Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules 53581

6.25(b)(1)(ii)96, and welcomes proposals

as to future implementation dates.

C. Eliminate the Three-Year Rule, While

Retaining the Five-Year Rule

Under this option, FAS would amend

the Regulation to delete § 6.25(b)(1)(i).

This action would eliminate the threeyear rule, while retaining the five-year

rule, which appears in § 6.25(b)(1)(ii).

Per the five-year rule, a licensee could

surrender more than 50 percent of its

historical licensed amount for two of

five consecutive years without penalty.

The five-year rule may be viewed as

giving licensees two years in which to

adjust to changed market conditions.

D. Eliminate the Five-Year Rule, While

Retaining the Three-Year Rule

Under this option, FAS could amend

the Regulation to delete § 6.25(b)(1)(ii).

This action would eliminate the fiveyear rule, while retaining the three-year

rule, which appears in § 6.25(b)(1)(i).

Per the three-year rule, a licensee could

surrender more than 50 percent of a

historical license amount for two years

without penalty and not be subjected to

license reduction if more than 50

percent of that license were surrendered

in the next two years. This also may be

viewed as giving licensees time to adjust

to changed market conditions.

Signed at Washington, DC, on October 3,

1997.

Christopher E. Goldthwait,

Acting Administrator.

[FR Doc. 97–26928 Filed 10–14–97; 8:45 am]

BILLING CODE 3410–10–M

FARM CREDIT ADMINISTRATION

12 CFR Parts 614, 616, 618, and 621

RIN 3052–AB63

Loan Policies and Operations;

Leasing; General Provisions;

Accounting and Reporting

Requirements

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

SUMMARY: The Farm Credit

Administration (FCA) through the Farm

Credit Administration Board (Board)

issues a proposed rule to amend its

regulations that provide Farm Credit

System (Farm Credit or System)

institutions, including the Farm Credit

Leasing Services Corporation (FCL),

regulatory guidance concerning leasing

activities. The proposed rule clarifies

leasing authorities of System

institutions and addresses issues

regarding leasing raised by System

institutions and FCA examiners. The

proposed rule is also intended to

provide clear and concise regulations

pertaining to the System’s leasing

activities and clarify what existing

regulations are applicable to leasing

activities.

DATES: Comments should be received on

or before December 15, 1997.

ADDRESSES: Comments may be mailed

or delivered to Patricia W. DiMuzio,

Director, Regulation Development

Division, Office of Policy Development

and Risk Control, Farm Credit

Administration, 1501 Farm Credit Drive,

McLean, Virginia 22102–5090, or sent

by facsimile transmission to FAX

number (703) 734–5784. Comments may

also be provided by electronic mail

addressed to ‘‘reg-comm@fca.gov’’ on

the internet. Copies of all

communications received will be

available for examination by interested

parties in the Office of Policy

Development and Risk Control, Farm

Credit Administration.

FOR FURTHER INFORMATION CONTACT:

Robert G. Magnuson, Policy Analyst,

Office of Policy Development and

Risk Control, Farm Credit

Administration, McLean, VA 22102–

5090, (703) 883–4498, TDD (703) 883–

4444,

or

James M. Morris, Senior Counsel, Office

of General Counsel, Farm Credit

Administration, McLean, VA 22102–

5090, (703) 883–4020, TDD (703) 883–

4444.

SUPPLEMENTARY INFORMATION: System

leasing operations continue to evolve to

meet the demands of agricultural and

aquatic producers, cooperatives, and

rural utilities. Several System

institutions have inaugurated new

leasing programs to meet the increased

demands for leasing and provide

customers with more options for

financing the expansion of agricultural

operations. In addition, the FCL has

experienced substantial growth since

1990 because of increased demand for

leases by agricultural and aquatic

producers and their cooperatives.

The System’s statutory leasing powers

were granted to supplement its lending

authorities. The leasing provisions of

the Farm Credit Act of 1971, as

amended (Act), remain separate

authorities, however, and do not

parallel the rules for lending in all

respects. The proposed regulations are

intended to clarify which lending

regulations are applicable to leasing

activities and how the rules applicable

to leasing differ from those governing

lending transactions. In addition, this

proposal provides specific guidance for

the FCL.

The FCL was chartered in 1983 as a

service corporation under section 4.25

of the Act. The FCL was initially

organized and owned by 14 of the 37

then existing System banks to acquire

and lease assets and provide related

services to eligible customers of the

System. Today, it is owned by all eight

of the System banks. As a service

corporation, it derives its leasing

authorities from the authorities of its

stockholder banks that operate under

titles I and III of the Act.

FCA’s regulations currently address

the leasing activities of System banks,

associations, and the FCL by defining

‘‘loans’’ as including leases in some, but

not all regulatory provisions and by

generally providing that service

corporations are subject to the

regulations applicable to their

organizing banks. This approach has

conveyed the FCA’s view that leasing

activities should ordinarily follow the

rules for lending and that the FCL

should be governed by the same rules as

other System lessors. This approach,

while having the virtue of simplicity,

has not always proved satisfactory. It

does not account for the ways in which

lease transactions differ from loan

transactions, nor does it reflect

differences between loans and leases in

the Act. The proposed regulations

would apply rules uniformly to all

System institutions that conduct leasing

activities under the same title(s) of the

Act.

The existing leasing regulations in

§§ 618.8050 and 618.8060 will be

deleted upon the promulgation of final

leasing regulations in part 616.

Technical changes are made to

§§ 614.4710 and 621.9 to conform with

the below amendments. A discussion of

the proposed amendments follows.

I. Leasing Authorities

1. Authority and Lessee Eligibility

Proposed § 616.6100 implements

sections 1.11(c)(2), 2.4(b)(4), and 3.7(a)

of the Act, which grant express leasing

authorities to various System

institutions. Proposed § 616.6100(a)

addresses the authority of Farm Credit

Banks (FCBs), agricultural credit banks

(ACBs), Federal land credit associations

(FLCAs), agricultural credit associations

(ACAs), and the FCL to lease facilities

under section 1.11(c)(2) of the Act.

Similarly, proposed § 616.6100(b)

reflects the equipment leasing authority

of: (1) FCBs, ACBs, and the FCL under

section 1.11(c)(2) of the Act; and (2)

ACAs and production credit

associations (PCAs) under section
53582 Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules

2.4(b)(4) of the Act. Proposed

§ 616.6100(a) and (b) reflect the

statutory authority of FCBs, ACAs,

PCAs, FLCAs, ACBs, and the FCL to

make leases to: (1) Bona fide farmers,

ranchers, or aquatic producers and

harvesters; (2) processing and/or

marketing operations; and (3) farmrelated service businesses.

Section 1.11(c)(2) of the Act specifies

that System banks may only lease

facilities or equipment to persons

eligible for credit under titles I or II of

the Act for use in their operations.

Section 2.4(b)(4) of the Act, however,

specifies that associations may only

lease equipment to stockholders for use

in their operations. In accordance with

these provisions, the scope of leasing

activity by System banks and

associations to bona fide farmers,

ranchers, and aquatic producers and

harvesters under proposed § 616.6100 is

restricted to those assets used in the

eligible lessee’s operations.

Proposed § 616.6100(c) provides that

the banks for cooperatives (BCs, ACBs,

and the FCL are authorized to lease

equipment to cooperatives, rural

electric, telecommunication, and cable

television utilities, water and waste

treatment facilities, and other entities

that comply with the requirements of

§ 613.3100(b), (c), and (d). As discussed

above, the Act grants PCAs the authority

to lease only equipment, and FLCAs the

authority to lease only facilities, but

these terms are not defined in the Act

and are not always clearly

distinguishable from each other.

Equipment is ordinarily considered to

be movable personal property. Facilities

include property that is attached, often

permanently, to real estate. The FCA

acknowledges that certain agricultural

property may have attributes of both

equipment and facilities. For example,

center-pivot irrigation systems may be

fairly viewed as either equipment or a

facility. Recognizing that agricultural

‘‘equipment’’ and ‘‘facilities’’ may in

some instances overlap, the proposed

rule does not attempt to provide a

specific regulatory definition of

equipment and facility. Instead,

proposed § 616.6100(d) requires each

institution to document that the leased

equipment or facility is authorized to be

leased under its leasing authorities.

While the FCA expects each System

institution involved in lending and

leasing to have the necessary expertise

to make such a determination, it will

review these determinations as part of

FCA’s routine examination process.

2. Purchase and Sale of Interests in

Leases

The current regulatory requirements

for transactions involving interests in

loans are in §§ 614.4325 and 614.4330.

These regulations have been in effect

since 1992 and establish the necessary

guidance and parameters for institutions

to follow for loan participations.

Although the FCA believes that

analogous requirements should apply to

the purchase and sale of lease interests,

a definition of a participation in a lease

is needed.

The FCA’s current regulations on loan

purchases and sales do not differentiate

participations in leases from

participations in loans. FCA regulations

define ‘‘loan’’ for purposes of subpart H

of part 614 as ‘‘any extension of credit

or similar financial assistance of the

type authorized under the Act, such as

leases * * * and other similar

transactions.’’ A ‘‘loan participation’’ is

defined as ‘‘a fractional undivided

interest in the principal amount of a

loan that is sold by a lead lender to a

participating institution in accordance

with the requirements of § 614.4330 of

this subpart.’’ Although the definition of

a ‘‘loan’’ in § 614.4325(a)(3) specifically

includes ‘‘leases,’’ the definition of a

‘‘loan participation’’ in § 614.4325(a)(4)

does not, by its terms, address the very

different structure of a lease.

In leases, there is no separately

identified ‘‘principal’’ and ‘‘interest.’’

Instead, the lessor receives a stream of

lease payments, and a purchase price (if

a purchase option is exercised) or the

return of the leased asset (if a purchase

option is not exercised). Since leases are

structured differently than loans, the

FCA proposes a definition of a ‘‘lease

participation’’ that addresses the

different structure of a lease transaction

and provides sufficient flexibility to

cover lease situations that are analogous

to a ‘‘fractional undivided interest in the

principal amount’’ of a loan. Viewed

from the lessor’s perspective, a lease has

two primary components, the stream of

lease payments and the residual value.

These two components of a lease, lease

payments and residual value, do not

correspond neatly to the concepts of

interest, principal, and collateral in a

loan transaction. Because each of these

components of a lease has distinct

characteristics and risks, the FCA

believes that it is appropriate to

consider interests in leases to be lease

participations when they represent a

fractional undivided interest in the

whole of either or both of these two

components. Accordingly, the FCA

proposes to define a lease participation

in § 616.6000(d) as a fractional

undivided interest in: (1) All of the lease

payments; (2) the residual value of all of

the property leased; or (3) all of the

lease payments and the residual value of

all of the property leased.

Other than the new definition of

participation in § 616.6000(d), the

proposed lease participation regulations

contained in § 616.6110 closely parallel

most of the provisions of §§ 614.4325

and 614.4330 governing loan

participations, except for the provisions

concerning ‘‘collateral’’ or other loan

specific concepts.

Amendments to the Act in 1992 and

1994 granted System institutions

authority to participate in financing

provided to similar entities. The

regulations implementing this recent

authority for loans are found in

§ 613.3300 of this chapter. The FCA

believes that participations in leases

made to similar entities are also

authorized by the recent amendments to

the Act. The proposed regulations

address similar entity lease

participations for the first time. New

provisions concerning purchasing

interests in leases made to similar

entities are proposed at § 616.6110(g).

The proposed provisions are generally

parallel to the provisions of § 613.3300

that apply to loan participations.

Proposed § 616.6110(g) identifies the

terminology changes necessary to apply

the regulation to similar entity lease

participations.

The proposed lease participation

regulations set forth in § 616.6115 apply

the provisions of § 614.4330 with minor

changes in terminology to lease

participations.

3. Out-of-Territory Leases

Farm Credit institutions seeking to

provide loan services to borrowers

outside their respective chartered

territories are required to coordinate

such activities with other Farm Credit

institutions offering similar lending

services in those territories. Proposed

§ 616.6120 provides that a Farm Credit

bank or association that conducts

leasing activities outside its chartered

territory is subject to the same

requirements that § 614.4070 imposes

on out-of-territory loans.

As a service corporation owned by the

eight System banks, the FCL is chartered

to do business nationwide. Therefore, it

is not subject to out-of-territory

requirements. The proposed regulations

do not require other Farm Credit

institutions to notify or obtain

concurrence from the FCL with respect

to out-of-territory leases. The FCA

believes this is appropriate, because the

FCL does not have exclusive leasing

authority in a particular geographic
Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules 53583

1Final loan underwriting regulations are

currently under consideration by the FCA. See the

proposed rule published in the Federal Register on

April 15, 1996 (61 FR 16403).

territory but provides leasing services

concurrently with other System

institutions.

II. Lease Operations

1. Leasing Policies and Underwriting

Standards

Proposed § 616.6200 would require

System institutions engaged in leasing

to adopt written policies and

underwriting standards governing such

activity to ensure that all risks

associated with leasing are properly

managed. There are many similarities

between the credit risk of a loan and the

payment risk of a lease. In each case, the

borrower’s or lessee’s ability to make the

contractual payments is a primary

concern. Therefore, some aspects of the

primary payment analysis required of a

lessor are similar to the analysis

appropriate for a lender making a loan.

The most significant difference is that in

leasing, not only is there the risk

associated with the lessee’s ability to

service its contractual lease obligation,

but there is the additional risk

associated with establishing the

appropriate residual values on the

equipment or facility and the ultimate

remarketing of the leased property.

Therefore, from a safety and soundness

perspective, System institutions

engaged in leasing need to have

adequate policies and procedures that

address both loan and lease

underwriting to ensure prudent

management of both activities.

From a payment risk perspective, the

proposed rule requires System

institutions engaged in leasing to

comply with the minimum loan

underwriting standards in part 614

regarding the minimum amount of

financial information required of the

applicant since the risks are very similar

for both loans and leases. The loan

underwriting regulations 1 would

require written policies and procedures

to address underwriting standards such

as the minimum supporting credit

information required, credit analysis

procedures, and repayment capacity of

the applicant.

In addition to requiring institutions to

exercise due diligence in reviewing the

applicant’s ability to make payments as

required under part 614, the proposed

rule also requires institutions engaged

in leasing to adopt policies and

underwriting standards that address the

unique risks associated with lease

transactions. These additional risks

include things such as the establishment

of residual values of the leased property,

the types of equipment leased,

remarketing of leased property, tax

treatment of lease transactions, and

liability associated with ownership. The

proposed rule provides only a minimum

framework. The complexity and depth

of the policies and underwriting

standards should be consistent with the

current or planned leasing activity and

the institution’s risk-bearing ability.

2. Investment in Leased Assets

Proposed § 616.6210 authorizes an

institution to purchase property to lease

if the acquisition is consistent with the

type of leasing being conducted or

planned in the future. The purpose of

this provision is to prohibit System

institutions from speculating in the

acquisition of property or facilities.

3. Lending and Leasing Limits

The FCA believes that a consistent

approach should be applied to financial

risks in all System institutions,

including the FCL, to properly limit any

concentration of risk. Limits on the

amount of financing (whether in the

form of loans or leases) a System

institution can provide to any one

customer protect against unnecessarily

large risks to an institution’s capital.

The proposed regulatory changes would

limit an institution’s exposure to risk

from a single lessee or borrower, and

prescribe consistent standards for leases

in all types of System institutions.

Section 616.6220 of the proposed

regulations refers to the lending and

leasing limit regulations in subpart J of

part 614. The proposed regulations

would amend subpart J in order to make

it clear that the lending limits apply to

all leases made by System banks and

associations. The FCA proposes to

modify the title of subpart J to be

‘‘Lending and Leasing Limits,’’ and to

make conforming changes throughout

the subpart. The FCA believes all

System institutions should have a single

limit that applies to all types of

financial obligations. Both loans and

leases should be measured against this

limit when calculating how much risk

an institution can absorb from a single

customer. Likewise, all loans and leases

to a single borrower should be attributed

to that customer when calculating the

total risk against the institutions’

lending and leasing limit.

In § 614.4350(a) the definition of

‘‘borrower’’ would be amended to

clarify that, for the purposes of this

subpart, the term ‘‘borrower’’ includes

any customer to whom an institution

has made a lease or a commitment to

make a lease. In § 614.4350(c) the

definition of ‘‘loan’’ is proposed to be

amended to include all types of leases

(operating, financing, and lease

interests.)

In §§ 614.4352 through 614.4355,

proposed changes to clarify that a

System institution is prohibited from

making a lease or a loan if the

consolidated amount of all loans and

leases to a single customer exceeds a

specific percentage of the institution’s

lending and leasing limit base.

A new § 614.4356 is proposed that

prescribes standard leasing limits for the

FCL. The proposed regulation prohibits

the FCL from making leases to a single

customer that exceed 25 percent of the

FCL’s leasing limit base. This

requirement is similar to the risk

exposure allowed for other System

institutions.

In proposed § 614.4358(a)(1),

outstanding lease balances are added to

the items included in the computation

of obligations. In § 614.4358(b), the FCA

proposes to add a new paragraph to

address certain exclusions from the

lending and leasing limits regarding

participations or interests sold in leases.

The proposed regulation at

§ 614.4358(b)(5) allow interests in leases

sold, including participation interests,

to be excluded from leases to a customer

subject to the lending and leasing limit

when the sale agreement meets specific

requirements. This exclusion is based

on the premise that the institution

originating the lease retains some

interest in the lease, whether it is in the

lease payments or residual value. To the

extent that such an interest is retained,

the originating institution may exclude

that portion of the lease payments or

residual interests in which it no longer

has a legitimate ownership interest. In

§ 614.4360, the FCA proposes to add a

new paragraph (d) to clarify that all

leases, except those that are permitted

under § 614.4361, must be in

compliance with the limits at all times.

4. Portfolio Limitations

Under proposed § 616.6230, the

restrictions in sections 1.11(a)(2) and

2.4(a)(1) of the Act would apply to

leases that FCBs, ACBs, direct lender

associations, and the FCL make to

agricultural or aquatic producers who

supply less than 20 percent of the

throughput to a processing and/or

marketing operation. More specifically,

leases by Farm Credit banks and direct

lender associations to customers who

supply less than 20 percent of the

throughput used in a processing and/or

marketing operation would be subject to

the 15-percent portfolio ceiling in

§ 613.3010(b)(2). Furthermore, proposed

§ 616.6230(b) places this same 15-

percent portfolio limitation on the FCL
53584 Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules

for its leases made to processing and/or

marketing operations eligible under

§ 613.3010.

5. Stock Purchase Requirements

The Act authorizes FCBs to lease

facilities and equipment to ‘‘persons

eligible for credit.’’ The Act authorizes

PCAs and BCs, respectively, to lease

equipment to ‘‘stockholders,’’ but does

not prescribe any minimum stock

requirements for leases. Accordingly,

the FCA concludes that lessees who

lease equipment from PCAs, ACAs, BCs,

or ACBs under titles II and III must be

stockholders.

Because the minimum stock purchase

requirement under section 4.3A(c)(1)(E)

does not apply to leases, the FCA has

determined that the purchase of a single

share is sufficient to satisfy the stock

requirement. Institutions may satisfy the

minimum stock requirement by

counting outstanding shares

stockholders already own in the

institution making the lease. The

minimum stock requirement in

proposed § 616.6240(a) does not apply

to the FCL due to its stockholders being

System banks, and not its lease

customers. The FCA also proposes that

the disclosure requirements for equities

issued as a condition of obtaining a

lease are the same as disclosure

requirements for equities issued as a

condition of obtaining a loan as required

under § 615.5250 (a) and (b) of this

chapter.

6. Disclosure Requirements

The FCA has concluded that the

borrower rights provisions of the Act do

not apply to leases, because the

borrower rights provisions of the Act

explicitly refer to ‘‘loans,’’ but not

leases. Significantly, lessees have no

ownership rights in the leased

equipment or facilities during the term

of the lease, and thus, many of the

borrower rights provisions such as those

pertaining to restructuring or right of

first refusal are not applicable to leasing.

However, proposed § 616.6250(a) does

require that lease applicants be

provided, at a minimum, a copy of all

lease documents signed by the lessee,

not later than the time of lease closing.

In addition, proposed § 616.6250(b)

requires a System institution to render

its decision on the lease application in

as expeditious a manner as is practical.

The proposed rule also requires a

System institution to provide prompt

written notice of its decision to the

applicant.

List of Subjects

12 CFR Part 614

Agriculture, Banks, banking, Flood

insurance, Foreign trade, Reporting and

recordkeeping requirements, Rural

areas.

12 CFR Part 616

Agriculture, Banks, banking, leasing.

12 CFR Part 618

Agriculture, Archives and records,

Banks, banking, Insurance, Reporting

and recordkeeping requirements, Rural

areas, Technical assistance.

12 CFR Part 621

Accounting, Agriculture, Banks,

banking, Penalties, Reporting and

recordkeeping requirements, Rural

areas.

For the reasons stated in the

preamble, it is proposed that parts 614,

618 and 621 be amended and part 616

be added to chapter VI, title 12 of the

Code of Federal Regulations to read as

follows:

PART 614—LOAN POLICIES AND

OPERATIONS

1. The authority citation for part 614

is revised to read as follows:

Authority: 42 U.S.C. 4012a, 4104a, 4104b,

4106, and 4128; secs. 1.3, 1.5, 1.6, 1.7, 1.9,

1.10, 1.11, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13,

2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28,

4.12, 4.12A, 4.13, 4.13B, 4.14, 4.14A, 4.14C,

4.14D, 4.14E, 4.18, 4.18A, 4.19, 4.25, 4.26,

4.27, 4.28, 4.36, 4.37, 5.9, 5.10, 5.17, 7.0, 7.2,

7.6, 7.8, 7.12, 7.13, 8.0, 8.5 of the Farm Credit

Act (12 U.S.C. 2011, 2013, 2014, 2015, 2017,

2018, 2019, 2071, 2073, 2074, 2075, 2091,

2093, 2094, 2096, 2121, 2122, 2124, 2128,

2129, 2131, 2141, 2149, 2183, 2184, 2199,

2201, 2202, 2202a, 2202c, 2202d, 2202e,

2206, 2206a, 2207, 2211, 2212, 2213, 2214,

2219a, 2219b, 2243, 2244, 2252, 2279a,

2279a-2, 2279b, 2279b-1, 2279b-2, 2279f,

2279f-1, 2279aa, 2279aa-5); sec. 413 of Pub.

L. 100–233, 101 Stat. 1568, 1639.

2. The heading of subpart J is revised

to read as follows:

Subpart J—Lending and Leasing

Limits

3. Section 614.4350 is amended by

revising paragraphs (a) and (c) to read as

follows:

§ 614. 4350 Definitions.

* * * * *

(a) Borrower means an individual,

partnership, joint venture, trust,

corporation, or other business entity

(except a Farm Credit System

association or other financing

institution, as defined in § 614.4540) to

which an institution has made a loan or

a commitment to make a loan either

directly or indirectly. For the purposes

of this subpart, the term ‘‘borrower’’

includes any customer to which an

institution has made a lease or a

commitment to make a lease.

* * * * *

(c) Loan means any extension of, or

commitment to extend, credit

authorized under the Act whether it

results from direct negotiations between

a lender and a borrower or is purchased

from or discounted for another lender,

including participation interests. The

term ‘‘loan’’ includes loans and leases

outstanding, obligated but undisbursed

commitments to lend or lease, contracts

of sale, notes receivable, other similar

obligations, guarantees, and all types of

leases. An institution ‘‘makes a loan or

lease’’ when it enters into a commitment

to lend or lease, advances new funds,

substitutes a different borrower or lessee

for a borrower or lessee who is released,

or where any other person’s liability is

added to the outstanding loan, lease or

commitment.

* * * * *

§ 614.4351 [Amended]

4. Section 614.4351 is amended by

adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and ‘‘limit

base’’ each place they appear in the

heading and the entire section.

§ 614.4352 [Amended]

5. Section 614.4352 is amended by

adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and ‘‘limit

base’’ in paragraphs (a) and (b)(1), and

by adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and

‘‘limits’’ in paragraph (b)(2).

§ 614.4353 [Amended]

6. Section 614.4353 is amended by

adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and ‘‘limit

base.’’

§ 614.4354 [Amended]

7. Section 614.4354 is amended by

adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and ‘‘limit

base.’’

§ 614.4355 [Amended]

8. Section 614.4355 is amended by

adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and ‘‘limit

base’’ in the introductory paragraph,

and by removing the word ‘‘lending’’ in

the headings of paragraphs (a) and (b).

§§ 614.4356–614.4360 [Redesignated]

9. Subpart J is amended by

redesignating § 614.4356 through
Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules 53585

§ 614.4360 as § 614.4357 through

§ 614.4361, and by adding a new

§ 614.4356 to read as follows:

§ 614.4356 Farm Credit Leasing Services

Corporation.

The Farm Credit Leasing Services

Corporation may enter into lease

agreements if the consolidated amount

of all leases and undisbursed

commitments to a single lessee or any

related entities does not exceed 25

percent of its leasing limit base.

10. Newly designated § 614.4358 is

amended by adding the words ‘‘and

leasing’’ between the words ‘‘lending’’

and ‘‘limit’’ in the introductory text of

paragraphs (a) and (b); by adding the

words ‘‘lease balances outstanding’’

after the word ‘‘loans’’ the first place it

appears in paragraph (a)(1); by removing

the reference ‘‘§ 614.4358’’ and adding

in its place the reference ‘‘§ 614.4359’’

in paragraph (a)(3); by redesignating

existing paragraph (b)(5) as (b)(6); and

by adding new paragraph (b)(5) to read

as follows:

§ 614.4358 Computation of obligations.

(b) * * *

(5) Interests in leases sold, including

participation interests, when the sale

agreement meets the following

requirements:

(i) The interest sold must be a

fractional undivided interest in all the

lease payments, the residual value of all

the leased property, or both;

(ii) The interest must be sold without

recourse; and

(iii) The agreement under which the

interest is sold must provide for the

sharing of all payments on a pro rata

basis according to the percentage

interest in the lease.

* * * * *

§ 614.4359 [Amended]

11. Newly designated § 614.4359 is

amended by adding the words ‘‘and

leasing’’ between the words ‘‘lending’’

and ‘‘limit(s)’’ in paragraphs (a)

introductory text, (b), and (c); by

removing the reference ‘‘§ 614.4356’’

and adding in its place, the reference

‘‘§ 614.4357’’ in paragraph (a)(1)(iii),

and by removing the reference

‘‘§ 614.4358’’ and adding in its place,

the reference ‘‘§ 614.4359’’ in the

heading for column two in Table 1.

12. Newly designated § 614.4360 is

amended by adding the words ‘‘and

leasing’’ between the words ‘‘lending’’

and ‘‘limit’’ in the heading and in

paragraphs (a), (b), (c), and (d); by

revising the reference ‘‘§ 614.4360’’ and

adding in its place, the reference

‘‘§ 614.4361’’ in paragraph (a); by

removing the reference

‘‘§ 614.4359(b)(3)’’ and adding in its

place, the reference ‘‘§ 614.4360(b)(3)’’

in paragraph (c); and by redesignating

paragraph (d) as paragraph (e); and by

adding a new paragraph (d) to read as

follows:

§ 614.4360 Lending and leasing limit

violations.

* * * * *

(d) All leases, except those that are

permitted under the provisions of

§ 614.4361, reading ‘‘effective date of

this subpart’’ in § 614.4361(a) and

‘‘effective date of these regulations’’ in

§ 614.4361(b) as ‘‘effective date of this

amendment,’’ shall be in compliance

with the lending and leasing limit on

the date the lease is made, and at all

times thereafter.

* * * * *

§ 614.4361 [Amended]

13. Newly designated § 614.4361 is

amended by adding the words ‘‘and

leasing’’ between the words ‘‘lending’’

and ‘‘limit(s)’’ in each place they appear

in paragraphs (a) and (b), and by

removing the reference ‘‘§ 614.4359’’

and adding in its place, the reference

‘‘§ 614.4360’’ in paragraph (b).

Subpart O—Banks for Cooperatives

and Agricultural Credit Banks

Financing International Trade

§ 614.4710 [Amended]

14. Section 614.4710 is amended by

adding the words ‘‘and leasing’’

between the words ‘‘lending’’ and

‘‘limits’’ in the last sentence of the

introductory paragraph and in

paragraphs (a)(2) and (a)(3).

15–16. A new part 616 is added to

read as follows:

PART 616—LEASING

Subpart A—Leasing Authorities

Sec.

616.6000 Definitions.

616.6100 Authority and lessee eligibility.

616.6110 Purchase and sale of interests in

leases.

616.6115 Lease participations.

616.6120 Out-of-territory leasing.

Subpart B—Leasing Operations

616.6200 Leasing policies and underwriting

standards.

616.6210 Investment in leased assets.

616.6220 Leasing limits.

616.6230 Portfolio limitations.

616.6240 Stock purchase requirements.

616.6250 Disclosure requirements.

Authority: Secs. 1.3, 1.5, 1.6, 1.7, 1.9, 1.10,

1.11, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13, 2.15,

3.0, 3.1, 3.3, 3.7, 3.8, 3.9, 3.10, 3.20, 3.28, 4.3,

4.3A, 4.13, 4.13A, 4.13B, 4.14, 4.14A, 4.14C,

4.14D, 4.14E, 4.18, 4.18A, 4.25, 4.26, 4.27,

4.28, 4.36, 4.37, 5.9, 5.10, 5.17, 7.0, 7.2, 7.3,

7.6, 7.8, 7.12, 7.13 of the Farm Credit Act (12

U.S.C. 2011, 2013, 2014, 2015, 2017, 2018,

2019, 2071, 2073, 2074, 2075, 2091, 2093,

2094, 2097, 2121, 2122, 2124, 2128, 2129,

2130, 2131, 2141, 2149, 2154, 2154a, 2199,

2200, 2201, 2202, 2202a, 2202c, 2202d,

2202e, 2206, 2206a, 2211, 2212, 2213, 2214,

2219a, 2219b, 2243, 2244, 2252, 2279a,

2279a-2, 2279a-3, 2279b, 2279c-1, 2279f,

2279f-1).

Subpart A—Leasing Authorities

§ 616.6000 Definitions.

For the purposes of this part, the

following definitions shall apply:

(a) Interests in leases means

ownership interests in any aspect of a

lease transaction, including servicing

rights.

(b) Lead lessor means an institution

having a direct contractual relationship

with a lessee to make a lease, which

institution sells or assigns an interest or

interests in such lease to one or more

other lessors.

(c) Lease means any contractual

obligation to own and lease, or lease

with the option to purchase, equipment

or facilities.

(d) Lease participation means, with

respect to a lease that is sold by a lead

lessor to a participating institution in

accordance with the requirements of

§ 616.6100, a fractional undivided

interest in:

(1) All of the lease payments;

(2) The residual value of all of the

property leased; or

(3) All of the lease payments and the

residual value of all of the property

leased.

(e) Participating institution means an

institution that purchases a lease

participation originated by another

lessor.

(f) Sale with recourse means a sale of

a lease or an interest in a lease in which

the seller:

(1) Retains some risk of loss from the

transferred asset for any cause except

the seller’s breach of usual and

customary warranties or representations

designed to protect the purchaser

against fraud or misrepresentation; or

(2) Has an obligation to make

payments to any party resulting from:

(i) Default on the lease by the lessee

or guarantor or any other deficiencies in

the lessee’s performance;

(ii) Changes in the market value of the

assets after transfer;

(iii) Any contractual relationship

between the seller and purchaser

incident to the transfer that, by its

terms, could continue even after final

payment, default, or other termination

of the assets transferred; or

(iv) Any other cause, except the

retention of servicing rights alone shall

not constitute recourse.
53586 Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules

§ 616.6100 Authority and lessee eligibility.

(a) Facility leases. Farm Credit Banks,

agricultural credit banks, Federal land

credit associations, agricultural credit

associations, and the Farm Credit

Leasing Services Corporation may own

and lease, or lease with option to

purchase, to any person or entity that is

eligible to borrow under §§ 613.3000,

613.3010, or 613.3020 of this chapter,

facilities needed in the operations of

that person or entity.

(b) Equipment leases. Farm Credit

Banks, agricultural credit banks,

production credit associations,

agricultural credit associations, and the

Farm Credit Leasing Services

Corporation may own and lease, or lease

with option to purchase, to any person

or entity that is eligible to borrow under

§§ 613.3000, 613.3010, or 613.3020 of

this chapter, equipment needed in the

operations of that person or entity.

(c) Equipment leases under title III of

the Act. Agricultural credit banks, banks

for cooperatives, and the Farm Credit

Leasing Services Corporation may own

and lease, or lease with option to

purchase, to cooperatives and other

entities that comply with the

requirements of § 613.3100 (b), (c), and

(d) of this chapter, equipment needed in

the operations of those cooperatives or

other entities.

(d) Documentation. Each institution

shall adequately document that the

leased asset is within its statutory

authority to lease equipment or

facilities.

§ 616.6110 Purchase and sale of interests

in leases.

(a) Authority to purchase and sell

interests in leases. Leases and interests

in leases may only be sold in

accordance with each institution’s

leasing authorities, as set forth in

§ 616.6100. No Farm Credit System

institution may purchase from an

institution that is not a Farm Credit

System institution any interest in a

lease, unless the interest is a

participation interest that qualifies

under the institution’s leasing authority,

as set forth in § 616.6100, and meets the

requirements of § 616.6115.

(b) Policies. Each Farm Credit System

institution that is authorized to sell or

purchase interests in leases under this

subpart shall exercise that authority in

accordance with a policy adopted by its

board of directors that addresses the

following matters:

(1) The types of purchasers to which

the institution is authorized to sell

interests in leases;

(2) The types of leases in which the

institution may purchase or sell an

interest and the types of interests which

may be purchased or sold;

(3) The underwriting standards to be

applied in the purchase of interests in

leases;

(4) Such limitations on the aggregate

lease payments and/or residual amount

of interests in leases that the institution

may purchase from a single institution

as are necessary to diversify risk, and

such limitations on the aggregate

amounts the institution may purchase

from all institutions as are necessary to

assure that service to the territory is not

impeded;

(5) Provision for the identification and

reporting of leases in which interests are

sold or purchased;

(6) Requirements for providing and

securing in a timely manner adequate

financial and other information needed

to make an independent judgment; and

(7) Any limitations or conditions to

which sales or purchases are subject

that the board deems appropriate,

including arbitration.

(c) Purchase and sale agreements.

Agreements to purchase or sell an

interest in a lease shall, at a minimum:

(1) Identify the particular lease(s) to

be covered by the agreement;

(2) Provide for the transfer of lessee

information on a timely and continuing

basis;

(3) Identify the nature of the

interest(s) sold or purchased;

(4) Set forth the rights and obligations

of the parties and the terms and

conditions of the sale; and

(5) Contain any terms necessary for

the appropriate administration of the

lease and the protection of the interests

of the Farm Credit System institution.

(d) Independent judgment. Each

institution that purchases an interest in

a lease shall make a judgment on the

payment ability of the lessee that is

independent of the originating or lead

lessor and any intermediary seller or

broker prior to the purchase of the

interest and prior to any servicing action

that alters the terms of the original

agreement, which judgment shall not be

delegated to any person(s) not employed

by the institution. A Farm Credit System

institution that purchases a lease or any

interest therein may use information,

such as appraisals or inspections,

furnished by the originating or lead

lessor, or any intermediary seller or

broker; however, the purchasing Farm

Credit System institution shall

independently evaluate such

information when exercising its

independent judgment. The

independent judgment shall be

documented by a payment analysis that

considers factors set forth in § 616.6200

and is independent of the originating

institution and any intermediary seller

or broker. The payment analysis shall

consider such financial and other lessee

information as would be required by a

prudent lessor and shall include an

evaluation of the capacity and reliability

of the servicer. Boards of directors of

jointly managed institutions shall adopt

procedures to ensure that the interests

of their respective shareholders are

protected in participation between such

institutions.

(e) Limitations. The aggregate interests

in lease payments or residual values of

leases purchased from a single lead

lessor and the aggregate interests in

lease payments or residual values in

leases purchased from other institutions

shall not exceed the limits set in the

institution’s policy.

(f) Sales with recourse. When a lease

or interest in a lease is sold with

recourse, it shall be accorded the

following treatment:

(1) The lease shall be considered, to

the extent of the recourse or guaranty,

a lease by the purchaser to the seller, as

well as a lease from the seller to the

lessee, for the purpose of determining

whether total leases to a lessee are

within the lending or leasing limits

established in subpart J of part 614.

(2) The amount of the lease subject to

the recourse agreement shall be

considered a lease sold with recourse

for the purpose of computing permanent

capital ratios.

(g) Similar entity lease transactions.

The provisions of § 613.3300 of this

chapter that apply to interests in loans

made to similar entities shall apply to

interests in leases made to similar

entities. In applying these provisions,

the term ‘‘loan’’ shall be read to include

the term ‘‘lease’’ and the term ‘‘principal

amount’’ shall be read to include the

term ‘‘lease amount.’’

§ 616.6115 Lease participations.

Agreements to purchase or sell a lease

participation interest shall be subject to

the provisions of § 616.6110, and, in

addition, shall satisfy the requirements

of this section.

(a) Participation agreements.

Agreements to purchase or sell a

participation interest in a lease shall, in

addition to meeting the requirements of

§ 616.6110(c), at a minimum:

(1) Define the duties and

responsibilities of the participating

institution and the lead lessor, and/or

the servicing institution, if different

from the lead lessor.

(2) Provide for lease servicing and

monitoring of the servicer;

(3) Set forth authorization and

conditions for action in the event of

lessee distress or default;
Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules 53587

(4) Provide for sharing of risk;

(5) Set forth conditions for the

offering and acceptance of the lease

participation and termination of the

agreement;

(6) Provide for sharing of fees, and

costs between participating institutions;

(7) Provide for a method of resolution

of disagreements arising under the

agreement between two or more

institutions;

(8) Specify whether the contract is

assignable by either party; and

(9) Provide for the issuance of

certificates evidencing an undivided

interest in a lease.

(b) Retention requirement. No

participation interest may be purchased

from an institution that is not a Farm

Credit System institution unless the

servicing institution has an ownership

interest in the lease payments and/or

residual amount equal to the lesser of 10

percent of the lease payments and/or

residual amount or such lesser amount

as represents the servicing institution’s

leasing limit, which ownership interest

cannot be assigned separately from the

servicing rights.

(c) Intrasystem participations. Leases

participated between or among Farm

Credit System institutions shall meet

the lessee eligibility, membership, lease

term, lease amount, and stock purchase

requirements of the originating lessor.

§ 616.6120 Out-of-territory leasing.

The out-of-territory consent and

notification requirements of § 614.4070

of this chapter shall apply to leases.

Institutions shall obtain consent from at

least one institution that, at the time the

lease is executed, offers similar leasing

services in the territory. Institutions are

not required to obtain concurrence from

or provide notification to the Farm

Credit Leasing Services Corporation

when making out-of-territory leases.

Subpart B—Leasing Operations

§ 616.6200 Leasing policies and

underwriting standards.

The board of each institution engaged

in lease underwriting shall set forth

written policies and procedures

governing such activity that reflect

prudent lease practices that control risk

and comply with all applicable laws

and regulations. Any leasing activity

shall comply with the requirements

under the lending policies and loan

underwriting standards in part 614 of

this chapter. Institutions engaged in the

making, purchasing, or syndicating of

leases also must establish written

policies and procedures that address the

additional risks associated with leasing.

Written underwriting policies and

procedures shall address the following,

if applicable:

(a) Financial condition, capacity and

integrity of the applicant;

(b) Repayment capacity of the

applicant;

(c) Appropriateness of the lease

amount, purpose, and terms and

conditions;

(d) Establishment of a prudent

residual value at the inception of the

lease and the related process of

estimating the leased asset’s market

value during the lease term;

(e) Types of equipment and facilities

the institution will lease;

(f) Remarketing of leased property and

associated risks;

(g) Property tax and sales tax

reporting;

(h) Title and ownership of leased

assets;

(i) Title and licensing for motor

vehicles;

(j) Liability associated with

ownership, including any

environmental hazards or risks;

(k) Insurance requirements for both

the lessor and lessee;

(l) Classification of leases in

accordance with generally accepted

accounting principles; and

(m) Tax treatment of lease

transactions and associated risks.

§ 616.6210 Investment in leased assets.

An institution may acquire property

to be leased, if the acquisition of the

property is consistent with the leasing

then conducted by the institution or is

consistent with a business plan for

expansion of the institution’s existing

leasing business or for entry into the

leasing business.

§ 616.6220 Leasing limits.

All leases made by Farm Credit

System institutions shall be subject to

the lending and leasing limits

prescribed in subpart J of part 614 of

this chapter.

§ 616.6230 Portfolio limitations.

(a) Leases that Farm Credit banks and

direct lender associations make under

§ 616.6100 (a) or (b) to processing or

marketing operations shall be subject to

the requirements of § 613.3010(b) of this

chapter, reading the term ‘‘loan’’ to

include the term ‘‘lease’’ and the term

‘‘borrower’’ to include ‘‘lessee.’’

(b) Processing and/or marketing leases

that the Farm Credit Leasing Services

Corporation makes to eligible lessees

who supply, on a regular basis, less than

20 percent of the throughput shall be

subject to the requirements of

§ 613.3010 (b)(1) and (b)(3) of this

chapter, reading the term ‘‘lease’’ in the

place of the term ‘‘loan.’’

§ 616.6240 Stock purchase requirements.

(a) Each System institution making an

equipment lease under titles II or III of

the Act shall require the lessee to

purchase at least one share of stock in

accordance with its bylaws, unless the

lessee already owns stock in the

institution making the lease. This

provision does not apply to the Farm

Credit Leasing Services Corporation.

(b) The disclosure requirements of

§ 615.5250 (a) and (b) of this chapter

shall apply to stock purchased as a

condition for obtaining a lease.

§ 616.6250 Disclosure requirements.

(a) Each System institution shall

furnish to each lessee a copy of all lease

documents signed by the lessee in

connection with the lease, not later than

the time of lease closing.

(b) Each System institution shall

render its decision on a lease

application in as expeditious a manner

as is practical. Upon reaching a decision

on a lease application, the institution

shall provide prompt written notice of

its decision to the applicant. Where the

lessor makes an adverse decision on a

lease application, the notice shall

include the specific reasons for the

institution’s action.

PART 618—GENERAL PROVISIONS

17. The authority citation for part 618

continues to read as follows:

Authority: Secs. 1.5, 1.11, 1.12, 2.2, 2.4,

2.5, 2.12, 3.1, 3.7, 4.12, 4.13A, 4.25, 4.29, 5.9,

5.10, 5.17 of the Farm Credit Act (12 U.S.C.

2013, 2019, 2020, 2073, 2075, 2076, 2093,

2122, 2128, 2183, 2200, 2211, 2218, 2243,

2244, 2252).

Subpart C—Leasing

§§ 618.8050 and 618.8060 Subpart C

[Removed and Reserved]

18. Subpart C, consisting of

§§ 618.8050 and 618.8060, is removed

and reserved.

PART 621—ACCOUNTING AND

REPORTING REQUIREMENTS

19. The authority citation for part 621

continues to read as follows:

Authority: Secs. 5.17, 8.11 of the Farm

Credit Act (12 U.S.C. 2252, 2279aa–11).

Subpart C—Loan Performance and

Valuation Assessment

§ 621.7 [Amended]

20. Section 621.7 is amended by

removing the reference

‘‘§ 614.4358(a)(2)’’ and adding in its

place, the reference ‘‘§ 614.4359(a)(2)’’

in paragraph (a)(2)(iii).
53588 Federal Register / Vol. 62, No. 199 / Wednesday, October 15, 1997 / Proposed Rules

Dated: October 8, 1997.

Floyd Fithian,

Secretary, Farm Credit Administration Board.

[FR Doc. 97–27146 Filed 10–14–97; 8:45 am]

BILLING CODE 6705–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 25

[REG–209823–96]

RIN 1545–AU25

Guidance Regarding Charitable

Remainder Trusts; Hearing

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Change of time and locations of

public hearing; teleconferencing

SUMMARY: This document changes the

time and location of the public hearing

on the proposed regulations regarding

charitable remainder trusts under

section 664 of the Internal Revenue

Code and special valuation rules of

interests in trusts under section 2702. In

addition, this document announces that

the Washington, DC location for the

public hearing will have

teleconferencing equipment and that

there will be a remote teleconference

site in Los Angeles, CA.

DATES: The public hearing will be held

on November 18, 1997, beginning at 1

p.m. (ET), 10 a.m. (PT). Additional

requests to speak and outlines of oral

comments must be received by

November 3, 1997.

ADDRESSES: The Washington, DC site for

the public hearing is room 3411,

Internal Revenue Building, 1111

Constitution Avenue, NW, Washington,

DC. The Los Angeles, CA remote

teleconference site is the Federal

Building, 5th Floor, Room 5003, 300 N.

Los Angeles Street, Los Angeles, CA.

Requests to speak and outlines of oral

comments should be mailed to the

Internal Revenue Service, P.O. Box

7604, Ben Franklin Station, Attn:

CC:DOM:CORP:R [REG–209823–96],

Room 5226, Washington, D.C., 20044.

FOR FURTHER INFORMATION CONTACT:

Evangelista Lee of the Regulations unit,

Assistant Chief Counsel (Corporate),

(202) 622–7180 (not a toll-free number).

SUPPLEMENTARY INFORMATION: A notice

of proposed rulemaking and notice of

public hearing, appearing in the Federal

Register on Friday, April 18, 1997, (62

FR 19072), announced that a public

hearing on the proposed regulations

relating to charitable remainder trusts

and special valuation rules of transfers

of interests in trusts would be held on

Tuesday, September 9, 1997, beginning

at 10 a.m. in the IRS Auditorium,

Internal Revenue Building 1111

Constitution Avenue, NW, Washington,

DC. Subsequent to receiving a request to

teleconference the hearing to Los

Angeles, CA, the IRS published a notice

in the Federal Register on Tuesday,

August 19, 1997, (62 FR 44103)

announcing that the hearing was

postponed to afford interested persons

the opportunity to request that the IRS

teleconference the hearing to other

locations outside Washington, DC.

The date, time, and addresses of the

teleconference public hearing are set

forth above. Attendees will be admitted

beyond the lobby of the Internal

Revenue Building in Washington, DC

after 12:30 p.m. (ET), and to the

teleconference site in Los Angeles, CA

after 9:30 a.m. (PT).

There is limited seating capacity at

both the Washington, DC and Los

Angeles sites. In particular, it should be

noted that no more than 12 people may

be accommodated at any one time in the

teleconference room in Los Angeles.

Seating at both sites will be made

available based on the order of

presentations, and IRS personnel will be

present to assist speakers in using the

teleconference equipment.

The IRS will distribute for no charge

at the hearing an agenda showing the

scheduling of speakers. Testimony will

begin in Los Angeles and will conclude

with presentations by speakers in

Washington, DC.

Cynthia E. Grigsby,

Chief, Regulations Unit, Assistant Chief

Counsel (Corporate).

[FR Doc. 97–27138 Filed 10–14–97; 8:45 am]

BILLING CODE 4830–01–U

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[CA 157–0050b; FRL–5907–6]

Approval and Promulgation of

Implementation Plans; California State

Implementation Plan Revision; Santa

Barbara County Air Pollution Control

District, California

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: EPA is proposing to approve

a revision to the California State

Implementation Plan (SIP). The revision

concerns the Operating Permits Program

rule revision submitted by the California

Air Resources Board (CARB) on behalf

of the Santa Barbara County Air

Pollution Control District (Santa Barbara

or District) pursuant to Clean Air Act

(CAA) sections 110 and 112(l).

In the final rules section of this

Federal Register, the EPA is approving

the states’s SIP revision as a direct final

rule without prior proposal because the

Agency views this as a noncontroversial

revision and anticipates no adverse

comments. A detailed rationale for this

approval is set forth in the direct final

rule. If no adverse comments are

received in response to this proposed

action, no further activity is

contemplated in relation to this

proposal. If EPA receives adverse

comments, the direct final approval will

be withdrawn and all public comments

received will be addressed in a

subsequent final action based on this

proposal. EPA will not institute a

second public comment period on this

document. Any parties interested in

commenting on this action should do so

at this time.

DATES: Comments on this proposed rule

must be received in writing by

November 14, 1997.

ADDRESSES: Written comments on this

action should be addressed to: John

Walser, Permits Office (AIR–3), Air

Division, U.S. Environmental Protection

Agency, Region IX, 75 Hawthorne

Street, San Francisco, CA 94105.

Copies of the District’s submittal,

EPA’s Technical Support Document,

and other supporting information used

in developing the proposed approvals

are available for public inspection at

EPA’s Region IX office during normal

business hours. Copies of the submitted

rule are available for inspection at the

following locations:

Permitting Office (AIR–3), Air Division,

U.S. Environmental Protection

Agency, Region IX, 75 Hawthorne

Street, San Francisco, CA 94105;

California Air Resource Board,

Stationary Source Division, Rule

Evaluation Section, 2020 ‘‘L’’ Street,

Sacramento, CA 94105;

Santa Barbara County Air Pollution

Control District, 26 Castilian Drive B–

23, Goleta, CA 93117

FOR FURTHER INFORMATION CONTACT: John

Walser (telephone 415/744–1257),

Permits Office (AIR–3), Air Division,

U.S. Environmental Protection Agency,

Region IX, 75 Hawthorne Street, San

Francisco, CA 94105.

SUPPLEMENTARY INFORMATION: EPA is

proposing to approve the following

rules into the SIP: Rule 370—Potential

to Emit—Limitations for Part 70 sources.