This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

26177 

Vol. 76, No. 88 

Friday, May 6, 2011 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 205 

[Doc. AMS–NOP–10–0048; NOP–10–05] 

National Organic Program: Notice of 

Final Guidance for Accredited 

Certifying Agents and Certified 

Operations 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Notice of availability of final 

guidance. 

SUMMARY: The National Organic 

Program (NOP) is announcing the 

availability of four final guidance 

documents intended for use by 

accredited certifying agents and 

certified operations. The four final 

guidance documents are entitled as 

follows: ‘‘Compost and Vermicompost in 

Organic Crop Production (NOP 5021); 

Wild Crop Harvesting (NOP 5022)’’; 

‘‘Commingling and Contamination 

Prevention in Organic Production and 

Handling (NOP 5025)’’; and ‘‘The Use of 

Chlorine Materials in Organic 

Production and Handling (NOP 5026)’’. 

These final guidance documents are 

intended to inform the public of NOP’s 

current thinking on these topics. These 

final guidance documents are now 

available from the NOP through ‘‘The 

Program Handbook: Guidance and 

Instructions for Accredited Certifying 

Agents (ACAs) and Certified 

Operations’’. The current edition of the 

Program Handbook is available online at 

http://www.ams.usda.gov/ 

NopProgramHandbook, or in print upon 

request. 

DATES: The final guidance documents 

announced by this notice are effective 

on May 9, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Melissa Bailey, Ph.D., Director, 

Standards Division, National Organic 

Program, USDA–AMS–NOP, 1400 

Independence Ave., SW., Room 2646– 

So., Ag Stop 0268, Washington, DC 

20250, E-mail: 

Melissa.bailey@ams.usda.gov; 

Telephone: (202) 720–3252; Fax: (202) 

205–7808. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On October 13, 2010, the National 

Organic Program (NOP) published in the 

Federal Register a notice of availability 

with request for public comment on five 

draft guidance documents (75 FR 

62693). The topics covered in the draft 

documents addressed recommendations 

issued by the National Organic 

Standards Board (NOSB) and the USDA 

Office of Inspector General (OIG) in a 

March 2010 audit report of the NOP. 

The five draft guidance topics included 

compost and vermicompost, wild crop 

harvesting, outdoor access for poultry, 

commingling and contamination 

prevention, and the use of chlorine 

materials. The five draft guidances can 

be viewed on-line at http:// 

www.ams.usda.gov/NopDraftGuidance. 

The 60-day comment period closed on 

December 13, 2010. 

The NOP received a total of 69 

individual comments and 22,096 form 

letter responses on the five draft 

guidance documents. ‘‘NOP Notice 11– 

7’’ provides a complete discussion of the 

comments received and the rationale 

behind any changes made to the 

guidance documents as well as any 

changes proposed, but not made to the 

guidance documents. ‘‘NOP Notice 11– 

7’’ can be found at http:// 

www.ams.usda.gov/ 

NOPCorrespondance. 

Based upon the comments received, 

the NOP revised and is publishing four 

of the five guidance documents as final: 

‘‘NOP 5021—Compost and 

Vermicompost in Organic Crop 

Production’’; ‘‘NOP 5022—Wild Crop 

Harvesting’’; ‘‘NOP 5025—Commingling 

and Contamination Prevention in 

Organic Production and Handling’’; and 

‘‘NOP 5026—The Use of Chlorine 

Materials in Organic Production and 

Handling’’. Based upon the comments 

received, the NOP is not finalizing the 

draft guidance, ‘‘NOP 5024—Outdoor 

Access for Poultry’’. The NOP intends to 

initiate a separate rulemaking on the 

outdoor access requirements for poultry 

in 2011. 

The four final guidance documents 

are now available from the NOP through 

‘‘The Program Handbook: Guidance and 

Instructions for Accredited Certifying 

Agents (ACAs) and Certified 

Operations’’. This Handbook provides 

those who own, manage, or certify 

organic operations with guidance and 

instructions that can assist them in 

complying with the NOP regulations. 

The current edition of the Program 

Handbook is available online at http:// 

www.ams.usda.gov/ 

NopProgramHandbook. 

II. Significance of Guidance 

These final guidance documents are 

being issued in accordance with the 

Office of Management and Budget 

(OMB) Bulletin on Agency Good 

Guidance Practices (GGPs) (January 25, 

2007, 72 FR 3432–3440). The purpose of 

GGPs is to ensure that program guidance 

documents are developed with adequate 

public participation, are readily 

available to the public, and are not 

applied as binding requirements. Final 

guidance represents the NOP’s current 

thinking on these topics. It does not 

create or confer any rights for, or on, any 

person and does not operate to bind the 

NOP or the public. Guidance documents 

are intended to provide a uniform 

method for operations to comply that 

can reduce the burden of developing 

their own methods and simplify audits 

and inspections. Alternative approaches 

that can demonstrate compliance with 

the Organic Foods Production Act 

(OFPA), as amended (7 U.S.C. 6501– 

6522), and its implementing regulations 

are also acceptable. As with any 

alternative compliance approach, the 

NOP strongly encourages industry to 

discuss alternative approaches with the 

NOP before implementing them to avoid 

unnecessary or wasteful expenditures of 

resources and to ensure the proposed 

alternative approach complies with the 

Act and its implementing regulations. 

III. Electronic Access 

Persons with access to Internet may 

obtain a copy of final guidance in the 

‘‘Program Handbook’’ along with the 

‘‘NOP Notice 11–7’’ at NOP’s Web site at 

http://www.ams.usda.gov/nop. 


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26178 Federal Register / Vol. 76, No. 88 / Friday, May 6, 2011 / Rules and Regulations 

Dated: May 2, 2011. 

Rayne Pegg, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2011–11115 Filed 5–5–11; 8:45 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9525] 

RIN 1545–BG98 

Modifications to Treatment of Aircraft 

and Vessel Leasing Income 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations and removal of 

temporary regulations. 

SUMMARY: This document contains final 

regulations addressing the treatment of 

certain income and assets related to the 

leasing of aircraft or vessels in foreign 

commerce. The regulations reflect 

statutory changes made by the American 

Jobs Creation Act of 2004. In general, 

the regulations will affect United States 

shareholders of controlled foreign 

corporations that derive income from 

the leasing of aircraft or vessels in 

foreign commerce and U.S. persons that 

transfer property subject to these leases 

to a foreign corporation. 

DATES: Effective Date: These regulations 

are effective on May 6, 2011. 

Applicability Dates: For dates of 

applicability, see §§ 1.367(a)–2(e)(2), 

1.367(a)–4(i), 1.367(a)–5(f)(3)(ii), 1.954– 

2(i) and 1.956–2(e). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the final regulations under 

section 367, Ronald M. Gootzeit at (202) 

622–3860; concerning the final 

regulations under section 954 or 956, 

Kristine A. Crabtree at (202) 622–3840; 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

In General 

This document contains amendments 

to 26 CFR Part 1 under sections 367, 954 

and 956 of the Internal Revenue Code 

(Code). Final and temporary regulations 

(TD 9406, 73 FR 38113) (the temporary 

regulations) and a cross-reference notice 

of proposed rulemaking (REG–138355– 

07, 73 FR 38162) were published in the 

Federal Register on July 3, 2008 (the 

proposed regulations). On July 29, 2008, 

corrections to the final regulations (73 

FR 43863) were published in the 

Federal Register. No public hearing was 

requested or held with respect to the 

proposed regulations. After 

consideration of the comments received, 

the proposed regulations are adopted, as 

amended by this Treasury decision. 

Explanation of Provisions 

Section 415(a) of the American Jobs 

Creation Act of 2004, Public Law 108– 

357 (118 Stat. 1418) (Jobs Act), repealed 

section 954(a)(4) and (f), the foreign base 

company shipping income provisions of 

subpart F. As a result of the repeal of 

these provisions, rents derived from 

leasing an aircraft or vessel in foreign 

commerce are included in subpart F 

income only if the rents are described in 

another category of subpart F income, 

such as foreign personal holding 

company income (FPHCI) as defined in 

section 954(c). Rents are generally 

included in FPHCI under section 

954(c)(1)(A), subject to certain 

exceptions. One such exception is for 

rents received from unrelated persons 

and derived in the active conduct of a 

trade or business. See section 

954(c)(2)(A). 

For this purpose, rents derived by a 

controlled foreign corporation (CFC) are 

considered derived in the active 

conduct of a trade or business in certain 

circumstances, including circumstances 

whereby the rents are derived as a result 

of the performance of marketing 

functions by the lessor CFC with respect 

to the leased property (the marketing 

exception). § 1.954–2(c)(1)(iv). 

Specifically, a lessor satisfies the 

marketing exception if the lessor, 

through its own officers or staff of 

employees located in a foreign country, 

maintains and operates an organization 

in the foreign country that is regularly 

engaged in the business of marketing, or 

of marketing and servicing, the leased 

property and that is substantial in 

relation to the amount of rents derived 

from leasing the property. For this 

purpose, whether an organization in a 

foreign country is substantial in relation 

to the amount of rents is determined 

based on all facts and circumstances; 

however, such an organization will be 

considered substantial if active leasing 

expenses equal or exceed 25 percent of 

the adjusted leasing profit (as defined in 

§ 1.954–2(c)(2)(iv)). § 1.954–2T(c)(2)(ii). 

The Jobs Act amended section 

954(c)(2)(A) to expand the marketing 

exception with respect to rents derived 

from leasing an aircraft or vessel in 

foreign commerce. In particular, section 

954(c)(2)(A) now provides that ‘‘rents 

derived from leasing an aircraft or vessel 

in foreign commerce shall not fail to be 

treated as derived in the active conduct 

of a trade or business if, as determined 

under regulations prescribed by the 

Secretary, the active leasing expenses 

are not less than 10 percent of the profit 

on the lease.’’ In addition, the legislative 

history to this provision states that the 

Secretary of the Treasury will make 

‘‘conforming changes to existing 

regulations, including guidance that 

aircraft or vessel leasing activity that 

satisfies the requirements of section 

954(c)(2)(A) shall also satisfy the 

requirements for avoiding income 

inclusion under section 956 and section 

367(a).’’ H.R. Conf. Rep. No. 755, 108th 

Cong., 2d Sess. 402 (2004). 

On July 3, 2008, the Treasury 

Department and the IRS published the 

proposed regulations providing 

guidance with respect to the treatment 

of certain income and assets related to 

the leasing of aircraft or vessels in 

foreign commerce under sections 367, 

954, and 956 of the Code in light of the 

Jobs Act changes. These final 

regulations adopt the proposed 

regulations with the modifications 

described herein. 

Section 954 Regulations 

Under current regulations, to satisfy 

the marketing exception, the lessor 

must, among other things, maintain an 

organization that is regularly engaged in 

the business of marketing, or of 

marketing and servicing, the leased 

property and that is ‘‘substantial in 

relation to the rents derived.’’ § 1.954– 

2(c)(1)(iv). The proposed regulations 

added a new marketing safe harbor for 

purposes of determining whether an 

organization is substantial in relation to 

rents derived from leasing aircraft or 

vessels (including component parts, 

such as engines, that are leased 

separately from an aircraft or vessel) in 

foreign commerce. This safe harbor 

provides that an organization will be 

considered substantial for purposes of 

§ 1.954–2(c)(1)(iv) if active leasing 

expenses equal or exceed 10 percent of 

the adjusted leasing profit. For this 

purpose, the rules in the current 

regulations for computing active leasing 

expense and adjusted leasing profit 

continue to apply. The proposed 

regulations also included a definition of 

when an aircraft or vessel is leased in 

foreign commerce, including defining 

when property is used predominantly 

outside the United States, that is 

consistent with the legislative history to 

the Jobs Act. See H.R. Rep. No. 108–548, 

pt. 1, at 210 (2004); H.R. Conf. Rep. No. 

108–755, at 402 (2004). Finally, the 

proposed regulations also clarified that 

rents derived from certain finance leases 

and acquired leases are eligible for the 

active rents exclusion. 


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