5228 Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Proposed Rules 

(f) The term ‘‘subsidiary’’ means any 

company which is controlled, directly 

or indirectly, by another company. 

(g) The terms ‘‘company’’ and 

‘‘insured depository institution’’ have 

the meanings given them in section 3 of 

the Federal Deposit Insurance Act, 12 

U.S.C. 1813. 

§ 354.3 Written agreement. 

No industrial bank may become a 

direct or indirect subsidiary of a NonFCBS Financial Company unless the 

Non-FCBS Financial Company enters 

into one or more written agreements 

with the FDIC and the subsidiary 

industrial bank which contain 

commitments by the company to 

comply with each of paragraphs (a) 

through (h) in § 354.4 and such other 

provisions as the FDIC deems 

appropriate in the particular 

circumstances. 

§ 354.4 Conditions and provisions of 

written agreement. 

The commitments required to be 

made in the written agreements 

referenced in § 354.3 by each Non-FCBS 

Financial Company that will control an 

industrial bank are listed as paragraphs 

(a) through (h) of this section. In 

addition, each grant of deposit 

insurance and each issuance of a nondisapproval of a change in control with 

respect to an industrial bank subject to 

this part will be conditioned on each 

parent Non-FCBS Financial Company 

complying with paragraphs (a) through 

(h) of this section: 

(a) Submitting to the FDIC an initial 

listing of all of the company’s 

subsidiaries, and updating that list 

annually; 

(b) consenting to examination of the 

company and each of its subsidiaries to 

monitor compliance with the provisions 

of the Federal Deposit Insurance Act or 

any other Federal law that the FDIC has 

specific jurisdiction to enforce against 

such company or subsidiary and those 

governing transactions and relationships 

between any depository institution 

subsidiary and its affiliates; 

(c) engaging, directly or indirectly, 

only in financial activities; 

(d) submitting to the FDIC an annual 

report regarding the company’s 

operations and activities, in the form 

and manner prescribed by the FDIC, and 

such other reports as may be requested 

by the FDIC to keep the FDIC informed 

as to financial condition, systems for 

monitoring and controlling financial 

and operating risks, and transactions 

with depository institution subsidiaries 

of the company; and compliance by the 

company or subsidiary with applicable 

provisions of the Federal Deposit 

Insurance Act or any other Federal Law 

that the FDIC has specific jurisdiction to 

enforce against such company or 

subsidiary; 

(e) maintaining such records as the 

FDIC may deem necessary to assess the 

risks to the industrial bank or to the 

Deposit Insurance Fund; 

(f) causing an independent annual 

audit of each subsidiary industrial bank 

to be performed during the first three 

years after the industrial bank becomes 

a subsidiary of the company; 

(g) limiting its representation, direct 

and indirect, on the board of directors 

or board of managers, as the case may 

be, of each subsidiary industrial bank to 

no more than 25% of the members of 

such board of directors or board of 

managers, in the aggregate, and, in the 

case of a subsidiary industrial bank that 

is organized as a member-managed 

limited liability company, limiting its 

representation as a managing member to 

no more than 25% of the managing 

member interests of the subsidiary 

industrial bank, in the aggregate; 

(h) maintaining the subsidiary 

industrial bank’s capital and liquidity at 

such levels as the FDIC deems 

appropriate, and/or taking such other 

actions as the FDIC deems appropriate 

to provide the industrial bank with a 

resource for additional capital and 

liquidity including, for example, 

pledging assets, obtaining and 

maintaining a letter of credit, and 

indemnifying the industrial bank. 

§ 354.5 Restrictions on industrial bank 

subsidiaries of financial companies. 

Without the FDIC’s prior written 

approval, no industrial bank that 

becomes a subsidiary of a Non-FCBS 

Financial Company after the effective 

date of the rules shall: 

(a) Make a material change in its 

business plan during the first three 

years after becoming a subsidiary 

industrial bank, 

(b) add or replace a member of the 

board of directors, board of managers, or 

a managing member, as the case may be, 

of the subsidiary industrial bank during 

the first three years after becoming a 

subsidiary industrial bank, 

(c) add or replace a senior executive 

officer during the first three years after 

becoming a subsidiary industrial bank, 

(d) employ a senior executive officer 

who is associated in any manner (e.g., 

as a director, officer, employee, agent, 

owner, partner, or consultant) with an 

affiliate of the industrial bank, or 

(e) enter into any contract for services 

essential to the operations of the 

industrial bank (for example, loan 

servicing function) with its parent 

financial company or any subsidiary 

thereof. 

Dated at Washington, DC, this 31st day of 

January, 2007. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Valerie J. Best, 

Assistant Executive Secretary. 

[FR Doc. E7–1854 Filed 2–2–07; 8:45 am] 

BILLING CODE 6714–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–147144–06] 

RIN 1545–BG09 

Certain Transfers of Stock or 

Securities by U.S. Persons to Foreign 

Corporations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

by cross-reference to temporary 

regulations. 

SUMMARY: In the Rules and Regulations 

section of this issue of the Federal 

Register, the IRS is issuing temporary 

regulations under section 367(a) of the 

Internal Revenue Code (Code) regarding 

gain recognition agreements. These 

regulations are necessary to respond to 

comments requested in Notice 2005–74. 

The regulations primarily affect U.S. 

persons that transfer stock or securities 

to foreign corporations or corporations 

engaged in transactions that affect 

existing gain recognition agreements. 

The text of those regulations also serves 

as the text of these proposed 

regulations. The preamble to the 

temporary regulations explains the 

temporary regulations and these 

proposed regulations. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by May 7, 2007. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–147144–06), room 

5203, Internal Revenue Service, PO Box 

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–147144–06), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC, or sent electronically, 

via the IRS Internet site at http:// 

www.irs.gov/regs or via the Federal 

eRulemaking Portal at http:// 

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Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Proposed Rules 5229 

www.regulations.gov (IRS REG–147144–

06). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Daniel McCall, (202) 622–3860; 

concerning submissions of comments, 

requests for a public hearing, and/or to 

be placed on the building access list to 

attend a hearing, contact Richard Hurst 

at (202) 622–7180 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collections of information 

contained in this notice of proposed 

rulemaking have been submitted to the 

Office of Management and Budget for 

review in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)). Comments on the 

collection of information should be sent 

to the Office of Management and 

Budget, Attn: Desk Officer for the 

Department of the Treasury, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, with copies to 

the Internal Revenue Service, Attn: IRS 

Reports Clearance Officer, 

SE:W:CAR:MP:T:T:SP, Washington, DC 

20224. Comments on the collection of 

information should be received by May 

7, 2007. 

Comments are specifically requested 

concerning: 

Whether the proposed collections of 

information are necessary for the proper 

performance of the functions of the 

Internal Revenue Service, including 

whether the information will have 

practical utility; 

The accuracy of the estimated burden 

associated with the proposed collection 

of information; 

How the quality, utility, and clarity of 

the information to be collected may be 

enhanced; 

How the burden of complying with 

the proposed collections of information 

may be minimized, including through 

the application of automated collection 

techniques or other forms of information 

technology; and 

Estimates of capital and start-up costs 

of operation, maintenance, and 

purchase of service to provide 

information. 

The collections of information in this 

proposed regulation is in § 1.367(a)–

8(b)(3)(iii), (e)(1) through (e)(8), and (g). 

Responses to these collections of 

information are required to prevent 

triggering gain recognition agreements—

for example, by submitting new gain 

recognition agreements or by submitting 

elections to reduce basis in certain 

stock. Responses are also required to 

facilitate electronic filing. These 

regulations include a rule requiring that 

gain or interest due under section 367(a) 

be included in a schedule that can be 

attached to a taxpayer’s electronicallyfiled return. Response to these 

collections of information is mandatory. 

The likely respondents are large 

corporations. 

Estimated total annual reporting 

burden: 240. 

Estimated average annual burden 

hours per respondent: from 1 hour to 2 

hours, depending on individual 

circumstances. 

Estimated number of respondents: 

170. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information, 

unless the collection of information 

displays a valid control number 

assigned by the Office of Management 

and Budget. 

Books or records relating to these 

collections of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Background and Explanation of 

Provisions 

Temporary regulations in the Rules 

and Regulations section of this issue of 

the Federal Register amend the Income 

Tax Regulations (26 CFR part 1) relating 

to section 367(a) of the Internal Revenue 

Code (Code) and gain recognition 

agreements. The text of those 

regulations also serves as the text of 

these proposed regulations. The 

preamble to the temporary regulations 

explains the temporary regulations and 

these proposed regulations. 

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 is hereby certified that the 

collections of information contained in 

these regulations will not have a 

significant economic impact on a 

substantial number of small entities. 

Accordingly, a regulatory flexibility 

analysis is not required. These 

regulations primarily will affect United 

States persons that are large 

corporations engaged in cross-border 

corporate transactions. Thus, the 

number of affected small entities—in 

whichever of the three categories 

defined in the Regulatory Flexibility Act 

(small businesses, small organizations, 

and small governmental jurisdictions)—

will not be substantial. The IRS and 

Treasury Department estimate that small 

organizations and small governmental 

jurisdictions are likely to be affected 

only insofar as they might hold a 

portfolio interest in stock or securities 

and in the unlikely event that they 

transfer such stock or securities to a 

foreign corporation. While a certain 

number of small entities may transfer 

stock or securities to a foreign 

corporation in connection with an 

acquisition or reorganization, the IRS 

and Treasury Department do not 

anticipate the number to be substantial. 

Furthermore, the IRS and Treasury 

Department estimate that those small 

entities that are affected by the 

regulations will likely face a burden of 

approximately two hours at an hourly 

rate of $200. Considering that the 

collections of information enable 

taxpayers to defer or avoid the 

recognition of potentially large amounts 

of gain that is subject to a gain 

recognition agreement, IRS and 

Treasury believe that $400 is not a 

significant economic impact. Comments 

about the accuracy of this certification 

may be submitted to the addresses 

provided in the preamble. Pursuant to 

section 7805(f) of the Internal Revenue 

Code, this regulation has been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Requests for a Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written comments (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 rules and how 

they can be made easier to understand. 

For additional requests for comments, 

see the section ‘‘Request for 

Comments,’’ in the preamble to the 

cross-referenced temporary regulations 

of this issue of the Federal Register. 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 author of these 

proposed regulations is Daniel McCall 

of the Office of Associate Chief Counsel 

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5230 Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Proposed Rules 

(International). However, other 

personnel from the IRS and the 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 is amended by adding the 

following new entries: 

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

Section 1.367(a)–3T(e) also issued 

under 367(a) and (b).* * * 

Section 1.367(a)–8T also issued under 

367(a) and (b).* * * 

Par. 2. Section 1.367(a)–3 is amended 

by revising paragraphs (e) and (f) to read 

as follows: 

§ 1.367(a)–3 Treatment of transfers of 

stock or securities to foreign corporations. 

* * * * * 

(e) [The text of this proposed 

amendment is the same as the text of 

§ 1.367(a)–3T(e) published elsewhere in 

this issue of the Federal Register]. 

(f) [The text of this proposed 

amendment is the same as the text of 

§ 1.367(a)–3T(f) published elsewhere in 

this issue of the Federal Register]. 

* * * * * 

Par. 3. Section 1.367(a)–8 is revised to 

read as follows: 

§ 1.367(a)–8 Gain recognition agreement 

requirements. 

[The text of proposed § 1.367(a)–8 is 

the same as the text of § 1.367(a)–8T 

published elsewhere in this issue of the 

Federal Register.] 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 07–496 Filed 2–1–07; 10:34 am] 

BILLING CODE 4830–01–P 

POSTAL REGULATORY COMMISSION 

39 CFR 3001 

[Docket No. RM2007–1; Order No. 2] 

Administrative Practice and Procedure, 

Postal Service 

AGENCY: Postal Regulatory Commission. 

ACTION: Advance notice of proposed 

rulemaking. 

SUMMARY: Recent legislation alters the 

postal ratemaking process, and tasks the 

Postal Regulatory Commission to 

develop regulations to implement this 

process. This notice invites public 

comment, in advance of formulating 

substantive rule proposals, to guide this 

process. 

DATES: Initial comments due April 6, 

2007; reply comments due May 7, 2007. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: The Postal 

Accountability and Enhancement Act, 

Public Law 109–435 (PAEA), directs 

that the Postal Regulatory Commission 

(Commission) shall by regulation 

establish a modern system for regulating 

rates and classes for market dominant 

postal products. The PAEA further 

directs that the Commission shall 

promulgate regulations to bound Postal 

Service discretion in setting rates for 

competitive postal products. Both of 

these tasks are to be completed by June 

19, 2008. 

Interested persons are invited to 

provide written comments and 

suggestions as to how the Commission 

can best fulfill these responsibilities to 

achieve the purposes of the PAEA. 

Comments are due within 60 days of the 

date of publication of this notice in the 

Federal Register. All comments and 

suggestions received will be available 

for review on the Commission’s Web 

site, http://www.prc.gov. Interested 

persons are further invited to review 

these submissions and provide followup comments and suggestions within 30 

additional days, that is, within 90 days 

of the publication of this notice in the 

Federal Register. 

Commenters are requested to 

specifically explain how suggestions 

will comport with the specific 

applicable statutory directions as set out 

below. 

I. Modern Rate Regulation of Market 

Dominant Products 

The PAEA reforms the postal laws of 

the United States. Among other things, 

it alters the method by which the rates 

and fees for postal products may be 

changed. Separate rules are to apply for 

market dominant, as opposed to 

competitive, postal services. The 

Commission is given 18 months to 

develop and implement this system. In 

fulfilling this responsibility, the 

Commission is to effectuate the 

following specific policies set forth in 

the PAEA. 

A. Requirements 

The system for regulating rates and 

classes for market dominant products 

shall: 

1. Establish a schedule whereby rates, 

when necessary and appropriate, would 

change at regular intervals by 

predictable amounts; 

2. Include an annual limitation on the 

percentage changes in rates, to be set by 

the Commission, that will be equal to 

the change in the Consumer Price Index 

for All Urban Consumers unadjusted for 

seasonal variation over the most recent 

available 12-month period preceding the 

date the Postal Service files notice of its 

intention to increase rates; 

3. Establish procedures whereby the 

Postal Service may adjust rates not in 

excess of the annual limitation; 

4. Provide that not later than 45 days 

before the implementation of any 

adjustment in rates subject to this 

limitation, including special rates 

pursuant to factor (10), below: 

(a) Require the Postal Service to 

provide public notice of the adjustment; 

(b) Provide an opportunity for review 

by the Commission; 

(c) Provide for the Commission to 

notify the Postal Service of any 

noncompliance of the adjustment with 

this annual limitation; 

(d) Require the Postal Service to 

respond to the notice provided under 

the previous clause and describe the 

actions to be taken to comply with this 

annual limitation; and 

5. Establish procedures to allow rate 

adjustments in excess of the annual 

limitation on an expedited basis due to 

either extraordinary or exceptional 

circumstances, provided: 

(a) There is not sufficient unused rate 

authority as defined in 39 U.S.C. 

3622(d)(2)(C); and 

(b) The Commission determines, after 

notice and opportunity for a public 

hearing and comment, and within 90 

days after any request by the Postal 

Service, that such adjustment is 

reasonable and equitable and necessary 

to enable the Postal Service, under best 

practices of honest, efficient, and 

economical management, to maintain 

and continue the development of postal 

services of the kind and quality adapted 

to the needs of the United States. 

B. Objectives 

The system for regulating rates and 

classes for market dominant products 

shall be designed to achieve the 

following objectives, each of which 

shall be applied in conjunction with the 

others: 

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