Source: https://www.federalregister.gov/documents/2014/09/25/2014-22821/capital-construction-fund-fishing-vessel-capital-construction-fund-procedures
Timestamp: 2018-12-11 23:02:46
Document Index: 381576943

Matched Legal Cases: ['art 259', 'art 259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', 'art 251', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', '§\u2009259', 'art 259', '§\u2009259', '§\u2009259']

A Proposed Rule by the National Oceanic and Atmospheric Administration on 09/25/2014
NMFS invites the public to comment on this proposed rule. Comments on the proposed rule must be received by November 10, 2014.
57496-57502 (7 pages)
Docket No. 080410551-4596-01
NOAA-NMFS-2013-0144
Update to the Capital Construction Fund Regulations
https://www.federalregister.gov/d/2014-22821 https://www.federalregister.gov/d/2014-22821
You may submit comments on this document, identified by NOAA-NMFS-2013-0144, by any one of the following methods:
Electronic Submission: Submit all electronic public comments via the Federal e-Rulemaking Portal. Go to: http://www.regulations.gov/​#!docketDetail;​D=​NOAA-NMFS-2013-0144, Click the “Comment Now!” icon, complete the required fields and enter or attach your comments.
Mail: Submit written comments to Paul Marx, Financial Services Division (FSD), NMFS-MB5, 1315 East-West Highway, Silver Spring, MD 20910; or
Fax: 301-713-1939; Attn: Richard VanGorder.
Copies of the Regulatory Impact Review/Initial Regulatory Flexibility Analysis (RIR/IRFA) prepared for this action may be obtained from the mailing address above or by calling Richard VanGorder (see FOR FURTHER INFORMATION CONTACT).
Send comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this proposed rule to Richard VanGorder at the address specified above and also to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Washington, DC 20503 (Attention: NOAA Desk Officer) or email to OIRA_Submission@omb.eop.gov, or fax to (202) 395-7825.
This proposed rule revises and replaces the CCF regulations found at 50 CFR part 259.
The program was established by the Merchant Marine Act of 1970. The CCF was authorized by Section 607 of the Merchant Marine Act, 1936, as amended, 46 U.S.C. 1177 (now at 46 U.S.C. 53503) and is administered pursuant to 50 CFR part 259.
The purpose of the program is to assist owners and operators of United States flagged vessels in accumulating the large amount of capital necessary for the modernization and expansion of the U.S. merchant marine fleet and to provide economic support for the U.S. fishing industry. The extensive vessel reconstruction requirements in the current regulations no longer make sense given the improved status of the merchant marine fleet.
The program encourages construction, reconstruction, or acquisition of vessels through deferment of Federal income taxes. Owners and operators of vessels deposit income from fishing into CCF accounts prior to paying income taxes. All deferred taxes are eventually recovered upon the sale of the vessel because the cost basis of the vessel is reduced by the dollar amount of CCF funds used for its purchase or improvements. The program was deemed necessary because operators of U.S.-flagged vessels are faced with a competitive disadvantage in the construction and replacement of their vessels relative to foreign-flagged operators, whose vessels are registered in countries that do not tax fishing income. The program helps counterbalance this situation through its tax-deferral privileges.
To participate in the program, a vessel owner submits an application to the Financial Services Division of the National Marine Fisheries Service in advance of the relevant Federal tax filing due date. The application identifies the income earning vessel(s), the type of project(s) anticipated and the financial institution that will hold the CCF deposits. Once the Secretary of Commerce deems an application compliant with the CCF statute and regulations, a CCF Agreement is executed between the United States and the vessel owner or operator.
Currently, there are 1,634 CCF Agreements with a total of approximately $263M on deposit. Many of these CCF Agreements were established years ago and identify scheduled projects that are no longer viable. Consequently, CCF participants are faced with either having funds languish on deposit for nonviable scheduled projects or making a non-qualified withdrawal of funds and paying deferred taxes at the highest marginal rate.
The authority to make regulatory changes to the program is granted under 46 U.S.C. 53502(a), which permits the Start Printed Page 57497Secretary of Commerce to prescribe regulations (except for the determination of tax liability) to carry out the program. The program regulations were last amended in 1997 to permit reconstruction projects for safety improvements.
The proposed changes to the CCF regulations are intended to ease the current restrictions on the allowable uses of CCF funds while remaining consistent with current agency priorities of maintaining sustainable fisheries. For example, currently, reconstruction is required when using CCF funds to acquire a used vessel. Reconstruction is mandated regardless of the condition of the vessel. Consequently, the CCF participant must often invest money in unnecessary capital improvements. If this requirement is eliminated and the definition of a “qualified reconstruction” is changed, a large portion of the funds that are currently on deposit could be used for projects that are actually needed, rather than required by now-outdated regulations. Additionally, these changes would allow the Government to recapture deferred taxes.
1. Revises § 259.31(a) to eliminate the requirement that the Agreement holder reconstruct a used vessel acquired with CCF funds (redesignated § 259.3(a)). This would eliminate the requirement to reconstruct vessels, because not all purchased vessels need improvement;
2. Revises § 259.31(b) to eliminate the requirement that the minimum cost of a reconstruction project be the lesser of $100,000 or 20% of the reconstructed vessel's acquisition cost. This provision would eliminate making excessive capital improvements to vessels based upon an arbitrary amount. Instead, program participants would use the CCF to spend what is needed to improve the vessel. It also would remove § 259.31(b)(2), which tiers off of the minimum cost requirement (redesignated § 259.3(c)), now eliminated;
3. Revises § 259.31(b)(1) to add material increases in safety, reliability, or energy efficiency to the list of qualified reconstruction items.
4. Revises § 259.31(c) to specify that a reconstruction or construction be completed within 12 months of commencement. The original regulations allowed for up to 18 months to complete reconstruction projects in order to allow program participants an extended period of time to meet the minimum cost requirements. Since the minimum cost requirement for reconstructions is eliminated, there would be no need for an extended period to complete planned projects.
5. Eliminates the requirement in § 259.34(a) that the Agreement holder annually make a minimum deposit of 2% of the anticipated cost of the scheduled Agreement objectives. The Proposed rule would also eliminate paragraphs (a)(1) and (2) of § 259.34 pertaining to the minimum cost requirement, now eliminated. This proposed change would be consistent with our attempt to reduce the amount of CCF funds on deposit by not requiring excess deposits to meet an annual deposit requirement;
6. Adds the requirement that any project done with CCF funds cannot add to the harvesting capacity of any fishery. This addition would ensure consistency with the agency's larger responsibility to maintain sustainable fisheries (new § 259.3(a), (b), and (c)), and reflects the CCF's current policy; and
7. Removes § 259.32 pertaining to “Conditional Fisheries.” “Conditional Fisheries” regulations were part of the Financial Aid Program Procedures contained in 50 CFR part 251 and were eliminated on April 3, 1996, under the authority of 16 U.S.C. 742.
In addition to the changes easing restrictions on CCF projects, program regulations would be amended as follows for purposes of simplicity, clarity, and brevity:
1. A Definitions section would be added (new § 259.1);
2. Existing § 259.1 would be removed because it deals only with deposits for taxable years beginning after December 31, 1969, and before January 1, 1972, and no such deposits remain;
3. Section 259.30 would be redesignated as § 259.2. Proposed § 259.2(b)(1) would add the requirement that the application for an Agreement include the name and Tax Identification Number of the applicant, pursuant to the Debt Collection Improvement Act of 1996 (31 U.S.C. 3701, et seq.);
4. Section 259.31 is redesignated as § 259.3 and would add a prohibition against using CCF funds for any vessel acquisition, construction, or reconstruction that increases fisheries harvesting capacity, to be consistent with the agency's larger responsibility to maintain sustainable fisheries;
5. Proposed § 259.3(a) would simplify the term “Acquisition” by removing the existing requirements when acquiring a used vessel and would add the requirement that the acquired vessel must replace an existing or recently sunken vessel, to ensure that the acquired vessel does not add to the fisheries' harvesting capacity (the replaced vessel must lose its fisheries trade endorsement);
6. Proposed § 259.3(b) is a new section pertaining specifically to the term “Construction,” which had been omitted as a separate section in the existing regulations, and to clarify that Construction of a vessel, like Acquisition, could not add fisheries harvesting capacity, in accordance with current NMFS fisheries policy;
7. Proposed § 259.3(c) replaces old § 259.31(b), and would simplify the definition of Reconstruction by incorporating the relevant language regarding energy and safety improvements from the deleted Sections 259.31(d) and (e);
8. Proposed § 259.3(d) replaces old § 259.31(c) and would change the time permitted for construction and reconstruction projects from 18 months to 12 months.
9. Section 259.33 would be redesignated as § 259.4;
10. Section 259.34 would be redesignated as § 259.5 and would eliminate the minimum deposit requirement;
11. Proposed § 259.6 would be added to provide for termination of inactive accounts and accounts with zero balances on deposit, and to detail the notification procedures and time limit for resolving Agreement deficiencies to avoid termination;
12. Section 259.35 would be redesignated as § 259.7, and the requirement to submit a preliminary deposit and withdrawal report at the end of each calendar year would be removed, because the preliminary report no longer serves a useful purpose and is not required by the Internal Revenue Service;
13. Section 259.36 would be redesignated as § 259.8, and provisions relating to non-cash deposits or investments would be dropped because they have never occurred;
14. Section 259.37 would be redesignated as § 259.9; and
15. Section 259.38 would be redesignated as § 259.10.
This proposed rule is published under the authority of, and is consistent with, Chapter 535 of the Shipping Act. The NMFS Assistant Administrator has determined that this proposed rule is consistent with the Magnuson-Stevens Fishery Conservation and Management Act, as amended, and other applicable law, subject to further consideration after public comment.Start Printed Page 57498
NMFS prepared an IRFA, as required by section 603 of the Regulatory Flexibility Act (RFA), to describe the economic impacts this proposed rule, if adopted, would have on small entities. The analysis will aid us in considering regulatory alternatives that could minimize the economic consequences on affected small entities. The proposed rule does not duplicate or conflict with other Federal regulations.
The RFA defines a small business as having the same meaning as a “small business concern” which is defined under Section 3 of the Small Business Act (SBA). Additionally, “small governmental jurisdictions” are defined as governments of cities, counties, towns, townships, villages, school districts, or special districts with populations of fewer than 50,000. As defined in the RFA, the small entities that this rule may affect include vessel owners, vessel operators, fish dealers, individual fishermen, small corporations, others engaged in commercial and recreational activities regulated by NOAA and native Alaskan governmental jurisdictions. In addition, the rule would affect some larger businesses. Notably for new participants, since the CCF is a voluntary program that provides tax deferred benefits to qualified applicants, we assume that no entities large or small would be negatively impacted by this rule. For current participants, the changes allow more flexibility in the use of the funds and, therefore, would only positively affect those entities.
Most participants in the program have annual gross revenues of less than $5.5 million for shellfish, $20.5 million for finfish and $7.5 million for other fishing. The IRFA analysis estimates that most of the 1634 active program participants are considered small entities. Furthermore, because analysts cannot quantify the exact number of small entities that may be directly regulated by this action, a definitive finding of non-significance for the proposed action under the RFA is not possible. However, because the proposed action would not result in additional compliance obligations, operating costs or any other costs on small entities, the net effects would be expected to be minimal relative to the status quo.
Since the new regulations merely simplify existing CCF regulations and policies, this action will not create new reporting requirements for small entities participating in the CCF. Although the CCF requires certain supporting documentation during the life of the Agreement, the CCF's requirements do not impose unusual burdens. Those supporting documents are usually within the normal business records already maintained by small business entities, and include income tax returns, tax basis schedules, vessel ownership documents, etc. Depending on circumstances, the CCF may require other supporting documents that can be acquired at reasonable cost if they are not already available. We estimate it will take small entities fewer than 3.5 hours per application to meet these requirements.
Because participation is voluntary and requires an average of 3.5 hours to prepare an application, all CCF applicants are assumed to have made a determination that using the program incurs a benefit. Consequently, it is assumed that the CCF's tax deferrals provide a positive economic impact. Importantly, the CCF does not regulate or manage the affairs of its program users, and the regulations impose no additional compliance obligations, operating costs or any other costs on small entities.
Because these regulations will impose no significant costs on any small entities, but rather will provide small and large entities with benefits, negative economic impacts on small entities, if any, are expected to be minimal at worst. The impact is likely to be positive. Accordingly, this rule will not substantially impact a significant number of small businesses.
Notwithstanding any other provisions of law, no person is required to respond to or be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act (PRA) unless that collection of information displays a currently valid Office of Management and Budget (OMB) control number.
This proposed rule contains no new collection of information requirements subject to the PRA. Existing collections have been approved by OMB under OMB Control No. 0648-0041. This collection includes the Deposit/Withdrawal Report, the Interim Capital Construction Fund Agreement and Certificate. The estimate of the annual total program public reporting burden for the Deposit/Withdrawal report is 1,200 hours. This equates to an average of less than 1 hour of annual reporting burden per program user. The estimates of the annual total program public reporting burden for the Interim Capital Construction Fund Agreement and Certificate is 2,250 hours. This equates to an average of 1 hour of annual reporting burden per existing program user and 3.5 hours of reporting burden for new applicants to the CCF program. The response time estimates above include the time needed for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and revising the collection of information.
The Assistant Administrator for Fisheries, NMFS, determined that this proposed rule will not affect the coastal zone of any state.
The Assistant Administrator for Fisheries, NMFS, determined that this proposed rule will not affect endangered or threatened species, marine mammals, or critical habitat.
This proposed rule does not contain policies with federalism implications under E.O. 13132.
For the reasons set out in the preamble, NMFS proposes to revise 50 CFR part 259 to read as follows:
(ii) Documented under the laws of the United States; and
(2) A commercial fishing vessel—
(ii) Of at least 2 net tons but fewer than 5 net tons;
(3) The first taxable year for which the Agreement is to apply (see § 259.4 for the latest time at which applications for an Agreement relating to the previous taxable year may be received);Start Printed Page 57500
(c) Filing. The application must be signed and submitted to the Financial Services Division of the National Marine Fisheries Service. As a general rule, the Agreement must be executed and entered into by the taxpayer on or prior to the due date for the filing of the Federal tax return in order to be effective for the tax year to which that return relates. It is manifestly in the Applicant's best interest to file at least 45 days in advance of such date.
CCF funds cannot be used for any vessel acquisition, construction, or reconstruction that increases harvesting capacity.
(a) Acquisition. CCF funds can be used to replace an existing or a recently sunken vessel and its existing harvesting capacity. The replaced vessel must lose its fisheries trade endorsement and the vessel owner must notify the Coast Guard Documentation Center of that fact.
(b) Construction. CCF funds can be used to construct a vessel to replace an existing vessel, or a recently sunken vessel and its existing harvesting capacity.
(d) Time permitted for construction or reconstruction. Construction or reconstruction must be completed within 12 months from the date construction or reconstruction first commences, unless otherwise consented to by the Secretary.
(c) First tax year for which an Agreement is effective. In order for an Agreement to be effective for any applicant's “Tax Year,” the written application must be submitted to the Secretary before the end of the “Filing Period” or “Extension Period” for that tax year, whichever applies. If the written application is received by the Secretary, after the end of the “Filing Start Printed Page 57501Period” or “Extension Period,” whichever applies, then the Agreement will be first effective for the next succeeding “Tax Year.”
(5) Redeposit of any withdrawals made without the Secretary's consent, and for which such consent is not subsequently given (either by ratification or otherwise), shall not be permitted. If the non-qualified withdrawal adversely affects the Agreement's general status the Secretary may terminate the Agreement.
(c) Additionally, each party shall submit, not later than 30 days after expiration of the party's tax due date, a copy of the party's Federal Income Tax Return filed with IRS for the preceding tax year. Failure to submit the Federal Income Tax Return shall, after due notice, be cause for the same adverse action specified in the paragraph above.
The Secretary may conditionally consent to the qualification of a withdrawal. This consent is conditioned Start Printed Page 57502upon the timely submission, to the Secretary, of the items requested by the Secretary in the withdrawal approval letter. Failure to provide these items in a timely manner, and after due notice, will result in nonqualification of the withdrawal and/or involuntary termination of the Agreement.
(e) These §§ 259.1 through 259.10 are specifically incorporated in all present Agreements.
[FR Doc. 2014-22821 Filed 9-24-14; 8:45 am]