45660 Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Proposed Rules 

and C each have a zero stock basis and X 

does not have any indebtedness to A, B, or 

C. For the 2008 taxable year, X excludes from 

gross income $30,000 of COD income under 

section 108(a)(1)(A). The COD income (had it 

not been excluded) would have been 

allocated $10,000 to A, $10,000 to B, and 

$10,000 to C under section 1366(a). For the 

2008 taxable year, X has $30,000 of losses 

and deductions that X passes through prorata to A, B, and C in the amount of $10,000 

each. The losses and deductions that pass 

through to A, B, and C are disallowed under 

section 1366(d)(1). In addition, B has $10,000 

of section 1366(d) losses from prior years and 

C has $20,000 from prior years. A’s ($10,000), 

B’s ($20,000) and C’s ($30,000) combined 

$60,000 of disallowed losses and deductions 

for the taxable year of the discharge are 

treated as a current year net operating loss 

tax attribute for X under section 108(d)(7)(B) 

(deemed NOL) for purposes of the section 

108(b) reduction of tax attributes. 

(ii) Allocation. Under section 108(b)(2)(A), 

X’s $30,000 of excluded COD income reduces 

this $60,000 deemed NOL to $30,000. 

Therefore, X has a $30,000 excess net 

operating loss (excess deemed NOL) to 

allocate to the shareholders. Under paragraph 

(d)(2)(ii)(C) of this section, none of the 

$30,000 excess deemed NOL is allocated to 

A because A’s section 1366(d) losses and 

deductions immediately prior to the section 

108(b)(2)(A) reduction ($10,000) do not 

exceed A’s share of the excluded COD 

income for 2008 ($10,000). Thus, A has no 

shareholder’s excess amount. Each of B’s and 

C’s respective section 1366(d) losses and 

deductions immediately prior to the section 

108(b)(2)(A) reduction exceed each of B’s and 

C’s respective shares of the excluded COD 

income for 2008. B’s excess amount is 

$10,000 ($20,000 ¥ $10,000) and C’s excess 

amount is $20,000 ($30,000 ¥ $10,000). 

Therefore, the total of all shareholders’

excess amounts is $30,000. Under paragraph 

(d)(2) of this section, X will allocate $10,000 

of the $30,000 excess deemed NOL to B 

($30,000 × $10,000/$30,000) and $20,000 of 

the $30,000 excess deemed NOL to C 

($30,000 × $20,000/$30,000). These amounts 

are treated as losses and deductions 

disallowed under section 1366(d)(1) for the 

taxable year of the discharge. Accordingly, at 

the beginning of 2009, A has no section 

1366(d)(2) carryovers, B has $10,000 of 

carryovers, and C has $20,000 of carryovers. 

(iii) Character. Immediately prior to the 

section 108(b)(2)(A) reduction, B’s $20,000 of 

section 1366(d) losses and deductions 

consisted of $8,000 of long-term capital 

losses, $7,000 of section 1231 losses, and 

$5,000 of ordinary losses. After the section 

108(b)(2)(A) tax attribute reduction, X will 

allocate $10,000 of the excess deemed NOL 

to B. Under paragraph (d)(3) of this section, 

the $5,000 of ordinary losses are treated as 

reduced first, followed by $5,000 of section 

1231 losses. Accordingly, the $10,000 of 

losses allocated to B consist of the remaining 

$2,000 of section 1231 losses and $8,000 of 

long-term capital losses. As a result, at the 

beginning of 2009, B’s $10,000 of section 

1366(d)(2) carryovers include $2,000 of 

section 1231 losses and $8,000 of long-term 

capital losses. 

Example 6. (i) A and B each own 50 

percent of the shares of stock in X, a calendar 

year S corporation. On June 30, 2008, A sells 

all of her shares of stock in X to C in a 

transfer not described in section 1041(a). For 

the 2008 taxable year, X excludes from gross 

income $12,000 of COD income under 

section 108(a)(1)(A). The COD income (had it 

not been excluded) would have been 

allocated $3,000 to A, $6,000 to B, and 

$3,000 to C under section 1366(a). Prior to 

the section 108(b)(2)(A) reduction, for the 

taxable year of the discharge the shareholders 

have disallowed losses and deductions under 

section 1366(d) (including disallowed losses 

carried over to the current year under section 

1366(d)(2)) in the following amounts: A—

$9,000, B—$9,000, and C—$2,000. These 

combined $20,000 of disallowed losses and 

deductions for the taxable year of the 

discharge are treated as a current year net 

operating loss tax attribute for X under 

section 108(d)(7)(B) (deemed NOL). 

(ii) Under section 108(b)(2)(A), X’s $12,000 

of excluded COD income reduces the $20,000 

deemed NOL to $8,000. Therefore, X has an 

$8,000 excess net operating loss (excess 

deemed NOL) to allocate to the shareholders. 

Under paragraph (d)(2)(ii)(C) of this section, 

none of the $8,000 excess deemed NOL is 

allocated to C because C’s section 1366(d) 

losses and deductions immediately prior to 

the section 108(b)(2)(A) reduction ($2,000) do 

not exceed C’s share of the excluded COD 

income for 2008 ($3,000). However, each of 

A’s and B’s respective section 1366(d) losses 

and deductions immediately prior to the 

section 108(b)(2)(A) reduction exceed each of 

A’s and B’s respective shares of the excluded 

COD income for 2008. A’s excess amount is 

$6,000 ($9,000¥$3,000) and B’s excess 

amount is $3,000 ($9,000¥$6,000). 

Therefore, the total of all shareholders’

excess amounts is $9,000. Under paragraph 

(d)(2) of this section, X will allocate $5,333 

of the $8,000 excess deemed NOL to A 

($8,000 × $6,000/$9,000) and $2,667 of the 

$8,000 excess deemed NOL to B ($8,000 × 

$3,000/$9,000). However, because A 

transferred all of her shares of stock in X in 

a transaction not described in section 

1041(a), A’s $5,333 of section 1366(d) losses 

and deductions are permanently disallowed 

under paragraph (d)(2)(iii) of this section. 

Accordingly, at the beginning of 2009, B has 

$2,667 of section 1366(d)(2) carryovers and C 

has no section 1366(d)(2) carryovers. 

(f) Effective/applicability date—(1) 

Paragraphs (a), (b), (c), and Examples 1, 

2, 3, and 4 of paragraph (e) of this 

section apply to discharges of 

indebtedness occurring on or after May 

10, 2004. 

(2) Paragraph (d) and Examples 5 and 

6 of paragraph (e) of this section apply 

to discharges of indebtedness occurring 

on or after the date that these 

regulations are published as final 

regulations in the Federal Register. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E8–17952 Filed 8–5–08; 8:45 am] 

BILLING CODE 4830–01–P 

FEDERAL MEDIATION AND 

CONCILIATION SERVICE 

29 CFR Part 1404 

RIN 3076–AA12 

Arbitration Services 

AGENCY: Federal Mediation and 

Conciliation Service. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Mediation and 

Conciliation Service (FMCS) proposes to 

amend its rules relating to arbitrators’

inactive status, removal, appointment, 

referral and obligation to provide FMCS 

with information. The proposed rules 

also address the appointment of 

arbitrators where a party has failed to 

pay fees in previous cases. In addition, 

the proposed rules raise the annual 

listing fee for arbitrators on the FMCS 

Roster. The changes will promote more 

efficient and effective procedures 

involving arbitrator retention and 

arbitration services. The increased cost 

of listing arbitrator biographical data 

more accurately reflects FMCS’ costs of 

maintaining and administering this 

information. 

DATES: Comments must be submitted to 

the office listed in the address section 

below on or before October 6, 2008. 

ADDRESSES: Submit written comments, 

identified by RIN number, by mail to 

Vella M. Traynham, Director, Office of 

Arbitration Services, FMCS, 2100 K 

Street, NW., Washington, DC 20427. 

Comments may be submitted by fax to 

(202) 606–3749. Comments may also be 

submitted electronically to 

vtraynham@fmcs.gov. All comments 

will be available for inspection in Room 

704 at the Washington, DC address 

above from 8:30 a.m. to 4:30 p.m. 

Monday through Friday, excluding legal 

holidays. 

FOR FURTHER INFORMATION CONTACT: 

Vella M. Traynham, Director, Office of 

Arbitration Services, FMCS, 2100 K 

Street, NW., Washington, DC 20427. 

Telephone: (202) 606–5111. 

SUPPLEMENTARY INFORMATION: Pursuant 

to 29 U.S.C. 171(b) and 29 CFR Part 

1404, FMCS maintains a Roster of 

qualified labor arbitrators to hear 

disputes arising from collective 

bargaining agreements and to provide 

fact finding and interest arbitration. 

FMCS proposes to amend its rules 

pertaining to arbitration services by 

revising: the arbitrator complaint 

process; circumstances applicable to 

inactive arbitrator status; procedures for 

the request of arbitration panels; the 

obligation of arbitrators to provide 

FMCS with designated information; and 


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Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Proposed Rules 45661 

methods for selecting an arbitrator 

panel. These changes are intended to 

make FMCS arbitration procedures more 

efficient and effective. 

FMCS also proposes in the Appendix 

to Part 1404 to increase the listing fee 

for an arbitrator’s first business address 

from $100 to $150. Increasingly, parties 

are requesting more individualized 

panels based on their requirements and 

arbitrator experience. The increased 

listing fee reflects the additional FMCS 

staff time and effort necessary to be 

responsive to these requests as well as 

that associated with updating arbitrator 

biographies. 

This rule is not a significant 

regulatory action for the purposes of 

Executive Order 12866 and has not been 

reviewed by the Office of Management 

and Budget. As required by the 

Regulatory Flexibility Act, I certify that 

this rule will not have a significant 

impact on a substantial number of small 

entities. This regulation does not have 

any federalism or tribal implications. 

List of Subjects in 29 CFR Part 1404 

Administrative practice and 

procedure, Labor management relations. 

For the reasons stated in the 

preamble, FMCS proposes to amend 29 

CFR part 1404 as follows: 

PART 1404—ARBITRATION SERVICES 

1. The authority citation for part 1404 

continues to read as follows: 

Authority: 29 U.S.C. 172 and 29 U.S.C. 173 

et seq. 

2. In § 1404.5, revise paragraph (d) to 

read as follows: 

§ 1404.5 Listing on the roster; criteria for 

listing and retention. 

* * * * * 

(d) Listing on roster, removal. Listing 

on the Roster shall be by decision of the 

Director of FMCS based upon the 

recommendations of the Board or upon 

the Director’s own initiative. The Board 

may recommend for removal, and the 

Director may remove, any person listed 

on the Roster for violation of this Part 

or of the Code of Professional 

Responsibility. FMCS will provide to 

the affected arbitrator written notice of 

removal from the Roster. Complaints 

about arbitrators should be in writing 

and sent to the Director of OAS. The 

complaint should cite the specific 

section of the Code or the FMCS rule the 

arbitrator has allegedly violated. The 

following criteria shall be a basis for the 

Board to recommend and/or the Director 

to initiate a member’s removal from the 

Roster: 

* * * * * 

3. Revise § 1404.6 to read as follows: 

§ 1404.6 Inactive status. 

(a) A member of the Roster who 

continues to meet the criteria for listing 

on the Roster may request that he or she 

be put in an inactive status on a 

temporary basis because of ill health, 

vacation, schedule or other reasons. 

(b) Arbitrators whose schedules do 

not permit cases to be heard within six 

months of assignment are encouraged to 

make themselves inactive temporarily 

until their caseload permits the earlier 

scheduling of cases. 

(c) An arbitrator can remain on 

inactive status without paying any 

annual listing fee for a period of two (2) 

years. If an arbitrator is on inactive 

status for longer than two (2) years, the 

arbitrator will be removed from the 

Roster unless he or she pays the annual 

listing fee. 

4. Amend § 1404.9 by revising 

paragraphs (b) and (d) to read as 

follows: 

§ 1404.9 Procedures for requesting 

arbitration lists and panels. 

* * * * * 

(b) The OAS will refer a panel of 

arbitrators to the parties upon request. 

The parties are encouraged to make joint 

requests. FMCS will abide by language 

in the parties’ collective bargaining 

agreement specifying the conditions 

under which a panel of arbitrators will 

be referred. If the parties’ collective 

bargaining agreement requires that the 

request for a panel of arbitrators be 

jointly submitted, FMCS will not 

proceed with an arbitrator selection if 

one party communicates to FMCS that 

it does not concur in the request. In the 

event, however, that the request is made 

by only one party without objection, the 

OAS will submit a panel of arbitrators. 

The issuance of a panel—pursuant to 

either a joint or a unilateral request—is 

nothing more than a response to a 

request. It does not signify the adoption 

of any position by the FMCS regarding 

the arbitrability of any dispute or a 

ruling that an agreement to arbitrate 

exists. 

* * * * * 

(d) The OAS reserves the right to 

decline to submit a panel or to make an 

appointment of an arbitrator if the 

request submitted is overly burdensome 

or otherwise impracticable. The OAS, in 

such circumstances, may refer the 

parties to an FMCS mediator to help in 

the design of an alternative solution. 

The OAS may also decline to service 

any request from a party based on the 

party’s non-payment of arbitrator fees or 

other behavior that constrains the spirit 

or operation of the arbitration process. 

* * * * * 

5. Revise § 1404.12 to read as follows: 

§ 1404.12 Selection by parties and 

appointment of arbitrators. 

(a) After receiving a panel of names, 

the parties must notify the OAS of their 

selection of an arbitrator or of the 

decision not to proceed with arbitration. 

Upon notification of the selection of an 

arbitrator, the OAS will make a formal 

appointment of the arbitrator. The 

arbitrator, upon notification of 

appointment, shall communicate with 

the parties within 14 days to arrange for 

preliminary matters, such as the date 

and place of hearing. Should an 

arbitrator be notified directly by the 

parties that he or she has been selected, 

the arbitrator must promptly notify the 

OAS of the selection and of his or her 

willingness to serve. The arbitrator must 

provide the OAS with the FMCS case 

number and other pertinent information 

for the OAS to make an appointment. A 

pattern of failure by an arbitrator to 

notify FMCS of a selection in an FMCS 

case may result in suspension or 

removal from the Roster. If the parties 

settle a case prior to the hearing, the 

parties must inform the arbitrator as 

well as the OAS. Consistent failure to 

follow these procedures may lead to a 

denial of future OAS services. 

(b) If the parties request a list of 

names and biographical sketches rather 

than a panel, the parties may choose to 

contact and select an arbitrator directly 

from that list. In this situation, neither 

the parties nor the arbitrator is required 

to furnish any additional information to 

FMCS and no case number will be 

assigned. 

(c) Where the parties’ collective 

bargaining agreement is silent on the 

manner of selecting arbitrators, FMCS 

will accept one of the following 

methods for selection from a panel: 

(1) A selection by mutual agreement; 

(2) A selection in which each party 

alternately strikes a name from the 

submitted panel until one remains; 

(3) A selection in which each party 

advises OAS of its order of preference 

by numbering each name on the panel 

and submitting the numbered list in 

writing to OAS. If the parties separately 

notify OAS of their preferred selections, 

OAS, upon receiving the preferred 

selection of the first party, will notify 

the other party that it has fourteen (14) 

days in which to submit its selections. 

Where both parties respond, the name 

that has the lowest combined number 

will be appointed. If the other party fails 

to respond, the first party’s choice will 

be honored. 

(d) Where the parties’ collective 

bargaining agreement permits each party 

to separately notify OAS of its preferred 


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45662 Federal Register / Vol. 73, No. 152 / Wednesday, August 6, 2008 / Proposed Rules 

selection, OAS will proceed with the 

selection process as follows. When the 

OAS receives the preferred selection 

from one party, it will notify the other 

party that it has fourteen (14) days in 

which to submit its selections. If that 

party fails to respond within the 

deadline, the first party’s choice will be 

honored unless prohibited by the 

collective bargaining agreement. Where 

both parties respond, the name that has 

the lowest combined number will be 

appointed. If, within fourteen (14) days, 

a second panel is requested, and is 

permitted by the collective bargaining 

agreement, the requesting party must 

pay a fee for the second panel. 

(e) The OAS will make a direct 

appointment of an arbitrator only upon 

joint request or as provided by 

paragraphs (c)(3) or (d) of this section. 

(f) A direct appointment in no way 

signifies a determination of arbitrability 

or a ruling that an agreement to arbitrate 

exists. The resolution of disputes over 

these issues rests solely with the parties. 

6. Amend the Appendix to 29 CFR 

Part 1404 by removing ‘‘$100’’ and 

adding ‘‘$150’’ in its place. 

Michael J. Bartlett, 

Deputy General Counsel. 

[FR Doc. E8–17674 Filed 8–5–08; 8:45 am] 

BILLING CODE 6732–01–P 

DEPARTMENT OF COMMERCE 

Patent and Trademark Office 

37 CFR Parts 1, 2, and 3 

[Docket No. PTO–P–2008–0022] 

RIN 0651–AC27 

Changes to Practice for Documents 

Submitted to the United States Patent 

and Trademark Office 

AGENCY: United States Patent and 

Trademark Office, Commerce. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The United States Patent and 

Trademark Office (Office) is proposing 

to revise the rules of practice to limit the 

types of correspondence that may be 

submitted to the Office by facsimile. 

The Office is also proposing an 

increased minimum font size for use on 

papers submitted to the Office for a 

patent application, patent or 

reexamination proceeding. The 

proposed changes will improve the 

legibility of documents in the Office’s 

files of patent applications and 

reexamination proceedings. 

DATES: Written comments must be 

received on or before October 6, 2008. 

No public hearing will be held. 

ADDRESSES: Comments should be sent 

by electronic mail over the Internet 

addressed to 

AC27.comments@uspto.gov. Comments 

may also be submitted by mail 

addressed to: Mail Stop CommentsPatents, Commissioner for Patents, P.O. 

Box 1450, Alexandria, VA 22313–1450, 

marked to the attention of Raul Tamayo, 

Legal Advisor, Office of Patent Legal 

Administration (OPLA). Although 

comments may be submitted by mail, 

the Office prefers to receive comments 

via the Internet. 

Comments may also be sent by 

electronic mail message over the 

Internet via the Federal eRulemaking 

Portal. See the Federal eRulemaking 

Portal Web site (http:// 

www.regulations.gov) for additional 

instructions on providing comments via 

the Federal eRulemaking Portal. 

The comments will be available for 

public inspection at the Office of Patent 

Legal Administration, Office of the 

Deputy Commissioner for Patent 

Examination Policy, currently located at 

Room 7D74 of Madison West, 600 

Dulany Street, Alexandria, Virginia and 

will also be available through 

anonymous file transfer protocol (ftp) 

via the Internet (address: http:// 

www.uspto.gov). Because comments will 

be made available for public inspection, 

information that is not desired to be 

made public, such as an address or a 

telephone number, should not be 

included in the comments. 

FOR FURTHER INFORMATION CONTACT: 

Hiram H. Bernstein ((571) 272–7707), 

Senior Legal Advisor, or Raul Tamayo, 

Legal Advisor, ((571) 272–7728), Office 

of Patent Legal Administration, Office of 

Deputy Commissioner for Patent 

Examination Policy, directly by 

telephone, or by mail addressed to: Mail 

Stop Comments-Patents, Commissioner 

for Patents, P.O. Box 1450, Alexandria, 

VA 22313–1450, marked to the attention 

of the Office of Patent Legal 

Administration. 

For information regarding 

reexamination issues, contact Stephen 

Marcus ((571) 272–7743) or Kenneth 

Schor ((571) 272–7710), Senior Legal 

Advisors, Office of Patent Legal 

Administration, Office of Deputy 

Commissioner for Patent Examination 

Policy. 

SUPPLEMENTARY INFORMATION: The Office 

is proposing to revise the rules of 

practice in title 37 of the Code of 

Federal Regulations (CFR) for facsimile 

transmissions of correspondence, and 

the minimum font size required to be 

used. The Office is specifically 

proposing revising §§ 1.6, 1.52, 1.366, 

2.195, 3.24, and 3.25. 

I. Background 

The number of patent applications 

and patent-related correspondence 

received by the Office has increased 

substantially over the last few years, and 

submissions are expected to continue to 

increase in the next few years. 

Processing paper is extremely laborintensive and subject to error and 

misfiling, particularly as the Office must 

sort through several thousand pieces of 

patent correspondence that are received 

on a daily basis. Although the Office has 

made substantial changes in an attempt 

to accurately and efficiently process the 

increased number of correspondence 

received, the Office believes that it 

should make further changes in its 

business practices to improve its 

handling of patent correspondence. 

II. Facsimile Transmission 

In 1988, the Office, due to widespread 

use of facsimile transmission and the 

resulting time saved in correspondence 

between applicants and the Office, 

established a trial program to accept 

facsimile transmission of certain 

correspondence. In light of the success 

of the trial program, a policy on 

acceptance of facsimile transmissions 

was incorporated into the rules of 

practice. See Changes in Signature and 

Filing Requirements for Correspondence 

Files in the Patent and Trademark 

Office, 58 FR 54494 (October 22, 1993). 

Facsimile transmission of 

correspondence has grown to over 

240,000 pieces of patent correspondence 

per year sent to the Office’s central 

facsimile number. While the number of 

facsimile transmissions in any one 

application may be small, the overall 

number of facsimile transmissions 

represents a significant processing 

burden on the Office. 

The advantage of facsimile 

transmitting patent and assignment 

correspondence has been the quick 

submission of such correspondence to 

the particular area of the Office 

concerned with promptly acting on 

them. The advantage, however, is not 

exclusive to facsimile transmissions. 

EFS–Web offers this advantage as well 

as others not available with facsimile 

transmission. For example, EFS–Web 

submissions are ‘‘soft scanned’’ (i.e., 

electronically uploaded) directly into 

the official application file, so multiple 

Office employees can simultaneously 

view the document(s). Furthermore, 

when documents are submitted via 

EFS–Web, the Office’s electronic system 

sends an auto-generated message 

notifying the appropriate area which 

treats the type of documents submitted. 

Additionally, EFS–Web offers 


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