Federal Register / Vol. 61, No. 92 / Friday, May 10, 1996 / Rules and Regulations 21365

were invited to participate in the

rulemaking proceeding by submitting

written comments on the proposal. No

comments were received.

The coordinates for this airspace

docket are based on North American

Datum 83. Class E airspace areas

extending upward from 700 feet or more

above the surface of the earth are

published in paragraph 6005 of FAA

Order 7400.9C dated August 17, 1995,

and effective September 16, 1995, which

is incorporated by reference in 14 CFR

71.1. The Class E airspace listed in this

document will be published

subsequently in the Order.

The Rule

This amendment to part 71 of Federal

Aviation Regulations establishes Class E

airspace at John Day, Oregon. The FAA

has determined that this regulation only

involves an established body of

technical regulations for which frequent

and routine amendments are necessary

to keep them operationally current. It,

therefore, (1) is not a ‘‘significant

regulatory action’’ under Executive

Order 12866; (2) is not a ‘‘significant

rule’’ under DOT Regulatory Policies

and Procedures (44 FR 11034; February

26, 1979); and (3) does not warrant

preparation of a regulatory evaluation as

the anticipated impact is so minimal.

Since this is a routine matter that will

only affect air traffic procedures and air

navigation, it is certified that this rule

will not have a significant economic

impact on a substantial number of small

entities under the criteria of the

Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference,

Navigation (air).

Adoption of the Amendment

In consideration of the foregoing, the

FAA amends 14 CFR part 71 as follows:

PART 71—[AMENDED]

1. The authority citation for 14 CFR

part 71 continues to read as follows:

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.

ANM–OR E5 John Day, OR

John Day State Airport, OR

(Lat 44°24′14′′N, long. 118°57′49′′W)

That airspace extending upward from 700

feet above the surface within a 6.5-mile

radius of the John Day State Airport; that

airspace extending upward from 1,200 feet

above the surface within a 9-mile radius of

the John Day State Airport, and that airspace

within 4 miles either side of a line bearing

076° true from the John Day State Airport,

extending from the 9-mile radius to a point

38 miles northeast of the airport, and within

an area bounded on the northwest by V357,

on the northeast by V4, on the southeast of

V269, and on the southwest by V500;

excluding that airspace within Federal

Airways.

* * * * *

Issued in Seattle, Washington, on May 1,

1996.

Richard E. Prang,

Acting Assistant Manager, Air Traffic

Division, Northwest Mountain Region.

[FR Doc. 96–11728 Filed 5–9–96; 8:45 am]

BILLING CODE 4910–13–M

14 CFR Part 71

[Airspace Docket No. 95–AWP–13]

Establishment of Class E Airspace;

Hollister, CA

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Final rule.

SUMMARY: This action establishes a Class

E airspace area at Hollister, CA. The

development of a Global Positioning

System (GPS) Standard Instrument

Approach Procedure (SIAP) to Runway

(RWY) 31 has made this action

necessary. The intended effect of this

action is to provide adequate controlled

airspace for Instrument Flight Rules

(IFR) operations at Hollister Municipal

Airport, Hollister, CA.

EFFECTIVE DATE: 0901 UTC August 15,

1996.

FOR FURTHER INFORMATION CONTACT:

William Buck, Airspace Specialist,

Operations Branch, AWP–530, Air

Traffic Division, Western-Pacific

Region, Federal Aviation

Administration, 15000 Aviation

Boulevard, Lawndale, California, 90261,

telephone (310) 725–6556.

SUPPLEMENTARY INFORMATION:

History

On January 8, 1996, the FAA

proposed to amend part 71 of the

Federal Aviation Regulations (14 CFR

part 71) by establishing a Class E

airspace area at Hollister, CA (61 FR

549). On March 11, 1996, the FAA

issued a supplemental notice to amend

this proposal to establish a Class E

airspace area at Hollister, (61 FR 9655).

This action will provide adequate

controlled airspace to accommodate a

GPS SIAP to RWY 31 at Hollister

Municipal Airport, Hollister, CA.

Interested parties were invited to

participate in this rulemaking

proceeding by submitting written

comments on the proposals to the FAA.

No comments to the proposals were

received. Class E airspace designations

are published in paragraph 6005 of FAA

Order 7400.9C dated August 17, 1995,

and effective September 16, 1995, which

is incorporated by reference in 14 CFR

71.1. The E airspace designation listed

in this document will be published

subsequently in this Order.

The Rule

This amendment to part 71 of the

Federal Aviation Regulations (14 CFR

part 71) establishes a Class E airspace

area at Hollister, CA. The development

of a GPS SIAP to RWY 31 has made this

action necessary. The intended effect of

this action is to provide adequate

controlled airspace for aircraft executing

the GPS RWY 31 SIAP at Hollister

Municipal Airport, Hollister, CA.

The FAA has determined that this

regulation only involves an established

body of technical regulations for which

frequent and routine amendments are

necessary to keep them operationally

current. Therefore, this regulation—(1)

is not a ‘‘significant regulatory action’’

under Executive Order 12866; (2) is not

a ‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 10034; February 26, 1979); and (3)

does not warrant preparation of a

Regulatory Evaluation as the anticipated

impact is so minimal. Since this is a

routine matter that will only affect air

traffic procedures and air navigation, it

is certified that this rule will not have

a significant economic impact on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference,

Navigation (air).

Adoption of the Amendment

In consideration of the foregoing, the

Federal Aviation Administration

amends 14 CFR part 71 as follows:

PART 71—[AMENDED]

1. The authority citation for 14 CFR

part 71 continues to read as follows:
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