Federal Register Vol. 83, No.209,

On May 15, 2018, the President signed E.O. 13833, titled, “Enhancing the Effectiveness of Agency Chief Information Officers” (83 FR 23345). The E.O. is aimed at modernizing the Federal Government's information technology infrastructure and improving the delivery of digital services and the management, acquisition, and oversight of Federal IT. Section 9 of the E.O. directs OPM to propose regulations pursuant to which OPM may delegate to the heads of certain agencies (other than the Secretary of Defense) authority to determine, under regulations prescribed by OPM, whether a severe shortage of candidates (or, for the U.S. Department of Veterans Affairs (VA) a severe shortage of highly qualified candidates) or a critical hiring need exists for positions in the Information Technology Management (IT) Series, general schedule (GS)-2210 or equivalent, for purposes of an entitlement to a direct hire authority (DHA). The agencies covered by the E.O. are those listed in 31 U.S.C. 901(b), or independent regulatory agencies defined in 44 U.S.C. 3502(5).

OPM is proposing to amend its regulations to delegate to the heads of covered agencies the authority to determine whether a severe shortage of candidates (VA need only determine the existence of a severe shortage of highly qualified candidates) or a critical hiring need exists for IT positions. The current rules do not provide for a delegation of authority in relation to direct hire authorities; only OPM may make these determinations. When determining the existence of a severe shortage of qualified candidates for IT positions, an agency exercising such a delegation would be required to justify its determination using the supporting evidence prescribed in section 337.204(b) of title 5, Code of Federal Regulations (CFR). When determining the presence of a critical hiring need, an agency exercising such a delegation would be required to justify its determination in accordance with the criteria prescribed in 5 CFR 337.205(b). OPM has further developed these criteria in Direct Hire templates available at https://www.opm.gov/policy-data-oversight/hiring-information/direct-hire-authority/templates.pdf. Agency heads would be expected to make use of these templates in making their findings. The supporting evidence used for either determination would be required to be kept in a file for documentation and auditing purposes in accordance with 5 CFR 337.206.

Under the current DHA provisions at 5 U.S.C. 3304(a)(3) and 5 CFR part 337 subpart B, OPM determines the existence of a severe shortage of candidates or a critical hiring need and may grant DHA to one or more agencies pursuant to this determination. Thus OPM is responsible for making both a determination that the DHA is warranted and for granting the actual DHA. While E.O. 13833 authorizes OPM to submit a proposed regulation that would sever these actions for IT positions (in other words, permit the heads of agencies to make the determination, but preserve OPM's responsibility for granting DHA based on an agency's determination), OPM is choosing to delegate to agency heads its authority to actually issue the DHA under 5 U.S.C. 1104(a)(2) in the circumstances specified. OPM will, however, maintain oversight of the use of this authority as provided in 5 U.S.C. 1104(b). Therefore, after the determination is made, the deciding agency is required to provide the determination and a description of the supporting evidence to OPM. OPM may request access to the underlying documentation at any time, and may require corrective action in accordance with 5 U.S.C. 1104(c) and section 337.206 of the regulation.

The proposed rules contemplate that, after an agency head has authorized DHA under these rules, the agency could use this authority to hire needed individuals for initial appointments lasting longer than 1 year, but not to exceed 4 years. The hiring agency, at its discretion, could extend the initial appointment up to an additional 4 years. No individual hired under these provisions could serve in excess of 8 years at the same agency. No individual hired under these provisions could be transferred to positions that are not IT positions. An agency would be required to use this authority in accordance with the provisions of 5 CFR part 337 subpart B and in the same manner it would for filling other positions under DHA. Generally speaking, this would entail providing applicants with public notice consistent with the provisions of 5 CFR 337.203, assessing applicants to determine whether they have the level of proficiency required to perform the duties of the position being filled, and giving selection priority to qualified applicants eligible under the agency's Reemployment Priority List (RPL), Career Transition Assistance Plan (CTAP), and the Interagency Career Transition Assistance Plan (ICTAP) in accordance with 5 CFR part 330 subparts B, F, and G before selecting other qualified applicants. An agency would not be able to assess applicants in order to make more meaningful or relative distinctions as to the quality of the applicant pool; i.e., an agency could not rate and rank applicants and select them based on a numerical rating or categorize and select them in terms of “good, better, best” or similar quality designations. Applicants who met the required proficiency level would be deemed to be equally qualified for these purposes. Each agency would then be expected to select qualified applicants in the order in which their applications were received and processed.

OPM is revising its regulations to:

a. Add new subsections, 337.204(d), and 337.205(b) titled, “Information Technology Positions” to propose implementing rules with respect to covered agencies, agency authority, conditions for using these provisions, and duration of appointments.

This rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866.

I certify that this regulation will not have a significant impact on a substantial number of small entities because it applies only to Federal agencies and employees.

Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” under Executive Order 12866.

This proposed rule is not expected to be subject to the requirements of E.O. 13771 (82 FR 9339, February 3, 2017) because this proposed rule is expected to be related to agency organization, management, or personnel

This regulation 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. Therefore, in accordance with Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant preparation of a Federalism Assessment.

This regulation meets the applicable standard set forth in section 3(a) and (b)(2) of Executive Order 12988.

This rule will not result in the expenditure by State, local or tribal governments of more than $100 million annually. Thus, no written assessment of unfunded mandates is required.

This action pertains to agency management, personnel and organization and does not substantially affect the rights or obligations of nonagency parties and, accordingly, is not a “rule” as that term is used by the Congressional Review Act (Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)). Therefore, the reporting requirement of 5 U.S.C. 801 does not apply.

This proposed regulatory action will not impose any additional reporting or recordkeeping requirements under the Paperwork Reduction Act.

Accordingly, we propose to amend 5 CFR part 337 as follows:

Acronyms and Abbreviations. A number of acronyms and abbreviations are used in this preamble. While this may not be an exhaustive list, to ease the reading of this preamble and for reference purposes, the following terms, acronyms, and abbreviations are defined as follows:

In this proposed rule, DOE proposes to establish procedures for the designation of critical electric infrastructure information (CEII) under the Fixing America's Surface Transportation Act (FAST Act), Public Law 114-94. The FAST Act contains several provisions designed to protect and enhance the Nation's electric power delivery infrastructure. Section 61003 of that Act added a new section 215A, entitled “Critical Electric Infrastructure Security,” to Part II of the Federal Power Act (FPA), codified at 16 U.S.C. 824o-1. FPA section 215A authorizes both the Secretary of Energy (the Secretary) and the Federal Energy Regulatory Commission (FERC) independently to designate CEII. The FAST Act required FERC, after consultation with the Secretary, to “promulgate such regulations as necessary to . . . establish criteria and procedures to designate information as [CEII]”. 16 U.S.C. 824o-1(d)(2). While FERC's 2016 rulemaking established criteria for designating CEII applicable to both FERC and the Department, the designation procedures in the rulemaking were limited to FERC. Thus, the Department proposes to establish its own designation procedures.

The Department has sought to harmonize its procedures with the FERC procedures as much as possible. Some small variations are the result of the different roles of each agency. Specifically, the Department anticipates receiving a smaller volume of CEII materials, due to DOE's non-regulatory role, which gives DOE the flexibility to engage in more proactive designations. Additionally, the Department's procedures reflect informal input from industry representatives, who are the submitters of CEII, regarding enhancements the DOE could make when adapting CEII procedures to the unique role of DOE as the Sector-Specific Agency for the Energy Sector. For example, DOE has designed proposed procedures that anticipate designation before a FOIA request is received and allow for longer industry response times before materials are released.

According to the statutory definition, CEII includes information that qualifies as “critical energy infrastructure information” under existing FERC regulations, which are codified at 18 CFR 388.113(c). These proposed CEII regulations align with DOE's role as the lead Sector-Specific Agency for cybersecurity for the energy sector under section 61003(c)(2)(A) of the FAST Act, and the Sector-Specific Agency for Energy (Critical Infrastructure) under Presidential Policy Directive 21, “Critical Infrastructure Security and Resilience” (Feb. 12, 2013). In those roles and in coordination with DHS, DOE coordinates interagency sharing of information concerning the energy sector.

Through this proposed rule, DOE would establish a set of procedures by which the Secretary of Energy would designate, protect, and share CEII under new section 215A of the FPA, according to criteria FERC has established and codified at 18 CFR 388.113. This proposed rule would also set forth provisions concerning the type of information that DOE would designate as CEII, when that information has been submitted in response to a request from DOE. The proposed procedures apply to both Federal entities and non-Federal entities that may submit or request information designated, protected, and shared as CEII. The procedures do not contemplate any new collection or storage techniques, but instead describe marking protocols for physical and electronic materials to indicate that they are to be treated as CEII. These procedures better facilitate the use of the CEII FOIA exemption for material shared with the Department for reasons outside the scope of this proposed rule.

In this proposed rule, DOE also intends to address stakeholder concerns about the protection of critical infrastructure information from public release.1 For example, DOE is proposing a process for immediate CEII designation (pre-designation) of information marked “Defense Critical Electric Infrastructure Information,” and for information provided by industry in response to certain Federal agency reporting requirements. DOE also proposes to address concerns about the format required and time allotted for communications with DOE regarding its CEII designation actions. DOE further proposes increased coordination between DOE and submitters of potential CEII-designated materials to facilitate voluntary sharing of CEII with, between, and by Federal and non-Federal entities, as appropriate.2 Finally, DOE is proposing that the Department convene on occasion with other Federal agencies, in order to facilitate mutual understanding among Federal information classification programs as it may relate to CEII.

Note that as a general principle, DOE does not intend to designate information as CEII if it has been made publicly available by the owner or generator of the CEII previously.

Section 1004.13(c) of the proposed rule would define terms applicable to the proposed procedures in this notice for the designation of critical electric infrastructure information. Some terms are adopted from those used in the existing procedures. Other terms are proposed for the first time in this context.

“Bulk-power system” means the facilities and control systems necessary for operating an interconnected electric energy transmission network (and any portion thereof) and electric energy from generation facilities needed to maintain transmission system reliability. The term excludes facilities used in local electric distribution.

“Critical electric infrastructure” means a system or asset of the bulk-power system, whether physical or virtual, the incapacity or destruction of which would negatively affect national security, economic security, public health or safety, or any combination of such matters.

“Critical electric infrastructure information” or “CEII” means information related to critical electric infrastructure, or proposed critical electrical infrastructure, generated by or provided to FERC or another Federal agency, other than classified national security information, that is designated as critical electric infrastructure information by FERC or the Secretary pursuant to section 215A(d) of the FPA.3 CEII-designated material would include information related to Defense Critical Electric Infrastructure, consistent with section 215A(a)(4) of the FPA. DOE would also include the following in the definition of CEII: (1) “critical energy infrastructure information” as described in 18 CFR 388.113(c); 4 (2) information reported to DOE through the Electric Emergency Incident and Disturbance Report (Form OE-417); and (3) Federal spectrum information managed by the National Telecommunications and Information Administration (NTIA) as CEII-designated material.

“CEII coordinator” means the Assistant Secretary or Principal Deputy Assistant Secretary of the DOE Office of Electricity, who shall provide coordination for and oversight of the implementation of DOE's program for CEII designation authority under Section 215A of the FPA and shall assist all DOE Offices in determining whether particular information meets the definition of CEII, as well as managing DOE's protection, storage, and sharing of CEII materials to ensure that CEII materials are shielded from disclosure in accordance with the Federal Power Act and the Freedom of Information Act. The CEII coordinator may delegate the daily implementation of the CEII coordinator function as described in this proposed rule to an appropriate official in the DOE Office of Electricity, Bonneville Power Administration, Energy Information Administration, Southeastern Power Administration, Southwestern Power Administration, or Western Area Power Administration (“Coordinator's designee”).

Proposed § 1004.13(a) provides interested stakeholders with the location of information regarding CEII filing procedures and guidance.

As described in proposed § 1004.13(b), procedures for the designation, protection, and sharing of CEII developed under section 215A of the FPA would apply to anyone who provides CEII to DOE or who receives CEII from DOE, including DOE employees, DOE contractors, agents of DOE, and individuals or organizations who have been permitted access to CEII, as well as non-DOE entities submitting CEII to DOE or receiving CEII from DOE. These proposed procedures would also apply to other Federal agencies seeking CEII designation and protection of information agencies may submit to DOE.

Proposed § 1004.13(c) defines the terms Critical Electric Infrastructure, Critical Electric Infrastructure Information (CEII), CEII Coordinator, Defense Critical Electric Infrastructure, Department of Energy (DOE), DOE Office, and Secretary, as used throughout proposed § 1004.13. Where the terms are defined by statute or by FERC's CEII regulations, the definitions track those corresponding definitions, either verbatim or with maximum consistency.

The procedures, as described in proposed § 1004.13(d), are designed to allow the Secretary, or DOE Offices with authority delegated by the Secretary, to receive and designate CEII in a manner ensuring that the Department can access the critical information it needs to execute its responsibilities as the lead Sector-Specific Agency for cybersecurity for the energy sector and the Sector-Specific Agency for Energy (Critical Infrastructure). The FAST Act protects CEII by exempting CEII-designated information from disclosure under the Freedom of Information Act (FOIA), as codified at 5 U.S.C. 552(b)(3), or any Federal, State, political subdivision, or tribal law requiring disclosure of information or records. The proposed rules set out a standardized process to request CEII designation, and requirements for treatment of CEII following a CEII determination. The following sections provide greater detail regarding the proposed revisions to the Department's FOIA regulations.

Proposed § 1004.13(e) sets out the functions of the CEII Coordinator and the Coordinator's designee. The CEII coordinator may apply immediate CEII designation (pre-designation) to information such as that marked as “Defense Critical Electric Infrastructure Information,” or to information provided by industry in response to certain Federal agency reporting requirements or requests, as appropriate. However, final CEII designation authority would reside with the DOE Office exercising its delegated CEII designation authority. The CEII Coordinator, in consultation with the DOE Office with CEII designation authority, would be the responsible DOE official to make a final determination regarding the release of CEII to any non-Federal entity requesting the release of CEII-designated materials from the Department. The proposed subsection also provides that DOE entities with authority to designate CEII would meet to calibrate their approaches to CEII designation, and would meet with representatives of other Federal agencies, as needed and at the discretion of the Coordinator or designee, to ensure consistent understanding of CEII designation processes.

Proposed § 1004.13(f) states that CEII is exempt from disclosure under FOIA, as provided by the FAST Act amendments to the FPA.

Proposed § 1004.13(g) sets out criteria and procedures the Department would follow to designate CEII. The subsection covers requesting designation for information submitted to or generated by DOE, how DOE would treat submitted information and apply the CEII designation criteria, how DOE would treat information once it has decided whether to designate the information as CEII, and how DOE would protect designated CEII.

Proposed § 1004.13(h) states that CEII designations can last up to five years and are renewable, and describes how designation may be removed and how DOE would treat and return the information should its designation be removed.

Proposed § 1004.13(i) describes how a submitter may request reconsideration of a decision not to designate CEII, not to release CEII in response to a request for release, or not to maintain an existing CEII designation, and discusses eligibility for judicial review. The subsection also notes that, with several exceptions, a reconsideration request triggers a stay of the underlying decision.

Proposed § 1004.13(j) discusses tightly-controlled sharing of CEII among Federal and non-Federal Entities, taking into account International Sharing Protocols when appropriate. The subsection notes that when the Department plans to share CEII it did not generate, it would notify the submitter well in advance unless circumstances dictate otherwise and would speak directly with the submitter before sharing any of the information to discuss any concerns and make a well-informed determination.

Proposed § 1004.13(k) describes procedural requirements for requesting CEII. A request must include contact information, an explanation of the need for and intended use of the CEII, and a signed Non-Disclosure Acknowledgment or Agreement, as applicable.

Proposed § 1004.13(l) sets out penalties and sanctions for unauthorized disclosure of CEII, emphasizing that statutory whistleblower protections still apply.

Proposed § 1004.13 outlines criteria and procedures for designating CEII. The Department understands that the energy sector, including electric entities, requires assurance that certain critical information will be protected from public disclosure. DOE would take appropriate measures related to the treatment of submitted information as CEII, including designation of a central Departmental point of contact for all CEII matters—the DOE CEII Coordinator as defined in § 1004.13(c)(3)—who would provide oversight and assistance to DOE Offices in the implementation of the proposed procedures as described in § 1004.13(e).

In cases where information concerns “Defense Critical Electric Infrastructure,” as defined by Section 215A(a)(4) of the FPA, DOE proposes to designate such information as CEII automatically upon receipt by the DOE CEII Coordinator. In cases where information concerning Federal government agency spectrum use managed by the NTIA is submitted,5 or in cases in which information on electric incidents and emergencies reported to DOE through Form OE-417 is submitted as a part of a CEII-designation request, DOE also proposes to designate such information as CEII automatically upon receipt by the DOE CEII Coordinator.6 In communications to the submitter, or DOE Office and/or Federal agency generating the information, DOE may “pre-designate” such information as CEII, noting why it considers the material to fall within the statutory and regulatory definition of CEII.

The proposed procedures outline how the Department would provide protection for information where CEII designation has been requested but a final determination on CEII status has not yet been made by the Secretary or the designating DOE Office. After submission, DOE would evaluate whether the submitted information or portions of information meet the criteria established for designation prior to making a CEII determination. DOE would subsequently communicate the decision to the submitter as soon as practicable. If designated as CEII, information would be labeled as such and would be stored in a manner affording protection as CEII. Information voluntarily supplied by submitter that is not designated as CEII by DOE would be returned or destroyed at the request of the submitter. If a submitter is required to provide information and DOE denies CEII designation, the submitter may file a request for review under the proposed procedures.

Power Marketing Administrations (PMAs) generate copious data, a great deal of which may be CEII. To accommodate the practical difficulties of making CEII designation decisions about such data, proposed section (g)(2)(iv) states that all organizational entities that are a part of the Executive Department created by Title II of the DOE Organization Act may make CEII determination decisions at any time, regardless of when such information was generated. The proposed procedures are also intended for use by other Federal agencies that may also want to request CEII protection for information generated, collected, managed, or potentially released that fits into the definition of CEII in § 1004.13(c). These procedures create no new burdens in the existing FOIA response process.

Proposed § 1004.13(h) outlines procedures governing the duration of CEII designation, to include re-applications for CEII designation, expiration of designation, removal of designation, and treatment and return of information no longer designated as CEII.

Proposed § 1004.13(i) establishes procedures that would allow any person who has submitted information requested to be CEII to request reconsideration of a DOE decision to not designate that information as CEII, to remove an existing CEII designation, or to deny a request for the release or change of designation of CEII.

As indicated in proposed § 1004.13(j), DOE may share CEII as necessary to carry out its specific jurisdictional duties pursuant to section 215A of the FPA and as the lead Sector-Specific Agency for cybersecurity for the energy sector under section 61003(c)(2)(A) of the FAST Act, and the Sector-Specific Agency for Energy (Critical Infrastructure) under Presidential Policy Directive 21, “Critical Infrastructure Security and Resilience” (Feb. 12, 2013). Those submitting CEII would have DOE's assurance that the information will be protected from unauthorized disclosure. The Department would follow standardized procedures when sharing CEII with Federal and non-Federal entities to ensure the protection of CEII. Non-Federal entities would be required to enter into a Non-Disclosure Agreement with the Department, meeting minimum standards outlined in the proposed rule, prior to receiving CEII from DOE. When a non-Federal entity requests such information, the DOE CEII coordinator would notify the submitter of the CEII and the appropriate DOE Office(s), to facilitate coordination and allow the submitter to raise concerns related to a requesting entity. The DOE CEII coordinator would, in consultation with the appropriate DOE Office(s), make a final determination on whether to release any CEII-designated material in response to such a request.

Proposed § 1004.13(k) delineates procedures for requesting CEII designation and sharing CEII-designated materials.

Interested persons are invited to participate in this proceeding by submitting data, views, or arguments. Written comments should be submitted to the address, and in the form, indicated in the ADDRESSES section of this notice of proposed rulemaking. To help DOE's review of the comments, interested persons are asked to refer to specific proposed rule provisions, if possible.

Written comments must be submitted by 4:00 p.m., December 28, 2018, electronically via Regulations.gov, via email to [email protected], or to the address indicated in the ADDRESSES section of this preamble and should be identified on the outside envelope and on the document with the designation: “Proposed Rulemaking Critical Electric Infrastructure Information Designation Procedures (Docket #OE-1901-AB44).” All comments received will be available for public inspection via http://www:regulations.gov. All comments received by 4:00 p.m., December 28, 2018, and all other relevant information will be considered by DOE before final action is taken on this proposed regulation.

If you submit information that you believe to be exempt by law from public disclosure, you should submit one complete copy, as well as one copy from which the information requested to be exempt by law from public disclosure has been redacted. DOE is responsible for the final determination regarding disclosure or nondisclosure of the information, and for treating the information accordingly under FOIA and DOE implementing regulations at 10 CFR 1004.11.

This action was determined to be a significant regulatory action subject to review under Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (Oct. 4, 1993) by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget (OMB).

On January 30, 2017, the President issued Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs.” That Order stated the policy of the executive branch is to be prudent and financially responsible in the expenditure of funds, from both public and private sources. The Order stated it is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.

Additionally, on February 24, 2017, the President issued Executive Order 13777, “Enforcing the Regulatory Reform Agenda.” The Order required the head of each agency to designate an agency official as its Regulatory Reform Officer (RRO). Each RRO oversees the implementation of regulatory reform initiatives and policies to ensure that agencies effectively carry out regulatory reforms, consistent with applicable law. Further, Executive Order 13777 requires the establishment of a regulatory task force at each agency. The regulatory task force is required to make recommendations to the agency head regarding the repeal, replacement, or modification of existing regulations, consistent with applicable law. At a minimum, each regulatory reform task force must attempt to identify regulations that:

(i) Eliminate jobs, or inhibit job creation;

(ii) Are outdated, unnecessary, or ineffective;

(iii) Impose costs that exceed benefits;

(iv) Create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies;

(v) Are inconsistent with the requirements of the Information Quality Act, or the guidance issued pursuant to that Act, in particular those regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard for reproducibility; or

(vi) Derive from or implement Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified.

Finally, on March 28, 2017, the President signed Executive Order 13783, entitled “Promoting Energy Independence and Economic Growth.” Among other things, Executive Order 13783 requires the heads of agencies to review all existing regulations, orders, guidance documents, policies, and any other similar agency actions (collectively, agency actions) that potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources. Such review does not include agency actions that are mandated by law, necessary for the public interest, and consistent with the policy set forth elsewhere in that order. Executive Order 13783 defined “burden” for purposes of the review of existing regulations to mean “to unnecessarily obstruct, delay, curtail, or otherwise impose significant costs on the siting, permitting, production, utilization, transmission, or delivery of energy resources.

The development and implementation of the proposed procedures, as laid out in Section 215A(d) of the FPA, are designed to protect the security and reliability of the nation's bulk-power system, distribution facilities, and other forms of energy infrastructure. The procedures relate solely to marking information that would facilitate voluntary sharing of CEII among DOE and other appropriate Federal, state, or local entities to address emergencies, accidents, or intentional destructive acts affecting the production, transmission and delivery of energy resources. There is no new reporting requirement nor new program created as a result of the proposed procedures. This information will be stored on currently existing DOE systems. DOE concludes that this proposed rule is consistent with the directives set forth in these Executive Orders.

DOE has determined that this proposed rule is covered under the Categorical Exclusion found in the DOE's National Environmental Policy Act regulations at paragraph A6 Rulemakings, procedural of Appendix A to Subpart D, 10 CFR part 1021, which applies to Rulemakings that are strictly procedural, such as rulemaking (under 48 CFR part 9) establishing procedures for technical and pricing proposals and establishing contract clauses and contracting practices for the purchase of goods and services, and rulemaking (under 10 CFR part 600) establishing application and review procedures for, and administration, audit, and closeout of, grants and cooperative agreements. Accordingly, neither an environmental assessment nor an environmental impact statement is required.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of an initial regulatory flexibility analysis for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (Aug. 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process (68 FR 7990). DOE's procedures and policies are available on the Office of General Counsel's website: https://energy.gov/gc/office-general-counsel.

DOE has reviewed this proposed rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. This proposed rule sets forth agency procedures for the designation, sharing, and protection of CEII, and applies to DOE employees, DOE contractors, agents of DOE, and individuals or organizations submitting a request for CEII designation or who have requested or been permitted access to CEII. The proposed procedures for marking incoming requests and/or submissions, which are expected to facilitate voluntary sharing of CEII among DOE and other appropriate Federal, state, or local entities to address emergencies, accidents, or intentional destructive acts to the production, transmission, and delivery of energy resources, are not expected to result in a significant impact. FERC's regulations already require entities requesting CEII designation to mark the subject information. DOE's procedures would provide consistency and would also help avoid unauthorized disclosure or release. DOE therefore expects that these procedures, if adopted, would not affect DOE's decision to designate submitted information as CEII, nor any decision to withhold or release information to requesters of energy infrastructure information under FOIA. On the basis of the foregoing, DOE certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking. DOE's certification and supporting statement of factual basis will be provided to the Chief Counsel for Advocacy of the Small Business Administration pursuant to 5 U.S.C. 605(b).

Proposed §§ 1004.13(g), 1004.13(h), 1004.13(i), and 1004.13(k) contain information collection requirements. DOE has submitted the proposed collection of information to the OMB for approval pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the procedures implementing that Act at 5 CFR part 1320. A person is not required to respond to a collection of information unless it displays a currently valid OMB control number.

DOE invites public comment on (1) whether the proposed information collection requirements are necessary for the performance of DOE's functions, including whether the information will have practical utility; (2) the accuracy of DOE's estimates of the burden of the proposed information collection requirements; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the information collection requirements on respondents. Comments should be addressed to the DOE Desk Officer, OIRA, OMB, 725 17th Street NW, Washington, DC 20503. Persons submitting comments to OMB also are requested to send a copy to the contact person at the address given in the ADDRESSES section of this notice of proposed rulemaking. Interested persons may obtain a copy of DOE's Paperwork Reduction Act Submission to OMB from the contact person named in this notice of proposed rulemaking.

The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally requires Federal agencies to examine closely the impacts of regulatory actions on State, local, and tribal governments. Section 101(5) of title I of that law defines a Federal intergovernmental mandate to include any regulation that would impose upon State, local, or tribal governments an enforceable duty, except a condition of Federal assistance or a duty arising from participating in a voluntary Federal program. Title II of that law requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and tribal governments, in the aggregate, or to the private sector, other than to the extent such actions merely incorporate requirements specifically set forth in a statute. Section 202 of that title requires a Federal agency to perform a detailed assessment of the anticipated costs and benefits of any rule that includes a Federal mandate which may result in costs to State, local, or tribal governments, or to the private sector, of $100 million or more in any one year (adjusted annually for inflation). 2 U.S.C. 1532(a) and (b). Section 204 of that title requires each agency that proposes a rule containing a significant Federal intergovernmental mandate to develop an effective process for obtaining meaningful and timely input from elected officers of State, local, and tribal governments. 2 U.S.C. 1534.

The proposed rule will not result in the expenditure by State, local, and tribal governments in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, no assessment or analysis is required under the Unfunded Mandates Reform Act of 1995.

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any proposed rule that may affect family well-being. The proposed rule will not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

Executive Order 13132, “Federalism,” 64 FR 43255 (Aug. 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. DOE has examined this proposed rule and has determined that it will not preempt State law and 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. No further action is required by Executive Order 13132.

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (Feb. 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or whether it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the proposed rule meets the relevant standards of Executive Order 12988.

The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB.

OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has reviewed this proposed rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

Executive Order No. 13,211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001) requires Federal agencies to prepare and submit to the OMB a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of the OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. This regulatory action will not have a significant adverse effect on the supply, distribution, or use of energy because it is concerned primarily with the procedures for designating, protecting, and sharing information. As the FAST Act highlighted, protection of CEII will have a positive effect on the energy supply, and is therefore not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects.

The Secretary of Energy has approved publication of this notice of proposed rulemaking.

For the reasons set out in the preamble, the DOE proposes to amend part 1004 of title 10, Code of Federal Regulations as set forth below:

On May 26, 2010, the FAA published a notice of proposed rulemaking (NPRM) titled “Prohibition against Certain Flights within the Territory and Airspace of Afghanistan” (75 FR 29466). The NPRM proposed to restrict U.S. civil flight operations below FL 160 within the territory and airspace of Afghanistan, unless the operations are authorized by another U.S. Government department or agency (hereinafter referred to as “department or agency”) and approved by the FAA, or subject to an exemption granted by the FAA. The preamble to the NPRM explained the process for a department or agency to apply for FAA approval for operations to be conducted under contract to that department or agency and for operators to apply for exemption.

The situation in Afghanistan presented a unique environment relative to other situations where the FAA had imposed similar regulations to address the safety of U.S. operators while in foreign territories and airspace. The presence of the U.S. military forces in Afghanistan had required a large presence of U.S. civil aircraft operations to support the warfighting, nation building, and humanitarian efforts. The level of these operations occurring in Afghanistan warranted the FAA to provide notice of the proposed regulation to limit flight in this area and a limited opportunity for comment from operators or other individuals that might have been affected by such action. The FAA found that good cause existed to limit the notice and public comment period required by 5 U.S.C. 553(d)(3) to 15 days. The comment period closed on June 10, 2010.

The FAA received 22 submissions containing multiple comments from air carriers, associations, labor organizations, humanitarian organizations, and individuals. All of the commenters acknowledged the risks associated with conducting aviation operations in Afghanistan. Several commenters fully supported the provisions in the NPRM, while others requested clarification of certain elements in the proposal. The majority of commenters, however, asserted that the proposed rule would place unnecessary restrictions and burdens on U.S. civil aviation operations in Afghanistan. They contended that the proposed rule would result in an adverse economic impact for U.S. operators and limit their ability to support the ongoing U.S. military activities, nation building, and humanitarian efforts.

Following publication of the NPRM, several commenters, including Kalitta Air, Pactec International, and Atlas Air Worldwide Holdings submitted comments that questioned the FAA's determination of the costs of implementing the NPRM if adopted as proposed. Kalitta Air specifically requested that the FAA complete a regulatory impact analysis to accurately account for the costs associated with the proposal. In response, the FAA published a Supplemental Regulatory Flexibility Analysis on July 20, 2010 (75 FR 42015) for a 15-day comment period that closed on August 4, 2010. No comments were submitted to the supplemental regulatory flexibility analysis.

After considering the comments, the FAA has determined the unique environment in Afghanistan continues. There is no scheduled U.S. air service in Afghanistan, and the only operations by U.S. operators or airmen currently conducted there are in support of U.S. Government activities. Additionally, the FAA has issued an advisory notice to airmen (NOTAM KICZ A0031/17) advising U.S. operators in Afghanistan airspace to operate, to the maximum extent possible, only on established air routes and at altitudes at or above FL 330 due to the risk to civil aviation.

Accordingly, the FAA has decided to withdraw this proposal. Withdrawal of proposed SFAR No. 110 does not preclude the FAA from issuing another notice on this subject matter in the future and does not commit the agency to any future course of action. The FAA continues to assess the circumstances in Afghanistan and intends to take action as appropriate to mitigate risks to aviation safety.

The FAA withdraws Notice No. 2010-12670, published at 75 FR 29466 on May 26, 2010.

This document contains proposed regulations under section 1400Z-2 of the Code that amend the Income Tax Regulations (26 CFR part 1). Section 13823 of the Tax Cuts and Jobs Act, Public Law 115-97, 131 Stat. 2054, 2184 (2017) (TCJA), amended the Code to add sections 1400Z-1 and 1400Z-2. Section 1400Z-1 provides procedural rules for designating qualified opportunity zones and related definitions. Section 1400Z-2 allows a taxpayer to elect to defer certain gains to the extent that corresponding amounts are timely invested in a QOF.

Section 1400Z-2, in conjunction with section 1400Z-1, seeks to encourage economic growth and investment in designated distressed communities (qualified opportunity zones) by providing Federal income tax benefits to taxpayers who invest in businesses located within these zones. Section 1400Z-2 provides two main tax incentives to encourage investment in qualified opportunity zones. First, it allows for the deferral of inclusion in gross income for certain gains to the extent that corresponding amounts are reinvested in a QOF. Second, it excludes from gross income the post-acquisition gains on investments in QOFs that are held for at least 10 years.

As is more fully explained in the Explanation of Provisions, these proposed regulations describe and clarify the requirements that must be met by a taxpayer in order properly to defer the recognition of gains by investing in a QOF. In addition, the proposed regulations provide rules permitting a corporation or partnership to self-certify as a QOF. Finally, the proposed regulations provide initial proposed rules regarding some of the requirements that must be met by a corporation or partnership in order to qualify as a QOF.

Contemporaneous with the issuance of these proposed regulations, the IRS is releasing a revenue ruling addressing the application to real property of the “original use” requirement in section 1400Z-2(d)(2)(D)(i)(II) and the “substantial improvement” requirement in section 1400Z-2(d)(2)(D)(i)(II) and 1400Z-2(d)(2)(D)(ii).

In addition, these proposed regulations address the substantial-improvement requirement with respect to a purchased building located in a qualified opportunity zone. They provide that for purposes of this requirement, the basis attributable to land on which such a building sits is not taken into account in determining whether the building has been substantially improved. Excluding the basis of land from the amount that needs to be doubled under section 1400Z-2(d)(2)(D)(ii) for a building to be substantially improved facilitates repurposing vacant buildings in qualified opportunity zones. Similarly, an absence of a requirement to increase the basis of land itself would address many of the comments that taxpayers have made regarding the need to facilitate repurposing vacant or otherwise unutilized land.

In connection with soliciting comments on these proposed regulations the Department of the Treasury (Treasury Department) and the IRS are soliciting comments on all aspects of the definition of “original use” and “substantial improvement.” In particular, they are seeking comments on possible approaches to defining the “original use” requirement, for both real property and other tangible property. For example, what metrics would be appropriate for determining whether tangible property has “original use” in an opportunity zone? Should the use of tangible property be determined based on its physical presence within an opportunity zone, or based on some other measure? What if the tested tangible property is a vehicle or other movable tangible property that was previously used within the opportunity zone but acquired from a person outside the opportunity zone? Should some period of abandonment or under-utilization of tangible property erase the property's history of prior use in the opportunity zone? If so, should such a fallow period enable subsequent productive utilization of the tangible property to qualify as “original use”? Should the rules appropriate for abandonment and underutilization of personal tangible property also apply to vacant real property that is productively utilized after some period? If so, what period of abandonment, underutilization, or vacancy would be consistent with the statute? In addition, comments are requested on whether any additional rules regarding the “substantial improvement” requirement for tangible property are warranted or would be useful.

The Treasury Department and the IRS are working on additional published guidance, including additional proposed regulations expected to be published in the near future. The Treasury Department and the IRS expect the forthcoming proposed regulations to incorporate the guidance contained in the revenue ruling to facilitate additional public comment. The forthcoming proposed regulations are expected to address other issues under section 1400Z-2 that are not addressed in these proposed regulations. Issues expected to be addressed include: The meaning of “substantially all” in each of the various places where it appears in section 1400Z-2; the transactions that may trigger the inclusion of gain that has been deferred under a section 1400Z-2(a) election; the “reasonable period” (see section 1400Z-2(e)(4)(B)) for a QOF to reinvest proceeds from the sale of qualifying assets without paying a penalty; administrative rules applicable under section 1400Z-2(f) when a QOF fails to maintain the required 90 percent investment standard; and information-reporting requirements under section 1400Z-2.

The Treasury Department and the IRS welcome comments on what other additional issues should be addressed in forthcoming proposed regulations or guidance.

The proposed regulations clarify that only capital gains are eligible for deferral under section 1400Z-2(a)(1). In setting forth the gains that are subject to deferral, the text of section 1400Z-2(a)(1) specifies “gain from the sale to, or exchange with, an unrelated person of any property held by the taxpayer,” to the extent that such gain does not exceed the aggregate amount invested by the taxpayer in a QOF during the 180-day period beginning on the date of the sale or exchange (emphasis added). The statutory text is silent as to whether Congress intended both ordinary and capital gains to be eligible for deferral under section 1400Z-2. (Sections 1221 and 1222 define these two kinds of gains.) However, the statute's legislative history explicitly identifies “capital gains” as the gains that are eligible for deferral. The Treasury Department and the IRS believe, based on the legislative history as well as the text and structure of the statute, that section 1400Z-2 is best interpreted as making deferral available only for capital gains. The proposed regulations provide that a gain is eligible for deferral if it is treated as a capital gain for Federal income tax purposes. Eligible gains, therefore, generally include capital gain from an actual, or deemed, sale or exchange, or any other gain that is required to be included in a taxpayer's computation of capital gain.

The proposed regulations address two additional gain deferral requirements. First, the gain to be deferred must be gain that would be recognized, if deferral under section 1400Z-2(a)(1) were not permitted, not later than December 31, 2026, the final date under section 1400Z-2(a)(2)(B) for the deferral of gain. Second, the gain must not arise from a sale or exchange with a related person as defined in section 1400Z-2(e)(2). Section 1400Z-2(e)(2) incorporates the related person definition in sections 267(b) and 707(b)(1) but substitutes “20 percent” in place of “50 percent” each place it occurs in section 267(b) or section 707(b)(1).

The proposed regulations clarify that taxpayers eligible to elect deferral under section 1400Z-2 are those that recognize capital gain for Federal income tax purposes. These taxpayers include individuals, C corporations (including regulated investment companies (RICs) and real estate investment trusts (REITs)), partnerships, and certain other pass-through entities, including common trust funds described in section 584, as well as, qualified settlement funds, disputed ownership funds, and other entities taxable under § 1.468B of the Income Tax Regulations.

In order to address the numerous issues raised by new section 1400Z-2 for pass-through entities, the proposed regulations include special rules for partnerships and other pass-through entities, and for taxpayers to whom these entities pass through income and other tax items. Under these rules, the entities and taxpayers can invest in a QOF and thus defer recognition of eligible gain. The Treasury Department and the IRS request comments on whether the rules are sufficient and whether more detailed rules are required to provide additional certainty for investors in pass-through entities that are not partnerships.

The proposed regulations clarify that, to qualify under section 1400Z-2(a)(1)(A), (that is, to be an eligible interest in a QOF), an investment in the QOF must be an equity interest in the QOF, including preferred stock or a partnership interest with special allocations. Thus, an eligible interest cannot be a debt instrument within the meaning of section 1275(a)(1) and § 1.1275-1(d). Provided that the eligible taxpayer is the owner of the equity interest for Federal income tax purposes, status as an eligible interest is not impaired by the taxpayer's use of the interest as collateral for a loan, whether a purchase-money borrowing or otherwise. The proposed regulations also clarify that deemed contributions of money under section 752(a) do not result in the creation of an investment in a QOF.

Under section 1400Z-2(a)(1)(A), to be able to elect to defer gain, a taxpayer must generally invest in a QOF during the 180-day period beginning on the date of the sale or exchange giving rise to the gain. Some capital gains, however, are the result of Federal tax rules deeming an amount to be a gain from the sale or exchange of a capital asset, and, in many cases, the statutory language providing capital gain treatment does not provide a specific date for the deemed sale. The proposed regulations address this issue by providing that, except as specifically provided in the proposed regulations, the first day of the 180-day period is the date on which the gain would be recognized for Federal income tax purposes, without regard to the deferral available under section 1400Z-2. The proposed regulations include examples that illustrate the general rule by applying it to capital gains in a variety of situations (including, for example, gains from the sale of exchange-traded stock and capital gain dividend distributions).

If a taxpayer acquires an original interest in a QOF in connection with a gain-deferral election under section 1400Z-2(a)(1)(A), if a later sale or exchange of that interest triggers an inclusion of the deferred gain, and if the taxpayer makes a qualifying new investment in a QOF, then the proposed regulations provide that the taxpayer is eligible to make a section 1400Z-2(a)(2) election to defer the inclusion of the previously deferred gain. Deferring an inclusion otherwise mandated by section 1400Z-2(a)(1)(B) in this situation is permitted only if the taxpayer has disposed of the entire initial investment without which the taxpayer could not have made the previous deferral election under section 1400Z-2. The complete disposition is necessary because section 1400Z-2(a)(2)(A) expressly prohibits the making of a deferral election under section 1400Z-2(a)(1) with respect to a sale or exchange if an election previously made with respect to the same sale or exchange remains in effect. The general 180-day rule described above determines when this second investment must be made to support the second deferral election. Under that rule, the first day of the 180-day period for the new investment in a QOF is the date that section 1400Z-2(b)(1) provides for inclusion of the previously deferred gain .

Comments are requested as to whether the final regulations should contain exceptions to the general 180-day rule and whether it would be helpful for either the final regulations or other guidance to illustrate the application of the general 180-day rule to additional circumstances, and what those circumstances are.

Section 1400Z-2(a)(1)(B) and (b) require taxpayers to include in income previously deferred gains. The proposed regulations provide that all of the deferred gain's tax attributes are preserved through the deferral period and are taken into account when the gain is included. The preserved tax attributes include those taken into account under sections 1(h), 1222, 1256, and any other applicable provisions of the Code. Furthermore, the proposed regulations address situations in which separate investments providing indistinguishable property rights (such as serial purchases of common stock in a corporation that is a QOF) are made at different times or are made at the same time with separate gains possessing different attributes (such as different holding periods). If a taxpayer disposes of less than all of its fungible interests in a QOF, the proposed regulations provide that the QOF interests disposed of must be identified using a first-in, first-out (FIFO) method. Where the FIFO method does not provide a complete answer, such as where gains with different attributes are invested in indistinguishable interests at the same time, the proposed regulations provide that a pro-rata method must be used to determine the character, and any other attributes, of the gain recognized. Examples in the proposed regulations illustrate this rule.

Comments are requested as to whether different methods should be used. Any such alternative methods must both provide certainty as to which fungible interest a taxpayer disposes of and allow taxpayers to comply easily with the requirements of section 1400Z-2(a)(1)(B) and (b),which require that certain dispositions of an interest in a QOF cause deferred gain be included in a taxpayer's income.

Under section 1400Z-2(a)(2)(A), no election may be made under section 1400Z-2(a)(1) with respect to a sale or exchange if an election previously made with respect to that sale or exchange is in effect. There has been some confusion as to whether this language bars a taxpayer from making multiple elections within 180-days for various parts of the gain from a single sale or exchange of property held by the taxpayer. This rule in section 1400Z-2(a)(2)(A) is meant to exclude from the section 1400Z-2(a)(1) election multiple purported elections with respect to the same gain. (Although the gain itself can be deferred only once, a taxpayer might be seeking to multiply the investments eligible for various increases in basis.) Thus, the proposed regulations clarify that in the case of a taxpayer who has made an election under section 1400Z-2(a) with respect to some but not all of an eligible gain, the term “eligible gain” includes the portion of that eligible gain as to which no election has been made. (All elections with respect to portions of the same gain would, of course, be subject to the same 180-day period.)

The proposed regulations provide rules for capital gains arising from section 1256 contracts. Under section 1256, a taxpayer generally “marks to market” each section 1256 contract at the termination or transfer of the taxpayer's position in the contract or on the last business day of the taxable year if the contract is still held by the taxpayer at that time. The mark causes the taxpayer to take into account in the taxable year any not-yet recognized appreciation or depreciation in the position. This gain or loss, if capital, is treated as 60 percent long-term capital gain or loss and 40 percent short-term capital gain or loss. Currently, for federal income tax purposes, the only relevant information required to be reported by a broker to the IRS and to individuals and certain other taxpayers holding section 1256 contracts, is the taxpayer's net recognized gain or loss from all of the taxpayer's section 1256 contracts held during the taxable year. Some taxpayers holding section 1256 contracts, however, report the gain or loss from section 1256 contracts to the IRS on a per contract basis rather than on an aggregate basis. To minimize the burdens on taxpayers, brokers, and the IRS from tax compliance and tax administration, the proposed regulations allow deferral under section 1400Z-2(a)(1) only for a taxpayer's capital gain net income from section 1256 contracts for a taxable year. In addition, because the capital gain net income from section 1256 contracts for a taxable year is determinable only as of the last day of the taxable year, the proposed regulations provide that the 180-day period for investing capital gain net income from section 1256 contracts in a QOF begins on the last day of the taxable year.

Finally, the proposed regulations do not allow any deferral of gain from a section 1256 contract in a taxable year if, at any time during the taxable year, one of the taxpayer's section 1256 contracts was part of an offsetting-positions transaction (as defined later in the proposed regulations and described later in this preamble) in which any of the other positions was not also a section 1256 contract.

Comments are requested on this limitation and on whether capital gain from a section 1256 contract should be eligible for deferral under section 1400Z-2 on a per contract basis rather than on an aggregate net basis. Reporting on a per contract basis might require a significant increase in the number of information returns that taxpayers would need to file with the IRS as compared to the number of information returns that are currently filed on an aggregate net basis. Comments are requested on how to minimize the burdens and complexity that may be associated with reporting on a per contract basis for section 1256 contracts.

The Treasury Department and the IRS considered allowing deferral under section 1400Z-2(a)(1) for a net amount of capital gain related to a straddle (as defined in section 1092(c)(1)) after the disposition of all positions in the straddle. However, such a rule would pose significant administrative challenges. For example, additional rules would be needed for a taxpayer to defer such a net amount of capital gain when positions are disposed of in different taxable years (and likely would require affected taxpayers to file amended tax returns). Further, additional rules might be needed to take into account the netting requirements for identified mixed straddles described in § 1.1092(b)-3T or 1.1092(b)-6 and for mixed straddle accounts described in § 1.1092(b)-4T. Accordingly, in the interest of sound tax administration and to provide consistent treatment for transactions involving offsetting positions in personal property, the proposed regulations provide that any capital gain from a position that is or has been part of an offsetting-positions transaction (other than an offsetting-positions transaction in which all of the positions are section 1256 contracts) is not eligible for deferral under section 1400Z-2.

An offsetting-positions transaction is defined in the proposed regulations as a transaction in which a taxpayer has substantially diminished the taxpayer's risk of loss from holding one position with respect to personal property by holding one or more other positions with respect to personal property (whether or not of the same kind). It does not matter whether either of the positions is with respect to actively traded personal property. An offsetting-positions transaction includes a straddle as defined in section 1092 and the regulations thereunder, including section 1092(d)(4), which provides rules for positions held by related persons and certain flow-through entities (for example, a partnership). An offsetting-positions transaction also includes a transaction that would be a straddle (taking into account the principles referred to in the preceding sentence) if the straddle definition did not contain the active trading requirement in section 1092(d)(1).

Commenters have requested clarification regarding whether deferral is possible under section 1400Z-2 any time a partnership would otherwise recognize capital gain. The proposed regulations provide rules that permit a partnership to elect deferral under section 1400Z-2 and, to the extent that the partnership does not elect deferral, provide rules that allow a partner to do so. These rules both clarify the circumstances under which each can elect and clarify when the applicable 180-day period begins.

Proposed § 1.1400Z2(a)-1(c)(1) provides that a partnership may elect to defer all or part of a capital gain to the extent that it makes an eligible investment in a QOF. Because the election provides for deferral, if the election is made, no part of the deferred gain is required to be included in the distributive shares of the partners under section 702, and the gain is not subject to section 705(a)(1). Proposed § 1.1400Z2(a)-1(c)(2) provides that, to the extent that a partnership does not elect to defer capital gain, the capital gain is included in the distributive shares of the partners under section 702 and is subject to section 705(a)(1). If all or any portion of a partner's distributive share satisfies all of the rules for eligibility under section 1400Z-2(a)(1) (including not arising from a sale or exchange with a person that is related either to the partnership or to the partner), then the partner generally may elect its own deferral with respect to the partner's distributive share. The partner's deferral is potentially available to the extent that the partner makes an eligible investment in a QOF.

Consistent with the general rule for the beginning of the 180-day period, the partner's 180-day period generally begins on the last day of the partnership's taxable year, because that is the day on which the partner would be required to recognize the gain if the gain is not deferred. The proposed regulations, however, provide an alternative for situations in which the partner knows (or receives information) regarding both the date of the partnership's gain and the partnership's decision not to elect deferral under section 1400Z-2. In that case, the partner may choose to begin its own 180-day period on the same date as the start of the partnership's 180-day period.

The proposed regulations state that rules analogous to the rules provided for partnerships and partners apply to other pass-through entities (including S corporations, decedents' estates, and trusts) and to their shareholders and beneficiaries. Comments are requested regarding whether taxpayers need additional details regarding analogous treatment for pass-through entities that are not partnerships.

These proposed regulations require deferral elections to be made at the time and in the manner provided by the Commissioner of Internal Revenue (Commissioner). The Commissioner may prescribe in regulations, revenue procedures, notices, or other guidance published in the Internal Revenue Bulletin or in forms and instructions the time, form, and manner in which an eligible taxpayer may elect to defer eligible gains under section 1400Z-2(a). It is currently anticipated that taxpayers will make deferral elections on Form 8949, which will be attached to their Federal income tax returns for the taxable year in which the gain would have been recognized if it had not been deferred. Form instructions to this effect are expected to be released very shortly after these proposed regulations are published. Comments are requested whether additional proposed regulations or other guidance are needed to clarify the required procedures. In addition IRS releases draft forms for public review and comments. These drafts are posted to www.IRS.gov/DraftForms and include a cover sheet that indicates how to submit comments.

Under section 1400Z-2(c), a taxpayer that holds a QOF investment for at least ten years may elect to increase the basis of the investment to the fair market value of the investment on the date that the investment is sold or exchanged.

The basis step-up election under section 1400Z-2(c) is available only for gains realized upon investments that were made in connection with a proper deferral election under section 1400Z-2(a). It is possible for a taxpayer to invest in a QOF in part with gains for which a deferral election under section 1400Z-2(a) is made and in part with other funds (for which no section 1400Z-2(a) deferral election is made or for which no such election is available). Section 1400Z-2(e) requires that these two types of QOF investments be treated as separate investments, which receive different treatment for Federal income tax purposes. Pursuant to section 1400Z-2(e)(1)(B), the proposed regulations reiterate that a taxpayer may make the election to step-up basis in an investment in a QOF that was held for 10 years or more only if a proper deferral election under section 1400Z-2(a) was made for the investment.

Section 1400Z-2(c), as stated above, permits a taxpayer to elect to increase the basis in its investment in a QOF if the investment is held for at least ten years from the date of the original investment in the QOF. However, under section 1400Z-1(f), the designations of all qualified opportunity zones now in existence will expire on December 31, 2028. The loss of qualified opportunity zone designation raises numerous issues regarding gain deferral elections that are still in effect when the designation expires. Among the issues that the zone expiration date raises is whether, after the relevant qualified opportunity zone loses its designation, investors may still make basis step-up elections for QOF investments from 2019 and later.

Section 1400Z-2 does not contain specific statutory language like that in some other provisions, such as the DC enterprise zones provision in section 1400B(b)(5), that expressly permits a taxpayer to satisfy the requisite holding period after the termination of the designation of a zone. Commenters have raised the question described in the preceding paragraph—whether a taxpayer whose investment in a QOF has its 10-year anniversary after the 2028 calendar year will be able to take advantage of the basis step-up election provided in section 1400Z-2(c). The incentive provided by this benefit is integral to the primary purpose of the provision (see H.R. Rept. 115-466, 537, which describes the intent to attract an influx of capital to designated low income communities). For this reason, the proposed regulations permit taxpayers to make the basis step-up election under section 1400Z-2(c) after a qualified opportunity zone designation expires.

The ability to make this election is preserved under these proposed regulations until December 31, 2047, 201/2 years after the latest date that an eligible taxpayer may properly make an investment that is part of an election to defer gain under section 1400Z-2(a). Because the latest gain subject to deferral would be at the end of 2026, the last day of the 180-day period for that gain would be in late June 2027. A taxpayer deferring such a gain would achieve a 10-year holding period in a QOF investment only in late June 2037. Thus, this proposed rule would permit an investor in a QOF that makes an investment as late as the end of June 2027 to hold the investment in the QOF for the entire 10-year holding period described in section 1400Z-2(c), plus another 10 years.

The additional ten year period is provided to avoid situations in which, in order to enjoy the benefits provided by section 1400Z-2(c), a taxpayer would need to dispose of an investment in a QOF shortly after completion of the required 10-year holding period. There may be cases in which disposal shortly after the 10-year holding period would diverge from otherwise desirable business conduct, and, absent the additional time, some taxpayers may lose the statutory benefit.

The Treasury Department and the IRS request comments on this proposed fixed 201/2-year end date for the section 1400Z-2(c) basis step-up election. In particular, whether some other time period would better align with taxpayers' economic interests and the purposes of the statute. Comments may also include an alternative to incentivizing investors to disinvest shortly before any such a fixed end date for the section 1400Z-2(c) basis step-up election. For example, should the regulations provide for a presumed basis step-up election immediately before the ability to elect a step-up upon disposition expires? If such a basis step-up without disposition is allowed, how should a QOF investment be properly valued at the time of the step-up?

Section 1400Z-2(e)(4) allows the Secretary of the Treasury to prescribe regulations for the certification of QOFs for purposes of section 1400Z-2. In order to facilitate the certification process and minimize the information collection burden placed on taxpayers, the proposed regulations generally permit any taxpayer that is a corporation or partnership for tax purposes to self-certify as a QOF, provided that the entity self-certifying is statutorily eligible to do so. The proposed regulations permit the Commissioner to determine the time, form, and manner of the self-certification in IRS forms and instructions or in guidance published in the Internal Revenue Bulletin. It is expected that taxpayers will use Form 8996, Qualified Opportunity Fund, both for initial self-certification and for annual reporting of compliance with the 90-Percent Asset Test in section 1400Z-2(d)(1). It is expected that the Form 8996 would be attached to the taxpayer's Federal income tax return for the relevant tax years. The IRS expects to release this form contemporaneous with the release of these proposed regulations.

The proposed regulations allow a QOF both to identify the taxable year in which the entity becomes a QOF and to choose the first month in that year to be treated as a QOF. If an eligible entity fails to specify the first month it is a QOF, then the first month of its initial taxable year as a QOF is treated as the first month that the eligible entity is a QOF. A deferral election under section 1400Z-2(a) may only be made for investments in a QOF. Therefore, a proper deferral election under section 1400Z-2(a) may not be made for an otherwise qualifying investment that is made before an eligible entity is a QOF.

The proposed regulations provide guidance regarding application of the 90-Percent Asset Test in section 1400Z-2(d)(1) with respect to an entity's first year as a QOF, if the entity chooses to become a QOF beginning with a month other than the first month of its first taxable year. The phrase “first 6-month period of the taxable year of the fund” means the first 6-month period composed entirely of months which are within the taxable year and during which the entity is a QOF. For example, if a calendar-year entity that was created in February chooses April as its first month as a QOF, then the 90-Percent-Asset-Test testing dates for the QOF are the end of September and the end of December. Moreover, if the calendar-year QOF chooses a month after June as its first month as a QOF, then the only testing date for the taxable year is the last day of the QOF's taxable year. Regardless of when an entity becomes a QOF, the last day of the taxable year is a testing date.

The proposed regulations clarify that the penalty in section 1400Z-2(f)(1) does not apply before the first month in which the entity qualifies as a QOF. The Treasury Department and the IRS intend to publish additional proposed regulations that will address, among other issues, the applicability of the section 1400Z-2(f)(1) penalty and conduct that may lead to potential decertification of a QOF.

Section 1400Z-2(e)(4)(B) authorizes regulations to ensure that a QOF has “a reasonable period of time to reinvest the return of capital from investments in qualified opportunity zone stock and qualified opportunity zone partnership interests, and to reinvest proceeds received from the sale or disposition of qualified opportunity zone business property.” For example, if a QOF shortly before a testing date sells qualified opportunity zone property, that QOF should have a reasonable amount of time in which to bring itself into compliance with the 90-Percent Asset Test. Soon-to-be-released proposed regulations will provide guidance on these reinvestments by QOFs. Many stakeholders have requested guidance not only on the length of a “reasonable period of time to reinvest” but also on the Federal income tax treatment of any gains that the QOF reinvests during such a period. In the forthcoming notice of proposed rulemaking, the Treasury Department and the IRS will invite additional public comment on the scope of statutorily permissible policy alternatives. The Treasury Department and the IRS will carefully consider those comments in evaluating the widest range of statutorily permissible possibilities.

Commenters have inquired whether a pre-existing entity may qualify as a QOF or as the issuer of qualified opportunity zone stock or of a qualified opportunity zone partnership. For example, commenters have asked whether a pre-existing entity may self-certify as a QOF or whether, after 2017, a QOF may acquire an equity interest in a pre-existing operating partnership or corporation. The proposed regulations clarify that there is no prohibition to using a pre-existing entity as a QOF or as a subsidiary entity operating a qualified opportunity business, provided that the pre-existing entity satisfies the requirements under section 1400Z-2(d).

As previously discussed, section 1400Z-2(d)(1) requires that a QOF must undergo semi-annual tests to determine whether its assets consist on average of at least 90 percent qualified opportunity zone property. For purposes of these semi-annual tests, section 1400Z-2(d)(2) requires that a tangible asset can be qualified opportunity zone business property by an entity that has self-certified as a QOF or an operating subsidiary entity only if it acquired the asset after 2017 by purchase. The Treasury Department and the IRS request comments on whether there is a statutory basis for additional flexibilities that might facilitate qualification of a greater number of pre-existing entities across broad categories of industries.

For purposes of the calculation of the 90-Percent Asset Test in section 1400Z-2(d)(1) by the QOF, the proposed regulations require the QOF to use the asset values that are reported on the QOF's applicable financial statement for the taxable year, as defined in § 1.475(a)-4(h) of the Income Tax Regulations. If a QOF does not have an applicable financial statement, the proposed regulations require the QOF to use the cost of its assets. The Treasury Department and the IRS request comments on the suitability of both of these valuation methods, and whether another method, such as tax adjusted basis, would be better for purposes of assurance and administration.

Commenters have recommended that the Treasury Department and the IRS adopt a rule that provides that cash be an appropriate QOF property for purposes of the 90-Percent Asset Test, if the cash is held with the intent of investing in qualified opportunity zone property. Specifically, commenters indicated that, because developing a new business or the construction or rehabilitation of real estate may take longer than six months, QOFs should be given longer than the six months provided under section 1400Z-2(d)(1) to invest in qualifying assets.

In response to these comments, the proposed regulations provide a working capital safe harbor for QOF investments in qualified opportunity zone businesses that acquire, construct, or rehabilitate tangible business property, which includes both real property and other tangible property used in a business operating in an opportunity zone. The safe harbor allows qualified opportunity zone businesses to apply the definition of working capital provided in section 1397C(e)(1) to property held by the business for a period of up to 31 months, if there is a written plan that identifies the financial property as property held for the acquisition, construction, or substantial improvement of tangible property in the opportunity zone, there is written schedule consistent with the ordinary business operations of the business that the property will be used within 31-months, and the business substantially complies with the schedule. Taxpayers would be required to retain any written plan in their records.

This expansion of the term “working capital” reflects the fact that section 1400Z-2(d)(iii) anticipates situations in which a QOF or operating subsidiary may need up to 30 months after acquiring a tangible asset in which to improve the asset substantially. In seeking relief, some commenters based their requests on administrative practices that have developed under other sections of the Code that these commenters believe are analogous. The Treasury Department and the IRS request comments on the adequacy of the working-capital safe harbor and of ancillary safe harbors that protect a business during the working capital period, and on whether there is a statutory basis for any additional relief. Comments are also requested about the appropriateness of any further expansion of the “working capital” concept beyond the acquisition, construction, or rehabilitation of tangible business property to the development of business operations in the opportunity zone.

Under section 1400Z-2(d)(1), a QOF is any investment vehicle organized as a corporation or partnership for the purpose of investing in qualified opportunity zone property (other than another QOF). A QOF must hold at least 90 percent of its assets in qualified opportunity zone property. Compliance with the 90 Percent Asset Test is determined by the average of the percentage of the qualified opportunity zone property held in the QOF as measured on the last day of the first 6-month period of the taxable year of the QOF and on the last day of the taxable year of the QOF.

Under section 1400Z-2(d)(2)(A), the term qualified opportunity zone property includes qualified opportunity zone business property. Qualified opportunity zone property may also include certain equity interests in an operating subsidiary entity (either a corporation or a partnership) that qualifies as a qualified opportunity zone business by satisfying certain requirements pursuant to section 1400Z-2(d)(2)(B) and (C).

Consequently, if a QOF operates a trade or business directly and does not hold any equity in a qualified opportunity zone business, at least 90 percent of the QOF's assets must be qualified opportunity zone property.

The definition of qualified opportunity zone business property requires property to be used in a QOZ and also requires new capital to be employed in a QOZ. Under section 1400Z-2(d)(2)(D)(i), qualified opportunity zone business property means tangible property used in a trade or business of a QOF, but only if (1) the property was acquired by purchase after December 31, 2017; (2) the original use of the property in the QOZ commences with the QOF, or the QOF substantially improves the property; and (3) during substantially all of the QOF's holding period for the property, substantially all of the use of the property was in a QOZ.

Under section 1400Z-2(d)(2)(B)(i) and (C), to qualify as a qualified opportunity zone business, an entity must be a qualified opportunity zone business both (a) when the QOF acquires its equity interest in the entity and (b) during substantially all of the QOF's holding period for that interest. The manner of the QOF's acquisition of the equity interest must comply with certain additional requirements.

Under section 1400Z-2(d)(3)(A), for a trade or business to qualify as a qualified opportunity zone business, it must (among other requirements) be one in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property.

If an entity qualifies as a qualified opportunity zone business, the value of the QOF's entire interest in the entity counts toward the QOF's satisfaction of the 90 Percent Asset Test. Thus, if a QOF operates a trade or business (or multiple trades or businesses) through one or more entities, then the QOF can satisfy the 90 Percent Asset Test if each of the entities qualifies as a qualified opportunity zone business. The minimum amount of qualified opportunity zone business property owned or leased by a business for it to qualify as a qualified opportunity zone business is controlled by the meaning of the phrase substantially all in section 1400Z-2(d)(3)(A)(i).

In determining whether an entity is a qualified opportunity zone business, these proposed regulations propose a threshold to determine whether a trade or business satisfies the substantially all requirement in section 1400Z-2(d)(3)(A)(i).

If at least 70 percent of the tangible property owned or leased by a trade or business is qualified opportunity zone business property (as defined section 1400Z-2(d)(3)(A)(i)), the trade or business is treated as satisfying the substantially all requirement in section 1400Z-2(d)(3)(A)(i). The 70 percent threshold provided in these proposed regulations is intended to apply only to the term “substantially all” as it is used in section 1400Z-2(d)(3)(A)(i).

The phrase substantially all is also used in several other places in section 1400Z-2. That phrase appears in section 1400Z-2(d)(3)(A)(i), in which a qualified opportunity zone business is generally defined as a trade or business “in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property (determined by substituting ‘qualified opportunity zone business' for ‘qualified opportunity fund' each place it appears in section 1400Z-2(d)](2)(D)).” In addition, substantially all appears in section 1400Z-2(d)(2)(D)(i)(III), which establishes the conditions for qualifying as an opportunity zone business property “during substantially all of the qualified opportunity fund's holding period for such property, substantially all of the use of such property was in a qualified opportunity zone” and section 1400Z-2(d)(2)(B)(ii)(III).

Several requirements of section 1400Z-2(d) use substantially all multiple times in a row (that is, “substantially all of . . . substantially all of . . . substantially all of . . .”). This compounded use of substantially all must be interpreted in a manner that does not result in a fraction that is too small to implement the intent of Congress.

The Treasury Department and the IRS request comments regarding the proposed meaning of the phrase substantially all in section 1400Z-2(d)(3)(A)(i) as well as in the various other locations in section 1400Z-2(d) where that phrase is used.

The proposed regulations clarify that a QOF must be an entity classified as a corporation or partnership for Federal income tax purposes. In addition, it must be created or organized in one of the 50 States, the District of Columbia, or a U.S. possession. In addition, if an entity is organized in a U.S. possession but not in one of the 50 States or in the District of Columbia, then it may be a QOF only if it is organized for the purpose of investing in qualified opportunity zone property that relates to a trade or business operated in the possession in which the entity is organized.

The proposed regulations further clarify that qualified opportunity zone property may include stock or a partnership interest in an entity classified as a corporation or partnership for Federal income tax purposes. In addition, it must be a corporation or partnership created or organized in, or under the laws of, one of the 50 States, the District of Columbia, or a U.S. possession. Specifically, if an entity is organized in a U.S. possession but not in one of the 50 States or the District of Columbia, an equity interest in the entity may be qualified opportunity zone stock or a qualified opportunity zone partnership interest, as the case may be, only if the entity conducts a qualified opportunity zone business in the U.S. possession in which the entity is organized.

The proposed regulations further define a U.S. possession to mean any jurisdiction outside of the 50 States and the District of Columbia in which a designated qualified opportunity zone exists under section 1400Z-1. This definition may include the following U.S. territories: American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. A complete list of designated qualified opportunity zones is found in Notice 2018-48, 2018-28 I.R.B. 9.

If only a portion of a taxpayer's investment in a QOF is subject to the deferral election under section 1400Z-2(a), then section 1400Z-2(e) requires the investment to be treated as two separate investments, which receive different treatment for Federal income tax purposes. Pursuant to section 1400Z-2(e)(1)(B), the proposed regulations reiterate that a taxpayer may make the election to step-up basis in an investment in a QOF that was held for 10 years or more only if a proper deferral election under section 1400Z-2(a) was made for the investment.

Commenters have questioned whether section 752(a) could result in investments with mixed funds under section 1400Z-2(e)(1). Section 1400Z-2(e)(1) requires a taxpayer to treat as two separate investments the combination of an investment to which a section 1400Z-2(a) gain-deferral election applies and an investment of any amount to which such an election does not apply. As previously noted, these proposed regulations clarify that deemed contributions of money under section 752(a) do not constitute an investment in a QOF; therefore, such a deemed contribution does not result in the partner having a separate investment under section 1400Z-2(e)(1). Thus, a partner's increase in outside basis is not taken into account in determining what portion of the partner's interest is subject to the deferral election under section 1400Z-2(a) or what portion is not subject to the deferral election under section 1400Z-2(a). Comments are requested on whether other pass-through entities require similar treatment. Comments are also requested on whether there may be certain circumstances in which not treating the deemed contribution under section 752(a) as creating a separate investment for purposes of section 1400Z-2(e)(1) may be considered abusive or otherwise problematic.

These regulations generally are proposed to be effective on or after the date of publication in the Federal Register of a Treasury decision adopting these proposed rules as final regulations (final regulations publication date). However—

• An eligible taxpayer may rely on the rules of proposed § 1.1400Z2(a)-1 with respect to eligible gains that would be recognized before the final regulations' date of applicability, but only if the taxpayer applies the rules in their entirety and in a consistent manner.

• A taxpayer may rely on the rules in proposed § 1.1400Z2(c)-1 with respect to dispositions of investment interests in QOFs in situations where the investment was made in connection with an election under section 1400Z-2(a) that relates to the deferral of a gain such that the first day of 180-day period for the gain was before the final regulations' date of applicability. This reliance is dependent on the taxpayer's applying the rules of § 1.1400Z2(c)-1 in their entirety and in a consistent manner.

• A QOF may rely on the rules in proposed § 1.1400Z2(d)-1 with respect to taxable years that begin before the final regulations' date of applicability, but only if the QOF applies the rules in their entirety and in a consistent manner.

• A taxpayer may rely on the rules in proposed § 1.1400Z2(e)-1 with respect to investments and deemed contributions of money that occur before the final regulations' date of applicability, but only if the taxpayer applies the rules in their entirety and in a consistent manner.

Executive Orders 13771, 13563, and 12866 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility.

These proposed regulations have been designated by the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations. OIRA has determined that the proposed rulemaking is economically significant and subject to review under E.O. 12866 and section 1(c) of the Memorandum of Agreement. The Treasury Department and the IRS believe that significant investment will flow into qualified opportunity zones as a result of the TCJA legislation and proposed regulation. This investment is likely to be primarily from other areas of the United States. Accordingly, the proposed regulations have been reviewed by the Office of Management and Budget. In addition, the Treasury Department and the IRS expect the proposed regulation, when final, to be an Executive Order 13771 deregulatory action and request comment on this designation. Details on the costs of the proposed regulations can be found in this economic analysis.

Congress enacted section 1400Z-2, in conjunction with section 1400Z-1, as a temporary provision to encourage private sector investment in certain lower-income communities designated as qualified opportunity zones (see Senate Committee on Finance, Explanation of the Bill, at 313 (November 22, 2017)). Taxpayers may elect to defer the recognition of capital gain to the extent of amounts invested in a QOF, provided that the corresponding amounts are invested during the 180-day period beginning on the date such capital gain would have been recognized by the taxpayer. Inclusion of the deferred capital gain in income occurs on the date the investment in the QOF is sold or exchanged, or on December 31, 2026, whichever comes first. For investments in a QOF held longer than five years, taxpayers may exclude 10 percent of the deferred gain from inclusion in income, and for investment held longer than seven years, taxpayers may exclude a total of 15 percent of the deferred gain from inclusion in income. In addition, for investments held longer than 10 years, the post-acquisition gain on the qualifying investment in the QOF may also be excluded from income. In turn, a QOF must hold at least 90 percent of its assets in qualified opportunity zone property, as measured by the average percentage held at the last day of the first 6-month period of the taxable year of the fund and the last day of the taxable year. The statute requires a QOF that fails this 90 percent test to pay a penalty for each month it fails to maintain the 90-percent asset requirement.

The proposed regulations clarify several terms used in the statute, such as what type of gains are eligible for this preferential treatment, what type of taxpayers are eligible, the timing of transactions necessary for satisfying the requirements of the statute, including the time period for which the exclusion on gains for investments held longer than 10 years applies, and certain rules related to the creation and continued qualification of a fund as a QOF.

Taxpayers may be unwilling to make investments in QOFs without first having additional clarity on which investments in a QOF would qualify to receive the preferential tax treatment specified by the TCJA. This uncertainty could reduce the amount of investment flowing into lower-income communities designated as qualified opportunity zones below the congressionally intended effect. The lack of additional clarity could also lead to different taxpayers interpreting, and therefore applying, the same statute differently, which could distort the allocation of investment across the qualifying opportunity zones.

The Treasury Department and the IRS have assessed the benefits and costs of the proposed regulations relative to a no-action baseline reflecting anticipated Federal income tax-related behavior in the absence of these proposed regulations.

The Treasury Department and the IRS expect that the certainty and clarity provided by these proposed regulations, relative to the baseline, will enhance U.S. economic performance under the statute. Under the proposed regulations, taxpayers are provided clarity on the type and timing of transactions that would qualify for the beneficial tax treatment provided for investments in QOFs. As a primary benefit, the clarity provided by these proposed regulations would reduce planning costs for taxpayers and make it easier for taxpayers to make investment decisions that more precisely conform to the statutory requirements for QOFs. In addition, the reduction in uncertainty should encourage investment to flow into qualified opportunity zones, consistent with the intent of the TCJA.

The Treasury Department and the IRS considered various alternatives in the promulgation of the proposed regulations, with the major ones described in the following paragraphs. These alternatives included not issuing the proposed regulations under section 1400Z-2. This path was not chosen for several reasons. The TCJA provides both a reward in terms preferential tax treatment of deferred gains, but also a penalty if a QOF does not maintain compliance with the 90-percent asset test. Without the proposed regulations, some taxpayers may have foregone making promising investments within a qualifying opportunity zone out of concern that the investment may later be determined to not be a qualifying investment. As described in the following paragraphs, the proposed regulations help clarify several areas in which the statutory language was either ambiguous or not very specific. Overall, the clarity provided by the proposed regulations should reduce planning costs by taxpayers and enable taxpayers to make economically efficient decisions given the context of the whole Code.

The proposed regulations specify that only capital gains are eligible for deferral and potential exclusion under section 1400Z-2. As discussed in section I.A of the Explanation of Provisions, there is ambiguity that results from the variation between the operative statutory text and the section heading in the statute regarding what type of gains would be eligible for deferral. The Treasury Department and the IRS determined that Congress intended deferral only to be available to capital gains. This clarity provided in the proposed regulations would reduce uncertainty for taxpayers regarding what transactions would qualify for the preferential tax treatment and also reduce administrative and compliance costs.

The proposed regulations also clarify which taxpayers are eligible to defer the recognition of capital gain through investing in a QOF and describe how different types of taxpayers may satisfy the requirements for electing to defer capital gain consistent with the rules of section 1400Z-2 and the overall Code. In particular, the proposed regulations describe rules for how partnerships and partners in a partnership may invest in a QOF and elect to defer recognition of capital gains. Partnerships are expected to be a significant source of funds invested in QOFs. Without these proposed rules clarifying how partnerships and partners may satisfy the requirements for the preferential treatment of capital gains, partners may be less willing to invest in a QOF. The proposed regulations help provide a uniform signal to different types of taxpayers of the availability of this preferential treatment of capital gains and provide the mechanics of how these different taxpayers may satisfy the requirements imposed by the statute. Thus these different types of taxpayers may make decisions that are more economically efficient contingent on the overall Code.

Proposed § 1.1400Z2(c)-1 specifies that expiration of a zone designation would not impair the ability of a taxpayer to elect the exclusion from gains for investments held for at least 10 years, provided the disposition of the investment occurs prior to January 1, 2048. The Treasury Department and the IRS considered four alternatives regarding the interaction between the expiration of the designated zones and the election to exclude gain for investments held more than 10 years. A discussion of the economic costs and benefits of the four options follows.

The first alternative would be for the proposed regulations to remain silent on this issue. Section 1400Z-2(c) permits a taxpayer to increase the basis in the property held in a QOF longer than 10 years to be equal to the fair market value of that property on the date that the investment is sold or exchanged, thus excluding post-acquisition capital gain on the investment from tax. However, the statutory expiration of the designation of qualified opportunity zones on December 31, 2028, makes it unclear to what extent investments in a QOF made after 2018 would qualify for this exclusion.

Some taxpayers may believe that only investments in a QOF made prior to January 1, 2019, would be eligible for the exclusion from gain if held greater than 10 years. Such taxpayers may rush to complete transactions within 2018, while others may choose to hold off indefinitely from investing in a QOF until they received clarity on the availability of the 10-year exclusion from gain for investments made later than 2018. Other taxpayers may plan to invest in a QOF after 2018 with the expectation that future regulations would be provided or the statute would be amended to make it clear that dispositions of assets within a QOF after 2028 would be eligible for exclusion if held longer than 10 years. The ambiguity of the statute is likely to lead to uneven response by different taxpayers, dependent on the taxpayer's interpretation of the statute, which may lead to an inefficient allocation of investment across qualified opportunity zones.

The alternative adopted by the proposed regulations clarifies that as long as the investment in the QOF was made with funds subject to a proper deferral election under section 1400Z-2(a), which requires the investment to be made prior to June 29, 2027, then the 10-year gain exclusion election is allowed as long as the disposition of the investment occurs before January 1, 2048. This proposed rule would provide certainty to taxpayers regarding the timing of investments eligible for the 10-year gain exclusion. Taxpayers would have a more uniform understanding of what transactions would be eligible for the favorable treatment on capital gains. This would help taxpayers determine which investments provide a sufficient return to compensate for the extra costs and risks of investing in a QOF. This proposed rule would likely lead to an increase in investment within QOFs compared the proposed regulations remaining silent on this issue.

However, setting a fixed date for the disposition of eligible QOFs investments could introduce economic inefficiencies. Some taxpayers may dispose of their investment in a QOF by the deadline in the proposed regulation primarily in order to receive the benefit of the gain exclusion, but that selling date may not be optimal for the taxpayer in terms of the portfolio of assets that the taxpayer could have chosen to invest in were there no deadline. Setting a fixed deadline may also generate an overall decline in asset values in some qualified opportunity zones if many investors in QOFs seek to sell their portion of the fund within the same time period. This decline in asset values may affect the broader level of economic activity within some qualified opportunity zones or affect other investors in such zones that did not invest through a QOF. In anticipation of this fixed deadline, some taxpayers may choose to dispose of QOF assets earlier than the deadline to avoid an anticipated “rush to the exits,” but this would seem to conflict with the purpose of the incentives in the statute to encourage “patient” capital investment within qualified opportunity zones. While the proposed regulations may produce these inefficiencies, by providing a long time period for which taxpayers may dispose of their investment within a QOF and still qualify for the exclusion the proposed regulations will lead any such inefficiencies to be minor.

As an alternative, the proposed regulations could have provided no deadline for electing the 10-year gain exclusion for investments in a QOF, while still stating that the ability to make the election is not impaired solely because the designation of one or more qualified opportunity zones ceases to be in effect. While this alternative would eliminate the economic inefficiencies associated with a fixed deadline and would likely lead to greater investment in QOFs, it could introduce substantial additional administrative and compliance costs. Taxpayers would also need to maintain records and make efforts to maintain compliance with the rules of section 1400Z-2 on an indefinite basis.

Another alternative considered would allow taxpayers to elect to increase the basis in their investment in the QOF if held at least 10 years to the fair market value of the investment without disposing of the property, as long as the election was made prior to January 1, 2048. (Analogously, the proposed regulations could have provided that, at the close of business of the day on which a taxpayer first has the ability to make the 10-year gain exclusion election, the basis in the investment automatically sets to the greater of current basis or the fair market value of the investment.) This alternative would minimize the economic inefficiencies of the proposed regulations resulting from taxpayers needing to dispose of their investment in the opportunity zone at a fixed date not related to any factor other than the lapse of time. However, this approach would require a method of valuing assets that could raise administrative and compliance costs. It may also require the maintenance of records and trained compliance personnel for over two decades.

As discussed in section V.B of the Explanation of Provisions, the Treasury Department and the IRS have determined the ability to exclude gains for investment held at least 10 years in a QOF is integral to the TCJA's purpose of creating qualified opportunity zones. The proposed regulations provide a uniform signal to all taxpayers on the availability of this tax incentive, which should encourage greater investment, and a more efficient distribution of investment, in QOFs than in the absence of these proposed regulations. The relative costs and benefits of the various alternatives are difficult to measure and compare. The proposed regulations would likely produce the lowest compliance and administrative costs among the alternatives and any associated economic inefficiencies are likely to be small.

Section 1400Z-2 contains several rules limiting taxpayers from benefitting from the deferral and exclusion of capital gains from income offered by that section without also locating investment within a qualifying opportunity zone. The proposed regulations clarify the rules related to nonqualified financial property and what amounts can be held in cash and cash equivalents as working capital. The statute requires that a QOF must hold 90 percent of its assets in qualified opportunity zone property, such as owning stock or a partnership interest in a qualified opportunity zone business. A qualifying opportunity zone business is subject to the requirements of section 1397C(b)(8), that less than 5 percent of the aggregate adjusted basis of the entity is attributable to nonqualified financial property. The proposed regulations establish a working capital safe harbor consistent with section 1397C(e)(1), under which a qualified opportunity zone business may hold cash or cash equivalents for a period not longer than 31 months and not violate section 1397C(b)(8).

The Treasury Department and the IRS expect that the establishment of safe harbors under these parameters will provide net economic benefits. Without specification of the working capital safe harbor, some taxpayers would not invest in a QOF for fear that the QOF would not be able to deploy the funds soon enough to satisfy the 90-percent asset test. Thus, this part of the proposed regulations would generally encourage investment in QOFs by providing greater specificity to how an entity may consistently satisfy the statutory requirements for maintaining a QOF without penalty. In addition, this part of the proposed regulations minimizes the distortion that may arise between purchasing existing property and sufficiently rehabilitating that property versus constructing new property, as the time frame specified under the statute and proposed regulations are similar (30 months after acquisition for rehabilitating existing property versus 31 months for acquiring and rehabilitating existing property or for constructing new property).

A longer or a shorter period could have been chosen for the working capital safe harbor. A shorter time period would minimize the ability of taxpayers to use the investment in a QOF as a way to lower taxes without actually investing in tangible assets within a qualified opportunity zone, but taxpayers may also forego legitimate investments within an opportunity zone out of concern of not being able to deploy the working capital fast enough to meet the requirements. A longer period would have the opposite effects. Taxpayers could potentially invest in a QOF and receive the benefits of the tax incentive for multiple years before the money is invested into a qualified opportunity zone.

The proposed regulations specify that if at least 70 percent of the tangible property owned or leased by a trade or business is qualified opportunity zone business property, then the trade or business is treated as satisfying the substantially all requirement of section 1400Z-2(d)(3)(A)(i). This clarity would provide taxpayers greater certainty when evaluating potential investment opportunities as to whether the potential investment would satisfy the statutory requirements.

However, the 70 percent requirement for a trade or business will give QOFs an incentive to invest in a qualified opportunity zone business rather than owning qualified opportunity zone business property directly. For example, consider a QOF with $10 million in assets that plans to invest 100 percent of its assets in real property. If it held the real property directly, then at least $9 million (90 percent) of the property must be located within an opportunity zone to satisfy the 90 percent asset test for the QOF. If instead, it invests in a subsidiary that then holds real property, then only $7 million (70 percent) of the property must be located within an opportunity zone. In addition, if the QOF only invested $9 million into the subsidiary, which then held 70 percent of its property within an opportunity zone, the investors in the QOF could receive the statutory tax benefits while investing only $6.3 million (63 percent) of its assets within a qualified opportunity zone.

The Treasury Department and the IRS also considered setting this “substantially all” threshold at 90 percent. This would reduce, but not eliminate, the incentive the QOF has to invest in a qualified opportunity zone business rather than directly owning qualified opportunity zone business property compared to the 70 percent threshold. Please see earlier discussion and request for comment regarding this definition for additional detail.

The Treasury Department and the IRS anticipate decreased taxpayer compliance costs resulting from the proposed regulations due to the greater taxpayer certainty regarding how to comply with the requirements set forth in the statute. The Treasury Department also anticipates decreased administrative and enforcement costs for the IRS.

The collection of information in these proposed regulations with respect to QOFs is in proposed § 1.1400Z2(d)-1. The collection of information in proposed § 1.1400Z2(d)-1 is satisfied by submitting a new reporting form, Form 8996, Qualified Opportunity Fund, with an income tax return. For purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) (PRA), the reporting burden associated with proposed § 1.1400Z2(d)-1 will be reflected in the Paperwork Reduction Act submission associated with new Form 8996 (OMB control number 1545-0123). Notice of the availability of the draft Form 8996 and request for comment will be available at IRS.gov/DraftForms. In addition, the Treasury Department and the IRS request comments on any aspect of this collection in this proposed rulemaking.

The collection of information in proposed § 1.1400Z2(d)-1 requires each QOF, be it a corporation or partnership, to file a Form 8996 to certify that it is organized to invest in qualified opportunity zone property. In addition, a QOF files Form 8996 annually to certify that the qualified opportunity fund meets the investment standards of section 1400Z-2 or to figure the penalty if it fails to meet the investment standards.

Under the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6), it is hereby certified that these proposed regulations, if adopted, would not have a significant economic impact on a substantial number of small entities that are directly affected by the proposed regulations. Therefore, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Although there is a lack of available data regarding the extent to which small entities invest in QOFs, this certification is based on the belief of the Treasury Department and the IRS that these funds will generally involve investments made by larger entities and investments are entirely voluntary. The Treasury Department and the IRS specifically solicit comment from any party, particularly affected small entities, on the accuracy of this certification.

Pursuant to section 7805(f), this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2018, that threshold is approximately $150 million. This rule does not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.

IRS Revenue Procedures, Revenue Rulings, and Notices cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at http://www.irs.gov.

Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic and written comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at http://www.regulations.gov or upon request.

The principal author of these proposed regulations is Erika C. Reigle, Office of Associate Chief Counsel (Income Tax & Accounting). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

The Right to Financial Privacy Act of 1978, Public Law. No. 95-630, was enacted to provide the financial records of financial institution customers a reasonable amount of privacy from federal government scrutiny. The Act, which became effective in March 1979, establishes specific procedures that government authorities must follow when requesting a customer's financial records from a bank or other financial institution. It also imposes duties and limitations on financial institutions prior to the release of information sought by government agencies. In addition, the act generally requires that customers receive:

Certain exceptions allow for delayed notice or no customer notice at all. Prior to passage of the Act, bank customers were not informed that their personal financial records were being turned over to a government authority and could not challenge government access to the records. In United States v. Miller (425 U.S. 435 (1976)), the Supreme Court held that because financial records are maintained by a financial institution, the records belong to the institution rather than the customer; therefore, the customer has no protectable legal interest in the bank's records and cannot limit government access to those records. It was principally in response to this decision that the Right to Financial Privacy Act was enacted.

Coverage under the Act specifically extends to customers of financial institutions. A customer is defined as any person or authorized representative of that person who uses or has used any service of a financial institution. The definition also includes any person for whom the financial institution acts as a fiduciary. Corporations and partnerships of six or more individuals are not considered customers for purposes of the Act.

To obtain access to, copies of, or information contained in a customer's financial records, a government authority, generally, must first obtain one of the following:

A financial institution may not release a customer's financial records until the government authority seeking the records certifies in writing that it has complied with the applicable provision of the Act. In addition, the institution must maintain a record of all instances in which a customer's records are disclosed to a government authority pursuant to customer authorization. The records should include the date, the name of the government authority, and an identification of the records disclosed. Generally, the customer has a right to inspect the records. Although there are no specific record-retention requirements in the act, financial institutions should retain copies of all administrative and judicial subpoenas, search warrants, and formal written requests given to them by federal government agencies or departments along with the written certification required. A financial institution must begin assembling the required information upon receipt of the agency's summons or subpoena or a judicial subpoena and must be prepared to deliver the records upon receipt of the written certificate of compliance.

With certain exceptions, government entities must reimburse financial institutions for the cost of providing the information. This reimbursement may include costs for assembling or providing records, reproduction and transportation costs, or any other costs reasonably necessary or incurred in gathering and delivering the requested information. The Federal Reserve Board's Regulation S establishes rates and the conditions under which these payments may be made https://www.thefederalregister.org/fdsys/pkg/FR-2009-09-30/pdf/E9-23407.pdf.

In general, exceptions to the notice and certification requirements cover situations pertinent to routine banking business, information requested by supervisory agencies, and requests subject to other statutory requirements. Specific exceptions include records:

In certain cases, the Act does not require the customer to be notified of the request but still requires the federal agency requesting the information to certify in writing that it has complied with all applicable provisions of the act. Exceptions to the notice provisions include:

Although the Securities and Exchange Commission is covered by the Act, it can obtain customer records from an institution without prior notice to the customer by obtaining an order from a U.S. district court. The agency must, however, provide the certificate of compliance to the institution along with the court order prohibiting disclosure of the fact that the documents have been obtained. The court order will set a delay-of-notification date, after which the customer will be notified by the institution that the SEC has obtained his or her records.

Under certain circumstances, a government entity may request a court order delaying the customer notice for up to ninety days. This delay may be granted if the court finds that earlier notice would result in endangering the life or physical safety of any person, flight from prosecution, destruction of or tampering with evidence, or intimidation of potential witnesses or would otherwise seriously jeopardize or unduly delay an investigation, trial, or official proceeding. Delayed notice of up to ninety days is also allowed for search warrants.

A customer may collect civil penalties from any government agency or department that obtains, or any financial institution or employee of the institution who discloses, information in violation of the act. These penalties include:

DoD's current rule was last updated on May 4, 2006 (71 FR 26221). DoD's proposed revisions seek to only include content relating to those instances when the Department submits “formal written requests” to financial institutions for customer records, as described by 12 U.S.C. 3408. The final rule will apply DoD-wide to provide consistent implementation across all components. When the final rule is published one component-level rule at 32 CFR part 504 will be rescinded.

The primary benefit to a DoD-wide rule is consistent implementation across the DoD's responsibilities under the Act. The Act requires DoD to reimburse a financial institution for such costs as are reasonably necessary and which have been directly incurred based on the rates of reimbursement established by the Federal Reserve Board in 12 CFR part 219.3. The average cost of reimbursement from DoD to financial institutions over the past five years is $4,328 and the Department does not anticipate an increase with the finalization of this rule. DoD has not paid any civil penalties associated with this rule as discussed in the Civil Liability section of the rule. DoD welcomes comments on the costs associated with implementation of the Act.

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

This proposed rule is not expected to be subject to the requirements of E.O. 13771 (82 CFR 9339, February 3, 2017) because this proposed rule is expected to result in no more than de minimis costs.

This proposed rule is not subject to the Unfunded Mandates Reform Act because it does not contain a federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100M or more in any one year.

It has been certified that 32 CFR part 275 is not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it does not have a significant economic impact on a substantial number of small entities.

It has been certified that 32 CFR part 275 does not impose reporting or recordkeeping requirements under the Paperwork Reduction Act of 1995.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has federalism implications. This proposed rule will not have a substantial effect on state and local governments, or otherwise have federalism implications.

Accordingly, 32 CFR part 275 is proposed to be revised to read as follows:

The Environmental Protection Agency (EPA) proposes to approve revisions to the New Jersey State Implementation Plan (SIP) for attainment and maintenance of the 8-hour ozone National Ambient Air Quality Standards (NAAQS) for the following major volatile organic compound (VOC) facilities: Paulsboro Refining, Buckeye Port Reading Terminal, Buckeye Pennsauken Terminal, and Phillips 66 Company's Linden facility. Specifically, under New Jersey Administrative Code (NJAC), Title 7, Chapter 27, Subchapter 16 (“Control and Prohibition of Air Pollution by Volatile Organic Compound”), Section 2 (“VOC Stationary Storage Tanks”), all external floating roof tanks (EFRTs) in Range III with vapor pressure three (3) or more pounds per square inch absolute (psia) and that were in existence on May 18, 2009 must be equipped with a domed roof the first time the tank is degassed after May 19, 2009, and by no later than May 1, 2020. See NJAC 7:27-16.2(l)(4). In addition, NJAC 7:27-16.17(a-q) establishes procedures and standards for alternative and facility-specific VOC control requirements. The four relevant facilities were in existence on May 18, 2009, and so absent the currently proposed SIP revisions would be required to dome all EFRTs in accordance with NJAC 7:27-16.2(l)(4), which has already been approved by the EPA into the New Jersey SIP. See 75 FR 45483 (August 3, 2010). However, the New Jersey Department of Environmental Protection (NJDEP) reviewed and approved for these facilities alternative VOC control plans and respective Reasonably Available Control Technology (RACT), i.e., analysis of the lowest economically feasible emission limitation, for their EFRTs.

Following NJDEP's review and approval, the EPA reviewed the four facilities' alternative VOC control plans and RACT analyses that include (1) installing domes on 25 out of the 51 EFRTs, and leaving the remaining 26 EFRTs without domes based on the facilities' RACT cost analysis despite the NJAC 7:27-16.2(l)(4) requirements, and (2) installing eight domes after the regulatory due date.

In its SIP revision submittals from all four facilities, NJDEP also identified alternative, non-doming emission reduction strategies for VOC and nitrogen oxides (NOX) beyond what would be achieved by doming the 26 EFRTs that would not receive domes under this SIP revision. However, NJDEP did not request that the EPA approve these additional non-doming measures into the New Jersey SIP revision, and therefore the EPA did not evaluate them for approvability. A full summary of doming and non-doming measures is included in the technical support document (TSD) that is contained in the EPA's docket assigned to this Federal Register notice.

In 1997, the EPA revised the health-based NAAQS for 8-hour ozone, setting it at 0.084 parts per million (ppm) averaged over an 8-hour time frame. See 62 FR 38856 (July 18, 1997). The EPA revised the 8-hour ozone standard twice since 1997; in March 2008, the EPA revised the standard to 0.075 ppm, and in October 2015 the EPA revised it to 0.070 ppm while retaining the 2008 ozone indicators. See 73 FR 16436 (March 27, 2008); 80 FR 65292 (October 26, 2015). After the EPA establishes a new or revised NAAQS, the Clean Air Act directs the EPA and the states to take steps to ensure that the new or revised NAAQS are met. One of the first steps, known as the initial area designations, involves identifying areas of the country that are not meeting the new or revised NAAQS, as well as the nearby areas that contain emissions sources that contribute emissions to the areas not meeting the NAAQS.

The entire State of New Jersey has been designated as nonattainment since the adoption of the 1997 8-hour ozone NAAQS and is divided into two nonattainment areas. The two nonattainment areas in New Jersey are Philadelphia-Wilmington-Atlantic City (PA-NJ-MD-DE) and New York-Northern New Jersey-Long Island (NY-NJ-CT). These areas are designated as marginal nonattainment and as moderate nonattainment, respectively, for the newest 0.070 ppm 8-hour ozone NAAQS.1 As such, New Jersey has developed ozone SIPs to attain the standards and will consider source-specific SIPs as necessary. A source-specific SIP is submitted by a facility to request approval for source-specific emission limitations, and if approved by the state and the EPA, is incorporated into the state's ozone SIP.

RACT is defined as the lowest emission limit that a source is capable of meeting by the application of control technology that is reasonably available considering technological and economic feasibility. Clean Air Act (CAA) sections 172(c)(1), 182(b)(2) and 182(f) require nonattainment areas that are designated as moderate or above to adopt RACT. The entire State of New Jersey is subject to this requirement (1) due to nonattainment area designations for the 8-hour ozone standards (40 CFR 81.331), and (2) because the State of New Jersey is located within the Ozone Transport Region (OTR), a region in which the Clean Air Act requires that state SIPs implement RACT requirements. See CAA § 184(b)(1)(B).

In November 2005, the EPA published the final rule that discusses the RACT requirements for the 1997 8-hour ozone standard, and outlined the SIP requirements and deadlines for various areas designated as moderate nonattainment. See 70 FR 71612 (November 29, 2005) (the “Phase 2 Rule”).

On August 1, 2007, the NJDEP finalized RACT revisions to its SIP to address the 8-hour ozone NAAQS, and the EPA approved those revisions on May 15, 2009. See “RACT for the Eight-Hour Ozone NAAQS and other Associated SIP Revisions for the Fine Particulate Matter, Regional Haze, and Transport of Air Pollution,” available at http://www.nj.gov/dep/baqp/sip/8-hrRACT-Final.pdf; “Approval and Promulgation of Implementation Plans; New Jersey Reasonable Further Progress Plans, Reasonably Available Control Technology, Reasonably Available Control Measures and Conformity Budgets; Final Rule”, 74 FR 22837. The NJDEP believes that significantly higher costs are warranted and should be considered reasonable with respect to available technology than were discussed in the Phase 2 Rule. Although no dollar amount is suggested, the NJDEP identifies five considerations it plans to apply to sources when determining RACT:

(1) Past New Jersey costs for retrofitting a given control;

(2) Average RACT cost (dollars per tons reduced) for a control technology and maximum RACT cost. Once a reasonable number of sources in a source category achieve a lower emission level, other sources should do the same;

(3) The seriousness of the Region's ozone air quality exceedance. For nonattainment areas with higher ozone levels, higher costs for controls are reasonable;

(4) The seriousness of the need to reduce transported air pollution. As an OTR state, higher costs for RACT are justified; and

(5) The NJDEP plan for addressing economic feasibility in RACT rules.

The NJDEP's intent is to specify RACT at the lowest emission limit that a reasonable number of similar facilities have already successfully implemented for each source category.

New Jersey regulations at NJAC 7:27-16.2(l)(4), already approved into the ozone SIP, set forth requirements to dome existing EFRTs in Range III on or before May 1, 2020. See 75 FR 45483 (August 3, 2010). The four facilities' source-specific SIP revisions are before the EPA for approval because they would allow 26 EFRTs to avoid doming and would extend the deadline for installing eight domes. The NJDEP submittal relies on documents submitted by the four facilities to New Jersey reviewing the cost, feasibility, and projected emissions reductions of doming tanks similar in diameter when deciding which tanks are optimal for doming. Some of the facilities' tanks are smaller in dimension and contain organic liquids of lower VOC concentrations, and thus doming these tanks would result in spending comparatively much more for a substantially smaller reduction in VOC emissions.

The EPA has determined that the doming analyses identified in the source-specific SIP revisions are consistent with the NJDEP's VOC RACT regulation, which is incorporated into the NJ SIP. The reader is referred to the TSD for a detailed discussion of the EPA's evaluation of the source-specific SIP submittal. Below is a summary:

On December 10, 2015, the NJDEP submitted to the EPA proposed revisions to the New Jersey SIP for ozone specifically providing an alternative VOC control plan for the Paulsboro Refining facility located at 800 Billingsport Road, Paulsboro, New Jersey. Paulsboro Refining owns and operates 21 EFRTs in Range III with vapor pressure three (3) or more psia. According to the facility's RACT analysis, doming the total inventory of 21 EFRT is estimated to cost between $19,000 and $149,000 per ton of VOC emissions reduced. The cost per ton to dome all 21 EFRTs exceeds what the state defines as economically feasible for RACT.

The EPA is proposing to approve a source-specific SIP revision allowing the facility not to dome eleven of its 21 EFRTs that are in Range III, and to allow the facility to complete doming of five EFRTs beyond the regulatory deadline of May 1, 2020. Paulsboro Refining has already installed three domes (Tanks 724, 1319, and 1115), and will install two additional domes (Tanks 2173 and 1064 2 ) by the regulatory deadline. The facility is scheduled to install five more domes by 2028 according to the following schedule:

• Tank 1063 by Dec. 31, 2021

• Tank 1116 by Dec. 31, 2023

• Tank 1320 by Dec. 31, 2025

• Tank 1065 by Dec. 31, 2026

• Tank 1066 by Dec. 31, 2028

In total, under the proposed source-specific SIP revision, the facility will dome ten out of 21 EFRTs in Range III, including Tanks 724, 1319, 1115, 2173, 1064, 1063, 1116, 1320, 1065 and 1066. The eleven EFRTs not to be domed are Tanks 725, S02, 1023, 1027, 2869, 2940, 2941, 3174, SSO, SSI, and SS2.

On August 15, 2014, the NJDEP submitted to the EPA proposed revisions to the New Jersey SIP for ozone specifically providing an alternative VOC control plan for both the Buckeye Port Reading Terminal and Pennsauken Terminal, located at 750 Cliff Road, Woodbridge, New Jersey and 123 Derousse Avenue, Pennsauken, New Jersey respectively. Buckeye owns and operates eight EFRTs in Range III with vapor pressure three (3) or more psia at its Port Reading Terminal that are part of this proposed SIP revision,3 and one such EFRT at its Pennsauken Terminal. According to company's Port Reading RACT analysis, doming the facility's total inventory of eight EFRTs is estimated at $60,000 per ton of VOC emissions reduced, which exceeds what the state defines as economically feasible for RACT. The company's Pennsauken RACT analysis likewise estimated the cost of doming its single EFRT at $60,000 per ton of VOC emissions reduced.

The EPA is proposing to approve a source-specific SIP revision allowing the Port Reading facility not to dome four EFRTs that are in Range III and to complete doming of two EFRTs beyond the regulatory deadline of May 1, 2020.4 Of the eight relevant Port Reading EFRTs, Buckeye has already domed one EFRT (Tank 7935) and will install one additional dome (Tank 1222) by the regulatory deadline. Under this SIP revision, the Buckeye facilities are scheduled to install domes on the following EFRTs in Range III by 2028 according to the following schedule:

• Tank 1219 by March 8, 2027

• Tank 1178 by Sept. 25, 2028

In addition, the EPA is proposing to approve a source-specific SIP revision allowing the Pennsauken facility not to dome its single relevant EFRT (Tank 2018).

In total, the two facilities will dome four out of nine EFRTs in Range III, including Tanks 7935, 1222, 1219, and 1178. The 5 EFRTs not to be domed are Tanks 7930, 7934, 7937, 7945, and 2018.

On June 15, 2016, the NJDEP submitted to the EPA proposed revisions to the New Jersey SIP for ozone specifically providing an alternative VOC control plan for the Phillips 66 Company facility located at 1400 Park Avenue, Linden, New Jersey (the Linden facility). At the Linden facility, Phillips 66 Company owns and operates 21 EFRTs in Range III with vapor pressure three (3) or more psia. According to the facility's RACT analysis, doming the total inventory of 21 EFRTs is estimated to cost between $29,000 and $440,000 per ton of VOC emissions reduced, which exceeds what the state defines as economically feasible for RACT.

The EPA is proposing to approve a source-specific SIP revision allowing the Linden facility not to dome ten EFRTs that are in Range III and to complete doming of one EFRT beyond the regulatory deadline of May 1, 2020. The Linden facility has already installed domes on two EFRTs (Tanks T233 and T239); three additional EFRTs are currently out of service and ready for doming (Tanks T243, T351, and T250) and the facility will install five additional domes (Tanks T241, T352, T235, T249, and T353) by the regulatory deadline. The Linden facility is scheduled to install a dome on one additional tank (Tank T234) by December 31, 2024, beyond the regulatory due date.

In total, the facility will dome a total of eleven out of 21 EFRTs in Range III, including Tanks T233, T239, T243, T351, T250, T241, T352, T235, T249, T353 and T234. The 10 EFRTs not to be domed are Tanks T52, TI05, TI19, TI43, T224, T349, T350, T354, T355, and T356.

The NJDEP determined that the four facilities discussed above could avoid doming 26 EFRTs because it was not economically feasible to dome the four facilities' total inventory of 51 EFRTs. Specifically, the EPA proposes to approve the NJDEP SIP revisions for 8-hour ozone to allow the Paulsboro facility not to dome eleven EFRTs; the Buckeye facilities not to dome five EFRTs; and the Phillips 66 Company facility not to dome ten EFRTs. The EPA is also proposing to approve a deadline extension for doming nine EFRTs, as previously discussed. This SIP revision would still require the facilities to dome 25 EFRTs (and convert one EFRT to an internal floating roof tank).

Additional non-doming measures will be implemented to make up the foregone VOC emission reductions that would have occurred in doming the full inventory of EFRTs. However, the NJDEP did not request that the EPA approve the additional non-doming measures into the New Jersey SIP, therefore the EPA did not evaluate them for approvability and proposes no action on these measures today.

In this rule, we are proposing to include in a final rule regulatory text that includes incorporation by reference. In accordance with the requirements of 1 CFR 51.5, we are proposing to incorporate by reference the provisions described above in Section III (Proposed Action).

The EPA has made, and will continue to make, these documents generally available electronically through http://www.regulations.gov and in hard copy at the appropriate EPA office (see the ADDRESSES section of this preamble for more information).

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely proposes to approve state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.);

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, this rule does not have tribal implications as specified by Executive Order 13175, because the SIP is not approved to apply in Indian country located in the state, and the EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law. Thus, Executive Order 13175 does not apply to this action.

Each commenter will have 5 minutes to provide oral testimony. The EPA encourages commenters to provide the EPA with a copy of their oral testimony electronically (via email) or in hard copy form.

The EPA may ask clarifying questions during the oral presentations, but will not respond to the presentations at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as oral comments and supporting information presented at the public hearing. Commenters should notify Virginia Hunt if there are special needs related to providing comments at the hearings. Verbatim transcripts of the hearings and written statements will be included in the docket for the rulemaking.

Please note that any updates made to any aspect of the hearing will be posted online at https://www.epa.gov/controlling-air-pollution-oil-and-natural-gas-industry/forms/public-hearing-proposed-improvements. While the EPA expects the hearing to go forward as set forth above, please monitor our website or contact Virginia Hunt at (919) 541-0832 or [email protected] to determine if there are any updates. The EPA does not intend to publish a document in the Federal Register announcing updates.

The EPA will not provide audiovisual equipment for presentations. Any media presentations should be submitted to the public docket at https://www.regulations.gov/, identified by Docket ID No. EPA-HQ-OAR-2017-0483. The EPA must receive comments on the proposed action (83 FR 52056) no later than December 17, 2018.

If you require the service of a translator or special accommodations such as audio description, please pre-register for the hearing and describe your needs by November 6, 2018. We may not be able to arrange accommodations without advanced notice.

A. Why are revisions to state programs necessary?

States that have received final authorization from EPA under RCRA section 3006(b), 42 U.S.C. 6926(b), must maintain a hazardous waste program that is equivalent to, consistent with, and no less stringent than the federal program. As the federal program changes, states must change their programs and ask EPA to authorize the changes. Changes to state programs may be necessary when federal or state statutory or regulatory authority is modified or when certain other changes occur. Most commonly, states must change their programs because of changes to EPA's regulations in 40 Code of Federal Regulations (CFR) parts 124, 260 through 268, 270, 273, and 279.

New federal requirements and prohibitions imposed by federal regulations that EPA promulgates pursuant to the Hazardous and Solid Waste Amendments of 1984 (HSWA) take effect in authorized states at the same time that they take effect in unauthorized states. Thus, EPA will implement those requirements and prohibitions in the states, including the issuance of new permits implementing those requirements, until the states are granted authorization to do so.

Mississippi submitted program revision applications, dated September 10, 2014 and June 1, 2018, seeking authorization of changes to its hazardous waste program that correspond to certain federal rules promulgated between July 1, 2004 and June 30, 2014 (including RCRA Clusters 1 XV through XXIII). EPA concludes that Mississippi's applications to revise its authorized program meet all of the statutory and regulatory requirements established by RCRA, as set forth in RCRA section 3006(b), 42 U.S.C. 6926(b), and 40 CFR part 271. Therefore, EPA proposes to grant Mississippi final authorization to operate its hazardous waste program with the changes described in its authorization applications, and as outlined below in Section F of this document.

Mississippi has responsibility for permitting treatment, storage, and disposal facilities within its borders (except in Indian country) and for carrying out the aspects of the RCRA program described in its revised program applications, subject to the limitations of HSWA, as discussed above.

If Mississippi is authorized for the changes described in Mississippi's authorization applications, these changes will become part of the authorized State hazardous waste program, and therefore will be federally enforceable. Mississippi will continue to have primary enforcement authority and responsibility for its State hazardous waste program. EPA would retain its authorities under RCRA sections 3007, 3008, 3013, and 7003, including its authority to:

• Conduct inspections, and require monitoring, tests, analyses or reports;

• Enforce RCRA requirements, including authorized State program requirements, and suspend or revoke permits; and

• Take enforcement actions regardless of whether the State has taken its own actions.

This action will not impose additional requirements on the regulated community because the regulations for which EPA is proposing to authorize Mississippi are already effective, and are not changed by today's proposed action.

EPA will evaluate any comments received on this proposed action and will make a final decision on approval or disapproval of Mississippi's proposed authorization. Our decision will be published in the Federal Register. You may not have another opportunity to comment. If you want to comment on this authorization, you must do so at this time.

Mississippi initially received final authorization on June 13, 1984, effective June 27, 1984 (49 FR 24377), to implement the RCRA hazardous waste management program. EPA granted authorization for changes to Mississippi's program on August 17, 1988, effective October 17, 1988 (53 FR 31000); August 10, 1990, effective October 9, 1990 (55 FR 32624); March 29, 1991, effective May 28, 1991 (56 FR 13079); June 26, 1991, effective August 27, 1991 (56 FR 29589); May 11, 1992, effective July 10, 1992 (57 FR 20056); April 8, 1993, effective June 7, 1993 (58 FR 18162); October 20, 1993, effective December 20, 1993 (58 FR 54044); March 18, 1994, effective May 17, 1994 (59 FR 12857); June 1, 1995, effective July 31, 1995 (60 FR 28539); August 30, 1995, effective October 30, 1995 (60 FR 5718); February 23, 2005, effective April 25, 2005 (70 FR 8731); and August 4, 2008, effective October 3, 2008 (73 FR 45170).

Mississippi submitted program revision applications, dated September 10, 2014 and June 1, 2018, seeking authorization of changes to its hazardous waste management program in accordance with 40 CFR 271.21. The September 10, 2014 application included changes associated with Checklists 2 206.1, 207.1, 208-215, 217-218, 220, 222-223, and 225-228. All of these Checklists were resubmitted with Mississippi's June 1, 2018 application in response to prior EPA comments. The June 1, 2018 application also included changes associated with Checklists 229-232, as well as the non-checklist technical correction published at 72 FR 35666 (June 29, 2007). EPA proposes to determine, subject to receipt of written comments that oppose this action, that Mississippi's hazardous waste program revisions are equivalent to, consistent with, and no less stringent than the federal program, and therefore satisfy all of the requirements necessary to qualify for final authorization. Therefore, EPA is proposing to authorize Mississippi for the following program changes:

When revised state rules differ from the federal rules in the RCRA state authorization process, EPA determines whether the state rules are equivalent to, more stringent than, or broader in scope than the federal program. Pursuant to Section 3009 of RCRA, 42 U.S.C. 6929, state programs may contain requirements that are more stringent than the federal regulations. Such more stringent requirements can be federally authorized and, once authorized, become federally enforceable. Although the statute does not prevent states from adopting regulations that are broader in scope than the federal program, such regulations cannot be authorized and are not federally enforceable. In its review of the Mississippi regulations submitted as part of the program revision applications that are the subject of this proposed rule, EPA did not find any State regulations to be more stringent or broader in scope than the federal program.

EPA cannot delegate certain federal requirements associated with the manifest registry system in the Uniform Hazardous Waste Manifest Rule (Checklist 207) or the operation of the electronic manifest system in the Hazardous Waste Electronic Manifest Rule (Checklist 231). Mississippi has adopted these requirements and appropriately preserved EPA's authority to implement them (see 11 Miss. Admin. Code Pt. 3, Ch. 1, Rules 1.1, 1.3, 1.5, 1.7, and 1.11).

EPA also cannot delegate the federal requirements associated with international shipments (i.e., import and export provisions) associated with the Cathode Ray Tubes Rule (Checklists 215 and 232) and the OECD Requirements for Export Shipments of Spent Lead-Acid Batteries (Checklist 222). Mississippi has adopted these requirements and appropriately preserved EPA's authority to implement them (see 11 Miss. Admin. Code Pt. 3, Ch. 1, Rules 1.1, 1.2, and 1.3).

Mississippi will issue permits for all the provisions for which it is authorized and will administer the permits it issues. EPA will continue to administer any RCRA hazardous waste permits or portions of permits which EPA issued prior to the effective date of authorization until they expire or are terminated. EPA will not issue any new permits or new portions of permits for the provisions listed in the Table above after the effective date of the final authorization. EPA will continue to implement and issue permits for HSWA requirements for which Mississippi is not yet authorized.

Mississippi is not authorized to carry out its hazardous waste program in Indian country within the State, which includes the Mississippi Band of Choctaw Indians. Therefore, this proposed action has no effect on Indian Country. EPA will continue to implement and administer the RCRA program on these lands.

Codification is the process of placing the state's statutes and regulations that comprise the state's authorized hazardous waste program into the Code of Federal Regulations. EPA does this by referencing the authorized state rules in 40 CFR part 272. EPA is not proposing to codify the authorization of Mississippi's changes at this time. However, EPA reserves the amendment of 40 CFR part 272, subpart Z, for the authorization of Mississippi's program changes at a later date.

The Office of Management and Budget (OMB) has exempted this action from the requirements of Executive Order 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011). This action proposes to authorize State requirements for the purpose of RCRA section 3006 and imposes no additional requirements beyond those imposed by State law. Therefore, this action is not subject to review by OMB. This action is not an Executive Order 13771 (82 FR 9339, February 3, 2017) regulatory action because actions such as today's proposed authorization of Mississippi's revised hazardous waste program under RCRA are exempted under Executive Order 12866. Accordingly, I certify that this action will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this action proposes to authorize pre-existing requirements under State law and does not impose any additional enforceable duty beyond that required by State law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538). For the same reason, this action also does not significantly or uniquely affect the communities of tribal governments, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely proposes to authorize State requirements as part of the State RCRA hazardous waste program without altering the relationship or the distribution of power and responsibilities established by RCRA. This action also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant and it does not make decisions based on environmental health or safety risks. This action is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), because it is not a significant regulatory action under Executive Order 12866.

Under RCRA section 3006(b), EPA grants a state's application for authorization as long as the state meets the criteria required by RCRA. It would thus be inconsistent with applicable law for EPA, when it reviews a state authorization application, to require the use of any particular voluntary consensus standard in place of another standard that otherwise satisfies the requirements of RCRA. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in proposing this rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of this action in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings” issued under the executive order. This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). “Burden” is defined at 5 CFR 1320.3(b). Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. Because this action proposes authorization of pre-existing State rules which are at least equivalent to, and no less stringent than existing federal requirements, and imposes no additional requirements beyond those imposed by State law, and there are no anticipated significant adverse human health or environmental effects, this proposed rule is not subject to Executive Order 12898.