21366 Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Rules and Regulations

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389; 14 CFR 11.69.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of the Federal Aviation

Administration Order 7400.9C, Airspace

Designations and Reporting Points,

dated August 17, 1995, and effective

September 16, 1995, is amended as

follows:

Paragraph 6005 Class E airspace areas

extending upward from 700 feet or more

above the surface of the earth.

* * * * *

AWP CA E5 Hollister, CA [New]

Hollister Municipal Airport, CA

(Lat. 36°53′36′′N, long. 121°24′37′′W)

That airspace extending upward from 700

feet above the surface within a 4.2-mile

radius of the Hollister Municipal Airport and

within 2 miles each side of the 142° bearing

from the Hollister Municipal Airport,

extending from the 4.2-mile radius to 10

miles southeast of the Hollister Municipal

Airport and within 2 miles each side of the

320° bearing from the Hollister Municipal

Airport extending from the 4.2-mile radius to

5.4 miles northwest of the Hollister

Municipal Airport.

* * * * *

Issued in Los Angeles, California, on April

23, 1996.

Harvey R. Riebel,

Acting Manager, Air Traffic Division,

Western-Pacific Region.

[FR Doc. 96–11727 Filed 5–9–96; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8669]

RIN 1545–AR18

Computation of Combined Taxable

Income Under The Profit Split Method

When the Possession Product is a

Component Product or an End-Product

Form for Purposes of the Possessions

Credit Under Section 936

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations relating to the computation

of combined taxable income under the

profit split method. These regulations

amend the current regulations and

provide revised rules for taxpayers to

compute combined taxable income

under the profit split method when the

possession product chosen for purposes

of section 936(h)(5) of the Internal

Revenue Code is a component product

or an end-product form. These

regulations are necessary to provide

guidance to taxpayers electing the profit

split method of computing taxable

income under section 936(h)(5).

DATES: These regulations are effective

May 10, 1996. See Supplementary

Information for applicability dates.

FOR FURTHER INFORMATION CONTACT:

Jacob Feldman, 202–622–3870 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On January 12, 1994, the IRS

published a notice of proposed

rulemaking in the Federal Register

(INTL–0068–92, 59 FR 1690, 1994–1

C.B. 820) relating to the computation of

combined taxable income under the

profit split method under section

936(h)(5) (relating to the possessions

credit for U.S. companies doing

qualified business in Puerto Rico and

certain U.S. possessions). A number of

written public comments were received

concerning the proposed regulations

and a public hearing was held on July

11, 1994. After consideration of all the

comments, the proposed regulations are

adopted as revised by this Treasury

decision. The revisions are discussed

below.

Discussion

The proposed regulations would

amend § 1.936–6(b)(1), Q&A 12. Under

the proposed regulations, combined

taxable income for a taxpayer that elects

the profit split method for a possession

product that is either a component

product or an end-product form would

be determined by multiplying the

combined taxable income of the

integrated product that includes the

possession product by a production cost

ratio. In the case of a component

product, the combined taxable income

of the integrated product would be

multiplied by a ratio the numerator of

which is the production costs of the

component product and the

denominator of which is the production

costs of the integrated product. The

combined taxable income of an endproduct form would be determined in a

similar manner using the production

costs of the end-product form. The

regulations were proposed to be

effective for taxable years beginning

after 1993.

Taxpayers have argued that the

regulations should not be adopted as

proposed because they would violate

the arm’s length standard under section

482 and that a necessary consequence of

the abandonment of the arm’s length

standard would be distortions in

taxpayers’ income. That is, income

would be computed inconsistently for

related versus unrelated party sales of

the same product, under the same terms

and in the same market.

The proposed regulations did not

apply the arm’s length standard to

component products and end-product

forms under the profit-split method

because application of section 482 in

this context is inconsistent with the

statutory framework. The effect of the

profit split method when applied to

possession products is to minimize

disputes between taxpayers and the IRS

because, unlike section 482 methods,

there is no need to perform functional

analyses to allocate income among the

parties. Because Congress eliminated

the section 482 analysis from the profit

split method, the proposed regulations

did not reinject this analysis into the

area of intermediate products.

In response to taxpayer comments,

however, the IRS and Treasury are

providing an election to taxpayers that

sell the same possession product in both

component form and integrated form if

the transactions meet certain section

482 standards. This method is both

simple to apply and produces consistent

results with respect to related and

unrelated party transactions. Under this

method, the combined taxable income

from covered sales of the component

product shall be determined by using

the same per unit combined taxable

income as is derived from uncontrolled

sales of the product as an integrated

product. Taxpayers may elect to

compute the combined taxable income

for an end-product form in a similar

manner if all excluded components are

manufactured by a member of the

affiliated group that includes the

possession corporation and also sold by

the group separately in uncontrolled

transactions. In that case, the combined

taxable income of the end-product form

will be computed by reducing the

combined taxable income of the

integrated product that includes the

end-product form by the combined

taxable income of the excluded

components determined under the rules

of section 936 as if the excluded

components were possession products.

In order to make the election, the

uncontrolled sales must meet the

comparability standards of the fourth

sentence of § 1.482–3(b)(2)(ii)(A), which

requires that the uncontrolled and

controlled transactions have no

differences or minor differences for

which adjustment can be made.

However, under a no loss limitation, in

no case can the taxpayer use as its per
Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Rules and Regulations 21367

unit combined taxable income for a

component product or an end-product

form an amount that exceeds the per

unit combined taxable income of the

integrated product that includes the

component product or end-product

form.

In 1993, Congress adopted limitations

on the amount of the section 936 credit;

the taxpayer may be subject to an

activity based limitation or may elect a

percentage limitation. The election for

the percentage limitation had to be

made for the first taxable year beginning

after December 31, 1993. Taxpayers

commented that the proposed

regulations created uncertainty with

respect to the consequences of making

the percentage limitation election and,

therefore, the period for making the

election should be extended until after

the regulations are finalized. This

comment is adopted. Taxpayers that

have not elected the percentage

limitation under section 936(a)(1) for

the first taxable year beginning after

December 31, 1993, may so elect if the

taxpayer has elected the profit split

method and the computation of

combined taxable income is affected by

§ 1.936–6(b)(1) Q&A 12.

With respect to the proposed effective

date, taxpayers commented that the

regulations should not be applied

retroactively. One of the justifications

for the proposed rule was that it would

simplify the computation of combined

taxable income and applying the

regulation retroactively would not

simplify the computation because it

would require filing amended returns.

This comment is adopted in part. The

regulation is effective for taxable years

ending 30 days after May 10, 1996. If

however, the election under paragraph

(v) of A. 12 of § 1.936–6(b)(1) is made,

this election must be made for the

taxpayer’s first taxable year beginning

after December 31, 1993, and if not

made effective for that year, the election

cannot be made for any later taxable

year.

The last sentence of paragraph (vi) of

A. 13 of § 1.936–6(b)(1) in the proposed

regulations provided that, for purposes

of determining the estimated tax

liability of an affiliate of the possessions

corporation with respect to income

allocated to it from the possessions

corporation, the income would be

deemed received on the last day of the

taxable year of each such affiliate in

which or with which the taxable year of

the possessions corporation ended. This

rule is limited to taxable years

beginning prior to January 1, 1995. For

taxable years beginning after December

31, 1994, quarterly estimated tax

payments will be required as provided

under section 711 of the Uruguay Round

Agreements, Public Law 103–465

(1994), page 230, and any administrative

guidance issued by the IRS thereunder.

See Rev. Proc. 95–23 (1995–1 C.B. 693).

Accordingly, the proposed regulations

are finalized as proposed except with

respect to the changes discussed above

and the necessary conforming changes.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

12866. Therefore, a regulatory

assessment is not required. It has also

been determined that this regulation

does not have a significant impact on a

substantial number of small entities.

Thus, the Regulatory Flexibility Act (5

U.S.C. chapter 6) does not apply to these

regulations, and therefore, a Regulatory

Flexibility Analysis is not required.

Pursuant to section 7805(f) of the

Internal Revenue Code, the notice of

proposed rulemaking preceding these

regulations was submitted to the Small

Business Administration for comment

on its impact on small business.

Drafting Information

The principal authors of these

regulations are Jacob Feldman and Mary

Gillmarten of the Office of Associate

Chief Counsel (International), IRS. Other

personnel from the IRS and Treasury

Department participated in their

development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 continues to read in part as

follows:

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

Par. 2. In § 1.936–6, paragraph (b)(1)

is amended by:

1. Revising Q. 10.

2. Amending A. 10 by:

a. Redesignating the text of A. 10 as

paragraph A. 10(i).

b. Removing the last two sentences of

newly designated A.

10(i).

c. Adding paragraphs A. 10 (ii)

through (v).

3. Revising the first sentence of A. 11.

4. Revising Q&A. 12.

5. Revising A. 13.

The revisions and addition read as

follows:

§ 1.936–6 Intangible property income when

an election out is made; cost sharing and

profit split options; covered intangibles.

* * * * *

(b) * * *

(1) * * *

Q. 10: If the possessions corporation

is entitled to use the profit split method

in the situation described in Q. 9

(leasing units of the possession product

or use of such units in the taxpayer’s

own trade or business), how should it

compute combined taxable income with

respect to such units?

A. 10: (i) * * *

(ii) If the possession product is a

component product or an end-product

form, the combined taxable income with

respect to the possession product shall

be determined under Q&A. 12 of this

paragraph (b)(1).

(iii) For purposes of determining the

basis of a component product or an endproduct form, the deemed sales price of

such product must be determined. The

deemed sales price of the component

product shall be determined by

multiplying the deemed sales price of

the integrated product that includes the

component product by a ratio, the

numerator of which is the production

costs of the component product and the

denominator of which is the production

costs of the integrated product that

includes the component product. The

deemed sales price of an end-product

form shall be determined by multiplying

the deemed sales price of the integrated

product that includes the end-product

form by a ratio, the numerator of which

is the production costs of the endproduct form and the denominator of

which is the production costs of the

integrated product that includes the

end-product form. For the definition of

production costs, see Q&A. 12 of this

paragraph (b)(1).

(iv)(A) If combined taxable income is

determined under paragraph (v) of A. 12

of this paragraph (b)(1), in the case of a

component product, the deemed sales

price shall be determined by using the

actual sales price of that product when

sold as an integrated product (as

adjusted under the rules of the fourth

sentence of § 1.482–3(b)(2)(ii)(A)).

(B) If combined taxable income is

determined under paragraph (v) of A. 12

of this paragraph (b)(1), in the case of an

end-product form, the deemed sales

price shall be determined by subtracting

from the deemed sales price of the

integrated product that includes the

end-product form (e.g., the leased

property) the actual sales price of the

excluded component when sold as an
21368 Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Rules and Regulations

integrated product to an unrelated

person (as adjusted under the rules of

the fourth sentence of § 1.482–

3(b)(2)(ii)(A)).

(v) The full amount of income

received under the lease shall be treated

as income of (and be taxed to) the U.S.

affiliate and not the possessions

corporation.

* * * * *

A. 11: The U.S. affiliate shall be

treated, for purposes of computing its

basis in such units, as if it had

repurchased such units immediately

following the deemed sale and at the

deemed sales price as provided in Q&A.

10 of this paragraph (b)(1). * * *

Q. 12: If the possession product is a

component product or an end-product

form, how is the combined taxable

income for such product to be

determined?

A. 12: (i) Except as provided in

paragraph (v) of this A. 12, combined

taxable income for a component product

or an end-product form is computed

under the production cost ratio (PCR)

method.

(ii) Under the PCR method, the

combined taxable income for a

component product will be the same

proportion of the combined taxable

income for the integrated product that

includes the component product that

the production costs attributable to the

component product bear to the total

production costs (including costs

incurred by the U.S. affiliates) for the

integrated product that includes the

component product. Production costs

will be the sum of the direct and

indirect production costs as defined

under § 1.936–5(b)(4) except that the

costs will not include any costs of

materials. If the possession product is a

component product that is transformed

into an integrated product in whole or

in part by a contract manufacturer

outside of the possession, within the

meaning of § 1.936–5(c), the

denominator of the PCR shall be

computed by including the same

amount paid to the contract

manufacturer, less the costs of materials

of the contract manufacturer, as is taken

into account for purposes of the

significant business presence test under

§ 1.936–5(c) Q&A. 5.

(iii) Under the PCR method the

combined taxable income for an endproduct form will be the same

proportion of the combined taxable

income for the integrated product that

includes the end-product form that the

production costs attributable to the endproduct form bear to the total

production costs (including costs

incurred by the U.S. affiliates) for the

integrated product that includes the

end-product form. Production costs will

be the sum of the direct and indirect

production costs as defined under

§ 1.936–5(b)(4) except that the costs will

not include any costs of materials. If the

possession product is an end-product

form and an excluded component is

contract manufactured outside of the

possession, within the meaning of

§ 1.936–5(c), the denominator shall be

computed by including the same

amount paid to the contract

manufacturer, less cost of materials of

the contract manufacturer, as is also

taken into account for purposes of the

significant business presence test under

§ 1.936–5(c) Q&A. 5.

(iv) This paragraph (iv) of A. 12

illustrates the computation of combined

taxable income for a component product

or end-product form under the PCR

method. S, a possessions corporation, is

engaged in the manufacture of

microprocessors. S obtains a component

from a U.S. affiliate, O. S sells its

production to another U.S. affiliate, P,

which incorporates the microprocessors

into central processing units (CPUs). P

transfers the CPUs to a U.S. affiliate, Q,

which incorporates the CPUs into

computers for sale to unrelated persons.

S chooses to define the possession

product as the CPUs. The combined

taxable income for the sale of the

possession product on the basis of the

given production, sales, and cost data is

computed as follows:

Production costs (excluding costs of materials):

1. O’s costs for the component............... ........................................................................................................................................ 100

2. S’s costs for the microprocessors......... ...................................................................................................................................... 500

3. P’s costs for the CPU’s (the possession product)................................. ..................................................................................... 200

4. Q’s costs for the computers............... ......................................................................................................................................... 400

5. Total production costs for the computer (Add lines 1 through 4).................. ......................................................................... 1,200

6. Combined production costs for the CPU (the possession product) (Add lines 1 through 3)................................ ................. 800

7. Ratio of production costs for the CPUs (the possession product) to the production costs for the computer.................. ..... 0.667

Determination of combined taxable income for computers:

Sales:

8. Total possession sales of computers to unrelated customers and foreign affiliates........ ....................................................... 7,500

Total costs of O, S, P, and Q incurred in production of a computer:

9. Production costs (enter from line 5)....................... ................................................................................................................... 1,200

10. Material costs ........................... ................................................................................................................................................ 100

11. Total costs (line 9 plus line 10)........ ....................................................................................................................................... 1,300

12. Combined gross income from sale of computers (line 8 minus line 11).................... ........................................................... 6,200

Expenses of the affiliated group (other than foreign affiliates) allocable and apportionable to the computers or any component thereof under the rules of §§ 1.861–8 through 1.861–14T and 1.936–6 (b)(1), Q&A. 1:

13. Expenses (other than research expenses)... .............................................................................................................................. 980

Research expenses of the affiliated group allocable and apportionable to the computers:

14. Total sales in the 3-digit SIC Code....... ................................................................................................................................... 12,500

15. Possession sales of the computers (enter from line 8)........................................ .................................................................... 7,500

16. Cost sharing fraction (divide line 15 by line 14)............... ..................................................................................................... 0.6

17. Research expenses incurred by the affiliated group in 3-digit SIC Code multiplied by 120 percent................................... 700

18. Cost sharing amount (multiply line 16 by line 17)............. .................................................................................................... 420

19. Research of the affiliated group (other than foreign affiliates) allocable and apportionable under §§ 1.861–17 and

1.861–14T(e)(2) to the computers................................. .............................................................................................................. 300

20. Enter the greater of line 18 or line 19... ................................................................................................................................... 420

Computation of combined taxable income of the computer and the CPU:

21. Combined taxable income attributable to the computer (line 12 minus line 13 and line 20)...................................... ....... 4,800

22. Combined taxable income attributable to CPUs (multiply line 21 by line 7) (production cost ratio).............................. 3,200

23. Share of combined taxable income apportioned to S (50 percent of line 22).............. ......................................................... 1,600

Share of combined taxable income apportioned to U.S. affiliate(s) of S:

24. Adjustments for research expenses (line 18 minus line 19 multiplied by line 7)....... ......................................................... 80

25. Adjusted combined taxable income (line 22 plus line 24).................... ................................................................................. 3,280

26. Share of combined taxable income apportioned to affiliates of S (line 25 minus line 23) .................................................. 1,680
Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Rules and Regulations 21369

(v)(A) If a possession product is sold

by a taxpayer or its affiliate to unrelated

persons in covered sales both as an

integrated product and as a component

product and the conditions of paragraph

(v)(C) of this A. 12 are satisfied, the

taxpayer may elect to determine the

combined taxable income derived from

covered sales of the component product

under this paragraph (v). In that case,

the combined taxable income derived

from covered sales of the component

product shall be determined by using

the same per unit combined taxable

income as is derived from covered sales

of the product as an integrated product,

but subject to the limitation of

paragraph (v)(D) of this A. 12.

(B) In the case of a possession product

that is an end-product form, if all of the

excluded components are also

separately sold by the taxpayer or its

affiliate to unrelated persons in

uncontrolled transactions and the

conditions of paragraph (v)(C) of this A.

12 are satisfied, the taxpayer may elect

to determine the combined taxable

income of such end-product form under

this paragraph (v). In that case, the

combined taxable income derived from

covered sales of the end-product form

shall be determined by reducing the per

unit combined taxable income from the

integrated product that includes the

end-product form by the per unit

combined taxable income for excluded

components determined under the rules

of this paragraph (v), but subject to the

limitation of paragraph (v)(D) of this A.

12. For this purpose, combined taxable

income of the excluded components

must be determined under section 936

as if the excluded components were

possession products.

(C) In the case of component

products, this paragraph (v) applies only

if the sales price of the possession

product sold in covered sales as an

integrated product (i.e., in uncontrolled

transactions) would be the most direct

and reliable measure of an arm’s length

price within the meaning of the fourth

sentence of § 1.482–3(b)(2)(ii)(A) for the

component product. For purposes of

applying the fourth sentence of § 1.482–

3(b)(2)(ii)(A), the sale of the integrated

product that includes the component

product is treated as being immediately

preceded by a sale of the component

(i.e. without further processing) in a

controlled transaction. In the case of

end-product forms, this paragraph (v)

applies only if the sales price of

excluded components separately sold in

uncontrolled transactions would be the

most direct and reliable measure of an

arm’s length price within the meaning

of the fourth sentence of § 1.482–

3(b)(2)(ii)(A) for all excluded

components of an integrated product

that includes an end-product form. For

purposes of applying the fourth

sentence of § 1.482–3(b)(2)(ii)(A), the

sale of the integrated product that

includes excluded components is

treated as being immediately preceded

by a sale of the excluded components

(i.e. without further processing) in a

controlled transaction. Under the fourth

sentence of § 1.482–3(b)(2)(ii)(A), the

uncontrolled transactions referred to in

this paragraph (v)(C) must have no

differences with the controlled

transactions that would affect price, or

have only minor differences that have a

definite and reasonably ascertainable

effect on price and for which

appropriate adjustments are made

(resulting in appropriate adjustments to

the computation of combined taxable

income). If such adjustments cannot be

made, or if there are more than minor

differences between the controlled and

uncontrolled transactions, the method

provided by this paragraph (v)(C) cannot

be used. Thus, for example, these

uncontrolled transactions must involve

substantially identical property in the

same or a substantially identical

geographic market, and must be

substantially identical to the controlled

transaction in terms of their volumes,

contractual terms, and market level. See

§ 1.482–3(b)(2)(ii)(B).

(D) In no case can the per unit

combined taxable income as determined

under paragraph (v)(A) or (B) of this A.

12 be greater than the per unit combined

taxable income of the integrated product

that includes the component product or

end-product form.

(E) The provisions of this paragraph

(v) are illustrated by the following

example. Taxpayer manufactures

product A in a U.S. possession. Some

portion of product A is sold to unrelated

persons as an integrated product and the

remainder is sold to related persons for

transformation into product AB. The

combined taxable income of integrated

product A is $400 per unit and the

combined taxable income of product AB

is $300 per unit. The production cost

ratio with respect to product A when

sold as a component of product AB, is

2/3. Unless the taxpayer elects and

satisfies the conditions of this paragraph

(v), the combined taxable income with

respect to A will be $200 per unit

(combined taxable income for AB of

$300 × the production cost ratio of 2/3).

If, however, the comparability standards

of paragraph (v)(C) of this A. 12 are met,

the taxpayer may elect to determine

combined taxable income of product A

when sold as a component of product

AB using the same per unit combined

taxable income as product A when sold

as an integrated product. However, the

per unit combined taxable income from

sales of product A as a component

product may not exceed the per unit

combined taxable income on the sale of

product AB. Therefore, the combined

taxable income of component product A

may not exceed $300 per unit.

(vi) Taxpayers that have not elected

the percentage limitation under section

936(a)(1) for the first taxable year

beginning after December 31, 1993, may

do so if the taxpayer has elected the

profit split method and computation of

combined taxable income is affected by

Q&A.12 of this paragraph (b)(1).

(vii) The rules of Q&A. 12 of this

paragraph (b)(1) apply for taxable years

ending 30 days after May 10, 1996. If,

however, the election under paragraph

(v) of A. 12 of § 1.936–6(b)(1) is made,

this election must be made for the

taxpayer’s first taxable year beginning

after December 31, 1993, and if not

made effective for that year, the election

cannot be made for any later taxable

year. A successor corporation that

makes the same or substantially similar

products as its predecessor corporation

cannot make an election under

paragraph (v) of A.12 of § 1.936–6(b)(1)

unless the election was made by its

predecessor corporation for its first

taxable year beginning after December

31, 1993.

* * * * *

A. 13: (i) The income shall be

allocated to affiliates in the following

order, but no allocations will be made

to affiliates described in a later category

if there are any affiliates in a prior

category—

(A) First, to U.S. affiliates (other than

tax exempt affiliates) within the group

(as determined under section 482) that

derive income with respect to the

product produced in whole or in part in

the possession;

(B) Second, to U.S. affiliates (other

than tax exempt affiliates) that derive

income from the active conduct of a

trade or business in the same product

area as the possession product;

(C) Third, to other U.S. affiliates

(other than tax-exempt affiliates);

(D) Fourth, to foreign affiliates that

derive income from the active conduct

of a U.S. trade or business in the same

product area as the possession product

(or, if the foreign members are resident

in a country with which the U.S. has an

income tax convention, then to those

foreign members that have a permanent

establishment in the United States that

derives income in the same product area

as the possession product); and

(E) Fifth, to all other affiliates.

(ii) The allocations made under

paragraph (i)(A) of this A. 13 shall be
21370 Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Rules and Regulations

made on the basis of the relative gross

income derived by each such affiliate

with respect to the product produced in

whole or in part in the possession. For

this purpose, gross income must be

determined consistently for each

affiliate and consistently from year to

year.

(iii) The allocations made under

paragraphs (i)(B) and (i)(D) of this A. 13

shall be made on the basis of the relative

gross income derived by each such

affiliate from the active conduct of the

trade or business in the same product

area.

(iv) The allocations made under

paragraphs (i)(C) and (i)(E) of this A. 13

shall be made on the basis of the relative

total gross income of each such affiliate

before allocating income under this

section.

(v) Income allocated to affiliates shall

be treated as U.S. source and section

863(b) does not apply for this purpose.

(vi) For purposes of determining an

affiliate’s estimated tax liability for

income thus allocated for taxable years

beginning prior to January 1, 1995, the

income shall be deemed to be received

on the last day of the taxable year of

each such affiliate in which or with

which the taxable year of the

possessions corporation ends. For

taxable years beginning after December

31, 1994, quarterly estimated tax

payments will be required as provided

under section 711 of the Uruguay Round

Agreements, Public Law 103–465

(1994), page 230, and any administrative

guidance issued by the Internal Revenue

Service thereunder.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: April 4, 1996.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 96–11639 Filed 5–9–96; 8:45 am]

BILLING CODE 4830–01–U

EQUAL EMPLOYMENT OPPORTUNITY

COMMISSION

29 CFR Part 1601

706 Agencies; Orange County (NC)

Human Relations Commission and

Palm Beach County (FL) Office of

Equal Opportunity; Designation as Fair

Employment Practices Agencies

AGENCY: Equal Employment

Opportunity Commission.

ACTION: Final rule.

SUMMARY: The Equal Employment

Opportunity Commission amends its

regulations designating certain State and

local fair employment practices agencies

(706 Agencies) so that they may handle

employment discrimination charges

within their jurisdictions. Publication of

this amendment effectuates the

designation of the Orange County (NC)

Human Relations Commission and the

Palm Beach County (FL) Office of Equal

Opportunity.

EFFECTIVE DATE: May 10, 1996.

FOR FURTHER INFORMATION CONTACT:

Boyce Nolan, Equal Employment

Opportunity Commission, Office of

Program Operations, Charge Resolution

Review Program, 1801 L Street, N.W.,

Washington, D.C. 20507, Telephone

(202) 663–4856.

SUPPLEMENTARY INFORMATION:

List of Subjects in 29 CFR Part 1601

Administrative practice and

procedure, Equal employment

opportunity, Intergovernmental

relations.

Accordingly, title 29, chapter XIV,

part 1601 of the Code of Federal

Regulations is amended as follows:

PART 1601—PROCEDURAL

REGULATIONS

1. The authority citation for part 1601

continues to read as follows:

Authority: 42 U.S.C. 2000e to 2000e–17; 42

U.S.C. 12111 to 12117.

2. Section 1601.74(a) is amended by

adding in alphabetical order the

following agencies:

§ 1601.74 Designated and notice agencies.

(a) * * *

Orange County (NC) Human Relations

Commission

* * * * *

Palm Beach County (FL) Office of Equal

Opportunity

* * * * *

Signed at Washington, D.C. this 2nd day of

May, 1996.

For the Commission.

Gilbert F. Casellas,

Chairman.

[FR Doc. 96–11745 Filed 5–9–96; 8:45 am]

BILLING CODE 6750–01–M

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 63

[AD–FRL–5503–3]

Hazardous Air Pollutants: Amendment

to Regulations Governing Equivalent

Emission Limitations by Permit

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Direct final rule.

SUMMARY: On May 20, 1994, the Agency

promulgated a rule in the Federal

Register governing the establishment of

equivalent emission limitations by

permit, pursuant to section 112(j) of the

Clean Air Act (Act). After the effective

date of a Title V permit program in a

State, each owner or operator of a major

source in a source category for which

the EPA was scheduled to, but failed to

promulgate a section 112(d) emission

standard will be required to obtain an

equivalent emission limitation by

permit. The permit application must be

submitted to the Title V permitting

authority 18 months after the EPA’s

missed promulgation date. This action

amends the original Regulations

Governing Equivalent Emission

Limitations by Permit rule. This

amendment delays the section 112(j)

permit application deadline for all 4-

year source categories listed in the

regulatory schedule by 180 days until

November 15, 1996. This action is

needed to alleviate unnecessary

paperwork for both major source owners

or operators and permitting agencies.

EFFECTIVE DATE: May 10, 1996.

ADDRESSES: Docket. All information

used in the development of this final

action is contained in the preamble

below. However, Docket No. A–93–32,

containing the supporting information

for the original Regulations Governing

Equivalent Emission Limitations by

Permit rule is available for public

inspection and copying between 8:00

a.m. and 5:30 p.m., Monday through

Friday at the Air and Radiation Docket

and Information Center (6102), Room

M–1500, U.S. Environmental Protection

Agency, 401 M Street, S.W.,

Washington, D.C. 20460; telephone

(202) 260–7548, fax (202) 260–4000. A

reasonable fee may be charged for

copying.

FOR FURTHER INFORMATION CONTACT: Mr.

James Szykman or Mr. Anthony Wayne,

Emission Standards Division (MD–13),

U.S. Environmental Protection Agency,

Research Triangle Park, North Carolina

27711, telephone (919) 541–2452

(Szykman) or (919) 541–5439 (Wayne).