relatively minor (even when taken in aggregate across States) in comparison to the overall mix of allowable victim services, and thus they are unlikely to create new costs or significant fund transfers. In any event, the benefits of additional services for underserved and un-served victims are significant.

The provision allowing alternative risk-based monitoring procedures imposes no new costs on States that choose to retain their existing procedures, but will allow States that wish to implement more cost effective alternatives to do so.

The elimination of match for American Indian and Alaskan Native tribes and projects on tribal lands will permit victim service organizations in these communities, many of which do not have the resources to provide matching funds, the ability to more easily seek VOCA funding for victim services. This will benefit victims in these communities, many of whom are underserved. This change is unlikely to impose new costs on States, as there is no requirement that the administering agencies fund American Indian or Alaskan Native tribes or organizations at a particular level, and the amount of funding allocated to these organizations historically is a very small percentage of overall VOCA funding.

All of the changes to the provisions governing allowable and unallowable costs are in the nature of granting States additional flexibility to fund certain activities. None of the changes would require States to expend additional funding in any area, or change funding allocations. Moreover, the changes, while important, are relatively minor when compared to the entire scope of costs allowable with VOCA funding. Consequently, to the extent that States choose to fund the newly allowable victim services (e.g., increased time allowed in transitional housing), the reallocation of funding will not result in a significant reallocation of overall funding, given the small number of newly allowable services when compared to the overall mix of allowable victim services. In addition, it is not certain which States will permit what additional services if given the flexibility to do so, and to what extent, as these decisions typically are often made through State legislative or administrative processes and address considerations unique to each State. The important benefit of such potential minor reallocations of resources, whether within organizations that presently receive VOCA funding and will provide augmented services, or (in the less common case) to new organizations, would be that previously underserved or un-served victims would receive needed assistance.

This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government, as the rule only affects the eligibility for, and use of, federal funding under this program. The rule will not impose substantial direct compliance costs on State and local governments, or preempt any State laws. Therefore, in accordance with Executive Order No. 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

This rule meets the applicable standards set forth in sections 3(a) & (b)(2) of Executive Order No. 12988. Pursuant to section 3(b)(1)(I) of the Executive Order, nothing in this or any previous rule (or in any administrative policy, directive, ruling, notice, guideline, guidance, or writing) directly relating to the Program that is the subject of this rule is intended to create any legal or procedural rights enforceable against the United States, except as the same may be contained within subpart B of part 94 of title 28 of the Code of Federal Regulations.

This rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not significantly or uniquely affect small governments. The VOCA Victim Assistance Program is a formula grant program that provides funds to States to provide financial support to eligible crime victim assistance programs. Therefore, no actions are necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign- based companies in domestic and export markets.

This rule does not propose any new, or changes to existing, “collection[s] of information” as defined by the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.) and its implementing regulations at 5 CFR part 1320.

OVC sets forth a requirement, in section 94.105 of the final rule that SAAs update their subgrant award report information within 30 days of a change in such information. This requirement does not change the overall burden of the subgrant award report, which is estimated to take approximately three minutes to complete. It merely provides a reasonable timeframe for updating information that changes during a grant period. As the report contains only high level summary data, not detailed budget data, OVC estimates that the burden of requiring updates of this report throughout the grant period will be minimal.

Accordingly, for the reasons set forth in the preamble, Title 28, part 94, of the Code of Federal Regulations is amended as follows:

Table of Contents I. Background A. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 B. Calculation of Adjustments C. Effect of Rule in Federal Program States and on Indian Lands D. Effect of the Rule on Approved State Programs II. Procedural Matters and Required Determinations A. Regulatory Planning and Review (E.O. 12866 and 13563) B. Regulatory Flexibility Act C. Small Business Regulatory Enforcement Fairness Act D. Unfunded Mandates Reform Act E. Takings (E.O. 12630) F. Federalism (E.O. 13132) G. Civil Justice Reform (E.O. 12988) H. Consultation with Indian Tribes (E.O. 13175 and Departmental Policy) I. Paperwork Reduction Act J. National Environmental Policy Act K. Effects on Energy Supply, Distribution, and Use (E.O. 13211) L. Clarity of this Regulation M. Data Quality Act N. Administrative Procedure Act I. Background A. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015

Section 518 of SMCRA, 30 U.S.C. 1268, authorizes the Secretary of the Interior to assess civil monetary penalties (CMPs) for violations of SMCRA. The Office of Surface Mining Reclamation and Enforcement (OSMRE) regulations implementing the CMP provisions of section 518 are located in 30 CFR parts 723, 724, 845, and 846. We are adjusting CMPs in four sections—30 CFR 723.14, 724.14, 845.14, and 846.14.

On November 2, 2015, the President signed the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Sec. 701 of Public Law 114-74) (“the Act”) into law. The Act requires that Federal agencies promulgate rules to adjust the level of civil monetary penalties (“CMPs”) to account for inflation. The Act requires agencies to enact an initial “catch-up” adjustment by August 1, 2016. The Act also authorizes agencies to make subsequent annual adjustments to civil monetary penalties to account for inflation. These adjustments are aimed at maintaining the deterrent effect of civil penalties and furthering the policy goals of the statutes which authorize them.

Pursuant to SMCRA, this rule adjusts the following civil penalties:

The Office of Management and Budget (OMB) issued guidance on calculating the catch-up adjustment. See February 24, 2016, Memorandum for the Heads of Executive Departments and Agencies, from Shaun Donovan, Director, Office of Management and Budget, re: Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

The OMB guidance defines “civil monetary penalty” as “any assessment with a dollar amount that is levied for a violation of a Federal civil statute or regulation, and is assessed or enforceable through a civil action in Federal court or an administrative proceeding.” It further instructs that a civil monetary penalty “does not include a penalty levied for violation of a criminal statute, or fees for services, licenses, permits, or other regulatory reviews.” The guidance also specifies that agencies should calculate the catch-up adjustment by determining the percent change between the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October in the calendar year of the previous adjustment (or in the year of establishment, if no adjustment has been made) and the October 2015 CPI-U. OSMRE used this guidance to identify applicable civil monetary penalties and calculate the required catch-up adjustments.

Generally, OSMRE assigns points to a violation as described in 30 CFR 723.13 and 845.13. The CMP owed is based on the number of points received, ranging from one point to seventy points. For 2016, the Act requires that OSMRE adjust the civil penalty amounts for violations of SMCRA and provides the adjustment timing. The Act instructs OSMRE to use the maximum civil penalty amount as last adjusted by a provision of law other than the Federal Civil Penalties Inflation Adjustment Act of 1990 (Public Law 104-410) (FCPIA of 1990) when calculating the 2016 civil penalty adjustment. The maximum civil penalty amounts for violations of SMCRA have not been adjusted by a provision of law other than the FCPIA of 1990 since the penalties were established in SMCRA in 1977. Because the penalties were first published in the Federal Register in 1979, in computing the new civil penalty amounts for violations of SMCRA, OSMRE used the adjustment factor for 1979 provided in OMB's guidance. This resulted in a multiplying factor of 3.16274. The statutory maximum civil penalty amount (e.g., $5,000) was multiplied by the multiplying factor (e.g., $5,000 × 3.16274 = $15,813.70). The Act requires that the maximum civil penalty amount be rounded to the nearest $1.00 at the end of the calculation process (e.g., $15,814). OSMRE's calculated increases do not exceed 150 percent of the maximum civil penalty amount as of November 2, 2015, and thus, they comply with the Act. Also, pursuant to the Act, these increases apply to civil penalties assessed after the date they take effect, even if the associated violation predates such increase.

OSMRE directly regulates surface coal mining and reclamation activities within a State or on tribal lands if the State or tribe does not adopt its own program pursuant to section 503 of SMCRA. The increase in civil monetary penalties contained in this rule will apply to the following Federal program states: Arizona, California, Georgia, Idaho, Massachusetts, Michigan, North Carolina, Oregon, Rhode Island, South Dakota, Tennessee, and Washington. The Federal programs for those States appear at 30 CFR parts 903, 905, 910, 912, 921, 922, 933, 937, 939, 941, 942, and 947, respectively. The increase in civil monetary penalties also applies to Indian lands under the Federal program for Indian lands, which appears in 30 CFR 750.18.

State regulatory programs are not required to mirror all of the penalty provisions of our regulations. In re Permanent Surface Mining Regulation Litigation, No. 79-1144, Mem. Op. (D.D.C. May 16, 1980), 19 Env't Rep. Cas. (BNA) 1477. Thus, this rule has no effect on CMPs in states with SMCRA primacy.

Executive Order 12866 provides that the Office of Information and Regulatory Affairs in the Office of Management and Budget will review all significant rules. The Office of Information and Regulatory Affairs has determined that this rule is not significant.

Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements, to the extent permitted by statute.

The Regulatory Flexibility Act (FRA) requires an agency to prepare a regulatory flexibility analysis for all rules unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The RFA applies only to rules for which an agency is required to first publish a proposed rule. See 5 U.S.C. 603(a) and 604(a). The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires agencies to adjust civil penalties with an initial “catch-up” adjustment through an interim final rule. An interim final rule does not include first publishing a proposed rule. Thus, the RFA does not apply to this rulemaking.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule:

(a) Does not have an annual effect on the economy of $100 million or more.

(b) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.

(c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

This rule does not impose an unfunded mandate on State, local, or tribal governments, or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local, or tribal governments or the private sector. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.) is not required.

This rule does not effect a taking of private property or otherwise have taking implications under Executive Order 12630. A takings implication assessment is not required.

Under the criteria in section 1 of Executive Order 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. A federalism summary impact statement is not required.

This rule complies with the requirements of Executive Order 12988. Specifically, this rule:

(a) Meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and

(b) Meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards.

The Department of the Interior strives to strengthen its government-to-government relationship with Indian tribes through a commitment to consultation with Indian tribes and recognition of their right to self-governance and tribal sovereignty. We have evaluated this rule under the Department's consultation policy and under the criteria in Executive Order 13175 and have determined that it has no substantial direct effects on federally recognized Indian tribes and that consultation under the Department's tribal consultation policy is not required.

This rule does not contain information collection requirements, and a submission to the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) is not required. We may not conduct or sponsor, and you are not required to respond to, a collection of information unless it displays a currently valid OMB control number.

This rule does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed statement under the National Environmental Policy Act of 1969 (NEPA) is not required because the rule is covered by a categorical exclusion. This rule is excluded from the requirement to prepare a detailed statement because it is a regulation of an administrative nature. (For further information see 43 CFR 46.210(i).) We have also determined that the rule does not involve any of the extraordinary circumstances listed in 43 CFR 46.215 that would require further analysis under NEPA.

This rule is not a significant energy action under the definition in Executive Order 13211. A Statement of Energy Effects is not required.

We are required by Executive Orders 12866 (section 1 (b)(12)), 12988 (section 3(b)(1)(B)), and 13563 (section 1(a)), and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

(a) Be logically organized;

(b) Use the active voice to address readers directly;

(c) Use common, everyday words and clear language rather than jargon;

(d) Be divided into short sections and sentences; and

(e) Use lists and tables wherever possible.

If you believe that we have not met these requirements, send us comments by one of the methods listed in the ADDRESSES section. To better help us revise the rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that you find unclear, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

In developing this rule, we did not conduct or use a study, experiment, or survey requiring peer review under the Data Quality Act (Pub. L. 106-554).

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires agencies to publish interim final rules by July 1, 2016, with an effective date for the adjusted penalties no later than August 1, 2016. To comply with the Act, we are issuing these regulations as an interim final rule and are requesting comments post-promulgation. Section 553(b) of the Administrative Procedure Act (APA) provides that, when an agency for good cause finds that “notice and public procedure . . . are impracticable, unnecessary, or contrary to the public interest,” the agency may issue a rule without providing notice and an opportunity for prior public comment. 5 U.S.C. 553(b).

OSMRE finds that there is good cause to promulgate this rule without first providing for public comment. It would not be practicable to meet the deadlines imposed by the Act if we were to first publish a proposed rule, allow the public sufficient time to submit comments, analyze the comments, and publish a final rule. Also, OSMRE is promulgating this final rule to implement the statutory directive in the Act, which requires agencies to publish an interim final rule and to update the civil penalty amounts by applying a specified formula. OSMRE has no discretion to vary the amount of the adjustment to reflect any views or suggestions provided by commenters. Accordingly, it would serve no purpose to provide an opportunity for pre-promulgation public comment on this rule. Thus, OSMRE finds pre-promulgation notice and public comment to be impracticable and unnecessary.

Also, OSMRE finds that there is good cause for publishing this rule less than thirty days before its effective date, since the Act requires agencies to publish interim final rules with an effective date no later than August 1, 2016. 5 U.S.C. 553(d). OSMRE has no discretion to provide for an effective date that is later than August 1, 2016.

For the reasons given in the preamble, the Department of the Interior amends 30 CFR parts 723, 724, 845, and 846 as set forth below.

The Metro-North Devon Bridge, mile 3.9, across the Housatonic River, has a vertical clearance in the closed position of 19 feet at mean high water and 25 feet at mean low water. The existing bridge operating regulations are found at 33 CFR 117.207(b).

The waterway is transited by seasonal recreational vessels.

The bridge owner, Connecticut Department of Transportation, requested a temporary deviation from the normal operating schedule to perform timber ties replacement and steel repairs at the bridge.

Under this temporary deviation, the Metro-North Devon Bridge will operate according to the schedule below:

a. From 8 a.m. on September 6, 2016 through 4 a.m. on September 9, 2016, the bridge will not open to marine traffic.

b. From 4 a.m. on September 9, 2016 through 8 a.m. on September 12, 2016, the bridge will open fully on signal upon 24 hr advance notice.

c. From 8 a.m. on September 12, 2016 through 4 a.m. on September 16, 2016, the bridge will not open to marine traffic.

d. From 4 a.m. on September 16, 2016 through 8 a.m. on September 19, 2016, the bridge will open fully on signal upon 24 hr advance notice.

Vessels able to pass under the bridge in the closed position may do so at anytime. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass.

The Coast Guard will inform the users of the waterways through our Local Notice and Broadcast to Mariners of the change in operating schedule for the bridge so that vessel operations can arrange their transits to minimize any impact caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

Organization of this document. The following outline is provided to aid in locating information in this preamble.

On June 22, 2010 (75 FR 35520), EPA promulgated a revised NAAQS for the 1-hour primary SO2 at a level of 75 parts per billion (ppb), based on a 3-year average of the annual 99th percentile of 1-hour daily maximum concentrations. Pursuant to section 110(a)(1) of the CAA, states are required to submit SIPs meeting the applicable requirements of section 110(a)(2) within three years after promulgation of a new or revised NAAQS or within such shorter period as EPA may prescribe.

On September 13, 2013, the New Hampshire Department of Environmental Services (NH DES) submitted a SIP revision addressing infrastructure elements specified in section 110(a)(2) of the CAA to implement, maintain, and enforce the 2010 sulfur dioxide NAAQS. On July 17, 2015 (80 FR 42446), EPA published a notice of proposed rulemaking (NPR) for the State of New Hampshire proposing approval of New Hampshire's submittal. In the NPR, EPA proposed approval of the following infrastructure elements: Section 110(a)(2)(A), (B), (C) (enforcement and minor new source review), (D)(i)(II) (Visibility Protection), (D)(ii) (International Pollution Abatement), (E)(i) and (ii), (F), (G), (H), (J) (consultation, public notification, and visibility protection), (K), (L), and (M), or portions thereof. EPA also proposed to approve the PSD program relating to infrastructure elements (C)(ii), D(i)(II), D(ii), and (J)(iii), except to conditionally approve the aspect of the PSD program relating to notification to neighboring states. Within the same NPR, EPA also proposed taking similar action on New Hampshire's infrastructure SIP submittals for the 2008 lead, 2008 ozone, and the 2010 nitrogen dioxide standards. EPA has already finalized its action on the infrastructure SIPs for the 2008 lead, 2008 ozone, and the 2010 nitrogen dioxide standards (80 FR 78139, December 16, 2015).

In New Hampshire's September 13, 2013 infrastructure SIP for the SO2 NAAQS, the state did not submit section 110(a)(2)(I) which pertains to the nonattainment requirements of part D, Title I of the CAA, since this element is not required to be submitted by the 3-year submission deadline of section 110(a)(1), and will be addressed in a separate process. This rulemaking action also does not include action on section 110(a)(2)(D)(i)(I) of the CAA, because New Hampshire's September 13, 2013 infrastructure SIP submittal did not include provisions for this element. EPA will take later, separate action on section 110(a)(2)(D)(i)(I) for the 2010 SO2 NAAQS for New Hampshire.

The rationale supporting EPA's proposed rulemaking action, including the scope of infrastructure SIPs in general, is explained in the published NPR. The NPR is available in the docket for this rulemaking at www.regulations.gov, Docket ID Number EPA-R01-OAR-2012-0950.

EPA received comments from the Sierra Club on the August 17, 2015 proposed rulemaking action on New Hampshire's 2010 SO2 infrastructure SIP. A full set of these comments is provided in the docket for this final rulemaking action.

Comment 1: Sierra Club (hereafter referred to as Commenter) contends that the plain language of section 110(a)(2)(A) of the CAA, legislative history of the CAA, case law, EPA regulations such as 40 CFR 51.112(a), and EPA interpretations in prior rulemakings require that infrastructure SIPs include enforceable emission limits that ensure attainment and maintenance of the NAAQS. Accordingly, Commenter contends that any infrastructure SIP where emission limits are inadequate to prevent exceedances of the NAAQS must be disapproved.

The Commenter states the main objective of the infrastructure SIP process “is to ensure that all areas of the country meet the NAAQS” and states that nonattainment areas are addressed through “nonattainment SIPs.” The Commenter asserts the NAAQS “are the foundation upon which air emissions limitations and standards for the entire country are set,” including specific emission limitations for most large stationary sources, such as coal-fired power plants. The Commenter discusses the CAA's framework whereby states have primary responsibility to assure air quality within the state, which the states carry out through SIPs such as infrastructure SIPs required by section 110(a)(2). The Commenter also states that on its face the CAA requires infrastructure SIPs “to prevent exceedances of the NAAQS.” In support, the Commenter quotes the language in section 110(a)(1), which requires states to adopt a plan for implementation, maintenance, and enforcement of the NAAQS, and the language in section 110(a)(2)(A), which requires SIPs to include enforceable emissions limitations as may be necessary to meet the requirements of the CAA, which the Commenter claims includes attainment and maintenance of the NAAQS. The Commenter also notes the use of the word “attain” in section 110(a)(2)(H)(ii) and suggests this is further evidence that the emission limits provided for in section 110(a)(2)(A) must ensure attainment of the NAAQS.

Response 1: EPA disagrees that section 110 is clear on its face and must be interpreted in the manner suggested by the Commenter. As we have previously explained in response to the Commenter's similar comments on EPA's actions approving other states' infrastructure SIPs, section 110 is only one provision that is part of the complicated structure governing implementation of the NAAQS program under the CAA, as amended in 1990, and it must be interpreted in the context of not only that structure, but also of the historical evolution of that structure.1

EPA interprets infrastructure SIPs as more general planning SIPs, consistent with the CAA as understood in light of its history and structure. When Congress enacted the CAA in 1970, it did not include provisions requiring states and the EPA to label areas as attainment or nonattainment. Rather, states were required to include all areas of the state in “air quality control regions” (AQCRs) and section 110 set forth the core substantive planning provisions for these AQCRs. At that time, Congress anticipated that states would be able to address air pollution quickly pursuant to the very general planning provisions in section 110 and could bring all areas into compliance with a new NAAQS within five years. Moreover, at that time, section 110(a)(2)(A)(i) specified that the section 110 plan provide for “attainment” of the NAAQS and section 110(a)(2)(B) specified that the plan must include “emission limitations, schedules, and timetables for compliance with such limitations, and such other measures as may be necessary to insure attainment and maintenance [of the NAAQS].”

In 1977, Congress recognized that the existing structure was not sufficient and many areas were still violating the NAAQS. At that time, Congress for the first time added provisions requiring states and EPA to identify whether areas of a state were violating the NAAQS (i.e., were nonattainment) or were meeting the NAAQS (i.e., were attainment) and established specific planning requirements in section 172 for areas not meeting the NAAQS. In 1990, many areas still had air quality not meeting the NAAQS and Congress again amended the CAA and added yet another layer of more prescriptive planning requirements for each of the NAAQS. At that same time, Congress modified section 110 to remove references to the section 110 SIP providing for attainment, including removing pre-existing section 110(a)(2)(A) in its entirety and renumbering subparagraph (B) as section 110(a)(2)(A). Additionally, Congress replaced the clause “as may be necessary to insure attainment and maintenance [of the NAAQS]” with “as may be necessary or appropriate to meet the applicable requirements of this chapter.” 2 Thus, the CAA has significantly evolved in the more than 40 years since it was originally enacted. While at one time section 110 of the CAA did provide the only detailed SIP planning provisions for states and specified that such plans must provide for attainment of the NAAQS, under the structure of the current CAA, section 110 is only the initial stepping-stone in the planning process for a specific NAAQS. More detailed, later-enacted provisions govern the substantive planning process, including planning for attainment of the NAAQS.

Thus, section 110 of the CAA is only one provision of the complicated overall structure governing implementation of the NAAQS program under the CAA, as amended in 1990, and must be interpreted in the context of that structure and the historical evolution of that structure. In light of the revisions to section 110 since 1970 and the later promulgated and more specific planning requirements of the CAA, EPA reasonably interprets the requirement in section 110(a)(2)(A) of the CAA that the plan provide for “implementation, maintenance and enforcement” to mean that the SIP must contain enforceable emission limits that will aid in attaining and/or maintaining the NAAQS and that the state demonstrate that it has the necessary tools to implement and enforce a NAAQS, such as adequate state personnel and an enforcement program. EPA has interpreted the requirement for emission limitations in section 110 to mean that a state may rely on measures already in place to address the pollutant at issue or any new control measures that the state may choose to submit. Finally, as EPA has stated in the 2013 Guidance on Infrastructure State Implementation Plan (SIP) Elements under Clean Air Act Sections 110(a)(1) and 110(a)(2) (“2013 Infrastructure SIP Guidance”), which specifically provides guidance to states in addressing the 2010 SO2 NAAQS, “[t]he conceptual purpose of an infrastructure SIP submission is to assure that the air agency's SIP contains the necessary structural requirements for the new or revised NAAQS, whether by establishing that the SIP already contains the necessary provisions, by making a substantive SIP revision to update the SIP, or both.” 2013 Infrastructure SIP Guidance at p. 1-2.3

Comment 2: The Commenter cites two excerpts from the legislative history of the 1970 CAA, claiming they support an interpretation that SIP revisions under CAA section 110 must include emissions limitations sufficient to show maintenance of the NAAQS in all areas of the state. The Commenter also contends that the legislative history of the CAA supports the interpretation that infrastructure SIPs under section 110(a)(2) must include enforceable emission limitations, citing the Senate Committee Report and the subsequent Senate Conference Report accompanying the 1970 CAA.

Response 2: As provided in the previous response, the CAA, as enacted in 1970, including its legislative history, cannot be interpreted in isolation from the later amendments that refined that structure and deleted relevant language from section 110 concerning demonstrating attainment. See also 79 FR at 17046 (responding to comments on Virginia's ozone infrastructure SIP). In any event, the two excerpts of legislative history the Commenter cites merely provide that states should include enforceable emission limits in their SIPs, and they do not mention or otherwise address whether states are required to include maintenance plans for all areas of the state as part of the infrastructure SIP.

Comment 3: The Commenter also discusses several cases applying the CAA which the Commenter claims support its contention that courts have been clear that section 110(a)(2)(A) requires enforceable emissions limits in infrastructure SIPs to prevent exceedances of the NAAQS. The Commenter first cites to language in Train v. Natural Resources Defense Council, 421 U.S. 60, 78 (1975), addressing the requirement for “emission limitations” and stating that emission limitations “are the specific rules to which operators of pollution sources are subject, and which if enforced should result in ambient air which meets the national standards.” The Commenter also cites Pennsylvania Department of Environmental Resources v. EPA, 932 F.2d 269, 272 (3d Cir. 1991), for the proposition that the CAA directs EPA to withhold approval of a SIP where it does not ensure maintenance of the NAAQS, and to Mision Industrial, Inc. v. EPA, 547 F.2d 123, 129 (1st Cir. 1976), which quoted section 110(a)(2)(B) of the CAA of 1970. The Commenter contends that the 1990 Amendments do not alter how courts have interpreted the requirements of section 110, quoting Alaska Department of Environmental Conservation v. EPA, 540 U.S. 461, 470 (2004), which in turn quoted section 110(a)(2)(A) of the CAA and also stated that “SIPs must include certain measures Congress specified” to ensure attainment of the NAAQS. The Commenter also quotes several additional opinions in this vein, including Montana Sulphur & Chemical Co. v. EPA, 666 F.3d 1174, 1180 (9th Cir. 2012) (“The Clean Air Act directs states to develop implementation plans—SIPs—that `assure' attainment and maintenance of national ambient air quality standards (`NAAQS') through enforceable emission limitations.”) and Hall v. EPA, 273 F.3d 1146, 1161 (9th Cir. 2001) (EPA's analysis is required to “reflect consideration of the prospects of meeting current attainment requirements under a revised air quality plan.”). Finally, the Commenter cites Michigan Department of Environmental Quality v. Browner, for the proposition that an infrastructure SIP must “include[] emission limitations that result in compliance with the NAAQS.” 230 F.3d 181, 185 (6th Cir. 2000) (citing Train, 421 U.S. at 79).

Response 3: None of the cases the Commenter cites support its contention that section 110(a)(2)(A) is clear that infrastructure SIPs must include detailed plans providing for attainment and maintenance of the NAAQS in all areas of the state, nor do they shed light on how section 110(a)(2)(A) may reasonably be interpreted. With the exception of Train, none of the cases the Commenter cites concerned the interpretation of CAA section 110(a)(2)(A) (or section 110(a)(2)(B) of the pre-1990 Act). Rather, the courts reference section 110(a)(2)(A) (or section 110(a)(2)(B) of the pre-1990 CAA) in the background sections of decisions in the context of a challenge to an EPA action on revisions to a SIP that was required and approved or disapproved as meeting other provisions of the CAA or in the context of an enforcement action.

In Train, the Court was addressing a state revision to an attainment plan submission made pursuant to section 110 of the CAA, the sole statutory provision at that time regulating such submissions. The issue in that case concerned whether changes to requirements that would occur before attainment was required were variances that should be addressed pursuant to the provision governing SIP revisions or were “postponements” that must be addressed under section 110(f) of the CAA of 1970, which contained prescriptive criteria. The Court concluded that EPA reasonably interpreted section 110(f) not to restrict a state's choice of the mix of control measures needed to attain the NAAQS and that revisions to SIPs that would not impact attainment of the NAAQS by the attainment date were not subject to the limits of section 110(f). Thus, the issue was not whether a section 110 SIP needs to provide for attainment or whether emissions limits providing such are needed as part of the SIP; rather the issue was which statutory provision governed when the state wanted to revise the emission limits in its SIP if such revision would not impact attainment or maintenance of the NAAQS. To the extent the holding in the case has any bearing on how section 110(a)(2)(A) might be interpreted, it is important to realize that in 1975, when the opinion was issued, section 110(a)(2)(B) (the predecessor to section 110(a)(2)(A)) expressly referenced the requirement to attain the NAAQS, a reference that was removed in 1990.

The decision in Pennsylvania Department of Environmental Resources was also decided based on the pre-1990 provision of the CAA. At issue was whether EPA properly rejected a revision to an approved plan where the inventories relied on by the state for the updated submission had gaps. The Court quoted section 110(a)(2)(B) of the pre-1990 CAA in support of EPA's disapproval, but did not provide any interpretation of that provision. Yet, even if the Court had interpreted that provision, EPA notes that it was modified by Congress in 1990; thus, this decision has little bearing on the issue here.

At issue in Mision was the definition of “emissions limitation,” not whether section 110 requires the state to demonstrate how all areas of the state will attain and maintain the NAAQS as part of their infrastructure SIPs. The language from the opinion the Commenter quotes does not interpret but rather merely describes section 110(a)(2)(A); the decision in this case has no bearing here.4 In Montana Sulphur, the Court was not reviewing an infrastructure SIP, but rather EPA's disapproval of a SIP and promulgation of a federal implementation plan (FIP) after a long history of the state failing to submit an adequate SIP in response to EPA's finding under section 110(k)(5) that the previously approved SIP was substantially inadequate to attain or maintain the NAAQS. The Court cited generally to sections 107 and 110(a)(2)(A) of the CAA for the proposition that SIPs should assure attainment and maintenance of NAAQS through emission limitations, but this language was not part of the Court's holding in the case, which focused instead on whether EPA's finding of SIP inadequacy, disapproval of the state's required responsive attainment demonstration under section 110(k)(5), and adoption of a remedial FIP under section 110(c) were lawful. The Commenter suggests that Alaska Department of Environmental Conservation stands for the proposition that the 1990 CAA Amendments do not alter how courts interpret section 110. This claim is inaccurate. Rather, the Court quoted section 110(a)(2)(A), which, as noted previously, differs from the pre-1990 version of that provision and the Court made no mention of the changed language. Furthermore, the Commenter also quotes the Court's statement that “SIPs must include certain measures Congress specified,” but that statement specifically referenced the requirement in section 110(a)(2)(C), which requires an enforcement program and a program for the regulation of the modification and construction of new sources. Notably, at issue in that case was the state's “new source” permitting program, not its infrastructure SIP.

Two of the other cases the Commenter cites, Michigan Department of Environmental Quality and Hall, interpret CAA section 110(l), the provision governing “revisions” to plans, and not the initial plan submission requirement under section 110(a)(2) for a new or revised NAAQS, such as the infrastructure SIP at issue in this instance. In those cases, the courts cited to section 110(a)(2)(A) solely for the purpose of providing a brief background of the CAA.

EPA does not believe any of these court decisions addressed required measures for infrastructure SIPs and believes nothing in the opinions addressed whether infrastructure SIPs need to contain measures to ensure attainment and maintenance of the NAAQS.

Comment 4: The Commenter cites to 40 CFR 51.112(a), providing that each plan “must demonstrate that the measures, rules and regulations contained in it are adequate to provide for the timely attainment and maintenance of the [NAAQS].” The Commenter asserts that this regulation requires infrastructure SIPs to include emissions limits necessary to ensure attainment and maintenance of the NAAQS. The Commenter states the provisions of 40 CFR 51.112 are not limited to nonattainment SIPs and instead apply to infrastructure SIPs, which are required to attain and maintain the NAAQS in all areas of a state. The Commenter relies on a statement in the preamble to the 1986 action restructuring and consolidating provisions in part 51, in which EPA stated that “[i]t is beyond the scope of th[is] rulemaking to address the provisions of Part D of the Act . . .” 51 FR 40656, 40656 (Nov. 7, 1986). The Commenter asserts 40 CFR 51.112(a) “identifies the plans to which it applies as those that implement the NAAQS,” which it contends means that § 51.112(a) is applicable to infrastructure SIPs.

Response 4: The Commenter's reliance on 40 CFR 51.112 to support its argument that infrastructure SIPs must contain emission limits adequate to ensure attainment and maintenance of the NAAQS is not supported. As an initial matter, EPA notes this regulatory provision was initially promulgated and later restructured and consolidated prior to the CAA Amendments of 1990, in which Congress removed all references to “attainment” in section 110(a)(2)(A). And, it is clear on its face that 40 CFR 51.112 applies to plans specifically designed to attain the NAAQS. EPA interprets these provisions to apply when states are developing “control strategy” SIPs such as the detailed attainment and maintenance plans required under other provisions of the CAA, as amended in 1977 and again in 1990, such as sections 175A, 181-182, and 191-192. The Commenter suggests that these provisions must apply to section 110 SIPs because in the preamble to EPA's action “restructuring and consolidating” provisions in part 51, EPA stated the new attainment demonstration provisions in the 1977 Amendments to the CAA were “beyond the scope” of the rulemaking. It is important to note, however, that EPA's action in 1986 was not to establish new substantive planning requirements, but rather was meant merely to consolidate and restructure provisions that had previously been promulgated. EPA noted that it had already issued guidance addressing the new “Part D” attainment planning obligations. Also, as to maintenance regulations, EPA expressly stated that it was not making any revisions other than to re-number those provisions. 51 FR at 40657.

Although EPA was explicit that it was not establishing requirements interpreting the provisions of new “Part D” of the CAA, it is clear the regulations being restructured and consolidated were intended to address control strategy plans. In the preamble, EPA clearly stated that 40 CFR 51.112 was replacing 40 CFR 51.13 (“Control strategy: SOX and PM (portion)”), 51.14 (“Control strategy: CO, HC, OX and NO2 (portion)”), 51.80 (“Demonstration of attainment: Pb (portion)”), and 51.82 (“Air quality data (portion)”). Id. at 40,660. Thus, the present-day 40 CFR 51.112 contains consolidated provisions that are focused on control strategy SIPs, and the infrastructure SIP is not such a plan.

Comment 5: The Commenter references a prior EPA rulemaking action where EPA disapproved a SIP and claims that action shows EPA relied on section 110(a)(2)(A) and 40 CFR 51.112 to reject the SIP. The Commenter points to a 2006 partial approval and partial disapproval of revisions to Missouri's existing control strategy plans addressing the SO2 NAAQS. The Commenter claims EPA cited section 110(a)(2)(A) for disapproving a revision to the state plan on the basis that the State failed to demonstrate the SIP was sufficient to ensure maintenance of the SO2 NAAQS after revision of an emission limit and claims EPA cited to 40 CFR 51.112 as requiring that a plan demonstrates the rules in a SIP are adequate to attain the NAAQS. The Commenter claims the revisions to Missouri's control strategy SIP for SO2 were rejected by EPA because the revised control strategy limits were also in Missouri's infrastructure SIP and thus the weakened limits would have impacted the infrastructure SIP's ability to aid in attaining and maintaining the NAAQS.

Response 5: EPA does not agree the prior Missouri rulemaking action referenced by the Commenter establishes how EPA reviews infrastructure SIPs. It is clear from the final Missouri rule that EPA was not reviewing initial infrastructure SIP submissions under section 110 of the CAA, but rather reviewing revisions that would make an already approved SIP designed to demonstrate attainment of the NAAQS less stringent. EPA's partial approval and partial disapproval of revisions to restrictions on emissions of sulfur compounds for the Missouri SIP in 71 FR 12623 addressed a control strategy SIP and not an infrastructure SIP. Nothing in that action addresses the necessary content of the initial infrastructure SIP for a new or revised NAAQS.

The Commenter contends that the New Hampshire 2010 SO2 infrastructure SIP revisions did not revise the existing SO2 emission limits in response to the 2010 SO2 NAAQS and fail to comport with assorted CAA requirements for SIPs to establish enforceable emission limits that are adequate to prohibit NAAQS exceedances in areas not designated nonattainment.

Comment 6: Citing section 110(a)(2)(A) of the CAA, the Commenter contends that EPA may not approve New Hampshire's proposed 2010 SO2 infrastructure SIP, because it does not include SO2 emissions limits or other required measures sufficient to ensure attainment and maintenance of the SO2 NAAQS in areas not designated nonattainment, which the Commenter claims is required by section 110(a)(2)(A), and because it does not include SO2 emission limits “set in light of the 2010 SO2 NAAQS or even analyzed in light of the standard.” The Commenter also contended that section 110(a)(2)(A) requires not only that the state air agency has the authority to adopt future emission limitations, but that the SIP include existing substantive emission limitations. The Commenter also provided results from a refined air dispersion modeling analysis that evaluated SO2 impacts from Schiller Station, which the commenter asserts demonstrate that SO2 emission limits relied on in the infrastructure SIP are insufficient to prevent exceedances of the NAAQS in both New Hampshire and Maine and claims that emissions from this source can in theory, and have in practice, resulted in exceedances of the 2010 SO2 NAAQS. Lastly, the commenter asserted the structure of the Act makes clear that Congress did not intend states to be relieved of their infrastructure SIP obligations under section 110(a)(2)(A) until designations occur. For all of these reasons, the Commenter maintained that EPA should disapprove New Hampshire's SO2 infrastructure SIP and promulgate a FIP.

Response 6: EPA disagrees with the Commenter that EPA must disapprove New Hampshire's SO2 infrastructure SIP for the reasons provided by the Commenter, including the Commenter's modeling results and the state's allegedly insufficient SO2 emission limits. EPA is not in this action making a determination regarding the State's current air quality status or regarding whether its control strategy is sufficient to attain and maintain the NAAQS. Therefore, EPA is not in this action making any judgment on whether the Commenter's submitted modeling demonstrates the NAAQS exceedances that the Commenter claims. EPA believes that section 110(a)(2)(A) of the CAA is reasonably interpreted to require states to submit infrastructure SIPs that reflect the first step in their planning for attainment and maintenance of a new or revised NAAQS. These SIP revisions should contain a demonstration the state has the available tools and authority to develop and implement plans to attain and maintain the NAAQS and show that the SIP has enforceable control measures. In light of the structure of the CAA, EPA's longstanding position regarding infrastructure SIPs is that they are general planning SIPs to ensure that the state has adequate resources and authority to implement a NAAQS in general throughout the state and not detailed attainment and maintenance plans for each individual area of the state. As mentioned above, EPA has interpreted this to mean with regard to the requirement for emission limitations that states may rely on measures already in place to address the pollutant at issue or any new control measures that the state may choose to submit. As stated in response to a previous more general comment, section 110 of the CAA is only one provision that is part of the complicated structure governing implementation of the NAAQS program under the CAA, as amended in 1990, and it must be interpreted in the context of not only that structure, but also of the historical evolution of that structure. In light of the revisions to section 110 since 1970 and the later-promulgated and more specific planning requirements of the CAA, EPA reasonably interprets the requirement in section 110(a)(2)(A) of the CAA that the plan provide for “implementation, maintenance and enforcement” to mean that the SIP must contain enforceable emission limits that will aid in attaining and/or maintaining the NAAQS and that the State demonstrate that it has the necessary tools to implement and enforce a NAAQS, such as adequate state personnel and an enforcement program. As discussed above, EPA has interpreted the requirement for emission limitations in section 110 to mean the state may rely on measures already in place to address the pollutant at issue or any new control measures that the state may choose to submit. Finally, as EPA stated in the 2013 Infrastructure SIP Guidance, which specifically provides guidance to states in addressing the 2010 SO2 NAAQS, “[t]he conceptual purpose of an infrastructure SIP submission is to assure that the air agency's SIP contains the necessary structural requirements for the new or revised NAAQS, whether by establishing that the SIP already contains the necessary provisions, by making a substantive SIP revision to update the SIP, or both.” 2013 Infrastructure SIP Guidance at p. 2. On April 12, 2012, EPA explained its expectations regarding implementation of the 2010 SO2 NAAQS via letters to each of the states. EPA communicated in the April 2012 letters that all states were expected to submit SIPs meeting the “infrastructure” SIP requirements under section 110(a)(2) of the CAA by June 2013. At the time, EPA was undertaking a stakeholder outreach process to continue to develop possible approaches for determining attainment status under the SO2 NAAQS and implementing this NAAQS. EPA made abundantly clear in the April 2012 letters that EPA did not expect states to submit substantive attainment demonstrations or modeling demonstrations showing attainment for areas not designated nonattainment in infrastructure SIPs due in June 2013. Although EPA had previously suggested in its 2010 SO2 NAAQS preamble and in prior draft implementation guidance in 2011 that states should, in the unique SO2 context, use the section 110(a) SIP process as the vehicle for demonstrating attainment of the NAAQS, this approach was never adopted as a binding requirement and was subsequently discarded in the April 2012 letters to states. The April 2012 letters recommended states focus infrastructure SIPs due in June 2013, such as New Hampshire's SO2 infrastructure SIP, on traditional “infrastructure elements” in section 110(a)(1) and (2) rather than on modeling demonstrations for future attainment for areas not designated as nonattainment.5 Therefore, EPA asserts that evaluations of modeling demonstrations such as the one submitted by the Commenter are more appropriately considered in actions that make determinations regarding states' current air quality status or regarding future air quality status. EPA also asserts that SIP revisions for SO2 nonattainment areas, including measures and modeling demonstrating attainment, are due by the dates statutorily prescribed under subpart 5 under part D. Those submissions are due no later than 18 months after an area is designated nonattainment for SO2, under CAA section 191(a). Thus, the CAA directs states to submit these SIP requirements that are specific for nonattainment areas on a separate schedule from the “structural requirements” of 110(a)(2) which are due within three years of adoption or revision of a NAAQS and which apply statewide. The infrastructure SIP submission requirement does not move up the date for any required submission of a part D plan for areas designated nonattainment for the new NAAQS. Thus, elements relating to demonstrating attainment for areas not attaining the NAAQS are not necessary for infrastructure SIP submissions,6 and the CAA does not provide explicit requirements for demonstrating attainment for areas that have not yet been designated regarding attainment with a particular NAAQS. As stated previously, EPA believes that the proper inquiry at this juncture is whether New Hampshire has met the basic structural SIP requirements appropriate at the point in time EPA is acting upon the infrastructure submittal. Emissions limitations and other control measures needed to attain the NAAQS in areas designated nonattainment for that NAAQS are due on a different schedule from the section 110 infrastructure elements. A state, like New Hampshire, may reference preexisting SIP emission limits or other rules contained in part D plans for previous NAAQS in an infrastructure SIP submission. New Hampshire's existing rules and emission reduction measures in the SIP that control emissions of SO2 were discussed in the state's submittal.7 These provisions have the ability to reduce SO2 overall. Although the New Hampshire SIP relies on measures and programs used to implement previous SO2 NAAQS, these provisions are not limited to reducing SO2 levels to meet one specific NAAQS and will continue to provide benefits for the 2010 SO2 NAAQS. Additionally, as discussed in the NPR, New Hampshire has the ability to revise its SIP when necessary (e.g. in the event the Administrator finds the plan to be substantially inadequate to attain the NAAQS or otherwise meet all applicable CAA requirements) as required under element H of section 110(a)(2).

The requirements for emission reduction measures for an area designated nonattainment for the 2010 primary SO2 NAAQS are in sections 172 and 191-192 of the CAA, and therefore, the appropriate avenue for implementing requirements for necessary emission limitations for demonstrating attainment with the 2010 SO2 NAAQS is through the attainment planning process contemplated by those sections of the CAA. On August 5, 2013, EPA designated as nonattainment most areas in locations where existing monitoring data from 2009-2011 indicated violations of the 1-hour SO2 standard. 78 FR 47191. At that time, one area in New Hampshire had monitoring data from 2009-2011 indicating violations of the 1-hour SO2 standard, and this area was designated nonattainment in New Hampshire. See 40 CFR 81.330. On March 2, 2015 the United States District Court for the Northern District of California entered a Consent Decree among the EPA, Sierra Club and Natural Resources Defense Council to resolve litigation concerning the deadline for completing designations for the 2010 SO2 NAAQS. Pursuant to the terms of the Consent Decree, EPA will complete additional designations for all remaining areas of the country including remaining areas in New Hampshire.8