Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 6081 

1See Report of the U.S. Department of the 

Treasury on Accounting Principles and Practices for 

the Operation of the United States Postal Service’s 

Competitive Products Fund, December 19, 2007 

(Report). The Report may be accessed from the 

Commission’s Web site, http://www.prc.gov. 

2Pursuant to section 2011(h)(2)(B)(ii), the final 

regulations are to be issued within 12 months of the 

date Treasury submitted its recommendations, or 

such later date as agreed to by the Commission and 

the Postal Service. 

of the next in-person committee meeting 

and a committee conference call. 

DATES: The conference call is scheduled 

for February 14, 2008 from 10 a.m. to 

Noon (Eastern time); the in-person 

meeting is scheduled from 10 a.m. to 5 

p.m. on March 27 and from 9 a.m. to 5 

p.m. on March 28. 

ADDRESSES: Individuals can participate 

in the conference call on February 14, 

2008 by dialing the teleconference 

number which will be posted on the 

Access Board’s Web site (http:// 

www.access-board.gov/eth/). The inperson meeting will be held at the 

Access Board’s offices, 1331 F Street, 

NW., Suite 1000, Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Marsha Mazz, Office of Technical and 

Information Services, Architectural and 

Transportation Barriers Compliance 

Board, 1331 F Street, NW., Suite 1000, 

Washington, DC 20004–1111. 

Telephone number (202) 272–0020 

(Voice); (202) 272–0082 (TTY). These 

are not toll-free numbers. E-mail 

address: mazz@access-board.gov. 

SUPPLEMENTARY INFORMATION: On August 

23, 2007, the Architectural and 

Transportation Barriers Compliance 

Board (Access Board) established an 

advisory committee to make 

recommendations for possible revisions 

to the Americans with Disabilities Act 

(ADA) and Architectural Barriers Act 

(ABA) Accessibility Guidelines to 

include provisions for emergency 

transportable housing (72 FR 48251; 

August 23, 2007). 

The committee will hold a conference 

call on February 14 from 10 a.m. to 

Noon (Eastern time) to discuss 

definitional issues. The agenda, 

instructions (including information on 

captioning), and dial-in telephone 

number for the conference call is 

available on the Access Board’s Web site 

(http://www.access-board.gov/eth/). The 

conference call is open to the public and 

interested persons can dial in and 

communicate their views during a 

public comment period scheduled 

during the conference call. Participants 

may call in from any location of their 

choosing. 

The next in-person committee 

meeting will take place from 10 a.m. to 

5 p.m. on March 27 and from 9 a.m. to 

5 p.m. on March 28. It will focus on 

outstanding issues which have not yet 

been resolved. The preliminary meeting 

agenda, along with information about 

the committee, is available at the Access 

Board’s Web site (http://www.accessboard.gov/eth/). Committee meetings are 

open to the public and interested 

persons can attend the meetings and 

communicate their views. Members of 

the public will have opportunities to 

address the committee on issues of 

interest to them during public comment 

periods scheduled on each day of the 

meeting. 

The in-person meeting site is 

accessible to individuals with 

disabilities. Individuals who require 

sign language interpreters, real-time 

captioning, or materials in alternate 

formats should contact Marsha Mazz by 

March 6. Also, persons wishing to 

provide handouts or other written 

information to the committee are 

requested to provide them in an 

electronic format to Marsha Mazz 

preferably by e-mail so that alternate 

formats such as large print can be 

distributed to committee members. 

Persons attending the in-person meeting 

are requested to refrain from using 

perfume, cologne, and other fragrances 

for the comfort of other participants. 

Lawrence W. Roffee, 

Executive Director. 

[FR Doc. E8–1894 Filed 1–31–08; 8:45 am] 

BILLING CODE 8150–01–P 

POSTAL REGULATORY COMMISSION 

39 CFR 3001 

[Docket No. PI2008–2; Order No. 56] 

Administrative Practice and Procedure, 

Postal Service 

AGENCY: Postal Regulatory Commission. 

ACTION: Advance notice of proposed 

rulemaking and order. 

SUMMARY: This document notes that the 

Secretary of the Treasury, as required by 

recent postal reform legislation, has 

filed with the Commission a report and 

recommendations on accounting 

practices and principles that will govern 

the operation of the Competitive 

Products Fund. It briefly reviews the 

recommendations, poses several related 

questions, and invites public comment. 

Comments will assist the Commission 

in developing future regulations 

governing the Competitive Products 

Fund. 

DATES: Initial comments are due April 1, 

2008; reply comments are due May 1, 

2008. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: Regulatory 

History, 72 FR 63662 (November 9, 

2007). 

I. Introduction 

Section 401 of the Postal 

Accountability and Enhancement Act, 

Public Law 109–435 (PAEA), codified at 

39 U.S.C. 2011(h), requires the Secretary 

of the Treasury (Treasury) in 

consultation with the Postal Service and 

an independent certified public 

accounting firm to develop 

recommendations for accounting 

practices and principles that will govern 

the operation of the Competitive 

Products Fund (CPF) and the 

determination of an assumed Federal 

income tax to be imposed on 

competitive products income. Treasury 

submitted its report and 

recommendations to the Commission on 

December 19, 2007.1

Section 2011(h)(2)(A) requires that 

interested persons, including the Postal 

Service, users of the mails, and an 

officer of the Commission, be given an 

opportunity to comment on the Report’s 

recommendations in such manner as the 

Commission considers appropriate. To 

fulfill that obligation, the Commission is 

initiating this docket soliciting 

comments on both Treasury’s 

recommendations, and specific 

questions posed by the Commission in 

response to the Report. Initial comments 

are due 60 days after publication of this 

notice in the Federal Register. Reply 

comments are due 90 days after 

publication of this notice in the Federal 

Register. 

After review of the comments, the 

Commission will commence a 

rulemaking proceeding to develop 

regulations to satisfy the requirements 

of section 2011(h)(2), including 

establishing the accounting practices 

and principles to govern the operation 

of the CPF and rules for determining the 

assumed Federal income tax on 

competitive products income.2

Interested persons will have an 

opportunity to comment on the 

proposed regulations. 


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3See id. at 3. The marginal cost (or unit volume 

variable cost) of a product is the cost of producing 

an additional unit of output. Marginal cost includes 

only costs that vary with the level of output and 

does not account for any fixed costs. If a product’s 

price exceeds its marginal cost at current levels of 

production, a positive contribution is made toward 

paying the common costs of production. 

Incremental or avoidable cost of a product is the 

total cost incurred as the result of the provision of 

all units of that product. Incremental cost 

incorporates all variable and fixed costs specific to 

a particular product. Thus, if each product covers 

its avoidable cost then no single product is being 

cross-subsidized. For a more complete discussion of 

the incremental cost test, see William J. Baumol, 

John C. Panzar and Robert D. Willig, Contestable 

Markets and the Theory of Industry Structure, 351–

356, 1982. 

4 In Order No. 43, the Commission adopted, inter 

alia, rules governing rates for competitive products 

pursuant to section 3633. PRC Order No. 43, 

October 29, 2007. 

5As noted above, the other statutory requirements 

concern the computation of an assumed Federal 

income tax (section 3634(b)) and the ‘‘greater of’’

test (section 2011(e)(5)). 

II. Statutory Framework for 

Competitive Products’ Accounting 

Practices and Assumed Federal Income 

Tax 

The Report fulfills Treasury’s 

obligation under section 2011(h), which 

provides as follows: 

(h)(1)(A) The Secretary of the Treasury, in 

consultation with the Postal Service and an 

independent, certified public accounting firm 

and other advisors as the Secretary considers 

appropriate, shall develop recommendations 

regarding—

(i) the accounting practices and principles 

that should be followed by the Postal Service 

with the objectives of—

(I) identifying and valuing the assets and 

liabilities of the Postal Service associated 

with providing competitive products, 

including the capital and operating costs 

incurred by the Postal Service in providing 

such competitive products; and 

(II) subject to subsection (e)(5), preventing 

the subsidization of such products by marketdominant products; and 

(ii) the substantive and procedural rules 

that should be followed in determining the 

assumed Federal income tax on competitive 

products income of the Postal Service for any 

year (within the meaning of section 3634). 

(B) Not earlier than 6 months after the date 

of enactment of this section, and not later 

than 12 months after such date, the Secretary 

of the Treasury shall submit the 

recommendations under subparagraph (A) to 

the Postal Regulatory Commission. 

39 U.S.C. 2011(h)(1)(A)–(B). 

As relates to its task of developing 

recommendations pursuant to section 

2011(h)(1), Treasury identifies five 

PAEA requirements applicable to 

competitive products: 

1. The prohibition against subsidies 

by market dominant products (sections 

3633(a)(1) and 2011(h)(1)(A)(II)); 

2. The requirement that each 

competitive product cover its 

attributable costs (section 3633(a)(2)); 

3. The requirement that competitive 

products collectively cover what the 

Postal Regulatory Commission 

determines to be an appropriate share of 

the Postal Service’s institutional costs 

(section 3633(a)(3)); 

4. The obligation to annually compute 

an assumed Federal income tax on 

competitive products income (section 

3634(b)(1)); and 

5. The total assets of the CPF shall be 

the greater of the assets related to the 

provision of competitive products 

calculated under section 2011(h) or the 

percentage of total Postal Service 

revenues and receipts from competitive 

products times the Postal Service’s total 

assets (section 2011(e)(5)). Report at 31. 

III. Treasury Report 

To develop its recommendations, 

Treasury discusses both the Postal 

Service’s current costing system and the 

cost accounting requirements for 

competitive products under the PAEA. 

Treasury explains that the Postal 

Service currently functions under an 

Activity Based Costing system (ABC 

system), which it describes as an 

economic costing system designed to 

‘‘report (1) the marginal cost of each 

class of product and (2) the incremental 

cost of each class of product compared 

to all of the other classes of products 

serviced.’’ 3

Treasury indicates that under the 

current costing system, average volume 

variable costs serve as a proxy for 

marginal costs and further that the 

Postal Service estimates incremental 

costs based on the ABC system. Finally, 

Treasury notes that costs not attributed 

to postal products or services are 

classified as institutional costs. 

Turning to the PAEA, Treasury’s 

analysis of the statutory cost accounting 

requirements for competitive products 

begins with section 3633(a), which 

requires the Commission to promulgate 

regulations to: 

1. Prohibit the subsidization of 

competitive products by market 

dominant products; 

2. Ensure that each competitive 

product covers its attributable costs; and 

3. Ensure that all competitive 

products shall collectively cover what 

the Commission determines to be an 

appropriate share of the institutional 

costs of the Postal Service.4

Based on these requirements and 

other PAEA provisions,5 Treasury 

concludes that ‘‘the only viable method 

to begin to address the PAEA 

requirements for competitive products 

is to establish a theoretical, regulatory 

reporting construct under which the 

[Postal Service] would ‘on paper only’

analytically segregate and identify the 

revenue and costs associated with the 

competitive products * * *’’ Id. at 4. 

Regarding the costs, Treasury 

recommends that the Postal Service 

attribute costs consistent with the 

Commission’s definition of competitive 

products. Treasury indicates, however, 

that more is required ‘‘to calculate a 

PAEA-compliant, corporate-like income 

statement or impute an assured income 

tax.’’ Id. To achieve these additional 

requirements, Treasury contends that 

the Postal Service’s cost system will 

need to be modified ‘‘to provide for the 

additional assignment of competitive 

products’ costs.’’ Id. 

More specifically, Treasury suggests 

that, to satisfy the PAEA’s five statutory 

requirements, the modified cost system 

should have the capability to: 

1. Report the costs for competitive 

products at a more granular level than 

they are currently; 

2. Demonstrate that each competitive 

product (as defined under the PAEA) 

covers its attributable costs by pricing 

each competitive product above its 

volume-variable or marginal costs; 

3. Demonstrate that competitive 

products are not individually crosssubsidized by the market dominant 

products by showing that each 

competitive product’s revenues exceed 

its incremental costs; 

4. Ensure that the combined revenues 

of the competitive products cover an 

appropriate share of the Postal Service 

institutional costs; and 

5. Enable computation of an assumed 

Federal income tax on the income of the 

theoretical Postal Service competitive 

enterprise. Id. at 4–5 (footnotes 

omitted). 

Based on its analysis of the applicable 

PAEA accounting and tax-related 

provisions regarding competitive 

products, Treasury offers nine 

recommendations. 

IV. Issues Regarding Certain Treasury 

Recommendations 

Treasury emphasizes that ‘‘[t]he 

accounting and income tax approaches 

described in [its Report] should serve as 

the starting points for such further 

discussions and decisions.’’ Id. at 1. The 

Report further points out that: 

Given the size and scope of the [Postal 

Service’s] operations as well as the 

complexity involved in meeting the PAEA 

accounting and other requirements, Treasury 

believes that any necessary changes to the 

existing [Postal Service] costing and other 

systems should be made incrementally and 

notes that some may need to be implemented 

over the long term. 

Id. at 1–2. 


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6On January 16, 2008, the Federal Trade 

Commission (FTC) released its report entitled 

Accounting for Laws that Apply Differently to the 

United States Postal Service and Private 

Competitors (FTC Report). Among other things, the 

FTC Report discusses corporatization of assets 

associated with production of competitive products. 

FTC Report at 93–98. Commenters may address 

matters raised by the FTC Report as relates to the 

issues raised by Treasury’s Report, e.g., establishing 

a stand-alone competitive products entity. 

7Attributable cost is a concept developed by the 

Commission. Basically, it is equal to the marginal 

cost of a product plus some specific fixed costs, if 

any, attributed only to the production of that 

particular product, e.g., costs associated with 

Express Mail collection boxes and advertisements. 

The Report acknowledges that the 

ultimate responsibility and authority for 

issuing regulations concerning the 

PAEA accounting practices and CPF 

income tax requirements rest with the 

Commission. Id. at 1. 

The Commission solicits comments 

from interested persons on any or all 

aspects of Treasury’s Report. In 

addition, as set out below, the 

Commission has specific questions 

about certain Treasury 

recommendations and invites responses 

from interested persons to any or all of 

them. As noted above, initial and reply 

comments are due 60 days and 90 days, 

respectively, after publication of this 

notice in the Federal Register. 

A. Treasury Recommendation 2 

Treasury’s second recommendation 

concerns the development of a 

theoretical competitive enterprise: 

To enable a practical solution to be 

developed that could be validated by third 

parties, a theoretical or ‘on paper only’

enterprise—[Postal Service] competitive—

should be analytically created by assigning to 

it an appropriate share of all [Postal Service] 

costs. 

Id. at 7. 

This recommendation reflects 

Treasury’s conclusion that, based on the 

five PAEA statutory requirements for 

competitive products: 

[T]he only viable method to begin to 

address the PAEA requirements for 

competitive products is to establish a 

theoretical, regulatory reporting construct 

under which the [Postal Service] would ‘on 

paper only’ analytically segregate and 

identify the revenue and costs associated 

with the competitive products—that is, to 

treat competitive products as if they were 

sold by a separate, theoretical enterprise or 

corporation that shares economies of scale 

and scope with the market-dominant 

products. 

Id. at 4 (footnote omitted). 

Treasury recognizes, but rejects, an 

alternative approach based on creation 

of a ‘‘true stand-alone competitive 

products entity.’’ Id. at 7; see also id. at 

6. Treasury rejects this alternative 

because, inter alia, the cost modeling 

would be costly and take years to 

develop without likelihood of any 

corresponding benefits. Id.6

1. The Commission asks commenters 

to address Treasury’s conclusion that a 

theoretical enterprise, rather than a 

stand-alone enterprise, should be 

constructed. Specifically, commenters 

are asked to comment on the 

assumptions, studies, and procedures 

that would be needed to establish the 

costs of a stand-alone competitive 

entity, the time and cost of 

implementing these studies, and the 

time and cost of achieving structural 

separation. 

2. To what extent would economies of 

scale and scope be diminished if the 

Commission were to require the Postal 

Service to structurally separate its 

market dominant from its competitive 

lines of business? 

3. Given the manner in which rates 

are established under the PAEA, e.g., 

that market dominant products are 

subject to a price cap, would structural 

separation reduce the risk of 

competitive products being subsidized 

by market dominant products? 

4. If it is decided that establishing a 

theoretical competitive enterprise is 

appropriate: 

a. What is the appropriate basis for 

assigning operating and/or capital costs 

to the theoretical competitive 

enterprise? 

b. Is there a reasonable basis for 

directly assigning some types or 

categories of costs to competitive 

products based on underlying 

technologies and/or operating 

procedures? If so, what specific costs 

should be assigned in this way? 

c. Would there be a need to assign 

other costs not directly assignable 

(namely, joint and/or fixed costs), and if 

so, how should such costs be assigned? 

d. Would worksharing affect the 

assignment of costs other than direct 

costs? If so, how? 

5. What role, if any, should the 

concepts of profit centers and transfer 

pricing play? 

6. Should any Universal Service 

Obligation costs be assigned to the 

competitive products category? If not, 

why not? If so, on what basis? 

B. Treasury Recommendation 3 

Treasury’s third recommendation 

concerns the cost system that should be 

used under the PAEA: 

The volume-variable or marginal product 

costs reported by the [Postal Service] cost 

system should be used—after the product 

definition modification required by PAEA—

to ensure that the competitive products cover 

their attributable costs. The reported 

incremental costs should be used to ensure 

that cross-subsidization of the competitive 

products by the market-dominant products is 

not occurring. 

Report at 7. 

This recommendation ‘‘relates to the 

derivation of marginal and incremental 

costs’’ with regard to the Postal 

Service’s costing approach. Id. Citing 

section 3631(b), which defines ‘‘costs 

attributable’’ to mean ‘‘the direct and 

indirect postal costs attributable to 

[competitive] product[s] through 

reliably identified causal relationships’’, 

Treasury suggests that complying with 

this definition would not require the 

Postal Service’s current cost system to 

be modified other than to reflect 

products classified by the Commission 

as competitive. Id. Treasury also 

assumes that such attributable costs 

would ‘‘form the appropriate basis for 

determining the marginal and 

incremental costs of the competitive 

products.’’ Id.7

In suggesting modifications to the cost 

system, Treasury interprets section 

3633(a)(1) to mean that the incremental 

cost test should be applied to each 

individual competitive product. Id. at 3. 

In Order No. 26, the Commission 

addressed this statutory provision, 

endorsing the incremental cost test, but 

recognizing the need to employ its 

current test for cross-subsidies. PRC 

Order No. 26, August 15, 2007, paras. 

3040–43. The Commission interpreted 

section 3633(a)(1) to mean that the test 

for cross-subsidies applies collectively 

to competitive products, not 

individually to each product. See 39 

CFR 3015.7(a). 

1. Are the Postal Service’s current cost 

systems, after modification for new 

products, sufficient for allocating costs 

between competitive and market 

dominant products? If not, what 

changes should be made to the cost 

systems? 

2. Should the incremental cost test be 

applied to individual competitive 

products or to competitive products as 

a whole? If the former, what is the basis 

for determining whether a competitive 

product that fails the incremental cost 

test is being subsidized by market 

dominant or other competitive 

products? 

C. Treasury Recommendation 5 

The Treasury’s fifth recommendation 

concerns the cost system that should be 

employed to assign costs between 

market dominant and competitive 

products: 

The current [Postal Service] cost 

accounting system should be modified so 


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that all of the costs for [Postal Service’s] two 

lines of business (Market-Dominant and 

Competitive) can be assigned using cost 

drivers that capture the causal relationship 

between the lines of business and their 

applicable business costs. The remaining 

unassigned costs should be treated as 

institutional costs and an appropriate 

percentage of these institutional costs, which 

should be defined by the PRC by regulation, 

should be covered by the theoretical 

competitive enterprise. 

Report at 9. 

This recommendation appears to 

reiterate the principle that attributable 

costs should be allocated between 

market dominant and competitive 

products based on causal relationships. 

In addition, it urges that an appropriate 

share of institutional costs should be 

covered by the theoretical competitive 

enterprise. Treasury notes that, pursuant 

to section 3633(a)(3), the Commission 

has initially set the ‘‘appropriate share 

of institutional costs’’ test at 5.5 percent. 

Treasury also notes that the requirement 

that competitive products receive an 

appropriate share of institutional costs 

is echoed by section 3622(b)(9), a 

ratemaking objective applicable to 

market dominant products (‘‘to allocate 

the total institutional costs of the Postal 

Service appropriately between marketdominant and competitive products.’’) 

1. A significant amount of Postal 

Service costs are currently classified as 

institutional, based on the use of cost 

drivers for cost allocation in rate 

analyses with most non-volume variable 

costs being assigned as institutional. 

Should any additional types of drivers 

and/or different types of cost attribution 

approaches be considered in 

determining costs for the competitive 

and market dominant lines of business? 

2. The Report suggests that in 

addition to attributing product-specific 

costs to competitive products, the Postal 

Service should also attribute what 

Treasury calls line of business costs that 

are common to competitive products. Id. 

at 9. This suggestion could be 

interpreted to mean either that 

competitive line of business costs are 

costs shared by all competitive products 

or costs that may be shared by more 

than one, but not necessarily all, 

competitive products. The Commission 

asks commenters to address the 

appropriate meaning of line of business 

costs, including the basis on which to 

distinguish between market dominant 

and competitive lines of business. 

3. Does the Commission’s 

determination of an ‘‘appropriate share 

of institutional costs’’ under section 

3633(c)(3) also satisfy, at least 

implicitly, section 3622(b)(9)? If not, 

why not and on what basis should 

institutional costs be allocated between 

market dominant and competitive 

products? 

D. Treasury Recommendation 6 

Treasury’s sixth recommendation 

concerns revenue reporting 

requirements for the theoretical 

competitive enterprise: 

Subject to [Postal Service] system 

modifications to accommodate the new 

product definitions, the revenue numbers 

from the existing [Postal Service] financial 

systems should be used as a basis for both 

reporting the financial income and the 

taxable net income of the [Postal Service] 

Competitive theoretical enterprise. [Note: 

The revenues used to determine the assumed 

federal income tax might have to be adjusted, 

as appropriate, to conform to tax code 

treatment.] 

Id. 

The PAEA provides that Postal 

Service revenues should be 

appropriately measured. See 39 U.S.C. 

3652(e) and Report at 9. Treasury 

concludes that the current revenue 

tracking system employed by the Postal 

Service is appropriate and does not 

require changes ‘‘unless the 

reclassification of postal classes and 

subclasses to * * * competitive 

products warrants them.’’ Id. 

1. Is the Postal Service’s current 

revenue reporting system (modified to 

accommodate new product definitions) 

adequate for reporting the Postal 

Service’s financial income and net 

taxable income? 

2. If not, what modifications would be 

necessary? 

E. Treasury Recommendation 7 

Treasury’s seventh recommendation 

concerns the development of an income 

statement: 

A theoretical [Postal Service] Competitive 

enterprise income statement, or statement of 

operations along the lines of the 2007 

statement of the operations shown in Figure 

1, should be developed. The revenues should 

be derived from the current [Postal Service] 

revenue system and process as modified to 

reflect the new definitions of competitive 

products. The costs should be the outcome of 

applying Treasury’s above-proposed cost 

accounting approaches. 

Id. For purposes of calculating the 

assumed Federal income tax of the 

competitive products, Treasury states 

that an income statement or statement of 

operations should be developed as 

further addressed in recommendation 8. 

1. Is what Treasury suggests sufficient 

for purposes of calculating an assumed 

Federal income tax on competitive 

products? If not, what standard (or 

format) should apply? 

2. Please explain why any proposed 

additional information would be 

beneficial, and discuss whether the 

benefit associated with a more detailed 

statement outweighs the burden of any 

additional costs imposed by creating a 

more detailed statement. 

F. Treasury Recommendation 8 

Treasury’s eighth recommendation 

concerns the calculation of an assumed 

Federal income tax: 

The [Postal Service] should calculate the 

competitive products’ assumed federal 

income tax using a simplified approach, 

preferably using a published, regularly 

updated, tax rate. 

Id. at 22. As to the assumed Federal 

income tax on competitive products, 

section 3634(a) provides, in pertinent 

part, as follows: 

(1) The term ‘assumed Federal income tax 

on competitive products income’ means the 

net income tax that would be imposed by 

chapter 1 of the Internal Revenue Code of 

1986 on the Postal Service’s assumed taxable 

income from competitive products for the 

year; and 

(2) the term ‘assumed taxable income from 

competitive products’, with respect to a year, 

refers to the amount representing what would 

be the taxable income of a corporation under 

the Internal Revenue Code of 1986 for the 

year, if—

(A) the only activities of such corporation 

were the activities of the Postal Service 

allocable under section 2011(h) to 

competitive products; and 

(B) the only assets held by such 

corporation were the assets of the Postal 

Service allocable under section 2011(h) to 

such activities. 

In section 2 of the Report, Treasury 

discusses the numerous considerations 

that influence the calculation of an 

assumed Federal income tax on 

competitive products income. Id. at 11–

23. It identifies two general approaches, 

complex or simplified, that could be 

used for this purpose. Id. at 23–24. 

Treasury endorses the simplified 

approach, notwithstanding that it 

‘‘would require some level of PAEA 

intent interpretation and scope 

determination by the appropriate 

governance bodies.’’ Id. at 24. 

1. Should a simplified approach be 

used: 

a. For calculating an assumed Federal 

income tax? 

b. If so, what tax rate should be used 

and why? 

c. Should the tax rate be based on an 

analysis of Postal Service functions, 

markets, risks, and the performance by 

similar companies? 

d. If similar companies are considered 

relevant, then how does one determine 

similarity? 

2. Would use of a simplified approach 

require any changes to the Postal 

Service’s cost systems and/or 


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Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 6085 

accounting procedures not addressed in 

the Report? If so, please elaborate. 

3. If a simplified approach should not 

be used, what approach should be used 

and why? 

Section 3 of the Report (at 25–29) 

addresses difficulties with identifying 

and valuing assets and liabilities of the 

CPF, noting, for example, that efforts to 

determine each asset’s theoretical 

enterprise origin and usage could be a 

significant undertaking that, in any 

event, might yield less than satisfactory 

results. Id. at 26. Treasury suggests four 

potential methods to attempt to assign 

assets to the theoretical competitive 

enterprise. Id. at 26–27. It notes that one 

of its methods is similar to the approach 

in section 2011(e)(5)(B). Id. at 27. 

Treasury observes that the PAEA does 

not contain a similar test for assigning 

liabilities. Id. at 29. Recognizing the 

significant tax implications raised by 

the various methods, Treasury suggests 

that ‘‘[a] possible approach to 

simplifying the assumed tax calculation 

to maximize net income after taxes and 

still meet the PAEA ‘shall be the greater 

of’ total assets CPF quantification test, is 

to use the theoretical [Postal Service] 

Competitive enterprise income before 

taxes and apply an appropriate, set 

effective tax rate.’’ Id. 

Lastly, Treasury indicates that the 

CPF should be subject to a reasonable 

level of management and reporting 

oversight and, further that the reporting 

should be subject to independent review 

to ensure that it is fairly stated in all 

material respects. Id. 

1. Does the PAEA allow a simplified 

approach to assigning assets to the 

competitive products fund for financial 

disclosure purposes and/or calculating 

an assumed Federal income tax? 

2. If a simplified approach is allowed, 

should it be used? 

3. Section 3 of the Report notes that 

the PAEA does not define assets, but 

that the PAEA’s requirement to pay 

principal or interest on obligations 

issued for the provision of competitive 

products in section 2011(e)(5) supports 

the conclusion that it is permissible to 

define assets as net assets. The 

Commission asks commenters to 

address whether or not this is a 

reasonable assumption. 

4. Does the PAEA require an 

assignment of liabilities to the CPF? If 

so, on what basis should they be 

assigned? 

5. Should a full set of financial 

statements, including income statement, 

balance sheet and statement of cash 

flow, be prepared for the CPF? 

6. What level of oversight should 

apply to the CPF? 

7. What accounting principles should 

apply to the CPF? 

8. What level of independent review 

of the Postal Service’s CPF accounting 

and financial statements is sufficient 

and necessary under the PAEA? 

9. What type (public or private) of 

entity would be best suited to perform 

that independent review? 

10. Is there any information, not 

required to be reported under the PAEA, 

which should be included in the reports 

required under section 

2011(h)(2)(B)(i)(III)? 

V. Public Representative 

Section 505 of title 39 requires the 

designation of an officer of the 

Commission in all public proceedings to 

represent the interests of the general 

public. The Commission hereby 

designates Patricia A. Gallagher to serve 

as the Public Representative, 

representing the interests of the general 

public. Pursuant to this designation, she 

will direct the activities of Commission 

personnel assigned to assist her and, 

will, upon request, provide their names 

for the record. Neither Patricia A. 

Gallagher nor any of the assigned 

personnel will participate in or provide 

advice on any Commission decision in 

this proceeding. 

VI. Ordering Paragraphs 

It is Ordered: 

1. As set forth in the body of this 

notice, Docket No. PI2008–2 is 

established for the purpose of receiving 

comments regarding Treasury’s Report 

and recommendations as well as 

questions posed by the Commission in 

response to the Report. 

2. Interested persons may submit 

comments no later than 60 days from 

the date of publication of this notice in 

the Federal Register. 

3. Reply comments also may be filed 

no later than 90 days from the date of 

publication of this notice in the Federal 

Register. 

4. Patricia A. Gallagher is designated 

as the Public Representative 

representing the interests of the general 

public in this proceeding. 

5. The Secretary shall cause this 

notice to be published in the Federal 

Register. 

By the Commission. 

Dated: January 28, 2008. 

Steven W. Williams, 

Secretary. 

[FR Doc. E8–1893 Filed 1–31–08; 8:45 am] 

BILLING CODE 7710–FW–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

46 CFR Part 401 

[Docket No. USCG–2007–0039] 

RIN 1625–AB23 

2008 Rates for Pilotage on the Great 

Lakes 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard is proposing 

to update the rates for pilotage on the 

Great Lakes. Based on our review, we 

propose to adjust the pilotage rates an 

average of 8.17% for the 2008 shipping 

season to generate sufficient revenue to 

cover allowable expenses, target pilot 

compensation, and returns on 

investment. We also are proposing a 

clarification of the duty of pilots and 

pilot associations to cooperate with 

lawful authority. This rulemaking 

promotes the Coast Guard strategic goal 

of maritime safety. 

DATES: Comments and related material 

must reach the Docket Management 

Facility on or before March 3, 2008. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2007–0039 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590–

0001. 

(3) Hand delivery: Room W12–140 on 

the Ground Floor of the West Building, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The telephone 

number is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: For 

questions on this proposed rule, call Mr. 

Michael Sakaio, Program Analyst, Great 

Lakes Pilotage Branch, Commandant 

(CG–54122), U.S. Coast Guard, at 202–

372–1538, by fax 202–372–1929, or by 

e-mail at Michael.Sakaio@uscg.mil. For 

questions on viewing or submitting 

material to the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 


sroberts on PROD1PC70 with PROPOSALS