50966 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Rules and Regulations 

any vessel, vehicle, or aircraft. This 

applies whether the export is authorized 

by license or by written approval issued 

under this subchapter. 

(b) U.S. Immigration and Customs 

Enforcement and U.S. Customs and 

Border Protection officers have the 

authority to investigate, detain or seize 

any export or attempted export of 

defense articles or technical data 

contrary to this subchapter. 

(c) Upon the presentation to a U.S. 

Customs and Border Protection Officer 

of a license or written approval 

authorizing the export of any defense 

article, the customs officer may require 

the production of other relevant 

documents and information relating to 

the proposed export. This includes an 

invoice, order, packing list, shipping 

document, correspondence, 

instructions, and the documents 

otherwise required by the U.S. Customs 

and Border Protection or U.S. 

Immigration and Customs Enforcement. 

Dated: July 25, 2005. 

Robert G. Joseph, 

Under Secretary, Arms Control and 

International Security, Department of State. 

[FR Doc. 05–17121 Filed 8–26–05; 8:45 am] 

BILLING CODE 4710–25–P 

DEPARTMENT OF STATE 

22 CFR Part 126 

[Public Notice: 5177] 

RIN: 1400–ZA18 

Amendment to the International Traffic 

in Arms Regulations: Section 126.1(i) 

AGENCY: Department of State. 

ACTION: Final rule. 

SUMMARY: This rule amends the 

International Traffic in Arms 

Regulations (ITAR) by modifying the 

denial policy regarding the Democratic 

Republic of the Congo (DRC) at 22 CFR 

126.1. This action is taken in 

accordance with UN Security Council 

Resolution (UNSCR) 1596, unanimously 

adopted on April 18, 2005, which 

imposed a nation-wide embargo on arms 

sales or transfers to any recipient in the 

DRC. It represents an expansion of the 

policy issued under UNSCR 1493, 

which on July 28, 2003, imposed an 

embargo on the sale of arms, related 

materials, and defense services in the 

provinces of North and South Kivu and 

the Ituri District in the DRC. 

DATES: Effective Date: This rule is 

effective on August 29, 2005. 

ADDRESSES: Interested parties are 

invited to submit written comments to 

the Department of State, Directorate of 

Defense Trade Controls, Office of 

Defense Trade Controls Policy, ATTN: 

Regulatory Change, Part 126, 12th Floor, 

SA–1, Washington, DC 20522–0112. Email comments may be sent to 

DDTCResponseTeam@state.gov with the 

subject line: Part 126. Persons with 

access to the Internet may also view this 

notice by going to the regulations.gov 

Web site at: http://www.regulations.gov. 

Comments will be accepted at any time. 

FOR FURTHER INFORMATION CONTACT: 

James Juraska, Office of Defense Trade 

Controls Policy, Bureau of PoliticalMilitary Affairs, Department of State 

202–663–2860. 

SUPPLEMENTARY INFORMATION: On April 

18, 2005, the United Nations Security 

Council voted unanimously on UN 

Security Council Resolution (UNSCR) 

1596 to expand the embargo of UNSCR 

1493 (2003) on the export of arms and 

related material, as well as defense 

services, to the Democratic Republic of 

the Congo (DRC). Additionally, 

Resolution 1596 imposed a travel ban 

and an asset freeze on those who violate 

the expanded arms embargo, and 

mandated governments in the region to 

implement measures to monitor aircraft. 

This final rule amends Section 126.1(i) 

of the ITAR, 22 CFR 126.1(i), which 

details the export and sales policy of the 

United States with respect to the 

Democratic Republic of the Congo, to 

reflect the United Nations Security 

Council’s expanded mandate. This 

amendment to Section 126.1(i) becomes 

effective upon publication in the 

Federal Register. Please note that, as of 

April 18, 2005 (prior to the effective 

date of this final rule), the substance of 

the measures set forth in UNSCR 1596 

entered into effect in accordance with 

another provision of the ITAR, (Section 

126.1(c)), 22 CFR 126.1(c). 

It is the policy of the U.S. Government 

to deny all applications for licenses and 

other approvals and to suspend all 

existing licenses and authorizations to 

export or otherwise transfer defense 

articles and defense services to any 

geographic region in the Democratic 

Republic of the Congo (DRC) except 

under the circumstances specified 

below. 

UNSCR 1596 established several 

exemptions under which the embargo 

would not apply, namely: 

(a) Supplies of arms and related 

materials or technical training and 

assistance intended solely for the 

support of or use by units of the army 

or police of the DRC that operate under 

the command of the etat-major integre, 

have completed the process of 

integration (if operating in the provinces 

of North or South Kivu or the Ituri 

district), or are in the process of 

integration (if operating elsewhere in 

the DRC), 

(b) Supplies of arms and related 

materials or technical training and 

assistance intended solely for the 

support of or use by the United Nations 

Organization Mission in the Democratic 

Republic of the Congo (MONUC), and 

(c) Supplies of non-lethal military 

equipment and related technical 

assistance and training intended solely 

for humanitarian or protective use, as 

notified in advance to the DRC 

Committee in accordance with 

paragraph 8 (e) of Resolution 1533 

(2004). 

All future shipments of arms and 

related materials consistent with such 

exemptions noted in subparagraph (a) 

above shall only be made to receiving 

sites as designated by the Government 

of National Unity and Transition, in 

coordination with the United Nations 

Organization Mission in the Democratic 

Republic of the Congo (MONUC), and 

notified in advance to the DRC 

Committee. 

As previously noted on the 

Directorate of Defense Trade Controls 

Web site, http://www.pmdtc.org, 

effective April 18, 2005, no application 

for the export to the DRC of defense 

articles or services covered by the ITAR 

will be approved. Exceptions to this 

policy will be made (in accordance with 

the ITAR) on a case-by-case basis for 

proposed exports that conform to the 

conditions specified in (a) through (c) 

above. Any existing license for 

authorization for the export to any 

geographic region of the DRC of ITARcontrolled defense articles or services is 

suspended as of April 18, 2005. Holders 

of existing licenses and authorizations 

for such exports to the DRC who wish 

to request lifting of the suspension must 

submit documentation in support of an 

exception for review by the Directorate 

of Defense Trade Controls (DDTC). 

Regulatory Analysis and Notices 

This amendment involves a foreign 

affairs function of the United States and, 

therefore, is not subject to the 

procedures required by 5 U.S.C. 553 and 

554. It is exempt from review under 

Executive Order 12866 but has been 

reviewed internally by the Department 

to ensure consistency with the purposes 

thereof. This rule does not require 

analysis under the Regulatory 

Flexibility Act or the Unfunded 

Mandates Reform Act. It has been found 

not to be a major rule within the 

meaning of the Small Business 

Regulatory Enforcement Fairness Act of 

1996. It will not have substantial direct 

effects on the States, the relationship 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Rules and Regulations 50967 

1Section 1.402(a)–1(a)(2) also provides rules 

regarding the taxation of the distribution of an 

annuity contract. In certain cases, the distribution 

of an annuity contract is not includible in the 

participant’s gross income until distributions are 

made from the annuity contract. 

between the National Government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. Therefore, 

it is determined that this rule does not 

have sufficient federalism implications 

to warrant application of consultation 

provisions of Executive Orders 12372 

and 13132. This rule does not impose 

any new reporting or recordkeeping 

requirements subject to the Paperwork 

Reduction Act, 44 U.S.C. Chapter 35. 

List of Subjects in 22 CFR Part 126 

Arms and munitions, Exports. 

■ Accordingly, for the reasons set forth 

above, title 22, chapter I, subchapter M, 

part 126 is amended as follows: 

PART 126—GENERAL POLICIES AND 

PROVISIONS 

■ 1. The authority citation for part 126 

continues to read as follows: 

Authority: Secs. 2, 38, 40, 42, and 71, 

Public Law 90–629, 90 Stat. 744 (22 U.S.C. 

2752, 2778, 2780, 2791, and 2797); E.O. 

11958, 42 FR 4311; 3 CFR, 1977 Comp., p. 

79; 22 U.S.C. 2651a; 22 U.S.C. 287c; E.O. 

12918, 59 FR 28205, 3 CFR, 1994 Comp., p. 

899; Sec. 1225, Public Law 108–375. 

■ 2. Section 126.1 is amended by 

revising paragraph (i) to read as follows: 

§ 126.1 Prohibited exports and sales to 

certain countries. 

* * * * * 

(i) Democratic Republic of the Congo. 

It is the policy of the United States to 

deny licenses, other approvals, exports 

or imports of defense articles and 

defense services destined for or 

originating in the Democratic Republic 

of the Congo except for non-lethal 

equipment and training (lethal and nonlethal) to the United Nations 

Organization Mission in the Democratic 

Republic of the Congo (MONUC), the 

transitional National Unity Government 

of the Democratic Republic of the Congo 

and the integrated Congolese national 

army and police forces, such units 

operating under the command of the 

etat-major integre of the Congolese 

Armed Forces or National Police, and 

such units in the process of being 

integrated outside the provinces of 

North and South Kivu and the Ituri 

district; and non-lethal equipment for 

humanitarian or protective use, and 

related assistance and training, as 

notified in advance to the UN. An arms 

embargo exists with respect to any 

recipient in the Democratic Republic of 

the Congo. 

Robert G. Joseph, 

Under Secretary, Arms Control and 

International Security, Department of State. 

[FR Doc. 05–17122 Filed 8–26–05; 8:45 am] 

BILLING CODE 4710–25–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9223] 

RIN 1545–BC20 

Value of Life Insurance Contracts 

When Distributed From a Qualified 

Retirement Plan 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations under section 402(a) of the 

Internal Revenue Code regarding the 

amount includible in a distributee’s 

income when life insurance contracts 

are distributed by a qualified retirement 

plan and regarding the treatment of 

property sold by a qualified retirement 

plan to a plan participant or beneficiary 

for less than fair market value. This 

document also contains final regulations 

under sections 79 and 83 of the Internal 

Revenue Code regarding the amounts 

includible in income when an employee 

is provided permanent benefits in 

combination with group-term life 

insurance or when a life insurance 

contract is transferred in connection 

with the performance of services. These 

regulations will affect administrators of, 

participants in, and beneficiaries of 

qualified retirement plans. These 

regulations will also affect employers 

who provide permanent benefits in 

combination with group-term life 

insurance for their employees and 

employees who receive those permanent 

benefits, as well as service recipients 

who transfer life insurance contracts to 

service providers in connection with the 

performance of services, and service 

providers to whom those life insurance 

contracts are transferred. 

DATES: These regulations are effective 

August 29, 2005. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the section 79 regulations, 

Betty Clary at (202) 622–6080; 

concerning the section 83 regulations, 

Robert Misner at (202) 622–6030; 

concerning the section 402 regulations, 

Bruce Perlin or Linda Marshall at (202) 

622–6090 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

A. In General 

This document contains amendments 

to the Income Tax Regulations (26 CFR 

part 1) under section 402(a) of the 

Internal Revenue Code (Code) relating to 

the amount includible in a distributee’s 

income when a life insurance contract, 

retirement income contract, endowment 

contract, or other contract providing life 

insurance protection is distributed by a 

retirement plan qualified under section 

401(a), and relating to the sale of 

property by a qualified retirement plan 

to a plan participant or beneficiary for 

less than the fair market value of the 

property. This document also contains 

amendments to the regulations under 

sections 79 and 83 relating, respectively, 

to permanent benefits that are provided 

to employees in combination with 

group-term life insurance, and to life 

insurance contracts that are transferred 

in connection with the performance of 

services. 

Section 402(a) generally provides that 

any amount actually distributed to any 

distributee by any employees’ trust 

described in section 401(a) which is 

exempt from tax under section 501(a) is 

taxable to the distributee in the taxable 

year of the distributee in which 

distributed, in accordance with section 

72. Distributions from a qualified 

employees’ trust generally are subject to 

withholding and reporting requirements 

pursuant to section 3405 and 

regulations thereunder. Section 

1.402(a)–1(a)(1)(iii) provides, in general, 

that a distribution of property by a 

section 401(a) plan is taken into account 

by the distributee at its fair market 

value. Prior to its amendment by this 

Treasury decision, § 1.402(a)–1(a)(2) 

(which was originally published in 

1956) provided, in general, that upon 

the distribution of a life insurance 

contract, the ‘‘entire cash value’’ of the 

contract must be included in the 

distributee’s income.1 Section 1.402(a)–

1(a) did not define fair market value or 

entire cash value, and questions have 

arisen regarding the interaction between 

these two provisions and regarding 

whether the term entire cash value 

includes a reduction for surrender 

charges. 

On April 30, 1975, proposed 

regulations under section 402 regarding 

the taxation of certain lump sum