50502 Federal Register / Vol. 62, No. 187 / Friday, September 26, 1997 / Rules and Regulations

integrity tests, the manufacturer may

label the product with an expiration

date of up to 5 years from the date of

product packaging. If the extrapolated

expiration date under paragraphs (d)(1)

and (d)(2) of this section is used, the

labeled expiration date must be

confirmed by physical and mechanical

integrity tests performed at the end of

the stated expiration period as described

in paragraph (d)(3) of this section. If the

data from tests following real time

storage described in paragraph (d)(3) of

this section fails to confirm the

extrapolated expiration date, the

manufacturer must, at that time, relabel

the product to reflect the actual shelf

life.

(f) Products that already have

established shelf life data based upon

real time storage and testing and have

such storage and testing data available

for inspection are not required to

confirm such data using accelerated and

intermediate aging data described in

paragraphs (d)(1) and (d)(2) of this

section. If, however, such real time

expiration dates were based upon

testing of products that were not first

left unpackaged for the maximum

amount of time as described in

paragraph (d)(3) of this section, the real

time testing must be confirmed by

testing products consistent with the

requirements of paragraph (d)(3) of this

section. This testing shall be initiated no

later than the effective date of this

regulation. Until the confirmation

testing in accordance with paragraph

(d)(3) of this section is completed, the

product may remain on the market

labeled with the expiration date based

upon previous real time testing.

(g) If a manufacturer uses testing data

from one product to support expiration

dating on any variation of that product,

the manufacturer must document and

provide, upon request, an appropriate

justification for the application of the

testing data to the variation of the tested

product.

(h) If a latex condom contains a

spermicide, and the expiration date

based on spermicidal stability testing is

different from the expiration date based

upon latex integrity testing, the product

shall bear only the earlier expiration

date.

(i) The time period upon which the

expiration date is based shall start with

the date of packaging.

(j) As provided in part 820 of this

chapter, all testing data must be retained

in each company’s files, and shall be

made available upon request for

inspection by the Food and Drug

Administration.

(k) Any latex condom not labeled

with an expiration date as required by

paragraph (c) of this section, and

initially delivered for introduction into

interstate commerce after the effective

date of this regulation is misbranded

under sections 201(n) and 502(a) and (f)

of Federal Food, Drug, and Cosmetic Act

(21 U.S.C. 321(n) and 352(a) and (f)).

Dated: August 20, 1997.

William B. Schultz,

Deputy Commissioner for Policy.

[FR Doc. 97–25587 Filed 9-25-97; 8:45 am]

BILLING CODE 4160–01–F

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8731]

RIN 1545–AU92

Section 42(d)(5) Federal Grants

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final and temporary

regulations.

SUMMARY: This document contains final

regulations with respect to the lowincome housing tax credit relating to the

application of section 42(d)(5) to certain

rental assistance programs under section

42(g)(2)(B)(i). The regulations clarify

that certain types of federal rental

assistance payments do not result in a

reduction in the eligible basis of a lowincome housing building.

DATES: These regulations are effective

September 26, 1997.

FOR FURTHER INFORMATION CONTACT:

Christopher J. Wilson, (202) 622–3040

(not a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations (TD 8713) and

a notice of proposed rulemaking crossreferencing the temporary regulations

were published in the Federal Register

for January 27, 1997 (62 FR 3792, 3848).

Those regulations provide that certain

federal rental assistance payments made

to the owner of a building on behalf of

low-income tenants are not federal

grants with respect to a building or its

operation that require a reduction in the

building’s eligible basis under section

42(d)(5) of the Internal Revenue Code

(Code). These payments include rental

assistance payments made under section

8 of the United States Housing Act of

1937 (Act) (42 U.S.C. 1437f), certain

payments made under section 9 of the

Act (42 U.S.C. 1437g), and payments

made under such other programs or

methods of rental assistance as may be

designated in the Federal Register or

the Internal Revenue Bulletin. The

notice of proposed rulemaking indicated

that comments would be considered on

those areas addressed in the temporary

regulations. Written comments

responding to the notice of proposed

rulemaking were received. There was no

request for a public hearing, and no

public hearing was held. After

consideration of all the written

comments, the proposed regulations

have been adopted, without change, by

this Treasury decision.

Summary of Comments

One commenter suggested that the

final regulations provide additional

guidance for state agencies to use in

determining whether similar programs

beyond those described in the

regulations should be considered grants

that cause a reduction in a building’s

eligible basis under section 42(d)(5) of

the Code. The final regulations do not

adopt this suggestion. The scope of this

regulation is limited to specified rental

assistance payments that are not grants

requiring a reduction in a building’s

eligible basis and any additional

payments the Secretary may designate

in the future.

Another commenter suggested that

§ 1.42–16(c)(3) should be deleted if it is

intended to impose conditions beyond

the restrictions under section 9 of the

Act, because the Service is improperly

infringing upon the Department of

Housing and Urban Development’s

(HUD) authority to provide subsidies

under section 9. The final regulations do

not adopt this suggestion. Section 1.42–

16 does not interpret HUD’s authority

for paying subsidies under section 9; it

describes the extent to which section 9

payments may be made without a

reduction in a building’s eligible basis

under section 42(d)(5) of the Code. The

conditions imposed on section 9

payments in § 1.42–16(c)(3) serve to

differentiate section 9 assistance for

operating expenses that function in a

manner similar to rental assistance

payments under section 8 of the Act

from section 9 assistance that is applied

to uses more closely associated with

operational expenses requiring a

reduction in a building’s eligible basis

under section 42(d)(5).

This commenter also suggested that if

§ 1.42–16(c)(3) were to be retained, it

should be clarified to provide that

actual operating costs be determined by

HUD and/or the appropriate public

housing agency. The commenter reasons

that HUD is already making this

determination in the context of deciding

the proper amount of assistance to make
Federal Register / Vol. 62, No. 187 / Friday, September 26, 1997 / Rules and Regulations 50503

under section 9 of the Act, and that

precedent already exists for allowing

HUD to make certain interpretations

relating to the section 42 program. The

final regulations do not adopt this

suggestion. The IRS and Treasury

believe they should retain the ability to

determine what costs are appropriately

characterized as operating costs that

require a reduction in a building’s

eligible basis under section 42(d)(5) of

the Code.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

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 these

regulations do not impose on small

entities a collection of information

requirement, the Regulatory Flexibility

Act (5 U.S.C. chapter 6) does not apply.

Therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, the notice of proposed rulemaking

preceding these regulations was

submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on its

impact on small business.

Drafting Information: The principal

author of these regulations is

Christopher J. Wilson, Office of

Assistant Chief Counsel (Passthroughs

and Special Industries). 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.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by removing the

entry for Section 1.42–16T and adding

an entry in numerical order to read as

follows:

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

Section 1.42–16 also issued under 26 U.S.C.

42(n); * * *

Par. 2. Section 1.42–16 is added to

read as follows:

§ 1.42–16 Eligible basis reduced by federal

grants.

(a) In general. If, during any taxable

year of the compliance period

(described in section 42(i)(1)), a grant is

made with respect to any building or the

operation thereof and any portion of the

grant is funded with federal funds

(whether or not includible in gross

income), the eligible basis of the

building for the taxable year and all

succeeding taxable years is reduced by

the portion of the grant that is so

funded.

(b) Grants do not include certain

rental assistance payments. A federal

rental assistance payment made to a

building owner on behalf or in respect

of a tenant is not a grant made with

respect to a building or its operation if

the payment is made pursuant to—

(1) Section 8 of the United States

Housing Act of 1937 (42 U.S.C. 1437f)

(2) A qualifying program of rental

assistance administered under section 9

of the United States Housing Act of

1937 (42 U.S.C. 1437g); or

(3) A program or method of rental

assistance as the Secretary may

designate by publication in the Federal

Register or in the Internal Revenue

Bulletin (see § 601.601(d)(2) of this

chapter).

(c) Qualifying rental assistance

program. For purposes of paragraph

(b)(2) of this section, payments are made

pursuant to a qualifying rental

assistance program administered under

section 9 of the United States Housing

Act of 1937 to the extent that the

payments—

(1) Are made to a building owner

pursuant to a contract with a public

housing authority with respect to units

the owner has agreed to maintain as

public housing units (PH-units) in the

building;

(2) Are made with respect to units

occupied by public housing tenants,

provided that, for this purpose, units

may be considered occupied during

periods of short term vacancy (not to

exceed 60 days); and

(3) Do not exceed the difference

between the rents received from a

building’s PH-unit tenants and a pro

rata portion of the building’s actual

operating costs that are reasonably

allocable to the PH-units (based on

square footage, number of bedrooms, or

similar objective criteria), and provided

that, for this purpose, operating costs do

not include any development costs of a

building (including developer’s fees) or

the principal or interest of any debt

incurred with respect to any part of the

building.

(d) Effective date. This section is

effective September 26, 1997.

§ 1.42–16T [Removed]

Par. 3. Section 1.42–16T is removed.

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

Approved: August 26, 1997.

Donald C. Lubick,

Acting Assistant Secretary of the Treasury.

[FR Doc. 97–25490 Filed 9–25–97; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8732]

RIN 1545–AT60

Available Unit Rule

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations concerning the treatment of

low-income housing units in a building

that is occupied by individuals whose

incomes increase above 140 percent of

the income limitation applicable under

section 42(g)(1). These regulations affect

owners of those buildings who claim the

low-income housing tax credit.

DATES: These regulations are effective

September 26, 1997.

For dates of applicability of these

regulations, see § 1.42–15(i).

FOR FURTHER INFORMATION CONTACT:

David Selig, (202) 622–3040 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

Background

On May 30, 1996, the IRS published

a notice of proposed rulemaking in the

Federal Register (PS–29–95 at 61 FR

27036) proposing amendments to the

Income Tax Regulations (26 CFR part 1)

under section 42(g)(2)(D) of the Internal

Revenue Code. A public hearing was

scheduled for September 17, 1996,

pursuant to a notice of public hearing

published simultaneously with the

notice of proposed rulemaking.

However, the IRS received no requests

to speak at the public hearing, and no

public hearing was held. Written

comments responding to the notice were

received. After consideration of all the

comments, the proposed regulations are

adopted as revised by this Treasury

decision.

Explanation of Revisions and Summary

of Comments

The general rule in section

42(g)(2)(D)(i) provides that if the income