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

20918

Vol. 60, No. 82

Friday, April 28, 1995

NUCLEAR REGULATORY

COMMISSION

10 CFR Parts 170 and 171

[Docket No. PRM–170–4]

American Mining Congress; Denial of

Petition for Rulemaking

AGENCY: Nuclear Regulatory

Commission.

ACTION: Denial of petition for

rulemaking.

SUMMARY: The Nuclear Regulatory

Commission (‘‘NRC’’ or ‘‘Commission’’)

received a petition for rulemaking

submitted by the American Mining

Congress (‘‘petitioner’’) concerning the

licensing, inspection and annual fees

assessed by the NRC. The petitioner

requested that the NRC amend its

regulations to alleviate what the

petitioner claimed are inequitable

impacts of NRC user and annual fees on

its members, specifically for uranium

recovery sites with conventional mills

that have ceased operations and are

awaiting NRC approval of their

reclamation plans. The petitioner

claimed that there is a lack of a rational

relationship between fees and regulatory

services. The petitioner requested that

the fee be waived for any licensed

facility serving solely as a cost center

and not generating revenues; that

licensees be given the ability to review

and have input into the NRC’s budget

and fee development and that annual

fees only be increased in proportion to

normal inflation rates; that time limits

be established for NRC’s processing of

amendment requests and cost sheets

showing sample charges be provided to

licensees; that more detailed

information be provided to support the

bills for licensing and inspection

services; and that the Department of

Energy (DOE) be assessed costs for NRC

review of DOE sites under the Uranium

Mill Tailings Radiation Control Act

(UMTRCA). After careful consideration,

the Commission has decided to deny the

petition for rulemaking but notes that

(1) the NRC will continue its current

practice of providing available backup

data to support Part 170 licensing and

inspection billings upon request by the

licensee or applicant and (2) petitioner’s

request that DOE be assessed fees for its

UMTRCA actions was implemented in

the final fee rule for FY 1994.

ADDRESSES: Copies of the petition for

rulemaking, the public comments

received, and the NRC’s letter to the

petitioner are available for public

inspection or copying in the NRC Public

Document Room, 2120 L Street, NW.

(Lower Level), Washington, DC 20555.

FOR FURTHER INFORMATION CONTACT:

Glenda C. Jackson, Office of the

Controller, U.S. Nuclear Regulatory

Commission, Washington, DC 20555,

Telephone 301–415–6057.

SUPPLEMENTARY INFORMATION:

I. Background

II. Responses to Comments

I. Background

On February 4, 1993, the American

Mining Congress petitioned the NRC to

amend 10 CFR Parts 170 and 171 to

alleviate what the petitioner claimed are

inequitable NRC fees assessed its

members. Because the petition involved

Commission fee policy, the NRC

announced receipt of and solicited

public comment on the petition in its

April 19, 1993 (58 FR 21116), Federal

Register notice requesting public

comment on the NRC’s fee policy as

required by the Energy Policy Act of

1992. The Energy Policy Act of 1992

directed the NRC to review its policy for

assessment of annual fees, to solicit

public comment on the need for changes

to this policy, and to recommend to the

Congress changes needed in existing

law to prevent placing an unfair burden

on NRC licensees.

The petitioner requested that the NRC

take the following four actions to ensure

that the fee schedule bears a reasonable

relationship to the benefits provided by

NRC oversight and regulation.

1. Waive the annual fee for any

licensed facility in a standby status and

not generating revenue from use of

licensed material, i.e., those facilities in

standby status which still possess

licenses authorizing operation. The

petitioner claimed that current NRC

policy violates the principle that there

must be a reasonable relationship

between the cost of the NRC’s regulatory

program and the benefits derived from

the regulatory services. The petitioner

also stated that the annual fee does not

reflect NRC involvement with Class I

(conventional mill) uranium recovery

sites, particularly those that have ceased

operations and are awaiting NRC

approval of reclamation plans or are in

standby status. The petitioner suggested

that the fee regulations should take into

account the NRC’s own failure to

complete review as the only reason

these sites are assessed annual fees and

should adjust those fees accordingly.

2. Institute a system that allows NRC

licensees to have some control over

their fees. The petitioner suggested that

a licensee review board be established

to (i) review NRC fees annually; (ii)

monitor NRC inspection activities to

prevent regulatory abuse; and (iii)

propose revisions to the fee system to

eliminate inequitable treatment of

licensees. The petitioner stated that its

central concern with the NRC fee system

is the absence of built-in safeguards to

prevent overzealous imposition of fees

or to ensure that the fee schedule bears

a reasonable relationship to the benefits

provided by NRC. The petitioner

believes that the current system lacks

accountability, oversight, and quality

control, as well as a provision for

licensees to object to unreasonable

costs. The petitioner also indicated that

the annual fee should be increased only

in proportion to normal inflation rates

and stated that NRC’s hourly rate is

excessive for NRC staff as compared to

hourly charges of a senior consultant,

principal or project manager at a

nationally recognized consulting firm.

3. Develop a consistent method for

applying charges by setting standards

for services provided by the

Commission. For example, the

petitioner indicated that comparable

amounts should be charged for similar

types of work (i.e., amendment

requests), regardless of which licensee

submits the request or which particular

NRC employee completes the work.

NRC should develop and distribute to

its licensees a cost sheet describing

sample charges for different types of

work, establish time limits for

processing amendment requests, and

distribute response times to all

licensees. In addition, the 10 CFR Part

170 licensing and inspection bills

should show not only hours worked and

hourly charges, but also a description of

the work performed, the name(s) of
Federal Register / Vol. 60, No. 82 / Friday, April 28, 1995 / Proposed Rules 20919

individual(s) who performed the work,

and the dates on which the work was

done.

4. Assess fees to the Department of

Energy (DOE) for NRC review of DOE

sites under the Uranium Mill Tailings

Radiation Control Act (UMTRCA). The

petitioner stated that it is inequitable

and improper for DOE to receive NRC

oversight and review of DOE mill

tailings site reclamation activities

without contributing anything to the

NRC budget.

Of the 566 comments received on the

fee policy review, 21 specifically

addressed the AMC petition. Others

who provided comments on the fee

policy review addressed some of the

same issues raised by the petitioner,

such as inequities in the fee systems and

assessment of Part 170 fees to Federal

agencies because these issues were

included in the overall review of NRC

fee policy. Of the 21 comments, four

were from fuel facility licensees,

applicants, or their representatives;

three were from facility licensees; one

was from an Agreement State; nine were

from materials licensees or medical

associations; one was from two uranium

recovery licensees; one was from an

industry group representing fuel

fabrication facilities, conversion

facilities, uranium enrichment plants,

material processing facilities,

transporters, and other related service

facilities; one was from a company

holding materials, export and import,

distribution, and non-power reactor

licenses; and one was from the

petitioner, who represents the mining

and milling industry.

A majority of the commenters

supported all or portions of the petition.

After careful consideration of the

comments, the Commission has decided

to deny the petition for rulemaking for

reasons stated below.

II. Responses to Comments

1. Comment: Although commenters

did not support a full waiver of the

annual fee for facilities that are not

operating, several agreed that some

relief should be provided in the form of

reduced fees. One commenter suggested

a tiered fee system that would result in

full fees for operating facilities, reduced

fees for facilities in shutdown or

standby status, and minimal fees for

licenses who have shut down and have

submitted a decommissioning plan.

Another commenter indicated that

although the fee should not be waived,

the NRC should consider the licensee’s

ability to pass the costs of the NRC fees

to its customers—‘‘cost passthrough’’—

to determine the fee level for facilities

that require minimal NRC participation.

Response: The Commission

acknowledges the concern raised by the

petitioner regarding non-operating

facilities and has carefully evaluated the

comments received on this issue. The

Commission has considered a range of

options: (a) continuing the current

policy of charging operating mills and

those in standby status annual fees; (b)

only charging operating mills annual

fees; and (c) charging operating mills,

facilities in standby status, and those

with possession-only licenses annual

fees. The Commission has concluded

that the current policy represents the

fairest option available under current

legislation and therefore has denied

petitioner’s request. The NRC will

continue to assess annual fees based on

whether a licensee holds a valid license

with the NRC that authorizes possession

and use of radioactive material,

independent of whether the facility is

actively operating or in a standby status.

The basic premise for this policy is that

the benefit the NRC provides a licensee

is the authority to use licensed material.

The choice of whether or not to exercise

that authority is a business decision of

the licensee.

Because of the mandate that NRC

recover approximately 100 percent of its

budget through fees, to refrain from

charging annual fees to mills in a

standby status would increase the

annual fees for the other licensees in the

class because the number of licensees

assessed annual fees would decrease.

Such an approach would raise fairness

concerns.

The Commission recognizes that some

may perceive it to be unfair to charge a

licensee an annual fee when the facility

in question is not generating revenue.

However, the Commission has

previously considered the extent to

which a licensee’s economic status and

ability to ‘‘pass through’’ its costs to its

customers should be considered in

establishing fees, and the Commission

has declined to do so. As stated in the

final rule published July 20, 1993 (58 FR

38666), the Commission concluded,

after full consideration of the ‘‘cost

passthrough’’ question, that it cannot set

fees using passthrough considerations

with reasonable accuracy and at

reasonable costs even for classes of

licensees with few members. The

Commission has no new information

that would cause it to change this

policy. The Commission is also unable

to use factors such as the revenue

earned by a licensee or the licensee’s

profit from the use of licensed material

in developing the fees because OBRA–

90 requires that annual charges must, to

the maximum extent practicable, have a

reasonable relationship to the cost of

providing regulatory services.

The Commission decided that it

would not be appropriate to charge

facilities who have received a POL an

annual fee. While the NRC incurs

generic costs relating to the

decommissioning/reclamation of

facilities with POLs, many POL holders

were induced to relinquish their

authority to operate by the

Commission’s policy of not charging

annual fees to holders of POLs (56 FR

31485, July 10, 1991). It would be unjust

at this date to change this policy with

respect to these facilities. Primarily for

this reason, the Commission has also

decided not to implement a tiered

approach recommended by some

commenters, in which all licensees

would pay an annual fee, including

those no longer authorized to operate. In

sum, the NRC will continue to waive the

fee for licensees who have voluntarily

relinquished the authority to operate

and have ceased operations. This

includes licensees who have voluntarily

relinquished their authority to operate,

but must continue to be licensed to

possess nuclear materials, that is,

possession-only licenses (POLs). In

articulating our policy, we emphasize

that, contrary to the petitioner’s

statement, reclamation or

decommissioning plans do not have to

be approved for the annual fee to be

waived for these licensees. Therefore,

petitioner’s argument that some sites are

charged annual fees because of the

NRC’s failure to complete review of

reclamation plans is fallacious. The

Commission’s fee policy with respect to

operating, standby, and POL status is

consistently applied to all classes of

licensees, including uranium recovery,

fuel fabrication, and power reactor

licensees.

2. Comment: A majority of the

commenters supported the petitioner’s

request that licensees be given the

ability to oversee and have input into

the NRC budget and to review NRC fees

annually. Commenters suggested that a

review board, with at least some

members representing the regulated

parties, be established to review NRC

activities to control costs, to ensure that

maximum benefits and effectiveness are

achieved, and to monitor NRC activities

to prevent the appearances of regulatory

abuse. One commenter stated that such

a review board could benefit NRC, citing

as an example that the NRC incurred

higher costs by using a government

laboratory than the commenter incurred

using a commercial laboratory for the

same type of service. Another

commenter suggested that the review

board propose revisions to the fee
20920 Federal Register / Vol. 60, No. 82 / Friday, April 28, 1995 / Proposed Rules

system and methods to eliminate

inequities in the treatment of licensees.

Another commenter sought a greater

role in the development of regulatory

programs that could have a substantial

impact on the economic status of

licensees or result in license

termination. On the other hand, one

commenter disagreed with the

petitioner, stating that a scheme

whereby licensees would directly

control the agency’s activities would be

inappropriate for a regulatory program.

Another commenter was skeptical that

the petitioner’s suggestions would

simplify or otherwise lead to a more

equitable allocation of Commission

costs.

Several commenters agreed with the

petitioner that the fees charged do not

reflect the benefits derived and

expressed concern with the fee

amounts. One commenter stated that as

fees increase and more licenses are

terminated, it will create a disincentive

for continuing their licensed activities,

which include beneficial research. This

commenter suggested that the fee be

proportional to the number of pieces of

equipment used, the small amounts of

low energy radioisotopes in use, and the

status of the licensee as a business or

not-for-profit organization.

Other commenters maintained that

the fee increases may be due to a lack

of accountability by NRC; that the

frequency and details covered in

inspections is unnecessary and

inefficient; and that a limited number of

licensees are being billed to support

NRC services to Federal agencies,

Agreement States, and international

organizations. Some commenters

suggested that NRC’s management

structure be reviewed to streamline

activities and reduce redundancy and

unnecessary paperwork, that NRC

review its mechanism for calculating

fees, and that either costs be borne by

the organization receiving the services

or these costs should be recovered

through tax dollars rather than fees.

Response: The Commission addressed

many of these issues and similar

comments regarding the NRC budget in

the final rules published July 10, 1991

(56 FR 31482), July 23, 1992 (57 FR

32696), and July 20, 1993 (58 FR 38672).

As stated in these final rules, the

requirement for the NRC to recover 100

percent of its budget through fees does

not exempt the NRC from the normal

Government budget review and

decisionmaking process. The

Commission monitors and controls its

operating costs and is tightening its

financial operations by increasing the

effectiveness and efficiency of its

program financing. Notably, as a result

of its initial efforts, the Commission

proposed, and Congress approved, a

$12.7 million recision to the original

appropriation for FY 1994. The NRC is

committed to making its regulatory

programs more efficient wherever it can

do so without diminishing its ability to

protect the public health and safety.

In addition to its own rigorous budget

review, the NRC must submit its budget

to the Office of Management and Budget

for review. The NRC budget is then sent

to the Congress for approval. The bases

for requested NRC resources are

thoroughly addressed by the Congress

through hearings and written

submissions. This budget process,

combined with the internal NRC review

process, ensures that the approved

budget resources are those necessary for

NRC to implement its statutory

responsibilities and to carry out an

effective regulatory program. The fees

established by NRC must be consistent

with its annual budget in order to

comply with OBRA–90. As in the past,

the NRC will continue to base its fees on

its Congressionally approved budget

authority and provide the public and

licensees with detailed supporting

information concerning the bases for its

fees. This information will continue to

be available at the activity level, the

lowest level for budgeting purposes.

As a result of the very extensive

review of the NRC budget, the

Commission opposes the establishment

of a review board to oversee the NRC

budget. In 1994 testimony before

Congress on the NRC’s fee policy

review, Chairman Selin reiterated the

Commission’s position that it would be

inappropriate to have the regulated

community make recommendations

which the NRC would have to accept or

rebut on how it carries out its regulatory

function. The Commission also believes

that there are other avenues for

licensees to communicate with the NRC

concerning the efficiency of the NRC’s

regulatory program.

Additionally, the NRC complies with

legislation such as the Paperwork

Reduction Act of 1980 (44 U.S.C. 3501

et seq.) and the Regulatory Flexibility

Act of 1980 (5 U.S.C. 601 et seq.) that

require the agency to analyze the

economic effects of new regulations on

licensees. The NRC staff also prepares

detailed cost-benefit analyses to justify

any new regulatory requirements. These

analyses are carefully reviewed by the

Commission. The Commission has seen

nothing either in the petition or

comments on the petition that would

lead it to change its approach in this

area. The Commission would like to

emphasize, however, that licensees are

always welcome and expected to

comment on and propose revisions to

proposed rulemakings, including the

accompanying cost-benefit analyses,

and that such comments, along with the

day-to-day interaction between

licensees and the agency, in the

Commission’s view provide an adequate

and successful method of keeping each

group apprised of the other’s concerns.

For the foregoing reasons, the

Commission is denying the petitioner’s

request that a licensee review board be

established to oversee and make

recommendations about NRC’s budget

and fees.

The Commission has also carefully

considered the petitioner’s concerns and

the comments received regarding the

annual fee increases and the hourly rate,

issues which have been raised by

commenters in previous rulemakings.

As previously stated in the

Commission’s response to commenters

on the FY 1993 rule (58 FR 38674), the

NRC is unable to use the CPI or other

indices in the development of the

hourly rate or fees charged under 10

CFR Part 170 and 171 because these

increases may not allow the NRC to

meet the statutory requirement of

OBRA–90 to recover approximately 100

percent of the NRC budget authority

through fees. The NRC’s

Congressionally-approved budget is

determined on the basis of the resources

needed to carry out the agency mission.

The NRC professional hourly rate is

established to recover approximately

100 percent of the budget authority, less

the appropriation from the Nuclear

Waste Fund, as required by OBRA–90.

The method and budgeted costs used by

NRC in the development of the hourly

rate are discussed in Part IV, Section-bySection Analysis, of 10 CFR 170.20 in

each proposed and final fee rule. The

NRC budgeted costs for salaries and

benefits, administrative support, travel,

and program support (excluding

contract or other services in support of

the line organization’s direct program),

less offsetting receipts, are allocated

uniformly to the direct FTEs. The

hourly rate is calculated by dividing the

budget allocated to the direct FTEs by

the number of direct FTEs and the

number of productive hours in one year

(1,744 hours) as indicated in OMB

Circular A–76, ‘‘Performance of

Commercial Activities.’’ The

Commission continues to believe that

this cost allocation is appropriate and

represents a practical and equitable way

of allocating these costs to NRC

licensees and applicants in order to

meet the 100 percent recovery

requirement of OBRA–90.

The Commission has explained in the

past why it does not believe that basing
Federal Register / Vol. 60, No. 82 / Friday, April 28, 1995 / Proposed Rules 20921

1At the request of uranium recovery industry

representatives in a meeting with the NRC staff on

October 24, 1994, this additional information will

be provided with all Part 170 bills issued to

uranium recovery licensees and applicants.

fees on factors such as number of

sources, the size of the facility, and

market competitive positions, as

suggested by commenters, would result

in a fairer allocation of the 100 percent

recovery requirement. (See FY 1991

Final Rule, 56 FR 31472; July 10, 1991,

and Appendix A to that Final Rule; and

Limited Revision of Fee Schedules, 57

FR 13625; April 17, 1992). The

Commission has seen no evidence in the

petition or comments on the petition

which would lead it to change its

current approach of charging fees by

class of license.

3. Comment: Most commenters

supported the petitioner’s request that

the NRC establish standards for its

activities, such as a schedule for

response intervals for processing

licensing actions, and provide licensees

with a cost sheet indicating these

schedules in order to assure licensees

that services will be provided in a

reasonably stated time period. However,

one commenter stated that licensees

should not be in a position of dictating

things such as time limits for processing

applications. Several commenters also

supported the petitioner’s request that

NRC provide more detailed information

with the bills. Some commenters

indicated that bills should be itemized

to show hours spent, a description of

the work performed (specifically work

performed by contractors), the name(s)

of the individual(s) who completed the

work, and the dates on which the work

was performed.

Response: The petitioner’s requests

that review standards be established,

that cost sheets describing sample

charges be developed, and that

additional information be provided on

the bills pertain to NRC practices and

procedures which should not be

codified in a rule. The Commission

cannot establish fixed costs for

completing licensing actions and

inspections for major fuel cycle

licensees since the cost varies for such

activities. License and inspection fees,

established by 10 CFR Part 170 under

the authority of the Independent Offices

Appropriation Act (IOAA) and the

Atomic Energy Act (AEA), as amended,

recover the NRC’s cost of providing

individually identifiable services to

specific applicants and licensees. The

NRC’s principal concern is public

health and safety and thus the NRC

must spend the appropriate resources to

accomplish this, not a predetermined

amount. While the Commission is

committed to the expeditious review of

each application and uses all reasonable

means of keeping costs as low as

feasible, its responsibility for ensuring

the public health and safety and

environmental protection cannot be

compromised. The Commission is

committed to the effective use of its

increasingly limited resources and

therefore cannot afford to use these

resources unwisely if it is to

successfully perform its mission.

In response to the request for one

standard fee for the same type of action,

the Commission notes that full-cost

recovery fees based on the actual

professional staff hour and contractual

services costs expended for the review

were established in 1984 for the NRC’s

larger licensees (reactor and major fuel

cycle facilities). Previously, the IOAA

fees for amendment actions and

inspections of these licensees were

‘‘flat’’ fees based on the average number

of hours to process the same type of

licensing action or to conduct similar

inspection. Commenters on the fee

system at that time complained about

the inequities of such a fee system for

larger licensees. They pointed out that

NRC’s response time for applications

filed by licensees could vary

significantly, depending upon the

quality and completeness of the

information submitted by the applicant

or licensee and the extent and

complexity of the licensing action

requested. The NRC agreed with the

commenters and changed its method of

assessing fees for larger licensees based

on the fact that there were differences in

the types and complexity of the

applications being filed and the fact that

the NRC maintained a system whereby

employees processing applications and

conducting inspections reported, on a

periodic basis, the professional time

expended to process an application or to

conduct an inspection.

To ensure that applications are

processed in a timely and cost-effective

manner, each NRC office in the

licensing process develops and works in

accordance with an approved operating

plan. Upon receipt of applications,

schedules are established and resources

allocated for each review based on the

amount of time and professional staff

effort determined necessary to complete

the particular type of application or

activity. Because the total assigned

workload must be completed with

limited resources, management is

continuously challenged and, indeed,

evaluated on its ability to balance

workload and assigned resources in the

most efficient and effective manner.

Similarly, management is expected to

adhere to established review schedules,

and changes are approved only with

suitable justification. The NRC staff’s

success in meeting schedules is

monitored continuously and critically

by both NRC management and the

Commission to ensure that projects are

completed expeditiously and efficiently.

For the foregoing reasons, the

Commission is denying the petitioner’s

request that standards be established,

that costs sheets describing sample

charges be developed for different types

of work, and that response times be

established by NRC and distributed to

all licensees.

With regard to the petitioner’s request

that additional details be provided on

the bills, the NRC believes that

sufficient information is currently

provided to licensees or applicants on

which to base payment of the invoice.

NRC’s invoices for full-cost licensing

actions and inspections currently

contain information detailing the type of

service for which the costs are being

billed, the date or date range the service

was performed, the number of

professional staff-hours expended in

providing the service, the hourly rate,

and the contractual costs incurred.

Additionally, the Inspection Report

number is provided on inspection fee

bills, and the date of the application,

NRC’s completion date, and the subject

of the application or the amendment

number, if appropriate, are provided on

bills for licensing actions.

A licensee or applicant who does not

understand the charges or who feels

they need more information to

understand a bill may request additional

information from the NRC regarding the

specific bill in question. The NRC will

turn over all available data used to

support the bill upon request of the

licensee or applicant.1 Additionally, if

requested, the NRC program staff will

provide a best estimate of the hours

required to complete a specific licensing

action, with the caveat that the actual

hours expended may differ from that

estimate. However, OMB Circular A–25,

which provides guidelines for Federal

agencies to assess fees for Government

services, provides that new cost

accounting systems need not be

established solely for the purpose of

determining or estimating full cost.

Therefore, the NRC does not plan to

develop additional systems solely to

provide additional information on its

fee invoices at this time.

4. Comment: Several commenters

agreed with the petitioner that all

Federal agencies should be assessed fees

to recover their share of NRC’s costs.

The Commission agrees that, where

legally permissible, Federal agencies

should pay for services rendered,
20922 Federal Register / Vol. 60, No. 82 / Friday, April 28, 1995 / Proposed Rules

including the Department of Energy for

NRC review of DOE sites under

UMTRCA. However, as stated in

response to similar comments (See FY

1992 Final Rule, 57 FR 32695) NRC is

currently precluded under the

Independent Offices Appropriation Act

(IOAA) from assessing Part 170 fees to

Federal agencies for specific services

rendered. The NRC currently assesses

annual fees under 10 CFR Part 171 to

Federal agencies if those agencies have

a license or approval/certificate from the

NRC; however, OBRA–90 limits annual

fee assessments to NRC licensees. In

September 1993, DOE became a general

licensee of the NRC because postreclamation closure of the Spook,

Wyoming, site had been achieved.

Therefore, effective with the FY 1994

final rule published July 20, 1994, DOE

is being assessed for costs associated

with DOE facilities under the Uranium

Mill Tailings Radiation Control Act of

1978 (UMTRCA). These costs were

previously recovered from operating

reactors because DOE was not an NRC

licensee prior to September 1993 and

therefore could not be billed under 10

CFR Part 171.

The Commission has recommended in

its report submitted to Congress on

February 23, 1994, that either OBRA–90

be modified to remove costs from the fee

base for services to other Federal

agencies or the Atomic Energy Act be

modified to permit the NRC to assess

application and other fees for specific

services rendered to all Federal

agencies.

For the reasons stated above, the NRC

has denied this petition.

Dated at Rockville, Maryland, this 24th day

of April, 1995.

For the Nuclear Regulatory Commission.

John C. Hoyle,

Secretary of the Commission.

[FR Doc. 95–10477 Filed 4–27–95; 8:45 am]

BILLING CODE 7590–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[INTL–0065–93]

RIN 1545–AS46

Exceptions to Passive Income

Characterization for Certain Foreign

Banks and Securities Dealers

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document provides

guidance concerning the application of

the exceptions to passive income

contained in section 1296(b) for foreign

banks, securities dealers and brokers.

This document affects persons who own

direct or indirect interests in certain

foreign corporations. This document

also provides notice of a public hearing

on these proposed regulations.

DATES: Written comments must be

received by August 10, 1995. Outlines of

oral comments to be presented at the

public hearing scheduled for August 31,

1995 at 10 a.m. must be received by

August 10, 1995.

ADDRESSES: Send submissions to:

CC:DOM:CORP:T:R (INTL–0065–93),

room 5228, Internal Revenue Service,

POB 7604, Ben Franklin Station,

Washington, DC 20044. In the

alternative, submissions may be hand

delivered between the hours of 8 a.m.

and 5 p.m. to: CC:DOM:CORP:T:R

(INTL–0065–93), Courier’s Desk,

Internal Revenue Building, 1111

Constitution Avenue NW., Washington,

DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Ramon

Camacho at (202) 622–3870; concerning

submissions and the hearing, Ms.

Christina Vasquez, (202) 622–7180 (not

toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

A passive foreign investment

company (PFIC) is any foreign

corporation that satisfies either the

income test or asset test in section

1296(a) of the Internal Revenue Code

(Code). Under the income test, a foreign

corporation is a PFIC if 75 percent or

more of its gross income for the year is

passive income. Sec. 1296(a)(1).

Alternatively, a foreign corporation is a

PFIC if 50 percent or more of the

average value of its assets for the taxable

year produce passive income or are held

for the production of passive income.

Sec. 1296(a)(2). Under section

1296(b)(1), passive income is foreign

personal holding company income as

defined in section 954(c) of the Code,

and includes dividends, interest, certain

rents and royalties, and gain from

certain property transactions, including

gain from the sale of assets that produce

passive income.

Under section 1296(b)(2)(A), income

earned in the active conduct of a

banking business by a foreign

corporation licensed to do business as a

bank in the United States and, to the

extent provided in regulations, by other

corporations engaged in the banking

business is not passive. Notice 89–81,

1989–2 CB 399, (Notice) described rules

to be incorporated into subsequent

regulations that would expand this

exception to certain foreign banks not

licensed to do a banking business in the

United States. The rules contained in

§ 1.1296–4 of the proposed regulations

would implement section 1296(b)(2)(A)

for banking activities conducted by

foreign corporations.

In 1993, Congress added section

1296(b)(3)(A) to the Code, effective for

taxable years beginning after September

30, 1993. See Omnibus Budget

Reconciliation Act of 1993 (1993 Act),

Pub. L. 103–66, section 13231(d), 107

Stat. 312, 499. The provision treats as

nonpassive any income derived in the

active conduct of a securities business

by a controlled foreign corporation

(CFC) if the CFC is a U.S. registered

dealer or broker and, to the extent

provided in regulations, a CFC not so

registered. The rules contained in

§ 1.1296–6 would implement section

1296(b)(3)(A).

Section 956A, added by the 1993 Act,

requires each U.S. shareholder of a CFC

to include in income its pro rata share

of the CFC’s excess passive assets.

Under section 956A(c)(2), a passive

asset is any asset that produces passive

income as defined in section 1296(b).

An asset that generates nonpassive

income under § 1.1296–4 or § 1.1296–6

of the proposed regulations will be

nonpassive for purposes of section

956A.

Explanation of Provisions

I. Description of Proposed Rules for

Foreign Banks

A. General Rule

Section 1.1296–4(a) of the proposed

regulations provides generally that, for

purposes of section 1296(a)(1), passive

income does not include banking

income earned by an active bank or by

a qualified affiliate of such a bank. For

this purpose, an active bank is either a

corporation that possesses a license

issued under federal or state law to do

business as a bank in the United States,

or a foreign corporation that meets the

licensing, deposit-taking, and lending

requirements of paragraphs (c), (d), and

(e), respectively, of § 1.1296–4.

The proposed rules generally adopt

the deposit, lending, and licensing

standards contained in the Notice.

These standards are consistent with the

provisions of the Code that define a

bank as an institution that accepts

deposits from and makes loans to the

public and is licensed under state or

federal law to conduct banking

activities. See e.g., sec. 581. The IRS and

Treasury believe that Congress intended