Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 49897

a deemed dividend arising from FC10’s sale 

of the FC11 preferred stock to FC12. 

(ii) Analysis. FC10 has $5000x of earnings 

and profits for 2008 attributable to a dividend 

from a section 304 transaction which was 

part of a plan a principal purpose of which 

was the avoidance of Federal income 

taxation. Under paragraph (e)(3)(v) of this 

section, these earnings and profits are 

allocated to the common and preferred stock 

of FC10 in accordance with the relative value 

of each class of stock. Thus, for taxable year 

2008, $2500x is allocated to FC10’s common 

stock and $2500x is allocated to its preferred 

stock.

(7) Effective dates. Except as provided 

in paragraphs (e)(3)(v) and (e)(4)(ii) of 

this section, this paragraph (e) applies 

for taxable years of a controlled foreign 

corporation beginning on or after 

January 1, 2005. * * *

* * * * *

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement.

[FR Doc. 05–16610 Filed 8–24–05; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 1

[REG–133578–05] 

RIN 1545–BE74

Dividends Paid Deduction for Stock 

Held in Employee Stock Ownership 

Plan

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains 

proposed regulations under sections 

162(k) and 404(k) of the Internal 

Revenue Code (Code) relating to 

employee stock ownership plans 

(ESOPs). The regulations provide 

guidance concerning which corporation 

is entitled to the deduction for 

applicable dividends under section 

404(k). These regulations also clarify 

that a payment in redemption of 

employer securities held by an ESOP is 

not deductible. These regulations will 

affect administrators of, employers 

maintaining, participants in, and 

beneficiaries of ESOPs. In addition, they 

will affect corporations that make 

distributions in redemption of stock 

held in an ESOP.

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by November 23, 2005.

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–133578–05), room 

5203, Internal Revenue Service, POB 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to: CC:PA:LPD:PR (REG–133578–05), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC. Alternatively, 

taxpayers may submit comments 

electronically directly to the IRS 

Internet site at http://www.irs.gov/regs,

or via the Federal eRulemaking Portal at 

http://www.regulations.gov (IRS–REG–

133578–05).

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, John T. 

Ricotta at (202) 622–6060 with respect 

to section 404(k) or Martin Huck at (202) 

622–7750 with respect to section 162(k); 

concerning submission of comments or 

to request a public hearing, Robin Jones 

at (202) 622–7180 (not toll-free 

numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

This document contains proposed 

regulations under sections 162(k) and 

404(k) of the Internal Revenue Code 

(Code). These regulations address two 

issues that have arisen in the 

application of these sections. The first 

issue arises in a case in which the 

applicable employer securities held in 

an employee stock ownership plan 

(ESOP) are not securities of the 

corporation or corporations that 

maintain the plan. The issue is which 

corporation is entitled to the deduction 

under section 404(k) for certain 

dividends paid with respect to the stock 

held in the ESOP. The second issue is 

whether payments in redemption of 

stock held by an ESOP are deductible. 

Code and Regulations 

Section 404(a) provides that 

contributions paid by an employer to or 

under a stock bonus, pension, profit 

sharing, or annuity plan are deductible 

under section 404(a), if they would be 

otherwise deductible, within the 

limitations of that section. Section 

404(k)(1) provides that, in the case of a 

C corporation, there is allowed as a 

deduction for a taxable year the amount 

of any applicable dividend paid in cash 

by such corporation during the taxable 

year with respect to applicable 

employer securities held by an ESOP. 

The deduction under section 404(k) is 

in addition to the deductions allowed 

under section 404(a). 

Section 4975(e)(7) provides, in 

relevant part, that an ESOP is a defined 

contribution plan that is a stock bonus 

plan qualified under section 401(a) and 

designed to invest primarily in 

qualifying employer securities. Section 

4975(e)(8) states that the term qualifying 

employer security means any employer 

security within the meaning of section 

409(l). Section 409(l) generally provides 

that the term employer security means 

common stock issued by the employer 

(or a corporation that is a member of the 

same controlled group) that is readily 

tradable on an established securities 

market, if the corporation (or a member 

of the controlled group) has common 

stock that is readily tradable on an 

established securities market. Section 

409(l)(4)(A) provides that, for purposes 

of section 409(l), the term controlled 

group of corporations has the meaning 

given to that term by section 1563(a) 

(determined without regard to 

subsections (a)(4) and (e)(3)(C) of 

section 1563). Section 409(l)(4)(B) 

provides that, for purposes of section 

409(l)(4)(A), if a common parent owns 

directly stock possessing at least 50 

percent of the voting power of all 

classes of stock and at least 50 percent 

of each class of nonvoting stock in a first 

tier subsidiary, such subsidiary (and all 

corporations below it in the chain 

which would meet the 80 percent test of 

section 1563(a) if the first tier subsidiary 

were the common parent) are treated as 

includible corporations. 

Section 404(k)(2), for taxable years 

beginning on or after January 1, 2002, 

generally provides that the term 

applicable dividend means any 

dividend which, in accordance with the 

plan provisions—(i) is paid in cash to 

the participants in the plan or their 

beneficiaries, (ii) is paid to the plan and 

is distributed in cash to participants in 

the plan or their beneficiaries not later 

than 90 days after the close of the plan 

year in which paid, (iii) is, at the 

election of such participants or their 

beneficiaries—(I) payable as provided in 

clause (i) or (ii), or (II) paid to the plan 

and reinvested in qualifying employer 

securities, or (iv) is used to make 

payments on a loan described in section 

404(a)(9), the proceeds of which were 

used to acquire the employer securities 

(whether or not allocated to 

participants) with respect to which the 

dividend is paid. Under section 

404(k)(4), the deduction is allowable in 

the taxable year of the corporation in 

which the dividend is paid or 

distributed to a participant or 

beneficiary. 

Prior to 2002, section 404(k)(5)(A) 

provided that the Secretary may 

disallow the deduction under section 

404(k) for any dividend if the Secretary 

determines that such dividend 

constitutes, in substance, an evasion of 

49898 Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 

taxation. Section 662(b) of the Economic 

Growth and Tax Relief Reconciliation 

Act of 2001 (115 Stat. 38, 2001) 

amended section 404(k)(5)(A) to provide 

that the Secretary may disallow a 

deduction under section 404(k) for any 

dividend the Secretary determines 

constitutes, in substance, an avoidance 

or evasion of taxation. The amendment 

is effective for tax years after December 

31, 2001.

Section 162(k)(1) generally provides 

that no deduction otherwise allowable 

under chapter 1 of the Code is allowed 

for any amount paid or incurred by a 

corporation in connection with the 

reacquisition of its stock or the stock of 

any related person (as defined in section 

465(b)(3)(C)). The legislative history of 

section 162(k) states that the phrase ‘‘in 

connection with’’ is ‘‘intended to be 

construed broadly.’’ H.R. Conf. Rep. No. 

99–841, at 168 (1986). 

Corporation Entitled to Section 404(k) 

Deduction 

An ESOP may benefit employees of 

more than one corporation. In addition, 

an ESOP may be maintained by a 

corporation other than the payor of a 

dividend. In these cases, the issue arises 

as to which entity is entitled to the 

deduction provided under section 

404(k). Assume, for example, that a 

publicly traded corporation owns all of 

the stock of a subsidiary. The subsidiary 

operates a trade or business with 

employees in the U.S. and maintains an 

ESOP that holds stock of its parent for 

its employees. If the parent distributes 

a dividend with respect to its stock held 

in the ESOP maintained by the 

subsidiary, questions have arisen as to 

whether the parent or subsidiary is 

entitled to the deduction under section 

404(k). This question arises in cases in 

which the parent and subsidiary file a 

consolidated return as well as in cases 

in which the parent and subsidiary do 

not file a consolidated return. 

The IRS and Treasury Department 

believe that the statutory language of 

section 404(k) clearly provides that only 

the payor of the applicable dividend is 

entitled to the deduction under section 

404(k), regardless of whether the 

employees of multiple corporations 

benefit under the ESOP and regardless 

of whether another member of the 

controlled group maintains the ESOP. 

Therefore, in the example above, the 

parent, not the subsidiary, is entitled to 

the deduction under section 404(k). 

Treatment of Payments Made To 

Reacquire Stock 

Some corporations have claimed 

deductions under section 404(k) for 

payments in redemption of stock held 

by an ESOP that are used to make 

benefit distributions to participants or 

beneficiaries, including distributions of 

a participant’s account balance upon 

severance from employment. These 

taxpayers have argued that the 

payments in redemption qualify as 

dividends under sections 301 and 316 

and, therefore, are deductible under 

section 404(k). 

In Rev. Rul. 2001–6 (2001–1 C.B. 491), 

the IRS concluded that section 162(k) 

bars a deduction for payments made in 

redemption of stock from an ESOP. This 

conclusion was based on the fact that 

section 162(k)(1) disallows a deduction 

for payments paid in connection with 

the reacquisition of an issuer’s stock and 

that the redemption payments are such 

payments. The IRS also concluded that 

such payments were not applicable 

dividends under section 404(k)(1). The 

IRS reasoned that allowing a deduction 

for redemption amounts would vitiate 

important rights and protections for 

recipients of ESOP distributions, 

including the right to reduce taxes by 

utilizing the return of basis provisions 

under section 72, the right to make 

rollovers of ESOP distributions received 

upon separation from service, and the 

protection against involuntary cashouts. Finally, the IRS stated that a 

deduction under section 404(k)(1) for 

such amounts would constitute, in 

substance, an evasion of tax. 

In Boise Cascade Corporation v. 

United States, 329 F.3d 751 (9th Cir. 

2003), the Court of Appeals for the 

Ninth Circuit held that payments made 

by a corporation to redeem its stock 

held by its ESOP were deductible as 

dividends paid under section 404(k), 

and that the deduction was not 

precluded by section 162(k). The court 

reasoned that the distribution by the 

ESOP of the redemption proceeds to the 

participants was a transaction separate 

from the redemption transaction. 

Therefore, the court concluded that the 

distribution did not constitute a 

payment in connection with the 

corporation’s reacquisition of its stock, 

and section 162(k) did not bar the 

deduction of such payments. 

For the reasons stated in Rev. Rul. 

2001–6, the IRS and Treasury 

Department continue to believe that 

allowing a deduction for amounts paid 

to reacquire stock is inconsistent with 

the intent of, and policies underlying, 

section 404. In addition, the IRS and 

Treasury Department believe that 

allowing such a deduction would 

constitute, in substance, an avoidance or 

evasion of taxation within the meaning 

of section 404(k)(5)(A) because it would 

allow a corporation to claim two 

deductions for the same economic cost: 

once for the value of the stock originally 

contributed to the ESOP and again for 

the amount paid to redeem the same 

stock. See Charles Ilfeld Co. v. 

Hernandez, 292 U.S. 62 (1934). 

Moreover, despite the Ninth Circuit’s 

conclusion in Boise Cascade, the IRS 

and Treasury Department continue to 

believe that, even if a payment in 

redemption of stock held by an ESOP 

were to qualify as an applicable 

dividend, section 162(k) would disallow 

a deduction for that amount because 

such payment would be in connection 

with the reacquisition of the 

corporation’s stock. 

This notice of proposed rulemaking, 

therefore, includes proposed regulations 

under section 404(k) that confirm that 

payments made to reacquire stock held 

by an ESOP are not deductible under 

section 404(k) because such payments 

do not constitute applicable dividends 

under section 404(k)(2) and a deduction 

for such payments would constitute, in 

substance, an avoidance or evasion of 

taxation within the meaning of section 

404(k)(5). It also includes proposed 

regulations under section 162(k) that 

provide that section 162(k), subject to 

certain exceptions, disallows any 

deduction for amounts paid or incurred 

by a corporation in connection with the 

reacquisition of its stock or the stock of 

any related person (as defined in section 

465(b)(3)(C)). The proposed regulations 

also provide that amounts paid or 

incurred in connection with the 

reacquisition of stock include amounts 

paid by a corporation to reacquire its 

stock from an ESOP that are then 

distributed by the ESOP to its 

participants (or their beneficiaries) or 

otherwise used in a manner described in 

section 404(k)(2)(A). 

Proposed Effective Date 

These regulations are proposed to be 

effective on the date of issuance of final 

regulations. However, before these 

regulations become effective, the IRS 

will continue to assert in any matter in 

controversy outside of the Ninth Circuit 

that sections 162(k) and 404(k) disallow 

a deduction for payments to reacquire 

employer securities held by an ESOP. 

See Chief Counsel Notice 2004–038 

(October 1, 2004) available at http://

www.irs.gov/foia through the electronic 

reading room. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has also been determined that section 

553(b) of the Administrative Procedure 

Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 49899

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, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the 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 (a signed original and eight (8) 

copies) or electronic comments that are 

submitted timely to the IRS. The IRS 

and Treasury Department specifically 

request comments on the clarity of the 

proposed regulations and how they may 

be made easier to understand. All 

comments will be available for public 

inspection and copying. A public 

hearing will be scheduled if requested 

in writing by any person that timely 

submits written comments. If a public 

hearing is scheduled, notice of the date, 

time, and place for the public hearing 

will be published in the Federal 

Register. 

Drafting Information

The principal authors of these 

regulations are John T. Ricotta, Office of 

Division Counsel/Associate Chief 

Counsel (Tax Exempt and Government 

Entities) and Martin Huck of Office of 

Associate Chief Counsel (Corporate). 

However, other personnel from the IRS 

and Treasury participated in the 

development of these regulations.

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 is amended to read, in part, 

as follows:

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

Section 1.162(k)–1 is also issued under 26 

U.S.C. 162(k) * * *. 

Section 1.404(k)–3 is also issued under 26 

U.S.C. 162(k) and 404(k)(5)(A) * * *.

Par. 2. Section 1.162(k)–1 is added to 

read as follows:

§ 1.162(k)–1 Disallowance of deduction for 

reacquisition payments. 

(a) In general. Except as provided in 

paragraph (b) of this section, no 

deduction otherwise allowable is 

allowed under Chapter 1 of the Internal 

Revenue Code for any amount paid or 

incurred by a corporation in connection 

with the reacquisition of its stock or the 

stock of any related person (as defined 

in section 465(b)(3)(C)). Amounts paid 

or incurred in connection with the 

reacquisition of stock include amounts 

paid by a corporation to reacquire its 

stock from an ESOP that are used in a 

manner described in section 

404(k)(2)(A). See § 1.404(k)–3. 

(b) Exceptions. Paragraph (a) of this 

section does not apply to any— 

(i) Deduction allowable under section 

163 (relating to interest); 

(ii) Deduction for amounts that are 

properly allocable to indebtedness and 

amortized over the term of such 

indebtedness; 

(iii) Deduction for dividends paid 

(within the meaning of section 561); or 

(iv) Amount paid or incurred in 

connection with the redemption of any 

stock in a regulated investment 

company that issues only stock which is 

redeemable upon the demand of the 

shareholder. 

(c) Effective date. This section applies 

with respect to amounts paid or 

incurred on or after the date these 

regulations are published as final 

regulations in the Federal Register. 

Par. 3. Section 1.404(k)–2 is added to 

read as follows:

§ 1.404(k)–2 Dividends paid by corporation 

not maintaining ESOP. 

Q–1: What corporation is entitled to 

the deduction provided under section 

404(k) for applicable dividends paid on 

applicable employer securities of a C 

corporation held by an ESOP if the 

ESOP benefits employees of more than 

one corporation or if the corporation 

paying the dividend is not the 

corporation maintaining the plan? 

A–1: (a) In general. Under section 

404(k), only the corporation paying the 

dividend is entitled to the deduction 

with respect to applicable employer 

securities held by an ESOP. Thus, no 

deduction is permitted to a corporation 

maintaining the ESOP if that 

corporation does not pay the dividend. 

(b) Example. (i) Facts. S is a U.S. 

corporation that is wholly owned by P, 

an entity organized under the laws of 

Country A that is classified as a 

corporation for Federal income tax 

purposes. P is not engaged in a U.S. 

trade or business. P has a single class of 

common stock that is listed on a stock 

exchange in a foreign country. In 

addition, these shares are listed on the 

New York Stock Exchange, in the form 

of American Depositary Shares, and are 

actively traded through American 

Depositary Receipts (ADRs) meeting the 

requirements of section 409(l). S 

maintains an ESOP for its employees. 

The ESOP holds ADRs of P on Date X 

and receives a dividend with respect to 

those employer securities. The 

dividends received by the ESOP 

constitute applicable dividends as 

described in section 404(k)(2). 

(ii) Conclusion. P, as the payor of the 

dividend, is entitled to a deduction 

under section 404(k) with respect to the 

dividends, although as a foreign 

corporation P does not obtain a U.S. tax 

benefit from the deduction. No 

corporation other than the corporation 

paying the dividend is entitled to the 

deduction under section 404(k). Thus, 

because S did not pay the dividends, S 

is not entitled to a deduction under 

section 404(k). The answer would be the 

same if P is a U.S. C corporation. 

Q–2: What is the effective date of this 

section? 

A–2: This section applies with respect 

to dividends paid on or after the date 

these regulations are published as final 

regulations in the Federal Register. 

Par. 4. Section 1.404(k)–3 is added to 

read as follows:

§ 1.404(k)–3 Disallowance of deduction for 

reacquisition payments. 

Q–1: Are payments to reacquire stock 

held by an ESOP applicable dividends 

that are deductible under section 

404(k)(1)? 

A–1: (a) Payments to reacquire stock 

held by an ESOP, including 

reacquisition payments that are used to 

make benefit distributions to 

participants or beneficiaries, are not 

deductible under section 404(k) 

because— 

(1) Those payments do not constitute 

applicable dividends under section 

404(k)(2); and 

(2) The treatment of those payments 

as applicable dividends would 

constitute, in substance, an avoidance or 

evasion on taxation within the meaning 

of section 404(k)(5). 

(b) See § 1.162(k)–1 concerning the 

disallowance of deductions for amounts 

paid or incurred by a corporation in 

connection with the reacquisition of its 

stock from an ESOP. 

Q–2: What is the effective date of this 

section? 

A–2: This section applies with respect 

to payments to reacquire stock that are 

made on or after the date these 

49900 Federal Register / Vol. 70, No. 164 / Thursday, August 25, 2005 / Proposed Rules 

regulations are published as final 

regulations in the Federal Register.

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement.

[FR Doc. 05–16715 Filed 8–24–05; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117

[CGD08–05–041] 

RIN 1625–AA09

Drawbridge Operation Regulation; 

Tennessee River, Chattanooga, TN

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Coast Guard proposes to 

change the regulation governing the 

Chief John Ross Drawbridge, mile 464.1, 

across the Tennessee River at 

Chattanooga, Tennessee. Under the 

proposed rule, the drawbridge need not 

open for river traffic and may remain in 

the closed-to-navigation position from 8 

a.m., December 1, 2005 until 8 a.m., July 

1, 2006. This proposed rule would allow 

the drawbridge to be maintained in the 

closed-to-navigation position to allow 

major repair work to be performed on 

the bridge.

DATES: Comments and related material 

must reach the Coast Guard on or before 

September 26, 2005.

ADDRESSES: You may mail comments 

and related material to Commander, 

Eighth Coast Guard District, Bridge 

Branch, Robert A. Young Federal 

Building, 1222 Spruce Street, St. Louis, 

MO 63103–2832. Commander (obr) 

maintains the public docket for this 

rulemaking. Comments and material 

received from the public, as well as 

documents indicated in this preamble as 

being available in the docket, will 

become part of this docket and will be 

available for inspection or copying at 

room 2.107f in the Robert A. Young 

Federal Building, Eighth Coast Guard 

District, between 8 a.m. and 4 p.m., 

Monday through Friday, except Federal 

holidays.

FOR FURTHER INFORMATION CONTACT: Mr. 

Roger K. Wiebusch, Bridge 

Administrator, (314) 539–3900, 

extension 2378.

SUPPLEMENTARY INFORMATION: 

Request for Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related material. If you 

do so, please include your name and 

address, identify the docket number for 

this rulemaking (CGD08–05–041), 

indicate the specific section of this 

document to which each comment 

applies, and give the reason for each 

comment. Please submit all comments 

and related material in an unbound 

format, no larger than 81⁄2 by 11 inches, 

suitable for copying. If you would like 

to know they reached us, please enclose 

a stamped, self-addressed postcard or 

envelope. We will consider all 

comments and material received during 

the comment period. We may change 

this proposed rule in view of them. 

Public Meeting 

We do not now plan to hold a public 

meeting. But you may submit a request 

for a meeting by writing to the Eighth 

Coast Guard District, Bridge Branch, at 

the address under ADDRESSES explaining 

why one would be beneficial. If we 

determine that a meeting would aid this 

rulemaking, we will hold one at a time 

and place announced by a later notice 

in the Federal Register. 

Background and Purpose 

On February 11, 2005, the State of 

Tennessee Department of 

Transportation requested a temporary 

change to the operation of the Chief 

John Ross Drawbridge, across the 

Tennessee River, mile 464.1, at 

Chattanooga, Tennessee to allow the 

drawbridge to remain in the closed-tonavigation position for seven months to 

perform major repairs to the bridge. The 

drawbridge has a vertical clearance of 

58.7 feet above normal pool in the 

closed-to-navigation position. 

Navigation on the waterway consists 

primarily of commercial tows and 

recreational watercraft that will be 

minimally impacted by the closure 

period. Presently, the draw opens on 

signal for the passage of river traffic 

when the vertical clearance beneath the 

draw is 50 feet or less. When the vertical 

clearance beneath the draw is more than 

50 feet, at least eight hours notice is 

required. The Tennessee Department of 

Transportation requested the 

drawbridge be permitted to remain in 

the closed-to-navigation position from 8 

a.m., December 1, 2005 until 8 a.m. July 

1, 2006. This temporary change to the 

drawbridge’s operation has been 

coordinated with the commercial 

waterway operators. 

Regulatory Evaluation 

This rule is not a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866, Regulatory 

Planning and Review, and does not 

require an assessment of potential costs 

and benefits under section 6(a)(3) of that 

Order. The Office of Management and 

Budget has not reviewed it under that 

Order. It is not ‘‘significant’’ under the 

regulatory policies and procedures of 

the Department of Homeland Security. 

The Coast Guard expects that this 

temporary change to operation of the 

Chief John Ross Drawbridge will have 

minimal economic impact on 

commercial traffic operating on the 

Tennessee River. This temporary change 

has been written in such a manner as to 

allow for minimal interruption of the 

drawbridges regular operation. 

Small Entities 

Under the Regulatory Flexibility Act 

(5 U.S.C. 601–612), we have considered 

whether this proposed rule would have 

a significant economic impact on a 

substantial number of small entities. 

The term ‘‘small entities’’ comprises 

small businesses, not-for-profit 

organizations that are independently 

owned and operated and are not 

dominant in their fields, and 

governmental jurisdictions with 

populations of less than 50,000.

The Coast Guard certifies under 5 

U.S.C. 605(b) that this proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities. This proposed rule will be in 

effect for seven months and the Coast 

Guard expects the impact of this action 

to be minimal because the existing 

vertical clearance of 58.7 feet above 

normal pool in the closed-to-navigation 

position will still allow vessels to transit 

beneath the bridge. 

If you think that your business, 

organization, or governmental 

jurisdiction qualifies as a small entity 

and that this rule would have a 

significant economic impact on it, 

please submit a comment (see 

ADDRESSES) explaining why you think it 

qualifies and how and to what degree 

this rule would economically affect it. 

Assistance for Small Entities 

Under section 213(a) of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (Pub. L. 104–121), 

we want to assist small entities in 

understanding this proposed rule so that 

they can better evaluate its effects on 

them and participate in the rulemaking. 

If the rule would affect your small 

business, organization, or governmental 

jurisdiction and you have questions