47152 Federal Register / Vol. 74, No. 177 / Tuesday, September 15, 2009 / Proposed Rules 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

R–4804B Twin Peaks, NV [Amended] 

* * * * * 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. Intermittent by 

NOTAM 0715 to 2330 local time daily; other 

times by NOTAM. 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

* * * * * 

R–4810 Desert Mountains, NV [Amended] 

* * * * * 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. 0715 to 2330 local 

time daily; other times by NOTAM 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

* * * * * 

R–4812 Sand Springs, NV [Amended] 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. 0715 to 2330 local 

time daily; other times by NOTAM 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

R–4813A Carson Sink, NV [Amended] 

* * * * * 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. 0715 to 2330 local 

time daily; other times by NOTAM 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

R–4813B Carson Sink, NV [Amended] 

* * * * * 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. Intermittent by 

NOTAM 0715 to 2330 local time daily; other 

times by NOTAM. 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

R–4816N Dixie Valley, NV [Amended] 

* * * * * 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. 0715 to 2330 local 

time daily; other times by NOTAM 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

R–4816S Dixie Valley, NV [Amended] 

* * * * * 

By removing the current times of 

designation and using agency and 

substituting the following: 

Time of designation. 0715 to 2330 local 

time daily; other times by NOTAM 

Using agency. USN, Naval Strike and Air 

Warfare Center, Fallon, NV. 

* * * * * 

Issued in Washington, DC, on September 2, 

2009. 

Edith V. Parish, 

Manager, Airspace and Rules Group. 

[FR Doc. E9–22139 Filed 9–14–09; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–127270–06] 

RIN 1545–BF81 

Damages Received on Account of 

Personal Physical Injuries or Physical 

Sickness 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations relating to the 

exclusion from gross income for 

amounts received on account of 

personal physical injuries or physical 

sickness. The proposed regulations 

reflect amendments under the Small 

Business Job Protection Act of 1996. The 

proposed regulations also delete the 

requirement that to qualify for exclusion 

from gross income, damages received 

from a legal suit, action, or settlement 

agreement must be based upon ‘‘tort or 

tort type rights.’’ The proposed 

regulations affect taxpayers receiving 

damages on account of personal 

physical injuries or physical sickness 

and taxpayers paying these damages. 

DATES: Written (paper or electronic) 

comments must be received by 

December 14, 2009. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–127270–06), room 

5203, Internal Revenue Service, Post 

Office Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to: CC:PA:LPD:PR (REG–127270– 

06), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–127270– 

06). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Sheldon A. Iskow, (202) 622–4920 (not 

a toll-free number); concerning the 

submission of comments and/or 

requests for a public hearing, Richard 

Hurst at 

Richard.A.Hurst@irscounsel.treas.gov. 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

This document contains proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) to reflect 

amendments made to section 104(a)(2) 

of the Internal Revenue Code (Code) by 

section 1605(a) and (b) of the Small 

Business Job Protection Act of 1996, 

Public Law 104–188, (110 Stat. 1838 

(the 1996 Act)), and to delete the ‘‘tort 

or tort type rights’’ test under § 1.104– 

1(c) of the Income Tax Regulations. 

As amended, section 104(a)(2) 

excludes from gross income the amount 

of any damages (other than punitive 

damages) received (whether by suit or 

agreement and whether as lump sums or 

as periodic payments) on account of 

personal physical injuries or physical 

sickness. These proposed regulations 

conform the regulations to these 

statutory amendments and clarify the 

changes for taxpayers and practitioners. 

1. The 1996 Act Amendments 

Section 1605(a) of the 1996 Act 

amended section 104(a)(2) to provide 

expressly that punitive damages do not 

qualify for the income exclusion. The 

amendment was a response to divergent 

court opinions, some holding that 

punitive damages are received ‘‘on 

account of’’ a personal injury. See H.R. 

Conf. Rept. 104–737 (1996) at 301. The 

amendment is consistent with O’Gilvie 

v. United States, 519 U.S. 79 (1996), 

holding that punitive damages are not 

compensation for personal injuries and 

do not satisfy the ‘‘on account of’’ test 

under section 104(a)(2). 

Section 1605(a) also amended section 

104(a)(2) to provide that the income 

exclusion generally is limited to 

amounts received on account of 

personal ‘‘physical’’ injuries or 

‘‘physical’’ sickness. Section 1605(b) of 

the 1996 Act further amended section 

104(a) to provide that, for purposes of 

section 104(a)(2), even though 

emotional distress is not considered a 

physical injury or a physical sickness, 

damages not in excess of the amount 

paid for ‘‘medical care’’ (described in 

section 213(d)(1)(A) or (B)) for 

emotional distress are excluded from 

income. 

The proposed regulations reflect these 

statutory amendments. The proposed 

regulations also provide that a taxpayer 

may exclude damages received for 

emotional distress ‘‘attributable’’ to a 

physical injury or physical sickness. See 

H.R. Conf. Rept. 104–737 (1996) at 301. 


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Federal Register / Vol. 74, No. 177 / Tuesday, September 15, 2009 / Proposed Rules 47153 

2. The Tort Type Rights Test 

The proposed regulations also 

eliminate the requirement that 

‘‘personal injuries or sickness’’ be 

‘‘based upon tort or tort type rights.’’ 

That requirement in § 1.104–1(c) was 

intended to ensure that only damages 

compensating for torts and similar 

personal injuries qualify for exclusion 

under section 104(a)(2). In United States 

v. Burke, 504 U.S. 229 (1992), the 

Supreme Court interpreted the tort type 

rights test as limiting the section 

104(a)(2) exclusion to damages for 

personal injuries for which the full 

range of tort-type remedies is available. 

The Court held that section 104(a)(2) 

did not apply to an award of back pay 

under the pre-1991 version of Title VII 

of the 1964 Civil Rights Act because the 

damages awarded under the statute 

provided only a narrow remedy and 

thus did not compensate for a tort type 

injury. The Burke interpretation 

precluded section 104(a)(2) treatment 

for similar personal injuries redressed 

by ‘‘no-fault’’ statutes that do not 

provide traditional tort-type remedies. 

Many critics thought the Burke 

remedies test was too restrictive. 

Later legislative and judicial 

developments eliminated the need to 

base the section 104(a)(2) exclusion on 

tort and remedies concepts. First, 

Commissioner v. Schleier, 515 U.S. 323 

(1995), interpreted the statutory ‘‘on 

account of’’ test as excluding only 

damages directly linked to ‘‘personal’’ 

injuries or sickness. Second, the 1996 

Act restricts the exclusion to damages 

for ‘‘personal physical’’ injuries or 

‘‘physical sickness.’’ 

Accordingly, under the proposed 

regulations, damages for physical 

injuries may qualify for the section 

104(a)(2) exclusion even though the 

injury giving rise to the damages is not 

defined as a tort under state or common 

law. Nor does the section 104(a)(2) 

exclusion depend on the scope of 

remedies available under state or 

common law. In effect, the regulations 

reverse the result in Burke by allowing 

the exclusion for damages awarded 

under no-fault statutes. 

Proposed Effective/Applicability Date 

These regulations are proposed to 

apply to damages paid pursuant to a 

written binding agreement, court decree, 

or mediation award entered into or 

issued after September 13, 1995, and 

received after the date these regulations 

are published as final regulations in the 

Federal Register. However, taxpayers 

may apply these proposed regulations to 

amounts paid pursuant to a written 

binding agreement, court decree, or 

mediation award entered into or issued 

after September 13, 1995, and received 

after August 20, 1996. If applying the 

proposed regulations to damages 

received after August 20, 1996, results 

in an overpayment of tax, the taxpayer 

may file a claim for refund within the 

period of limitations under section 

6511. 

Notwithstanding the date these 

regulations are proposed to become 

effective, the 1996 Act amendments to 

section 104(a)(2), including the 

amendment restricting the exclusion to 

amounts received on account of 

personal physical injuries or physical 

sickness, are effective for amounts 

received after August 20, 1996, except 

for any amount received under a written 

binding agreement, court decree, or 

mediation award in effect on (or issued 

on or before) September 13, 1995. Since 

the 1996 Act amendments, courts have 

applied the statutory effective date in 

holding that amounts received on 

account of nonphysical injuries are not 

excludable. Hennessey v. 

Commissioner, T.C. Memo 2009–132; 

Green v. Commissioner, T.C. Memo 

2007–39. These regulations propose to 

conform existing regulations to 

amended section 104(a)(2). To the 

extent that existing regulations conflict 

with amended section 104(a)(2), the 

statute controls. See Murphy v. Internal 

Revenue Service, 493 F.3d 170, 176 n* 

(D.C. Cir. 2007). 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and because the 

regulations do not impose a collection 

of information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the Internal Revenue 

Code, this notice of proposed 

rulemaking will be submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

Comments and Requests for a Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written (either a signed paper original 

with eight (8) copies) or electronic 

comments that are submitted timely to 

the IRS. The IRS and the Treasury 

Department specifically request 

comments on the clarity of the proposed 

rules and how they can be made easier 

to understand. All comments will be 

available for public inspection and 

copying. 

A public hearing will be scheduled if 

requested in writing by any person that 

timely submits written comments. If a 

public hearing is scheduled, notice of 

the date, time and place for the hearing 

will be published in the Federal 

Register. 

Drafting Information 

The principal author of these 

regulations is Sheldon A. Iskow of the 

Office of Associate Chief Counsel 

(Income Tax and Accounting). However, 

other personnel from the IRS and 

Treasury Department participated in 

their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

proposed to be amended as follows: 

PART 1—INCOME TAXES 

Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Par. 2. In § 1.104–1, paragraph (c) is 

revised to read as follows: 

§ 1.104–1 Compensation for injuries or 

sickness. 

* * * * * 

(c) Damages received on account of 

personal physical injuries or physical 

sickness—(1) In general. Section 

104(a)(2) excludes from gross income 

the amount of any damages (other than 

punitive damages) received (whether by 

suit or agreement and whether as lump 

sums or as periodic payments) on 

account of personal physical injuries or 

physical sickness. Emotional distress is 

not considered a physical injury or 

physical sickness. However, damages 

for emotional distress attributable to a 

physical injury or physical sickness are 

excluded from income under section 

104(a)(2). Section 104(a)(2) also 

excludes damages not in excess of the 

amount paid for medical care (described 

in section 213(d)(1)(A) or (B)) for 

emotional distress. For purposes of this 

paragraph (c), the term damages means 

an amount received (other than workers’ 

compensation) through prosecution of a 

legal suit or action, or through a 

settlement agreement entered into in 

lieu of prosecution. 


sroberts on DSKD5P82C1PROD with PROPOSALS
47154 Federal Register / Vol. 74, No. 177 / Tuesday, September 15, 2009 / Proposed Rules 

(2) Cause of action and remedies. The 

section 104(a)(2) exclusion may apply to 

damages recovered for a physical 

personal injury or sickness under a 

statute, even if that statute does not 

provide for a broad range of remedies. 

The injury need not be defined as a tort 

under state or common law. 

(3) Effective/applicability date. This 

paragraph (c) applies to damages paid 

pursuant to a written binding 

agreement, court decree, or mediation 

award entered into or issued after 

September 13, 1995, and received after 

the date these regulations are published 

as final regulations in the Federal 

Register. Taxpayers also may apply 

these proposed regulations to damages 

paid pursuant to a written binding 

agreement, court decree, or mediation 

award entered into or issued after 

September 13, 1995, and received after 

August 20, 1996. If applying these 

proposed regulations to damages 

received after August 20, 1996, results 

in an overpayment of tax, the taxpayer 

may file a claim for refund before the 

period of limitations under section 6511 

expires. 

Notwithstanding the date these 

regulations are proposed to become 

effective, the statutory amendments to 

section 104(a) under section 1605 of the 

Small Business Job Protection Act of 

1996, Public Law 104–188, (110 Stat. 

1838), are effective for amounts received 

after August 20, 1996, except for any 

amount received under a written 

binding agreement, court decree, or 

mediation award in effect on (or issued 

on or before) September 13, 1995. 

* * * * * 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E9–22221 Filed 9–14–09; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R10–OAR–2008–0690; FRL–8956–7] 

Approval and Promulgation of State 

Implementation Plans: Alaska 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: The EPA is proposing to 

approve numerous revisions to Alaska’s 

State Implementation Plan (SIP) relating 

to the motor vehicle inspection and 

maintenance program for control of 

carbon monoxide (CO) in Anchorage 

and Fairbanks. The State of Alaska 

submitted three revisions to the Alaska 

SIP: a March 29, 2002 submittal 

containing minor revisions to the 

Statewide Inspection and Maintenance 

Program, a December 11, 2006 submittal 

containing more substantial revisions to 

the Statewide Inspection and 

Maintenance Program, and a June 5, 

2008 submittal containing major 

revisions to the Statewide Inspection 

and Maintenance Program 

discontinuing the Inspection and 

Maintenance Program in Fairbanks as an 

active control measure in the SIP and 

shifting it to contingency measures. EPA 

is proposing to approve these submittals 

because they satisfy the requirements of 

the Clean Air Act (hereinafter the Act or 

CAA). 

Also in this action, EPA is proposing 

a technical correction to the boundary 

description for the Fairbanks CO 

maintenance area, to correct a 

transcription error in the boundary 

description. 

DATES: Written comments must be 

received on or before October 15, 2009. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R10– 

OAR–2008–0690, by one of the 

following methods: 

A. http://www.regulations.gov. Follow 

the on-line instructions for submitting 

comments. 

B. Mail: Gina Bonifacino, EPA, Office 

of Air, Waste, and Toxics (AWT–107), 

1200 Sixth Avenue, Suite 900, Seattle, 

Washington 98101. 

C. Hand Delivery: EPA, Region 10 

Mailroom, 9th Floor, 1200 Sixth 

Avenue, Seattle, Washington 98101. 

Attention: Gina Bonifacino, Office of Air 

Waste, and Toxics (AWT–107). Such 

deliveries are only accepted during 

normal hours of operation, and special 

arrangements should be made for 

deliveries of boxed information. 

Instructions: Direct your comments to 

Docket ID No. EPA–R10–OAR–2008– 

0690. The EPA’s policy is that all 

comments received will be included in 

the public docket without change and 

may be made available online at 

http://www.regulations.gov, including 

any personal information provided, 

unless the comment includes 

information claimed to be Confidential 

Business Information (CBI) or other 

information whose disclosure is 

restricted by statute. Do not submit 

information that you consider to be CBI 

or otherwise protected through http:// 

www.regulations.gov or e-mail. The 

http://www.regulations.gov Web site is 

an ‘‘anonymous access’’ system, which 

means the EPA will not know your 

identity or contact information unless 

you provide it in the body of your 

comment. If you send an e-mail 

comment directly to the EPA without 

going through http:// 

www.regulations.gov, your e-mail 

address will be automatically captured 

and included as part of the comment 

that is placed in the public docket and 

made available on the Internet. If you 

submit an electronic comment, the EPA 

recommends that you include your 

name and other contact information in 

the body of your comment and with any 

disk or CD–ROM you submit. If the EPA 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, the EPA may not 

be able to consider your comment. 

Electronic files should avoid the use of 

special characters, any form of 

encryption, and be free of any defects or 

viruses. 

Docket: All documents in the 

electronic docket are listed in the 

http://www.regulations.gov index. 

Although listed in the index, some 

information is not publicly available, 

i.e., CBI or other information whose 

disclosure is restricted by statute. 

Certain other material, such as 

copyrighted material is not placed on 

the Internet and will be publicly 

available only in hard copy form. 

Publicly available docket materials are 

available either electronically in http:// 

www.regulations.gov or in hard copy 

during normal business hours at the 

Office of Air, Waste and Toxics, EPA 

Region 10, 1200 Sixth Avenue, Seattle, 

Washington 98101. 

FOR FURTHER INFORMATION CONTACT: Gina 

Bonifacino, (206) 553–2970, or by e-mail 

at R10-Public_Comments@epa.gov. 

SUPPLEMENTARY INFORMATION: 

Throughout this document whenever 

‘‘we,’’ ‘‘us,’’ or ‘‘our’’ is used, we mean 

the EPA. Information is organized as 

follows: 

Table of Contents 

I. Background 

II. Proposed Actions 

A. 2008 Submittal 

B. 2006 Submittal 

C. 2002 Submittal 

D. 110(k)(6) Correction 

III. Statutory and Executive Order Reviews 

I. Background 

Fairbanks North Star Borough 

Maintenance Area Planning History 

The urban portion of the Fairbanks 

North Star Borough (FNSB or Fairbanks) 

was designated in 1990 as a 

nonattainment area for CO and 

classified as moderate. On March 30, 

1998, Fairbanks was reclassified as a 

serious nonattainment area for failing to 

attain the ambient eight-hour CO 


sroberts on DSKD5P82C1PROD with PROPOSALS