66576 Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Proposed Rules

469(k) provides that section 469 applies

separately with respect to items

attributable to each publicly traded

partnership. Section 469(k)(2) defines a

publicly traded partnership in the same

manner as section 7704(b). The

legislative history of section 469(k)

indicates that the term publicly traded

partnership has the same meaning for

purposes of section 469(k) as it does for

purposes of section 7704. See H.R. Rep.

No. 495, 100th Cong., 1st Sess. 952–53

(1987) (Conference Report). In addition,

Notice 88–75 (1988–2 C.B. 386)

provided the same guidance on the

definition of a publicly traded

partnership for purposes of both

sections 469(k) and 7704.

The recently issued regulations under

§ 1.7704–1, however, define a publicly

traded partnership only for purposes of

section 7704. The proposed regulations

implement the legislative history of

section 469(k) by providing that the

definition of a publicly traded

partnership for purposes of section

469(k) is the same as the definition of

publicly traded partnership under

section 7704.

Proposed Effective Date

These regulations are proposed to

apply for taxable years of a partnership

beginning on or after the date the final

regulations are published in the Federal

Register.

Special Analyses

It has been determined that this notice

of proposed rulemaking 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 the regulations

do not impose a collection of

information on small entities, a

Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of

the Internal Revenue Code, this notice

of proposed rulemaking will be

submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on its

impact on small business.

Comments and Public Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments (preferably a signed

original and eight (8) copies) that are

submitted timely to the IRS. All

comments will be available for public

inspection and copying.

A public hearing has been scheduled

for Tuesday, April 28, 1998, at 10 a.m.,

in Room 2615, Internal Revenue

Building, 1111 Constitution Avenue

NW., Washington, DC. Because of access

restrictions, visitors will not be

admitted beyond the Internal Revenue

Building lobby more than 15 minutes

before the hearing starts.

The rules of 26 CFR 601.601(a)(3)

apply to the hearing. Persons that wish

to present oral comments at the hearing

must submit timely written comments

(preferably a signed original and eight

(8) copies) by March 19, 1998 and

submit an outline of the topics to be

discussed and the time to be devoted to

each topic by April 7, 1998.

A period of 10 minutes will be

allotted to each person for making

comments.

An agenda showing the scheduling of

the speakers will be prepared after the

deadline for receiving outlines has

passed. Copies of the agenda will be

available free of charge at the hearing.

Drafting Information: The principal

author of these regulations is

Christopher Kelley, Office of 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.

Proposed Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 continues to read in part as

follows:

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

Par. 2. Section 1.469–10 is revised to

read as follows:

§ 1.469–10 Application of section 469 to

publicly traded partnerships.

(a) [Reserved].

(b) Publicly traded partnership—(1) In

general. For purposes of section 469(k),

a partnership is a publicly traded

partnership only if the partnership is a

publicly traded partnership as defined

in § 1.7704–1.

(2) Effective date. This section applies

for taxable years of a partnership

beginning on or after the date final

regulations are published in the Federal

Register.

Par. 3. Section 1.7704–3 is added to

read as follows:

§ 1.7704–3 Qualifying income.

(a) Certain investment income—(1) In

general. For purposes of section

7704(d)(1), qualifying income includes

capital gain from the sale of stock,

income from holding annuities, income

from notional principal contracts (as

defined in § 1.446–3), and other

substantially similar income from

ordinary and routine investments to the

extent determined by the Commissioner.

Income from a notional principal

contract is included in qualifying

income only if the property, income, or

cash flow that measures the amounts to

which the partnership is entitled under

the contract would give rise to

qualifying income if held or received

directly by the partnership.

(2) Limitations. Qualifying income as

defined in paragraph (a)(1) of this

section does not include income derived

in the ordinary course of a trade or

business. For purposes of the preceding

sentence, income derived from an asset

with respect to which the partnership is

a broker, market maker, or dealer is

treated as income derived in the

ordinary course of a trade or business;

income derived from an asset with

respect to which the taxpayer is a trader

or investor is not treated as income

derived in the ordinary course of a trade

or business.

(b) Effective date. This section applies

for taxable years of a partnership

beginning on or after the date final

regulations are published in the Federal

Register.

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

[FR Doc. 97–33105 Filed 12–18–97; 8:45 am]

BILLING CODE 4830–01–P

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[TX 61–1–7270: FRL–5937–4]

Approval and Promulgation of State

Implementation Plans (SIP) for Texas:

Accelerated Vehicle Retirement (AVR)

Program

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The Environmental Protection

Agency (EPA) is proposing to

disapprove the SIP revision submitted

by the State of Texas for the Accelerated

Vehicle Retirement (AVR) program

which allows stationary sources to

purchase Emission Reduction Credits

(ERCs) through a vehicle scrappage

program. For areas which face relatively

high stationary source control costs,

Mobile Emission Reduction Credits
Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Proposed Rules 66577

(MERCs) offer stationary sources

another option to achieve required

emission reductions through early

retirement and scrappage of motor

vehicles which fail mandated emissions

testing. The EPA is proposing

disapproval because the State’s AVR SIP

revision uses a vehicle emission testing

method from a vehicle Inspection and

Maintenance (I/M) program that has

changed since the ARV SIP was

submitted. This action is being taken

under sections 110 and 182 of the Clean

Air Act, as amended in 1990 (the Act).

DATES: Comments must be received on

or before January 20, 1998.

ADDRESSES: Written comments on this

action should be addressed to Mr.

Thomas H. Diggs, Chief, Air Planning

Section, at the EPA Region 6 Office

listed. Copies of the documents relevant

to this action area available for public

inspection during normal business

hours at the following locations. Persons

interested in examining these

documents should make an

appointment with the appropriate office

at least 24 hours before the visiting

day.Environmental Protection Agency,

Region 6, Air Planning Section (6PD-L),

1445 Ross Avenue, suite 700, Dallas,

Texas 75202–2733.Texas Natural

Resource Conservation Commission,

12100 Park 35 Circle, Austin, Texas

78711–3087.

FOR FURTHER INFORMATION CONTACT: Ms.

Sandra Rennie, Air Planning Section

(6PD-L), EPA Region 6, 1445 Ross

Avenue, Dallas, Texas 75202–2733,

telephone (214) 665–7367.

SUPPLEMENTARY INFORMATION:

I. Background

The Act broadly encourages, and in

Title I of the Act, mandates, States to

develop and facilitate market-based

approaches for achieving the

environmental goals of the Act for

attainment and maintenance of the

National Ambient Air Quality

Standards, and to meet associated

emission reduction milestones. The

Agency has developed comprehensive

guidance and rules (as required by the

Act) for States and individual sources to

follow in designing and adopting such

programs for inclusion in SIPs. The

Economic Incentive Program (EIP) Rules

(April 7, 1994, 59 FR 16690–16717)

provide a broad framework for the

development and use of a wide variety

of incentive strategies for stationary,

area, and/or mobile sources. One such

approach is the generation and trading

of ERCs, which historically have been

allowed under guidance provided in the

1986 Emission Trading Policy

Statement. In certain areas where

emission control costs for stationary

sources may be high relative to mobile

source control costs, creating EIPs

which allow for the trading of emission

reduction credits from mobile sources to

stationary sources can be beneficial.

On October 31, 1994, the State of

Texas submitted revisions to the SIP

making changes to the Texas

Administrative Code (30 TAC), Chapter

114: Control of Air Pollution from Motor

Vehicles. In this revision, section

114.29, Accelerated Vehicle Retirement

Program, was added to the Code. The

new section provides specific

requirements for the purchase,

screening, and processing of scrappage

vehicles, so that all emission reductions

generated through AVR are creditable,

enforceable, surplus, quantifiable, and

permanent. The scrappage program

requires all potential vehicles to get an

‘‘IM240’’ emission test at an I/M testing

facility.

The AVR program was planned when

the State was intending to implement an

I/M program which utilized the IM240

emission test in a centralized, test-only

setting. The I/M program was designed,

developed, and began operation in

January 1995, before being halted by the

Governor and the Texas Legislature.

However, various states, including

Texas, desired greater flexibility in

implementing their I/M programs. On

September 18, 1995, EPA revised and

finalized I/M rules that gave states much

greater flexibility in implementing I/M

programs. One element of the I/M

flexibility amendments included a

provision for a new low enhanced

performance standard that would allow

for less stringent I/M programs if overall

air quality goals were met. In addition,

on November 28, 1995, President

Clinton signed the National Highway

System Designation Act of 1995

(NHSDA) which allowed even greater

flexibility in I/M programs for states,

especially in the area of emission

reduction estimates.

In response to this additional

flexibility, the State of Texas, in a letter

dated March 12, 1996, submitted its

revised I/M program to the Region 6

office within the submission deadlines

contained in the NHSDA. The EPA

granted conditional interim approval

(July 11, 1997, 62 FR 37138) of the

revised Texas I/M plan. As a result, the

State has implemented a decentralized

testing network which allows for both

test-and-repair and test-only stations,

and includes remote sensing. Testing

stations administer a two-speed idle

test. This program is referred to as the

Texas Motorist Choice Program. With

the IM240 test no longer available, the

tailpipe emission measurements needed

for AVR calculations as outlined in

section 114.29 of 30 TAC 114 cannot be

obtained. The EPA believes this is a

significant deficiency which prohibits

approval of the SIP under section 110 of

the Act.

II. Evaluation of Accelerated Vehicle

Retriement (AVR) SIP

Several key program elements in EIP

rules must generally be included in any

MERC program to ensure that the EIP

principles and requirements are met.

One of the elements calls for credible,

workable, replicable procedures for

quantifying emissions and/or emissionrelated parameters.

In the State’s submittal, emission

reductions in grams/vehicle/year for

each vehicle are calculated using

tailpipe emissions, evaporative

emissions, vehicle replacement

emissions, and vehicle miles traveled.

Tailpipe emissions are measured by

using the IM240 test. The MERCs are

calculated in tons/year from the

emission reductions from all vehicles in

a scrappage program.

The owner of a scrappage vehicle

must obtain an IM240 vehicle emission

certificate at a testing facility showing

that the vehicle has failed the mandated

emissions test prior to the sale of the

vehicle to a scrappage program. A

motorist must submit the vehicle to an

emissions test according to specific

procedures outlined in the SIP. In the

Texas Motorist Choice I/M program,

which is in operation, the test stations

offer only the idle test. The IM240 test

is not an option. Consequently, tailpipe

emissions can no longer be quantified

according to the procedure outlined in

the SIP. This prevents the State from

satisfying the program element for

obtaining credible emissions data.

In summary, the Texas AVR SIP

submittal does not reflect current

programs which are necessary to

implement the scrappage program as

designed. Based on the analysis, EPA

cannot approve the Texas AVR SIP.

III. Proposed Action

The EPA proposes to disapprove the

Texas AVR SIP under sections 110 and

182 since the State failed to update

elements of the AVR SIP submitted

October 31, 1994. The AVR SIP

submittal represents vehicle emission

testing for vehicle scrappage using an I/

M loaded mode transient emission test

(IM240). The Texas Legislature halted

the operation of that particular program,

and has since chosen to implement a

different I/M program, the Texas

Motorist Choice Program, which

requires a two-speed idle test. This test

has not been shown to be equivalent to
66578 Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Proposed Rules

the IM240 test. Consequently, the AVR

SIP is not applicable to current

programs as submitted.

This revision is not required by the

Act. Therefore, this proposed

disapproval action does not impose

sanctions for failure to meet Act

requirements.

The EPA is soliciting public comment

on the proposed action discussed in this

document or on other relevant matters.

These comments will be considered

before taking final action. Interested

parties may participate in the Federal

rule making procedure by submitting

written comments to the EPA Regional

office listed in the Addresses section of

this document.

Nothing in today’s action should be

construed as permitting, allowing, or

establishing a precedent for any future

request for revision to any SIP. Each

request for revision to the SIP shall be

considered separately in light of specific

technical, economic, and environmental

factors and in relation to relevant

statutory and regulatory requirements.

The Regional Administrator’s

decision to approve or disapprove the

AVR SIP revision will be based on

whether it meets the requirements of

section 110(a)(2)(A)–(K) and part D of

the Act, as amended, and EPA

regulations in 40 CFR part 51.

IV. Administrative Requirements

A. Executive Order 12866

The Office of Management and Budget

has exempted this regulatory action

from Executive Order 12866 review.

B. Regulatory Flexibility Act

Under the Regulatory Flexibility Act,

5 U.S.C. 600 et seq., EPA must prepare

a regulatory flexibility analysis

assessing the impact of any proposed or

final rule on small entities. See 5 U.S.C.

603 and 604. Alternatively, EPA may

certify that the rule will not have a

significant impact on a substantial

number of small entities. Small entities

include small businesses, small not-forprofit enterprises, and government

entities with jurisdiction over

populations of less than 50,000.

The EPA’s proposed disapproval of

the State request under sections 110 and

301, and subchapter I, part D of the Act

does not affect any existing

requirements applicable to small

entities. Any preexisting Federal

requirements remain in place after this

proposed disapproval. Federal

disapproval of the State submittal does

not affect its State-enforceability.

Moreover, the EPA’s disapproval of the

submittal does not impose any new

Federal requirements. Therefore, the

EPA certifies that this proposed

disapproval action does not have a

significant impact on a substantial

number of small entities because it does

not remove existing requirements, nor

does it impose any new Federal

requirements.

C. Unfunded Mandates Act

Under section 202 of the Unfunded

Mandate Reform Act of 1995, signed

into law on March 22, 1995, EPA must

prepare a budgetary impact statement to

accompany any proposed or final rule

that includes a Federal mandate that

may result in estimated costs to State,

local or tribal governments in aggregate;

or to the private sector, of $100 million

or more. Under section 205, EPA must

select the most cost-effective and least

burdensome alternative that achieves

the objectives of the rule and is

consistent with statutory requirements.

Section 203 requires EPA to establish a

plan for informing and advising any

small governments that may be

significantly or uniquely impacted by

the rule.

The EPA has determined that the

proposed disapproval action does not

include a Federal mandate that may

result in estimated costs of $100 million

or more to either State, local, or tribal

governments in the aggregate, or to the

private sector. This Federal action does

not impose new requirements.

Accordingly, no additional costs to

State, local, or tribal governments, or

private sector, result from this action.

List of Subjects in 40 CFR Part 52

Environmental protection, Air

pollution control, Ozone, Volatile

organic compounds.

Dated: December 10, 1997.

Lynda F. Carroll,

Acting Deputy Regional Administrator,

Region VI.

[FR Doc. 97–33222 Filed 12–18–97; 8:45 am]

BILLING CODE 6560–50–F

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 81

[CA–004–BU; FRL–5937–5]

Designation of Areas for Air Quality

Planning Purposes; State of California;

Redesignation of the San Francisco

Bay Area to Nonattainment for Ozone

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: On May 22, 1995, EPA

redesignated the San Francisco Bay

Area (Bay Area) from moderate

nonattainment for the federal 1-hour

ozone standard to attainment (60 FR

27028). The redesignation became

effective on June 21, 1995. Two days

later, the Bay Area experienced its first

violation of the federal 1-hour ozone

standard as an attainment area. There

have been a total of 43 exceedances and

17 violations of the standard since

redesignation. The Clean Air Act (CAA

or Act) provides that EPA may at any

time notify the Governor that available

air quality information indicates that the

designation of an area within the State

should be revised. EPA must consider

the response from the Governor as well

as public comment on the proposed

redesignation before finalizing its

action.

On August 21, 1997, EPA sent a letter

to the Governor of California notifying

him of the Agency’s intent to

redesignate the Bay Area from

attainment to nonattainment of the

federal 1-hour ozone standard. In

today’s action, EPA is proposing to

redesignate the Bay Area as a

nonattainment area for ozone.

DATES: Comments on this proposed

action must be received in writing by

February 17, 1998. Comments should be

addressed to the contact listed below.

ADDRESSES: EPA’s technical support

document and other supporting

documentation for the proposal are

contained in the docket for this

rulemaking. A copy of this document

and the technical support document are

also available in the air programs

section of EPA Region IX’s website,

http://www.epa.gov/region09. The

docket is available for inspection during

normal business hours at EPA Region

IX, Planning Office, Air Division, 17th

Floor, 75 Hawthorne Street, San

Francisco, California 94105. (415) 744-

1288.

FOR FURTHER INFORMATION CONTACT:

Dave Jesson, Planning Office (AIR–2),

Air Division, EPA Region IX, 75

Hawthorne Street, San Francisco, CA

94105, (415) 744–1288.

SUPPLEMENTARY INFORMATION:

I. Background

A. Original Designation

The Bay Area was originally

designated under section 107 of the

1977 CAA as nonattainment for ozone

on March 3, 1978 (40 CFR 81.305). The

Bay Area consists of the following

counties: Alameda, Contra Costa, Marin,

Napa, San Francisco, San Mateo, Santa

Clara, Solano (part), and Sonoma (part).

Following the 1990 amendments to the

Act, the area was classified by operation