This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

24656

Vol. 65, No. 82

Thursday, April 27, 2000

DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 25

RIN 0503–AA20

Rural Empowerment Zones and

Enterprise Communities

AGENCY: Office of the Secretary, USDA.

ACTION: Proposed rule.

SUMMARY: This proposed rule contains

the policy and procedures pertaining to

20 new rural enterprise communities

designated by the Secretary of the U.S.

Department of Agriculture (USDA)

(Secretary) as authorized by the

Agriculture, Rural Development, Food

and Drug Administration and Related

Agencies Appropriations Act, 1999

(Agriculture Appropriations Act 1999)

(Round IIS). These new Round IIS rural

enterprise communities are

supplemental to the second round of

rural empowerment zone designations

authorized by the Taxpayer Relief Act of

1997 (Round II). This rule also contains

the policies and procedures for

implementing a new grant program for

Round II empowerment zones and

Round IIS enterprise communities

authorized by section 766 of the

Agriculture Appropriations Act 1999

(USDA EZ/EC grants). Additionally, this

rule clarifies post-designation

procedures that rural empowerment

zones and enterprise communities must

follow to maintain their standing.

DATES: Written or email comments must

be submitted on or before June 26, 2000.

The comment period for information

collections under the Paperwork

Reduction Act of 1995 continues

through June 26, 2000.

ADDRESSES: Submit written comments

in duplicate. Comments sent via the

U.S. Postal Service should be addressed

to the Regulations and Paperwork

Management Branch, Attention: Cheryl

Thompson, Rural Development, U.S.

Department of Agriculture, STOP 0742,

1400 Independence Ave., SW,

Washington, DC 20250–0742.

Comments sent via Federal Express

Mail, or via another mail courier service

requiring a street address, should be

addressed to the same attention at 300

E Street, SW, 3rd Floor, Washington, DC

20546. Also, comments may be

submitted via the Internet by addressing

them to ‘‘comments@rus.usda.gov’’ and

must contain the word ‘‘Enterprise’’ in

the subject line. All written comments

will be available for public inspection

during regular work hours at the 300 E

Street, SW, address listed above.

FOR FURTHER INFORMATION CONTACT:

Deputy Administrator for Community

Development, USDA Rural

Development, Office of Community

Development, Reporters Building, Room

701, STOP 3203, 300 7th Street, SW,

Washington, DC 20024–3203, telephone

1–800–851–3403, or by sending an

Internet e-mail message to

‘‘ocd@ocdx.usda.gov’’. For hearing-and

speech-impaired persons, information

concerning this program may be

obtained by contacting USDA’s

TARGET Center at (202) 720–2600

(Voice and TDD).

SUPPLEMENTARY INFORMATION:

Classification

This rule has been reviewed under

E.O. 12866 and has been determined to

be a significant regulatory action, as that

term is defined in Executive Order

12866, and has been reviewed by OMB.

Programs Affected

The Catalog of Federal Domestic

Assistance Program number assigned to

this program is 10.772.

Program Administration

The program is administered through

the Office of Community Development

within the Rural Development mission

area of USDA, and delivered via the

USDA Rural Development state

directors in those states which have

designated rural empowerment zones

and enterprise communities.

Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act, USDA may not conduct

or sponsor, and a person is not required

to respond to, a collection of

information unless the collection

displays a currently valid OMB control

number.

The information collection

requirements contained in 7 CFR part 25

are comprised of one-time application

requirements (Application burden) and

ongoing reporting requirements

(Reporting burden). For Round IIS, the

Secretary designated the 20 additional

rural enterprise communities from

applications received in response to the

notice inviting applications published

April 16, 1998 in the Federal Register

at 63 FR 19143.

The Application burden paperwork

package approved by OMB under

control no. 0570–0026 covered the

Round II application effort. No

additional Application paperwork

requirements were associated with the

Round IIS designations. USDA will,

however, seek to amend the Reporting

burden paperwork reduction package

approved by OMB under control no.

0570–0027 to reflect the reporting

requirements contained in this rule, as

described in part 25, §§ 25.400, 25.403,

25.405(b)(2), attributable to 20

additional rural enterprise communities,

and to reflect the requirements relating

to the new 7 CFR part 25, subpart G

imposed by §§ 25.603, 25.604(b) and

25.607(c), which requirements are

imposed on Round II empowerment

zones and Round IIS enterprise

communities. Accordingly, USDA asks

for comments regarding the information

collections contained in the sections of

this rule and elsewhere in 7 CFR part 25

stated above. The Secretary has

submitted an information collection to

OMB for approval.

Comments on these information

collections should refer to the proposal

by name or OMB control number.

Organizations and individuals desiring

to submit comments on the information

collection requirements should direct

them to the Office of Information and

Regulatory Affairs, OMB, Room 10235,

New Executive Office Building,

Washington, D.C.; Attention: Desk

Officer for Rural Development, U.S.

Department of Agriculture.

Written comments may also be

submitted via the U.S. Postal Service to

Cheryl Thompson, Regulations and

Paperwork Management Branch,

Support Services Division, Rural

Development, U.S. Department of

Agriculture, STOP 0742, 1400

Independence Ave., SW, Washington,

DC 20250–0742. Mail courier service

deliveries requiring a street address

should be sent to the same attention at

Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules 24657

300 E Street, SW, 3rd Floor,

Washington, DC 20546.

Specifically, comments are solicited

from members of the public and affected

agencies concerning the proposed

collection of information to: (1) Evaluate

whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information will have practical utility;

(2) evaluate the accuracy of the agency’s

estimate of the burden of the proposed

collection of information; (3) enhance

the quality, utility and clarity of the

information to be collected; and (4)

minimize the burden of the collection of

information on those who are to

respond, including through the use of

appropriate automated collection

techniques or other forms of information

technology, e.g., permitting electronic

submission of responses.

The following table identifies the

components of the information

collection:

Type of collection Section of 7 CFR

part 25 affected

Number of

respondents

Frequency

of response

Estimate

average

response

time (hours)

Annual

burden

(hours)

Periodic Reporting (all ECs and EZs) ......................................... 25.400(a)

25.400(b)

25.403

57 2 10 1,140

Grant related paperwork burden (Round II EZs, Round IIS ECs

only).

25.603(a)

25.603(b)

25.603(c)

25.604(b)

25

25

25

25

1

1

1

1

3

3

1

1

75

75

25

25

Response to designation warning letter ...................................... 25.405(b)(2) 1 1 1 1

Response to notice of grant suspension ..................................... 25.607(c) 1 1 1 1

Total Burden in each Reporting Year,

Years 1 through 10: 1,342 hours

Environmental Impact Statement

It is the determination of the Secretary

that this action is not a major Federal

action significantly affecting the

environment. Therefore, in accordance

with the National Environmental Policy

Act of 1969, an Environmental Impact

Statement is not required.

Executive Order 12988

This rule has been reviewed in

accordance with E.O. 12988, Civil

Justice Reform. In accordance with this

rule: (1) All state and local laws and

regulations that are in conflict with this

rule will be preempted; (2) no

retroactive effect will be given to this

rule; and (3) administrative proceedings

in accordance with 7 CFR part 11 must

be exhausted before bringing suit in

court challenging action taken under

this rule unless those regulations

specifically allow bringing suit at an

earlier time.

The Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA) establishes

requirements for Federal agencies to

assess the effects of their regulatory

actions on state, local, and tribal

governments and the private sector.

Under section 202 of the UMRA, USDA

must prepare a written statement,

including a cost benefit analysis, for

proposed and final rules with ‘‘Federal

mandates’’ that may result in

expenditures to state, local or tribal

governments, in the aggregate, or to the

private sector, of $100 million or more

in any one year. When such a statement

is needed for a rule, section 205 of

UMRA generally requires USDA to

identify and consider a reasonable

number of regulatory alternatives and

adopt the least costly, more cost

effective or least burdensome alternative

that achieves the objectives of the rule.

This rule contains no Federal

mandates (under the regulatory

provisions of title II of the UMRA) for

state, local, and tribal governments or

the private sector. Therefore this rule is

not subject to the requirements of

sections 202 and 205 of UMRA.

Regulatory Flexibility Act

In compliance with the Regulatory

Flexibility Act (5 U.S.C. 601–612), the

undersigned has determined and

certified by signature of this document

that this rule will not have a significant

economic impact on a substantial

number of small entities. The

Regulatory Flexibility Act is intended to

encourage Federal agencies to utilize

innovative administrative procedures in

dealing with individuals, small

businesses, small organizations, and

small governmental bodies that would

otherwise be unnecessarily adversely

affected by Federal regulations. The

provisions included in this rule will not

impact a substantial number of small

entities to a greater extent than large

entities. Therefore, no regulatory

flexibility analysis under the Regulatory

Flexibility Act is necessary.

Executive Order 13132, Federalism

The policies contained in this rule do

not have any substantial direct effect on

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. Nor does this rule

impose substantial direct compliance

costs on state and local governments.

This rule is intended to foster

cooperation between the Federal

Government and the states and local

governments, and reduces, where

possible, any regulatory burden

imposed by the Federal Government

that impedes the ability of states and

local governments to solve pressing

economic, social and physical problems

in their state.

I. Background

The Empowerment Zone/Enterprise

Community program confers upon rural

distressed American communities the

opportunity to design and implement

programs to create jobs, support their

residents in becoming skilled and able

to earn a livable income and establish

other strategies for creating opportunity

and building a brighter future.

On April 16, 1998, the Secretary

published an interim final rule and

notice inviting applications for 5 newly

authorized Round II rural empowerment

zone designations. The deadline for

applications was October 9, 1998. One

hundred sixty eligible applications were

received. On October 21, 1998, the

Agriculture, Rural Development, Food

and Drug Administration and Related

Agencies Appropriations Act 1999 was

signed into law, authorizing an

additional 20 rural enterprise

communities. These Round II rural

empowerment zones and Round IIS

rural enterprise communities are in

addition to the 3 rural empowerment

zones and 30 rural enterprise

24658 Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules

communities designated on December

21, 1994, by the Secretary pursuant to

Title XIII of the Omnibus Budget

Reconciliation Act of 1993 (Round I).

Designation

The statutory deadline by which

Round II rural empowerment zones

must be designated was January 1, 1999.

There is no deadline for Round IIS rural

enterprise community designations. On

December 24, 1998 the Secretary

designated 5 Round II rural

empowerment zones and 20 Round IIS

rural enterprise communities from the

pool of over 160 eligible applications

received for Round II. Notice to this

effect was published on May 25, 1999 in

the Federal Register at 64 FR 28152.

The nomination process for

designation requires applicant

communities to take stock of their assets

and problems, create a vision for the

future, and structure a strategic plan for

achieving their vision. The amount of

time and effort which an applicant

community exerts in developing a

strategic plan is considerable. USDA is

of the opinion that a quality strategic

plan (required as part of the application

process) takes at least 6 months to

develop. Town meetings are held and

cross sections of the community are

brought together to decide how they

wish to develop as a community and

how best to achieve those goals.

In Round II, over 160 communities

took on this monumental task and

expended a great deal of time, effort and

money in bringing together their

citizens and creating a strategic plan for

their communities in applying for 5

authorized designations. The 160

eligible applications reflect a cross

section of 38 states; 22 or more

applications include reservation land or

were submitted by Native American

tribal communities. Nineteen Round I

enterprise communities submitted

applications for Round II empowerment

zone designation. Also, Round IIS

follows closely on the heels of the

October 9, 1998, application deadline

for Round II. The Round II applications

were current for purposes of Round IIS

as well.

Eligibility

Part I of subchapter U of chapter 1 of

the Internal Revenue Code of 1986

contains the eligibility criteria for

Round IIS rural enterprise communities.

The Secretary elected in his discretion

to apply the criteria as modified for

additional designations under section

1391(g) of the Internal Revenue Code,

the same criteria which apply to Round

II rural empowerment zones. These

criteria are more inclusive than the

original Round I EC eligibility criteria;

they represent the latest version of

eligibility criteria legislated for the

program, including modifications to

allow reservation land to be

incorporated in the applications for

designation and an outmigration criteria

to be substituted for the poverty rate test

defined in item 4 below:

To be eligible for designation as a

Round IIS rural enterprise community

an area must:

1. Have a maximum population of

30,000;

2. Be one of pervasive poverty,

unemployment, and general distress;

3. Not exceed one thousand square

miles in total land area;

4. Demonstrate a poverty rate that is

not less than:

a. 20 percent in each census tract or

census block numbering area (BNA);

and

b. 25 percent in 90 percent of the

census tracts and BNAs within the

nominated area;

5. Be located entirely within no more

than 3 contiguous states; if it is located

in more than one state, the area must

have one continuous boundary; if

located in only one state, the area may

consist of no more than 3

noncontiguous parcels;

6. Show that each nominated parcel

independently meets the two poverty

rate requirements;

7. Be located entirely within the

jurisdiction of the unit or units of

general local government making the

nomination; and

8. Not include any portion of a central

business district as defined in the

Census of Retail Trade unless the

poverty rate for each Census tract is at

least 35 percent.

Benefit Comparison

During the time period from April 16,

1998 (publication of the notice inviting

Round II applications) to October 9,

1998 (the deadline for applications), no

direct federal funding from any

appropriation source was in place for

Round II designees. However,

prospective applicant communities

were made aware that future

authorization of direct funding was

possible. Effective October 21, 1998,

section 766 of the Agriculture

Appropriations Act 1999 appropriated a

total of $15,000,000 in grant funds to

implement a second round of

empowerment zone and enterprise

communities, $10,000,000 for the 5

Round II rural empowerment zones and

$5,000,000 for the 20 newly authorized

Round IIS rural enterprise communities.

In the notice designating Round II and

Round IIS rural empowerment zones

and enterprise communities published

on May 25, 1999, the Secretary

announced his intent to award equal

grants of $2,000,000 to the Round II

rural empowerment zones, and equal

grants of $250,000 to each of the new

Round IIS rural enterprise communities.

An additional $15,000,000 was

appropriated on October 20, 1999, for

Round II rural empowerment zones and

enterprise communities (P.L. 106–74). It

is the Secretary’s intent to similarly

allocate this appropriation.

The authorizing legislation provides

that none of the tax benefits that are in

effect for all other rural empowerment

zones or enterprise communities accrue

to Round IIS rural enterprise

communities. Targeted federal financial

assistance specific to enterprise

community status is limited, in the case

of Round IIS rural enterprise

communities, to the newly authorized

USDA EZ/EC grants.

RURAL ENTERPRISE COMMUNITIES BENEFIT COMPARISON TABLE

[Subject to change in the event of legislation enacted subsequent to this rulemaking]

Round I Round IIS

Period ................................................................. In most cases, ten full calendar years following the Designation Date (December 21,

1994).

In most cases, ten full calendar years following the Designation Date (December 24,

1999).

Title XX of the Social Security Act Appropriations.1 grant equal to $2.9 million (rounded) ........... None.

Title VII of the Agriculture, Rural Development,

Food and Drug Administration and Related

Agencies Appropriations Act, 1999.

None ................................................................. $250,000 per EC.

Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules 24659

RURAL ENTERPRISE COMMUNITIES BENEFIT COMPARISON TABLE—Continued

[Subject to change in the event of legislation enacted subsequent to this rulemaking]

Round I Round IIS

Title II of the Veterans Affairs and Housing and

Urban Development, and Independent Agencies Appropriations Act, 2000.

None ................................................................. $250,000 per EC.

Tax Exempt Bonds ............................................. A new category of tax-exempt private activity

bonds was authorized for certain zone facilities. Issues are subject to state private

activity bond cap levels on total issuances,

and special limits on issue size.

Round IIS EC facilities do not have any special status, nor do the ECs have any special status relating to tax exempt bonding

authority.

Work Opportunity Tax Credit (not exclusive to

ECs or EZs; note: as of 11/1/99 this tax code

provision had expired 6/30/99 but legislation

to retroactively extend it was under consideration).

40% of qualified first-year wages paid to a

member of a targeted group, where firstyear wages taken into account may not exceed $6,000. Targeted employees include

high risk youth residents of EZs and ECs,

food stamp and SSI recipients, vocational

rehabilitation referrals and others.

This benefit does not attach to youth residents of Round IIS ECs, per se, however,

they may qualify under the other identified

targeted groups.

Internal Revenue Code 26 U.S.C. 179

Expensing ...........................................................

Capital costs of some kinds of business property which must otherwise be capitalized

and depreciated over time may be deducted in the year incurred under section

179. For a zone business, the annual expensing allowance for section 179 property

is increased by the lesser of (1) $20,000 or

(2) actual cost of property placed in service

during the year. Eligible types of property

do not include buildings. The phaseout provision of section 179 that would otherwise

apply to eligible 179 property is reduced for

zone property.

Not applicable.

Brownfields Deductible Expense (not exclusive

to EZs and ECs).

Certain environmental remediation expenditures that would otherwise be capitalized

into the cost of the land may be deducted if

the costs are paid or incurred prior to January 1, 2001.

No special status accrues to Round IIS ECs.

Qualified Zone Academy Bonds (A national limitation across all empowerment zones and

enterprise communities of up to $400 million

each year for years 1998 and 1999).

Tax credit bonds whereby certain financial institutions (i.e., banks, insurance companies,

and corporations actively engaged in the

business of lending money) that hold ‘‘qualified zone academy bonds’’ are entitled to a

nonrefundable tax credit in an amount

equal to a credit rate (set by the Treasury

Department) multiplied by the face amount

of the bond. They may or may not be interest bearing; if so, the interest is taxable.

This benefit does not attach to rural IIS ECs

per se, however, Round IIS academies may

qualify under the subsidized school lunch

criteria.

The credit is effective for obligations issued

after December 31, 1997.

The statute does not expressly provide for an

allocation to rural empowerment zones or

enterprise communities.

II. Program Description

Use of Grant Funds

The authorizing statute is silent on

the purposes for which Round IIS grant

funds may be used. In the interest of

uniformity in administering program

benefits and efficiency in administering

the program, the Secretary has elected

in his discretion to provide that the

purposes for which Round II and Round

IIS grant funds may be used shall

correspond to the purposes legislated

for Round I federal funding, namely,

those purposes contained in section

2007(a) of the Social Security Act (42

U.S.C. 1397(f)) for social services block

grants awarded to Round I

empowerment zones and enterprise

communities (EZ/EC SSBG funds).

Further guidance on the purposes for

which EZ/EC SSBG grant funds may be

used may be found in Appendix C to the

notice inviting applications for Round

II, published on April 16, 1998 at 63 FR

19147.

Funding of Grants

Round IIS of the program will be

administered by USDA as a Federallocal-private partnership, with a

minimum of red tape. This rule

proposes that the designated lead

managing entity, as identified in the

Memorandum of Agreement executed

by the designee (see below), is to be the

recipient, or ‘‘primary grantee’’ of the

USDA EZ/EC grant funds.

Modification of Strategic Plans

The pool from which the 20 new rural

enterprise communities were designated

was comprised of those which applied

for Round II empowerment zone status.

The strategic plans were developed with

assumed spending levels higher than

what direct federal funding levels

authorized by the 1999 Agriculture

Appropriations Act would support.

Accordingly, this rule proposes that the

plans incorporated in the applications

be adjusted to reflect spending levels

commensurate with actual

appropriation levels for both Round II

24660 Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules

empowerment zones and Round IIS

enterprise communities. This

requirement is imposed on the Round II

and Round IIS designees only, it is not

a modification of the Round II

application process.

Memorandum of Agreement

The notice inviting applications

published April 16, 1998 at 63 FR 19143

includes as an appendix a form of

Memorandum of Agreement (MOA).

Round I designees were asked to sign

comparable MOAs. Round II and Round

IIS applicants were given notice that

they, too, will be required to sign

comparable MOAs. A revised model

MOA is included as an appendix to the

notice of designation published in the

Federal Register.

List of Subjects in 7 CFR Part 25

Community development, Economic

development, Empowerment zones,

Enterprise communities, Housing,

Indians, Intergovernmental relations,

Reporting and recordkeeping

requirements, Rural development,

Strategic planning.

In accordance with the reasons set out

in the preamble, 7 CFR part 25 is

proposed to be amended as follows:

PART 25—RURAL EMPOWERMENT

ZONES AND ENTERPRISE

COMMUNITIES

1. The authority citation for part 25 is

revised to read as follows:

Authority: 5 U.S.C. 301; 26 U.S.C. 1391;

Sec. 766, Pub. L. 105–277, 112 Stat. 2681.

Subpart A—General Provisions

§ 25.1 [Amended]

2. Amend § 25.1 by revising paragraph

(a) to read as follows:

§ 25.1 Applicability and scope.

(a) Applicability. This part contains

policies and procedures applicable to

rural empowerment zones and

enterprise communities, authorized

under the Omnibus Budget

Reconciliation Act of 1993, title XIII,

subchapter C, part I (Round I), the

Taxpayer Relief Act of 1997, title IX,

subtitle F (Round II), and the

Agriculture, Rural Development, Food

and Drug Administration and Related

Agencies Appropriations Act, 1999

(Public Law 105–277) (Round IIS).

* * * * *

§ 25.3 [Amended]

3. Amend § 25.3 by revising the

definitions of ‘‘brownfield’’,

‘‘designation’’, and ‘‘designation date’’

and by adding in alphabetical order

definitions for ‘‘designation period’’,

‘‘funding official’’, ‘‘Office of

Community Development’’, ‘‘Round

IIS’’, ‘‘state director’’ and ‘‘USDA EZ/EC

grant program’’ to read as follows:

Brownfield means a ‘‘qualified

contaminated site’’ meeting the

requirements of section 941 of the

Taxpayer Relief Act of 1997, (26 U.S.C.

198(c)), where the site is located in an

empowerment zone or enterprise

community.

Designation means the process by

which the Secretary designates rural

areas as empowerment zones or

enterprise communities pursuant to

eligibility criteria established by

subchapter U of the Internal Revenue

Code (26 U.S.C. 1391 et seq.).

Designation date means December 21,

1994, in the case of Round I

designations, and December 24, 1998, in

the case of Round II and Round IIS

designations.

Designation period means the lesser

of ten years or such time as has elapsed

from the designation date to the

effective date of an applicable notice of

revocation pursuant to 7 CFR 25.405(e).

Funding official means the state

director in the state where the

designated rural area is located, or if the

designated rural area is located in more

than one state, the state where the

headquarters office of the lead managing

entity is located.

Office of Community Development or

OCD means the office of the Deputy

Administrator, Community

Development, as identified in 7 CFR

2003.26(b)(4).

Round IIS identifies designations of

rural enterprise communities pursuant

to section 766 of the Agriculture, Rural

Development, Food and Drug

Administration and Related Agencies

Appropriations Act 1999 (Public Law

105–277).

State director means the state director

for the Rural Development mission area

within USDA, as identified in 7 CFR

2003.10.

USDA EZ/EC grant program means

the grant program authorized by section

766 of the Agriculture, Rural

Development, Food and Drug

Administration and Related Agencies

Appropriations Act, 1999 (Public Law

105–277) for the benefit of Round II

empowerment zones and Round IIS

enterprise communities.

§ 25.4 [Amended]

4. Amend § 25.4 by revising

paragraphs (a) and (b)(2) and adding

paragraphs (b)(3) and (b)(4) to read as

follows:

§ 25.4 Secretarial review and designation.

(a) Designation. The Secretary will

review applications for the designation

of nominated rural areas to determine

the effectiveness of the strategic plans

submitted by applicants; such

designations of rural empowerment

zones and enterprise communities as are

made shall be from the applications

submitted in response to the notice

inviting applications or other applicable

notice published in the Federal

Register. The Secretary may elect to

designate as champion communities

those nominated areas which are not

designated as either a rural

empowerment zone or enterprise

community and whose applications

meet the criteria contained in § 25.301.

(b) * * *

(2) Round II. The Secretary may, prior

to January 1, 1999, designate up to five

rural empowerment zones in addition to

those designated in Round I.

(3) Round IIS. The Secretary may

designate up to 20 rural enterprise

communities in addition to those

designated in Round I.

(4) Champion communities. The

number of champion communities is

limited to the number of applicants

which are not designated empowerment

zones or enterprise communities.

* * * * *

Subpart B—Area Requirements

§ 25.103 [Amended]

5. Amend § 25.103 by revising the

introductory text of paragraphs (b)(2)

and (b)(3) to read as follows:

§ 25.103 Area size and boundary

requirements.

* * * * *

(b) * * *

(2) For purposes of applying

paragraph (a)(1) of this section to Round

II and Round IIS designations:

* * * * *

(3) For purposes of applying

paragraph (a)(2) of this section to Round

II and Round IIS designations, the

following shall not be treated as

violating the continuous boundary

requirement nor the limit on the number

of noncontiguous parcels:

* * * * *

§ 25.104 [Amended]

6. Amend § 25.104 as follows:

a. Amend the headings of paragraphs

(a)(2) and (b)(2) by adding ‘‘and Round

IIS’’.

b. Revise the introductory text of

paragraphs (a), (b) and (c), and revise

paragraph (c)(2) to read as follows:

§ 25.104 Poverty rate.

(a) General. Eligibility of an area on

the basis of poverty shall be established

in accordance with the following

Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules 24661

poverty rate criteria specific to Round I,

Round II and Round IIS nominated

areas:

* * * * *

(b) Special rules. The following

special rules apply to the determination

of poverty rate for Round I, Round II

and Round IIS nominated areas:

* * * * *

(c) General rules. The following

general rules apply to the determination

of poverty rate for Round I, Round II

and Round IIS nominated areas.

* * * * *

(2) Noncontiguous parcels. Each such

parcel (excluding, in the case of Round

II and Round IIS, up to 3 noncontiguous

developable sites not exceeding 2,000

acres in the aggregate) must separately

meet the poverty criteria contained in

this section.

* * * * *

Subpart C—Nomination Procedure

§ 25.202 [Amended]

7. Amend § 25.202 by revising

paragraph (b)(7) to read as follows:

§ 25.202 Strategic plan.

* * * * *

(b) * * *

(7) Include such other information as

required by USDA in the notice inviting

applications or other applicable notice.

* * * * *

§ 25.203 [Revised]

8. Revise § 25.203 to read as follows:

§ 25.203 Submission of applications.

General. A separate application for

designation as an empowerment zone or

enterprise community must be

submitted for each rural area for which

such designation is requested. The

application shall be submitted in a form

to be prescribed by USDA in the notice

inviting applications or other applicable

notice as published in the Federal

Register and must contain complete and

accurate information.

Subpart D—Designation Process

§ 25.300 [Amended]

9. Amend § 25.300 by revising

paragraphs (a) and (b) to read as follows:

§ 25.300 USDA action and review of

nominations for designation.

(a) Establishment of submission

procedures. USDA will establish a time

period and procedure for the

submission of applications for

designation as empowerment zones or

enterprise communities, including

submission deadlines and addresses, in

a notice inviting applications or other

applicable notice, to be published in the

Federal Register.

(b) Acceptance for processing. USDA

will accept for processing those

applications as empowerment zones and

enterprise communities which USDA

determines have met the criteria

required under this part. USDA will

notify the states and local governments

whether or not the nomination has been

accepted for processing. The application

must be received by USDA on or before

the close of business on the date

established by the notice inviting

applications or other applicable notice

published in the Federal Register. The

applications must be complete,

inclusive of the strategic plan, as

required by § 25.202, and the

certifications and written assurances

required by § 25.200(b).

* * * * *

Subpart E—Post-Designation

Requirements

§ 25.404 [Amended]

10. Amend § 25.404 as follows:

a. Redesignate paragraph (a) as (c) and

paragraph (b) as (d).

b. Add new paragraphs (a) and (b) to

read as follows:

§ 25.404 Validation of designation.

(a) Maintaining the principles of the

program. The empowerment zone,

enterprise community or champion

community (the designated community)

must maintain a process for ensuring

ongoing broad-based participation by

community residents consistent with

the approved application and planning

process outlined in the strategic plan.

(1) Continuous improvement. The

designated community must maintain a

process for evaluating and learning from

its experiences. It must detail the

methods by which the community will

assess its own performance in

implementing its benchmarks, the

process it will use for reviewing goals

and benchmarks and revising its

strategic plan.

(2) Participation. The designated

community must develop as part of its

strategic plan a written plan for assuring

continuous broad-based community

participation in the implementation of

the strategic plan and the means by

which the strategic plan is

implemented, including board

membership in the lead entity and other

key partnership entities.

(b) Administration of the strategic

plan. The strategic plan must be

administered in a manner consistent

with the principles of the program

contained in § 25.202(a).

(1) Lead Entity. The lead entity must

have legal status and authority to

receive and administer funds pursuant

to Federal, state and other government

or nonprofit programs.

(2) Capacity. The lead entity must

have the capacity to implement the

strategic plan, as demonstrated by

audited financial statements as of the

most recent fiscal year or other

documentation that may be requested by

USDA.

(3) Board membership. The

membership of the board must be

representative of the entire socioeconomic spectrum in the designated

community including business, social

service agencies, health and education

entities, low income and minority

residents. Board membership may be

determined by either broad-based

election or by appointment to meet this

diversity requirement; however, not

more than 45 percent of board members

may be selected by appointment.

Elections of community residents to the

board may be done by any locally

acceptable process; however, at least

one board member from each of the

designated community’s census tracts

must be elected and representative of

the low income residents in their census

tract.

(4) Partnerships. The relationship

between the designated community’s

lead entity board and local governments

and other major regional and

community organizations operating in

the same geographic area is critical to

the community’s success in

implementing its strategic plan. Every

effort should be made to identify and

maintain relationships with local

partners. Documentation including, but

not limited to, minutes of meetings,

benchmark activity reports and annual

reports of the lead entity must reflect

the contributions of local partnership

entities.

(5) Public information. The

designated community must have

written procedures in place describing

the means by which citizens of the

community and partnership

organizations will be kept informed of

the community’s activities and progress

in implementing the strategic plan,

consistent with the principal objective

of community based partnerships

pursuant to § 25.202(a)(2). These

procedures must be kept current and

compliance with them documented on

an ongoing basis.

* * * * *

11. Subpart G of part 25, consisting of

§§ 25.600 through 25.999 is added to

read as follows:

24662 Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules

Subpart G—Round II and Round IIS Grants

Sec.

25.600 Purpose.

25.601 Delegation of authority.

25.602 Eligible recipients.

25.603 Grant approval and obligation of

funds.

25.604 Disbursement of grant funds.

25.605 Grant program reporting

requirements.

25.606 Financial management and records.

25.607 Suspension or termination of grant

funds.

25.608–25.619 [Reserved]

25.620 Eligible grant purposes

25.621 Ineligible grant purposes

25.622 Other considerations

25.623 Programmatic changes

25.624 Exception authority

25.625–25.999 [Reserved]

Subpart G— Round II and Round IIS

Grants

§ 25.600 Purpose.

This subpart outlines USDA policies

and authorizations and contains

procedures for the USDA EZ/EC grant

program.

§ 25.601 Delegation of authority.

(a) Program administration. The

Deputy Administrator, Office of

Community Development, shall be

responsible for the overall development

of policy and administration of the

USDA EZ/EC grant program.

(b) Funding official. Unless otherwise

provided, the state director is

responsible for implementing the

authorities in this subpart, consistent

with the guidance issued by the Office

of Community Development. Except for

grant approval and environmental

determination authorities, state

directors may re-delegate their duties to

qualified staff members.

(c) Environmental review

determinations. The funding official is

responsible for making environmental

review determinations.

(d) Authority to issue regulations. The

Under Secretary, Rural Development,

may promulgate regulations under this

part.

§ 25.602 Eligible recipients.

(a) General. The grants made under

this subpart shall be made to the lead

managing entities on behalf of the

Round II rural empowerment zones and

Round IIS rural enterprise communities,

respectively, in accordance with an

approved strategic plan. Such grants

shall be available to successor entities

approved in writing by USDA.

(b) Exception. The funding official,

with the approval of the Office of

Community Development, may elect to

award all or part of the available grant

funds to an alternate grantee.

(c) Subrecipients. The grantee shall

relay funds to subrecipients, as

provided in the approved strategic plan,

as soon as practicable.

§ 25.603 Grant approval and obligation of

funds.

Grants may be made at such time as

the nominated area has been designated

and such other prerequisites as USDA

shall determine have been met,

including but not limited to:

(a) The empowerment zone or

enterprise community has entered into

a memorandum of agreement

satisfactory to USDA;

(b) The empowerment zone or

enterprise community has conformed its

strategic plan to be consistent with the

level of federal grant aid available and

such conforming amendments (if any)

have met with the approval of the Office

of Community Development and the

funding official;

(c) Completion of the environmental

review process, including all

appropriate public notices;

(d) The proposed grantee has agreed,

in form and substance satisfactory to the

Office of Community Development, to

any funding conditions imposed by

USDA;

(e) The grantee has submitted a

request for obligation of funds, in form

and substance satisfactory to the Office

of Community Development, inclusive

of the following certification:

‘‘The grantee certifies that it and all direct

or substantial subrecipients are in

compliance and will continue to comply

with all applicable laws, regulations,

executive orders and other generally

applicable requirements, including those

contained in 7 CFR parts 25, 3015, 3016,

3017, 3018, 3019 and 3052, and any

agreement to meet funding conditions, in

effect at the time of the grant or as

subsequently amended.’’

§ 25.604 Disbursement of grant funds.

(a) The funding official will

determine, based on 7 CFR parts 3015,

3016 and 3019, as applicable, whether

disbursement of a grant will be by

advance or reimbursement.

(b) A ‘‘request for advance or

reimbursement,’’ in form and substance

satisfactory to USDA, must be

completed by the grantee on behalf of

itself and all applicable subrecipients

and submitted to the funding official.

(c) Requests for advance or

reimbursement must identify:

(1) The amount requested for each

benchmark activity;

(2) The cumulative amount advanced

to date (not inclusive of the current

amount requested) for each benchmark

activity;

(3) The total USDA EZ/EC grant

obligated for each benchmark activity;

(4) The total approved budget for the

applicable project or program (inclusive

of non USDA EZ/EC grant program

sources);

(5) An estimated percentage of

completion or progress made in

accomplishing the benchmark goal

associated with each benchmark

activity;

(6) Certification that the lead

managing entity and the subrecipients

(where applicable) are in compliance

with all applicable laws and regulatory

requirements; and

(7) Such other information as the

funding official may require.

(d) Requests for advance or

reimbursement may include only

activities or projects which are

identified in an approved strategic plan.

§ 25.605 Grant program reporting

requirements.

Grantees may incorporate grant

reporting requirements in the reports

submitted pursuant to § 25.400, or

submit them separately. In complying

with the requirements of 7 CFR parts

3015, 3016, or 3019, as applicable,

grantees must submit, in lieu of the

forms prescribed therein, the equivalent

of such forms prescribed by the Office

of Community Development pursuant to

this subpart as such may be adapted to

the USDA EZ/EC grant program and

which may be submitted and retained in

electronic form.

§ 25.606 Financial management and

records.

(a) In complying with the

requirements of 7 CFR parts 3015, 3016,

or 3019, as applicable, grantees must

submit, in lieu of the forms prescribed

in those parts, the equivalent of such

forms prescribed by the Office of

Community Development pursuant to

this subpart as such may be adapted to

the USDA EZ/EC grant program and

which may be submitted and retained in

electronic form.

(b) Grantees must retain financial

records, supporting documents,

statistical records and all other records

pertinent to the grant for a period of at

least 3 years after the end of the

designation period, except that the

records shall be retained beyond the 3

year period if audit findings have not

been resolved or if directed by the

United States. Records may be retained

and submitted in electronic form if

allowed by Generally Accepted

Government Accounting Principles.

§ 25.607 Suspension or termination of

grant funds.

(a) Grants under this subpart, may be

suspended or terminated by the funding

official, in all or in part, in accordance

Federal Register / Vol. 65, No. 82 / Thursday, April 27, 2000 / Proposed Rules 24663

with this subpart and the applicable

provisions of 7 CFR parts 3015, 3016

and 3019, as applicable.

(b) The funding official may elect to

suspend or terminate the entirety of a

grant, or funding of a particular

benchmark activity, but nevertheless

fund the remainder of a request for

advance or reimbursement, where the

funding official has determined:

(1) That grantee or subrecipient of the

grant funds has demonstrated

insufficient progress toward achieving

the related benchmark goal or in any

other way failed to comply with the

strategic plan;

(2) There is reason to believe that

other sources of joint funding have not

been or will not be forthcoming on a

timely basis;

(3) The strategic plan, as amended,

calls for a revised use of the grant funds;

or

(4) Such other cause as the funding

official identifies in writing to the

grantee (including but not limited to the

use of federal grant funds for ineligible

purposes).

(c) The funding official shall notify

the grantee in writing within 30 days of

the official’s decision to suspend or

terminate all or part of the grant. This

notice shall identify what is being

suspended or terminated, whether such

decision is revocable, and such

requirements as may be a precondition

to reconsideration of the decision.

§§ 25.608–25.619 [Reserved]

§ 25.620 Eligible grant purposes.

Eligible grant purposes are:

(a) Services directed at the goals of—

(1) Achieving or maintaining

economic self-support to prevent,

reduce, or eliminate dependency;

(2) Achieving or maintaining self

sufficiency, including reduction or

prevention of dependency;

(3) Preventing or remedying neglect,

abuse, or exploitation of children and

adults unable to protect their own

interests, or preserving, rehabilitating or

reuniting families;

(b) Projects and activities identified in

the strategic plan for the area; and

(c) Activities that benefit residents of

the area for which the grant is made.

§ 25.621 Ineligible grant purposes.

Grant funds may not be used:

(a) As a source of local matching

funds required for other federal grants;

(b) To fund political activities;

(c) To duplicate current services or

replace or substitute for financial

support provided from other sources. If

the current service is inadequate,

however, grant funds may be used to

augment financial support or service

levels beyond what is currently

provided;

(d) To pay costs of preparing the

application package for designation

under this part;

(e) To pay costs of a project which

were incurred prior to the execution

date of the applicable memorandum of

agreement;

(f) To pay for assistance to any private

business enterprise which does not have

at least 51 percent ownership by those

who are either citizens of the United

States or reside in the United States

after being legally admitted for

permanent residence;

(g) To pay any judgment or debt owed

to the United States;

(h) To assist in the relocation of

businesses;

(i) To support or promote gambling; or

(j) For political lobbying.

§ 25.622 Other considerations.

(a) Civil rights compliance

requirements. All grants made under

this subpart are subject to Title VI of the

Civil Rights Act of 1964 and part 1901,

subpart E, of this title.

(b) Environmental review. All grants

made under this subpart are subject to

the environmental requirements in

effect for the water and environmental

programs of the Rural Utilities Service

at 7 CFR part 1794. The threshold levels

of environmental review, for projects

funded by the USDA EZ/EC grant

program (or EZ/EC SSBG funds where

the Secretary is authorized to execute

the responsibilities under the National

Environmental Policy Act of 1969),

which projects, by their nature, would

qualify for assistance under any

program administered by the Rural

Housing Service or Rural Business

Service within USDA, shall be

determined in accordance with 7 CFR

1940 Subpart G as follows:

(1) Projects meeting the descriptions

found at 7 CFR 1940.310(b), (c), (d) and

(e) shall be considered categorically

excluded (without an environmental

report) for purposes of 7 CFR 1794.21.

(2) Projects meeting the descriptions

found at 7 CFR 1940.311 shall be

considered categorically excluded (with

an environmental report) for purposes of

7 CFR 1794.22.

(3) Projects meeting the description

found at 7 CFR 1940.312 shall require

the preparation of an environmental

assessment (EA) for purposes of 7 CFR

1794.23.

(4) Projects which would normally

require the preparation of an

environmental impact statement (EIS)

for purposes of 7 CFR 1940.313 shall

require an EIS for purposes of 7 CFR

1794.25.

(c) Other USDA regulations. The rural

empowerment zone and enterprise

community program is subject to the

provisions of the following regulations,

as applicable:

(1) 7 CFR part 3015, ‘‘Uniform Federal

Assistance Regulations’’;

(2) 7 CFR part 3016, ‘‘Uniform

Administrative Requirements for Grants

and Cooperative Agreements to State

and Local Governments’’;

(3) 7 CFR part 3017,

‘‘Governmentwide Debarment and

Suspension (Nonprocurement) and

Governmentwide Requirements for

Drug-Free Workplace (Grants)’’;

(4) 7 CFR part 3018, ‘‘New

Restrictions on Lobbying’’;

(5) 7 CFR part 3019, ‘‘Uniform

Administrative Requirements for Grants

and Agreements with Institutions of

Higher Education, Hospitals, and other

Non-Profit Organizations; and

(6) 7 CFR part 3052, ‘‘Audits of States,

Local Governments, and Non-Profit

Organizations.’’

§ 25.623 Programmatic changes.

Prior approval from USDA is required

for all changes to the scope or objectives

of an approved strategic plan or

benchmark activity. Failure to obtain

prior approval of changes to the

strategic plan or benchmarks, including

changes to the scope of work or a project

budget may result in suspension,

termination, and recovery of USDA EZ/

EC grant funds.

§ 25.624 Exception authority.

The Deputy Administrator, Office of

Community Development, may, in

individual cases, grant an exception to

any requirement or provision of this

subpart which is not inconsistent with

any applicable law, provided the

Deputy Administrator determines that

application of the requirement or

provision would adversely affect

USDA’s interest.

§§ 25.625–25.999 [Reserved]

Dated: April 14, 2000.

Dan Glickman,

Secretary.

[FR Doc. 00–10138 Filed 4–26–00; 8:45 am]

BILLING CODE 3410–07–P