9306 Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules

§ 39.13 [Amended]

2. Section 39.13 is amended by

adding the following new airworthiness

directive:

Jetstream Aircraft Limited: Docket 94–NM–

189–AD.

Applicability: Model 4101 airplanes,

constructors numbers 41004 through 41039

inclusive, certificated in any category.

Note 1: This AD applies to each airplane

identified in the preceding applicability

provision, regardless of whether it has been

modified, altered, or repaired in the area

subject to the requirements of this AD. For

airplanes that have been modified, altered, or

repaired so that the performance of the

requirements of this AD is affected, the

owner/operator must use the authority

provided in paragraph (c) to request approval

from the FAA. This approval may address

either no action, if the current configuration

eliminates the unsafe condition; or different

actions necessary to address the unsafe

condition described in this AD. Such a

request should include an assessment of the

effect of the changed configuration on the

unsafe condition addressed by this AD. In no

case does the presence of any modification,

alteration, or repair remove any airplane from

the applicability of this AD.

Compliance: Required as indicated, unless

accomplished previously.

To prevent jamming of the elevator and

aileron disconnect handles, accomplish the

following:

(a) Within 600 flight hours after the

effective date of this AD, or within 6 months

after the effective date of this AD, whichever

occurs first, perform an inspection to

determine if a travel stop (screw) is installed

at the flight control assembly, in accordance

with Jetstream Service Bulletin J41–27–036,

dated September 2, 1994.

(1) If no travel stop is found to be installed,

prior to further flight, install a new travel

stop in accordance with the service bulletin.

After installation, accomplish paragraph

(a)(2) of this AD.

(2) If such a travel stop is installed, prior

to further flight, perform a rotation to

determine the security of the travel stop, in

accordance with the service bulletin.

(i) If the travel stop is found to be properly

secured, no further action is required by

paragraph (a) of this AD.

(ii) If the travel stop is found to be loose,

prior to further flight, remove it and perform

an inspection to detect damage in accordance

with the service bulletin. If any damage is

found, replace the travel stop with a new

travel stop, in accordance with the service

bulletin. After replacement, repeat the

requirements of paragraph (a)(2) of this AD.

(b) After accomplishment of paragraph (a)

of this AD, prior to further flight, accomplish

paragraphs (b)(1), (b)(2), and (b)(3) of this AD,

in accordance with Jetstream Service Bulletin

J41–27–036, dated September 2, 1994.

(1) Apply Loctite Superfast 290 to the

travel stop;

(2) Permanently mark the flight control

assembly; and

(3) Perform a functional test of the aileron

and elevator disconnect systems and set them

to the locked position.

Note 2: Procedures for installing a

protective spiral wrap cover are contained in

Jetstream Service Bulletin J41–27–036, dated

September 2, 1994. This installation is

recommended, but is not required by this

AD.

(c) An alternative method of compliance or

adjustment of the compliance time that

provides an acceptable level of safety may be

used if approved by the Manager,

Standardization Branch, ANM–113, FAA,

Transport Airplane Directorate. Operators

shall submit their requests through an

appropriate FAA Principal Maintenance

Inspector, who may add comments and then

send it to the Manager, Standardization

Branch, ANM–113.

Note 3: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Standardization Branch,

ANM–113.

(d) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

Issued in Renton, Washington, on February

13, 1995.

S.R. Miller,

Acting Manager, Transport Airplane

Directorate, Aircraft Certification Service.

[FR Doc. 95–4003 Filed 2–16–95; 8:45 am]

BILLING CODE 4910–13–U

Federal Highway Administration

23 CFR Part 630

[FHWA Docket No. 94–30]

RIN 2125–AD40

Federal-Aid Project Authorization

AGENCY: Federal Highway

Administration (FHWA), DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: The FHWA proposes to

amend its regulation on Federal-aid

program approval and project

authorization. In light of changes made

by the Intermodal Surface

Transportation Efficiency Act of 1991

(ISTEA) in the area of statewide

planning, and the joint FHWA/Federal

Transit Administration (FTA)

regulations implementing those

changes, this NPRM proposes to remove

all other project programming

provisions from the FHWA’s

regulations. This NPRM would also

provide more flexible funding

arrangements and make the Federal-aid

authorization process more flexible.

Changes contained in related laws are

included.

DATES: Written comments are due on or

before April 18, 1995. Comments

received after that date will be

considered to the extent practicable.

ADDRESSES: All written, signed

comments should refer to the docket

number that appears at the top of this

document and should be submitted to

Federal Highway Administration, Office

of the Chief Counsel, Room 4232, HCC–

10, 400 Seventh Street, SW.,

Washington, D.C. 20590. All comments

received will be available for

examination at the above address

between 8:30 a.m. and 3:30 p.m., e.t.,

Monday through Friday, except Federal

holidays. Those desiring notification of

receipt of comments must include a selfaddressed, stamped postcard.

FOR FURTHER INFORMATION CONTACT: Jerry

L. Poston, Office of Engineering, 202–

366–0450, or Wilbert Baccus, Office of

the Chief Counsel, 202–366–0780,

FHWA, 400 Seventh Street, SW.,

Washington, D.C. 20590. Office Hours

are from 7:45 a.m. to 4:15 p.m., e.t.,

Monday through Friday except Federal

holidays.

SUPPLEMENTARY INFORMATION: The

initiation of work for transportation

projects funded under the Federal-aid

highway program is a two-step process.

First, the State, in cooperation and

consultation with local officials, as

appropriate, through the metropolitan

and statewide planning process,

determines activities which will be

advanced with Federal funds made

available under title 23, United States

Code, and the Federal Transit Act (49

U.S.C. 5301–5338) and develops a

statewide program of projects for these

activities. Prior to passage of the ISTEA,

the requirements for developing the

program of projects were found in 23

U.S.C. 105 and the implementing

regulations in 23 CFR 630, subpart A.

With passage of the ISTEA, title 23,

U.S.C., was modified and the new

requirements concerning development

of a program of projects, now referred to

as the Statewide transportation

improvement program, are contained in

23 U.S.C. 135. The implementing

regulation for this section are at 23 CFR

450 and were initiated through previous

rulemaking actions.

Accordingly, those requirements

pertaining to a program of projects in 23

CFR 630, subpart A, no longer need to

be retained. The FHWA therefore

proposes to eliminate §§ 630.106,

630.108, 630.110 and 630.112 along

with inappropriate programming

references from the existing regulation.

The second step in initiation of work

is the project authorization process. The

State highway agency (SHA) requests

FHWA authorization to proceed with a

proposed Federal-aid highway project.
Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules 9307

The FHWA authorization commits the

Federal Government to participate in

the funding of a project, except in those

instances where the State requests

FHWA authorization without the

commitment of Federal funds. In

addition, FHWA authorization also

establishes a point in time after which

costs incurred on a project are eligible

for Federal participation. Requirements

covering project authorization are also

contained in 23 CFR 630, subpart A.

The FHWA proposes to modify certain

of these requirements, both for

clarification and to provide the SHA a

greater degree of flexibility on certain

funding arrangements. These

modifications are discussed in the

following section-by-section analysis.

Section-By-Section Analysis

Section 630.102 Purpose

The statement of purpose would be

revised to eliminate the reference to

programming of projects since this

activity would be eliminated from this

subpart.

Section 630.104 Applicability

The existing § 630.104, Definitions,

would be replaced with a new section

to identify the types of projects that are

covered by this subpart. FHWA

planning and research funds, as defined

in 23 CFR 420.103, are authorized using

the procedures in the regulations

dealing specifically with these types of

projects. At times, certain special

funding categories may have unique

authorization requirements and these

types of projects are authorized as set

out in implementing instructions or

regulations.

Section 630.106 Authorization to

Proceed

Current § 630.106, Policy, would be

removed. A new § 630.106,

Authorization to proceed, would be

redesignated from current § 630.114

covering the authorization process. It

retains many of the basic principles set

forth in existing § 630.114. However,

there are modifications to provide

greater flexibility in some funding areas

and additions for clarification. The

following discussion covers proposed

§ 630.106 by individual paragraph.

Paragraph (a) would retain the

requirement that FHWA authorization

to proceed with a Federal-aid project

will only be given in response to a

request from the SHA, and then only if

the applicable requirements in law have

been satisfied for the project.

Paragraph (b) would retain the

longstanding requirement that Federalaid funds will only participate in costs

incurred after the date the FHWA has

authorized the State to proceed with the

project. However, exceptions to this

requirement have been allowed under a

process set forth in 23 CFR 1.9(b). For

informational purposes, wording has

been included in paragraph (b) to

identify and cross reference the

exception process.

Paragraphs (c), (d) and (e) would

retain the requirement that at the time

a Federal-aid project is authorized, the

appropriate Federal funds for this

project must be available. Five general

categories for exceptions to this rule are

presented, these being the same five

categories that are in the existing

regulation.

Paragraph (f) is new and would be

added for purposes of clarification. The

FHWA authorization represents a

contractual action by the FHWA and the

Federal share of eligible costs must be

agreed upon when the authorization

occurs. The Federal share may be in the

form of a specified percentage of eligible

costs or a lump sum amount. Use of the

lump sum share is a relatively new

concept and is introduced to

accommodate those instances where

there is a desire to commit a fixed

amount of Federal funds to a project.

The lump sum amount may not exceed

the legal pro rata share for the Federal

funds involved. This may require

downward adjustment of the lump sum

amount when costs of eligible work on

a project are less than the initial

estimates at the time of FHWA

authorization.

The Federal share agreed to at FHWA

authorization would continue through

the life of the project. Manipulation of

funding levels of individual projects to

accommodate program funding changes

or needs would not be allowed.

However, adjustments to the Federal

share would be permitted for projects in

situations where bid prices are

significantly different from the estimates

at the time of FHWA authorization.

Paragraph (g) is new and would

incorporate the cost sharing principles

of title 23, U.S.C., into the regulation.

For Federal-aid projects, the Federal

share of eligible costs incurred by the

State cannot exceed the maximum share

permitted by legislation. There is an

agreed to Federal share of eligible costs

and the non-Federal share of eligible

costs must come from State funds (State

match). Local government funds are

considered to be State funds. Thus, local

government funds can be combined

with SHA funds to cover the required

State match of eligible costs.

Cash contributions from private

sources are a different matter. FHWA

participates in costs incurred on

Federal-aid projects. Donations of

private cash contributions for a specific

Federal-aid project reduce the cost

incurred; therefore, the private funds

cannot be used to reduce the required

State match. Private cash contributions

can be applied to either eligible or

ineligible items of work. However, when

a private cash contribution is applied to

costs eligible for Federal participation,

the private cash contribution is

considered to have reduced the cost of

the project and thus reduced the cost

incurred by the State.

On the other hand, if a private cash

contribution is made to a State or local

government with no designation to a

specific project, then the private cash

contribution can be treated as funds of

the State or local government and may

be used in any way State or local funds

are authorized to be used, including

providing State match on Federal-aid

projects.

Contributions of funds from other

Federal agencies to a specific project are

for the most part treated similarly to

private cash donations. These other

Federal agency funds may not be used

to provide the required State match on

a Federal-aid project but, instead, are

viewed as having reduced the cost

incurred by the State on the project. The

only exception is in those cases where

the other Federal agency has specific

legislative authority to use its funds to

match other Federal funds.

Paragraph (h) is new and would

require that all contributions to a project

be accounted for and properly credited

to the project. The sum of cash

contributions from all sources plus the

Federal funds may not exceed the total

cost of the project.

Paragraph (i) is new and would

incorporate into the regulation the

provision in 23 U.S.C. 120(i) that allows

the State to contribute more than the

normal State match on a Federal-aid

project. This provision has been

interpreted to mean that a State may

overmatch without being tied to a

mandatory Federal share. However,

token financing, such as when the

Federal share represents only a minor

percentage of eligible work or when

large contributions are applied to the

project to reduce the total cost, would

not be permitted. As a general rule of

thumb, it would be expected that the

amount of Federal funds requested will

represent at least 50 percent of eligible

project costs. Exceptions to the 50

percent level should be based on sound

project development or management

reasons.

The following table is provided to

assist the user in locating regulatory
9308 Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules

paragraph changes proposed by this

rulemaking:

Old Section New section

630.102 ............. 630.102

630.104 ............. Removed

None .................. 630.104

630.106 ............. Removed

630.108 ............. Removed

630.110 ............. Removed

630.112 ............. Removed

630.114(b) ......... 630.106(a)

630.114(g) ......... 630.106(b)

630.114(h) ......... 630.106(c)

630.114(h)(3) .... 630.106(d)

630.114(h)(3) .... 630.106(e)

None .................. 630.106(f) through (i)

Rulemaking Analyses and Notices

All comments received before the

close of business on the comment

closing date indicated above will be

considered and will be available for

examination in the docket at the above

address. Comments received after the

comment closing date will be filed in

the docket and will be considered to the

extent practicable, but the FHWA may

issue a final rule at any time after the

close of the comment period. In

addition to late comments, the FHWA

will also continue to file relevant

information in the docket as it becomes

available after the comment closing

date, and interested persons should

continue to examine the docket for new

material.

Executive Order 12866 (Regulatory

Planning and Review) and DOT

Regulatory Policies and Procedures

The FHWA has determined that this

action is not a significant regulatory

action within the meaning of Executive

Order 12866 or significant within the

meaning of Department of

Transportation regulatory policies and

procedures. It is anticipated that the

economic impact of this rulemaking

would be minimal; therefore, a full

regulatory evaluation is not required.

The FHWA does not consider this

action to be a significant regulatory

action because the proposed

amendments would update the Federalaid project authorization regulation to

conform to recent laws, regulations, and

to clarify existing policies.

Regulatory Flexibility Act

In compliance with the Regulatory

Flexibility Act (5 U.S.C. 601–612), the

FHWA has evaluated the effects of this

rule on small entities. Based on the

evaluation, the FHWA certifies that this

action would not have a significant

economic impact on a substantial

number of small entities. The proposed

amendments would only clarify or

simplify procedures used by SHA’s in

accordance with existing laws,

regulations, or guidance.

Executive Order 12612 (Federalism

Assessment)

This action has been analyzed in

accordance with the principles and

criteria contained in Executive Order

12612, and it has been determined that

this action does not have sufficient

federalism implications to warrant the

preparation of a federalism assessment.

Executive Order 12372

(Intergovernmental Review)

Catalog of Federal Domestic

Assistance Program Number 20.205,

Highway Planning and Construction.

The regulations implementing Executive

Order 12372 regarding

intergovernmental consultation on

Federal programs and activities apply to

this program.

Paperwork Reduction Act

This action does not contain a

collection of information requirement

for purposes of the Paperwork

Reduction Act of 1980, 44 U.S.C. 3501–

3520.

National Environmental Policy Act

The Agency has analyzed this action

for the purpose of the National

Environmental Policy Act of 1969 (42

U.S.C. 4321 et. seq.) and has determined

that this action would not have any

effect on the quality of the environment.

Regulation Identification Number

A regulation identification number

(RIN) is assigned to each regulatory

action listed in the Unified Agenda of

Federal Regulations. The Regulatory

Information Service Center publishes

the Unified Agenda in April and

October of each year. The RIN contained

in the heading of this document can be

used to cross reference this action with

the Unified Agenda.

List of Subjects in 23 CFR Part 630

Government contracts, Grant

programs—transportation, Highways

and roads, Project authorization.

In consideration of the foregoing, the

FHWA proposes to amend title 23, Code

of Federal Regulations, by revising Part

630, subpart A to read as set forth

below.

Issued on: February 10, 1995.

Rodney E. Slater,

Federal Highway Administrator.

PART 630—PRECONSTRUCTION

PROCEDURES

Subpart A—Federal-Aid Project

Authorization

Sec.

630.102 Purpose.

630.104 Applicability.

630.106 Authorization to proceed.

Authority: 23 U.S.C. 106, 118, 120, and

315; 49 CFR 1.48(b).

§ 630.102 Purpose.

The purpose of this subpart is to

prescribe policies for authorizing

Federal-aid projects.

§ 630.104 Applicability.

(a) This subpart is applicable to all

Federal-aid projects unless specifically

exempted.

(b) Projects financed with FHWA

planning and research funds, as defined

in 23 CFR 420.103 are not covered by

this subpart. These projects are to be

handled in accordance with 23 CFR

parts 420 and 450.

(c) Other projects which involve

special procedures shall be authorized

as set out in the implementing

instructions.

§ 630.106 Authorization to proceed.

(a) The FHWA issuance of an

authorization to proceed with a Federalaid project shall be in response to a

written request from the State highway

agency (SHA). Authorization can be

given only after applicable prerequisite

requirements of Federal laws and

implementing regulations and directives

have been satisfied.

(b) Federal funds shall not participate

in costs incurred prior to the date of

authorization to proceed except as

provided by 23 CFR 1.9(b).

(c) Authorization to proceed shall be

deemed a contractual obligation of the

Federal Government under 23 U.S.C.

106 and shall require that appropriate

funds be available at the time of

authorization for the agreed Federal

share, either pro rata or lump sum, of

the cost of eligible work to be incurred

by the State except as follows:

(1) Advance construction projects

authorized under 23 U.S.C. 115.

(2) Bond issue projects authorized

under 23 U.S.C. 122.

(3) Projects for preliminary studies for

the portion of the preliminary

engineering and right-of-way (ROW)

phase(s) through the selection of a

location.

(4) Projects for ROW acquisition in

hardship and protective buying
Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules 9309

situations through the selection of a

particular location. This includes ROW

acquisitions within a potential highway

corridor under consideration where

necessary to preserve the corridor for

future highway purposes. Authorization

of work under this paragraph shall be in

accord with the provisions of 23 CFR

part 712.

(5) In special cases where the Federal

Highway Administrator determines it to

be in the best interest of the Federal-aid

highway program.

(d) The authorization to proceed with

a project under 23 CFR 630.106(c)(3)

through (c)(5) shall contain the

following statement: ‘‘Authorization to

proceed shall not constitute any

commitment of Federal funds, nor shall

it be construed as creating in any

manner any obligation on the part of the

Federal Government to provide Federal

funds for that portion of the undertaking

not fully funded herein.’’

(e) When a project has received an

authorization under 23 CFR 630.106

(c)(3) and (c)(4), subsequent

authorizations beyond the location stage

shall not be given until appropriate

available funds have been obligated to

cover eligible costs of the work covered

by the previous authorization.

(f)(1) The Federal-aid share of eligible

project costs shall be established at the

time of project authorization in one of

the following manners:

(i) Pro rata, with the authorization

stating the Federal share as a specified

percentage, or

(ii) Lump sum, with the authorization

stating that Federal funds are limited to

a specified dollar amount not to exceed

the legal pro rata.

(2) The pro-rata or lump sum share

may be adjusted to reflect any

substantive change in the bids received

as compared to the SHA’s estimated cost

of the project at the time of FHWA

authorization, provided that Federal

funds are available.

(g) Federal participation is limited to

the agreed Federal share of eligible costs

actually incurred by the State, not to

exceed the maximum permitted by

enabling legislation. Any private cash

contributions to the project must be

credited to, and thereby such

contributions reduce, the total project

cost and are not considered to be costs

incurred by the State. Private cash

contributions may be applied to

participating or nonparticipating work.

Cash contributions provided by a local

government are considered the same as

State funds.

(h) The sum of cash contributions

from all sources plus the Federal funds

may not exceed the total cost of the

project.

(i) The State may contribute more

than the normal non-Federal share of

title 23, U.S.C., projects. However,

proposals resulting in token Federal

financing of a Federal-aid project shall

not be approved.

[FR Doc. 95–4029 Filed 2–16–95; 8:45 am]

BILLING CODE 4910–22–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[CO–62–94]

RIN 1545–AT15

Continuity of Interest in Transfer of

Target Assets After Qualified Stock

Purchase of Target

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the

income tax treatment of the transfer of

target assets to the purchasing

corporation or another member of the

same affiliated group as the purchasing

corporation (the transferee) after a

qualified stock purchase (QSP) of target

stock, if a section 338 election is not

made. These regulations provide

guidance to parties to such transfers and

their shareholders. This document also

provides notice of a public hearing on

these proposed regulations.

DATES: Written comments and outlines

of topics to be discussed at the public

hearing scheduled for June 7, 1995,

must be received by May 19, 1995.

ADDRESSES: Send submissions to:

CC:CORP:T:R (CO–62–94), 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:CORP:T:R (CO–62–94), Courier’s

Desk, Internal Revenue Service, 1111

Constitution Avenue NW., Washington,

DC. The public hearing will be held in

room 3313, Internal Revenue Building,

1111 Constitution Avenue NW.,

Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,

William Alexander, (202) 622–7780;

concerning the submissions and

requests for a hearing, Christina

Vasquez, (202) 622–7180 (not toll-free

numbers).

SUPPLEMENTARY INFORMATION:

Background

This document proposes guidance as

to the treatment of transfers of target

assets to another corporation after a

qualified stock purchase of target stock,

if a section 338 election is not made for

the target. It addresses the effect of

section 338 on the result in Yoc Heating

v. Commissioner and similar cases.

Under § 1.368–1(b), for a transfer of

assets to be pursuant to a reorganization

within the meaning of section 368, there

must be a continuity of interest in the

target’s business enterprise on the part

of those persons who, directly or

indirectly, were the owners of the

enterprise prior to the reorganization.

In Yoc Heating v. Commissioner, 61

T.C. 168 (1973), a corporation bought 85

percent of a target corporation’s stock

for cash and notes. As part of the same

plan, the target subsequently transferred

its assets to a newly formed subsidiary

of the purchaser and dissolved. The

purchaser received additional stock of

its subsidiary in exchange for the

purchaser’s target stock and the

minority shareholders received cash in

exchange for their target stock.

The Tax Court, viewing the stock

purchase and asset acquisition as an

integrated transaction in which the

purchaser acquired all of the target’s

assets for cash and notes, held there was

insufficient continuity of interest to

qualify the asset transfer as a

reorganization under section 368

because the shareholders of the target

before the stock purchase received no

stock in the acquiring entity. As a result,

the subsidiary received a cost basis in

the target’s assets.

In addition to Yoc Heating, there are

other cases in which courts have denied

reorganization treatment and have given

the transferee a stepped-up basis in the

target’s assets following the purchase of

the target’s stock and the merger of the

target into the purchaser or a related

corporation. See, e.g., Russell v.

Commissioner, 832 F.2d 349 (6th Cir.

1987), aff’g Cannonsburg Skiing Corp. v.

Commissioner, T.C. Memo 1986–150

(corporation purchased target stock and

then target merged into purchaser);

Security Industrial Insurance Co. v.

United States, 702 F.2d 1234 (5th Cir.

1983) (corporation purchased stock of

targets and then targets merged into

purchaser, which then transferred the

target assets to a subsidiary of the

purchaser); South Bay Corporation v.

Commissioner, 345 F.2d 698 (2d Cir.

1965) (individual purchased stock in

two targets and then targets merged into

a third corporation owned by the

individual); Superior Coach of Florida