18674 Federal Register / Vol. 61, No. 83 / Monday, April 29, 1996 / Rules and Regulations

published on March 20, 1996 (61 FR

11474). Section 570.3 now refers

directly to section 102(a)(12) of the Act

for the definition of ‘‘Extent of growth

lag’’.

Accordingly, FR Doc. 95–27488, a

final rule published in the Federal

Register on November 9, 1995 (60 FR

56892), is corrected to read as follows:

1. On page 56909, in the third

column, in § 570.3, the second sentence

of the definition of the term ‘‘Income’’

is corrected to read as follows.

§ 570.3 Definitions.

* * * * *

Income. * * * The option to choose

a definition does not apply to activities

that qualify under § 570.208(a)(1) (Area

benefit activities), except when the

recipient carries out a survey under

§ 570.208(a)(1)(vi). * * *

* * * * *

2. On page 56910, in the third

column, in § 570.200, paragraph (d)(2) is

corrected, and the third sentence of

paragraph (e) is corrected, to read as

follows:

§ 570.200 General policies.

* * * * *

(d) * * *

(2) Independent contractor

relationship. Consultant services

provided under an independent

contractor relationship are governed by

the procurement requirements in 24

CFR 85.36, and are not subject to the

compensation limitation of Level IV of

the Executive Schedule.

(e) * * * A written determination is

required for any activity carried out

under the authority of §§ 570.201(f),

570.201(i)(2), 570.201(p), 570.201(q),

570.202(b)(3), 570.206(f), 570.209, and

570.309.

* * * * *

2a. On page 56911, in the second

column, in instruction paragraph 8., the

words ‘‘the introductory text of

paragraph (n)’’ are corrected to read

‘‘paragraph (n)’’.

3. On page 56911, in the third

column, in § 570.201, paragraph (n) is

corrected to read as follows:

§ 570.201 Basic eligible activities.

* * * * *

(n) Homeownership assistance.

Subject to statutory authority, CDBG

funds may be used to provide direct

homeownership assistance to low- and

moderate-income households, as

provided in section 105(a)(25) of the

Act.

* * * * *

4. On page 56912, in the second and

third columns, in § 570.208, the second

sentence of paragraph (a)(1)(iii)(B), the

second sentence of paragraph

(a)(1)(iii)(D), and the first sentence of

paragraph (a)(1)(vi) are corrected to read

as follows:

§ 570.208 Ineligible activities.

(a) * * *

(1) * * *

(iii) * * *

(B) * * * As available, the recipient

must provide information that identifies

the total number of calls actually

received over the preceding 12-month

period for each of the emergency

services to be covered by the emergency

telephone number system and relates

those calls to the geographic segment

(expressed as nearly as possible in terms

of census tracts, block numbering areas,

block groups, or combinations thereof

that are contained within the segment)

of the service area from which the calls

were generated. * * *

* * * * *

(D) * * * For this purpose, the

recipient must include a description of

the boundaries of the service area of the

emergency telephone number system,

the census divisions that fall within the

boundaries of the service area (census

tracts or block numbering areas), the

total number of persons and the total

number of low- and moderate-income

persons within each census division,

the percentage of low- and moderateincome persons within the service area,

and the total cost of the system.

* * * * *

(vi) In determining whether there is a

sufficiently large percentage of low- and

moderate-income persons residing in

the area served by an activity to qualify

under paragraphs (a)(1) (i), (ii), or (vii)

of this section, the most recently

available decennial census information

must be used to the fullest extent

feasible, together with the section 8

income limits that would have applied

at the time the income information was

collected by the Census Bureau. * * *

* * * * *

5. On page 56916, in the first column,

in § 570.506, paragraph (c) is corrected

to read as follows:

§ 570.506 Records to be maintained.

* * * * *

(c) Records that demonstrate that the

recipient has made the determinations

required as a condition of eligibility of

certain activities, as prescribed in

§§ 570.201(f), 570.201(i)(2), 570.201(p),

570.201(q), 570.202(b)(3), 570.206(f),

570.209, and 570.309.

* * * * *

Dated: April 18, 1996.

Camille E. Acevedo,

Assistant General Counsel for Regulations.

[FR Doc. 96–10240 Filed 4–26–96; 8:45 am]

BILLING CODE 4210–29–M

Office of the Assistant Secretary for

Housing—Federal Housing

Commissioner; Real Estate Settlement

Procedures Act; Streamlining Final

Rule; Correction

24 CFR Part 3500

[Docket No. FR–4023–C–02]

RIN 2502–AG69

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Correction to final rule.

SUMMARY: On March 26, 1996 (61 FR

13232), the Department published a

final rule streamlining its regulations

under the Real Estate Settlement

Procedures Act (RESPA). The preamble

of the rule explained that, as part of this

streamlining, the Department was

removing from codification certain

appendices. Instead, the material in

these appendices would be made

available from the Department as Public

Guidance Documents. Because of an

error in the amendatory instructions, the

directions to remove the appendices as

specified in the preamble were omitted

from the rule text. This correction

publishes those instructions.

EFFECTIVE DATE: April 25, 1996.

FOR FURTHER INFORMATION CONTACT:

David R. Williamson, Director, Office of

Consumer and Regulatory Affairs, Room

5241, Department of Housing and Urban

Development, 451 Seventh Street SW.,

Washington, DC 20410, telephone

number (202) 708–4560 (this is not a

toll-free number); or for legal questions:

Kenneth A. Markison, Assistant General

Counsel for GSE/RESPA, or Grant E.

Mitchell, Senior Attorney for RESPA,

Room 9262, Department of Housing and

Urban Development, 451 Seventh Street

SW., Washington, DC 20410, telephone

number (202) 708–1550 (this is not a

toll-free number). For hearing- or

speech-impaired persons, this number

may be accessed via TTY (text

telephone) by calling the Federal

Information Relay Service at 1–800–

877–8339.

SUPPLEMENTARY INFORMATION:

Accordingly, FR Doc. 96–6511, Real

Estate Settlement Procedures Act;

Streamlining Final Rule (FR–4023–F–

01), published on March 26, 1996, is

corrected by adding on page 13251, in
Federal Register / Vol. 61, No. 83 / Monday, April 29, 1996 / Rules and Regulations 18675

the first column, a new amendatory

instruction 6 to read as follows:

Appendix G (Consisting of Appendices

G–1 and G–2), Appendix H (Consisting

of Appendices H–1 and H–2), Appendix

I (Consisting of Appendices I–1, I–2, I–

3, I–4, I–5, I–6, I–7, and I–8), Appendix

J (Consisting of Appendices J–1 and J–

2), Appendix K (Consisting of

Appendices K–1 Through K–4),

Appendix L, Appendix M—[Removed]

6. Appendix G (consisting of

Appendices G–1 and G–2), Appendix H

(consisting of Appendices H–1 and

H–2), Appendix I (consisting of

Appendices I–1, I–2, I–3, I–4, I–5, I–6,

I–7, and I–8), Appendix J (consisting of

Appendices J–1 and J–2), Appendix K

(consisting of Appendices K–1 through

K–4), Appendix L, and Appendix M are

removed.

Authority: 12 U.S.C. 2601 et seq.; 42 U.S.C.

3535(d).

Dated: April 19, 1996.

Camille E. Acevedo,

Assistant General Counsel for Regulations.

[FR Doc. 96–10533 Filed 4–26–96; 8:45 am]

BILLING CODE 4210–27–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8667]

RIN 1545–AT33

Lease Term; Exchanges of Tax-Exempt

Use Property

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations relating to the lease term of

tax-exempt use property. The final

regulations also provide guidance

regarding certain like-kind exchanges

among related parties involving taxexempt use property.

DATES: These regulations are effective

April 29, 1996.

For dates of applicability see

‘‘Effective dates’’ section under the

SUPPLEMENTARY INFORMATION portion of

the preamble and §§ 1.168(h)–1(e) and

1.168(i)–2(g).

FOR FURTHER INFORMATION CONTACT: John

M. Aramburu of the Office of Assistant

Chief Counsel (Income Tax and

Accounting) at (202) 622–4960 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains final

regulations under section 168 of the

Internal Revenue Code of 1986 (Code).

The regulations provide guidance

relating to certain exchanges of taxexempt use property among related

parties and the determination of lease

term under certain circumstances.

Proposed regulations (IA–18–95) were

published in the Federal Register on

April 21, 1995 (60 FR 19868). The IRS

received a number of comments on the

proposed regulations. A scheduled

public hearing was cancelled because

there were no requests to testify. After

consideration of all the comments, the

regulations proposed by IA–18–95 are

adopted as revised by this Treasury

decision. The revisions are discussed

below.

Overview

Under section 168, property used in a

trade or business, or held for the

production of income, generally may be

depreciated under the general

depreciation system (GDS) using

accelerated methods over relatively

short recovery periods. However, certain

property, including ‘‘tax-exempt use

property,’’ must be depreciated under

the alternative depreciation system

(ADS) described in section 168(g).

Section 168(h)(1)(A) generally defines

tax-exempt use property to include

tangible property (other than

nonresidential real property) leased to a

tax-exempt entity. For this purpose,

certain foreign entities and persons are

considered tax-exempt entities.

Congress subjected tax-exempt use

property to a slower depreciation

system than GDS to prevent tax-exempt

entities from indirectly claiming tax

benefits (in the form of reduced rentals)

‘‘from investment incentives for which

they [would] not qualify directly, and

effectively gain[ing] the advantage of

taking income tax deductions and

credits while having no corresponding

liability to pay any tax on income from

the property.’’ S. Rep. No. 169 (Vol. 1),

98th Cong., 2d Sess. 123 (1984).

In particular, section 168(g)(3)(A)

provides that tax-exempt use property

subject to a lease must be depreciated

using the straight-line method over a

period equal to the greater of the

property’s class life or 125 percent of

the lease term. Under section 168(i)(3),

options to renew generally must be

taken into account in determining the

lease term and the periods of certain

successive leases must be aggregated

with the period of an original lease.

Lease Term

The proposed regulations generally

include an additional period of time

during which a lessee may not continue

to be the lessee in the lease term if the

lessee (or a related person) has agreed

that one or both of them will or could

be obligated to make a payment of rent,

or a payment in the nature of rent, with

respect to such period. The

arrangements described in the proposed

regulations are frequently referred to as

‘‘replacement leases.’’ One commentator

requested that the portion of the

proposed regulations dealing with

replacement leases be withdrawn. The

commentator argued that Congress

would not have intended that the term

of the replacement lease be taken into

account in determining lease term. The

IRS and Treasury believe that the

proposed regulations are consistent with

Congressional intent, and thus the final

regulations retain this portion of the

proposed regulations.

Another commentator indicated that

application of the proposed regulations

was unclear where property is subject to

multiple leases, possibly involving

multiple parties. The final regulations

clarify that if property is subject to more

than one lease (including any sublease)

entered into as part of a single

transaction (or a series of related

transactions), the lease term shall

include all periods described in one or

more of such leases. Thus, for example,

if one taxable corporation leases

property to another taxable corporation

for a 20-year term and, as part of the

same transaction, the lessee subleases

the property to a tax-exempt entity for

a 10-year term, then the lease term of

the property is 20 years, and during the

period of tax-exempt use it must be

depreciated using the straight line

method over the greater of its class life

or 25 years.

Finally, the final regulations provide

that lease term also includes any period

during which the lessee (or a related

party) has assumed or retained any risk

of loss with respect to the property

(including, for example, by holding a

note secured by the property). The IRS

and Treasury believe that such an

arrangement is generally similar to the

replacement leases described in the

proposed regulations. As in the case of

a replacement lease, the lessee is

assuming risk with respect to the value

of the property at the termination of the

initial lease term. In addition, the term

of the debt provides an objective

indication that the useful life of the

property exceeds the original term of the

lease, in which case failure to include

the term of the debt in the lease term